Northern 2 Vct Regulatory News (NTV)

18 Apr 2008 14:49

Northern 2 VCT PLC18 April 2008 18 APRIL 2008 NORTHERN 2 VCT PLC RESULTS FOR THE YEAR ENDED 31 JANUARY 2008 Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by NVM PrivateEquity. The trust invests mainly in unquoted venture capital holdings and aimsto provide high long-term tax-free returns to shareholders through a combinationof dividend yield and capital growth. It was launched in 1999 and has recentlyclosed a £9 million top-up share issue, taking its net assets to over £50million. Financial highlights - year ended 31 January 2008: (comparative figures as at 31 January 2007 in italics): 2008 2007 • Net assets £43.8m £42.9m • Net asset value per share 89.1p 88.9p • Return per share: Revenue 2.5p 2.5p Capital 3.9p 1.2p Total 6.4p 3.7p • Dividend per share declared in respect of the year: Revenue 2.5p 2.5p Capital 3.5p 3.0p Total 6.0p 5.5p • Cumulative return to shareholders since launch: Net asset value per share 89.1p 88.9p Dividends paid per share* 35.4p 28.9p Net asset value plus dividends paid per share 124.5p 117.8p • Mid-market share price at year end 80.5p 75.0p *Excluding proposed final dividend For further information, please contact: NVM Private Equity LimitedAlastair Conn, Managing Director 0191 244 6000Website: www.nvm.co.ukLansons CommunicationsKaren Mignon 020 7294 3685 NORTHERN 2 VCT PLC CHAIRMAN'S STATEMENT I would like to take this opportunity to welcome for the first time those whohave become shareholders in Northern 2 VCT through the recent public shareoffer, as well as thanking existing shareholders for their continuing support.The company is in good shape, having achieved a total return of 6.4p per sharewhich is equivalent to 7.2% of the opening net asset value. Over the sameperiod the FTSE All-Share index produced a negative total return of 3.6%. Netassets at 31 January 2008 were £43.8 million, and I am pleased to report thatthis figure has subsequently increased to over £50 million as a result of theissue of new shares. Investment portfolio The venture capital portfolio at 31 January 2008 comprised 48 holdings with atotal value of £31.7 million. During the year eight new venture capitalinvestments were completed at a cost of £4.6 million. Our managers were alsoable to take a number of exit opportunities with the result that sale proceedsfrom venture capital investments reached a record level of £9.2 million. Revenue and dividends In October 2007 shareholders received a letter from the board in which, amongstother things, we reported on our review of policy in relation to dividends. Itis worth repeating the key points of that statement here. We said that weintended to maintain the company's annual dividend at not less than 5.5p pershare, subject to the availability of sufficient distributable profits, with aview to reinforcing the attraction not only of holding the shares but also ofacquiring them by secondary market purchase. The indicated figure of 5.5p pershare is not intended to be a maximum and the board may declare a higherdividend when circumstances permit. Dividends paid by VCTs are of course freeof tax in the hands of UK shareholders. By way of illustration, an annual dividend of 5.5p is equivalent to an 8.6%gross yield to a higher-rate taxpayer subscribing for shares in the recentpublic offer at 95p, and 12.3% if the 30% initial income tax relief onsubscriptions is taken into account. In the year ended 31 January 2008 the company's revenue return per share wasunchanged at 2.5p, enabling us to maintain the revenue dividend at 2.5p pershare for the seventh year in succession. In addition we propose to distributerealised gains from the venture capital portfolio, increasing the capitaldividend from 3.0p to 3.5p per share. The total dividend for the year istherefore 6.0p per share, exceeding our stated objective. An interim dividendof 2.0p per share was paid in December 2007 and the proposed final dividend of4.0p per share will, if approved by shareholders at the annual general meeting,be paid on 6 June 2008. Subscribers in the recent share issue do not rank forthis final dividend, but will be entitled to receive the interim dividend forthe year ending 31 January 2009 (expected to be paid in December 2008) and allsubsequent dividends. The cumulative total of dividends declared by the company has reached 39.4p pershare. Shareholder issues In November 2007 we launched a public offer of new ordinary shares forsubscription in the 2007/08 and 2008/09 tax years. The offer closed on 17 April2008, having raised a total of £9.5 million before expenses. I consider this asatisfactory outcome given the conditions prevailing in the economy and thefinancial markets. During the year the company bought back for cancellation 1,444,364 shares,equivalent to approximately 3% of the issued capital at the start of the year,at an average price of 80p per share. A resolution will be proposed at theannual general meeting to renew the board's authority to make market purchasesof shares and it remains our policy, subject to periodic review, to buy backshares at a discount of 10% to net asset value, as a means of assistingshareholders who need to dispose of their shares. Following a review of the provision of corporate broking services, we appointedLandsbanki Securities (UK) Limited as brokers to the company in October 2007.It is our long-term objective to stimulate a greater level of secondary marketdemand for the company's shares, and our new dividend policy should help ustowards this goal. VAT on management fees The Government's Budget proposals in March 2008 included the exemption of VCTsfrom paying VAT on management fees with effect from 1 October 2008. Thisfollows a European Court judgment against the Government in a case relating toVAT payable by investment trusts. Exemption from VAT will be a useful benefitto your company: we incurred £182,000 in VAT on management fees in the yearended 31 January 2008, equivalent (before tax relief) to approximately 0.4p pershare. Our advisers are currently looking into the possibility of obtaining arepayment of VAT paid in respect of previous years, but the process is still atan early stage. VCT qualifying status The company has continued to meet the qualifying conditions laid down by HMRevenue & Customs for approval as a VCT. With a large and actively managedportfolio it is important that our compliance is closely monitored, and inaddition to continuous review by our managers we retain PricewaterhouseCoopersLLP to advise the board on VCT status. Board of directors In April 2008 Michael Denny retired as chairman of NVM Private Equity after adistinguished career in venture capital, including a term of office as chairmanof the British Venture Capital Association. I am delighted to say that Michaelwill remain a non-executive director of Northern 2 VCT so we will continue tohave the benefit of his knowledge and experience. As I reported at the half year stage, David Gravells joined the board in July2007. David has wide and deep experience in venture capital and he has alreadymade an outstanding contribution to the board. After serving nine years as chairman, I have indicated that I will be retiringfrom the board on 30 April 2008. I am delighted to report that David Gravellshas accepted the directors' invitation to take over as chairman on my retirementand I wish him, the board and the company every success in the future. Prospects The period since 31 January 2008 has seen encouraging progress, with thecompletion of two substantial new investments and three profitable exits - plusthe closing of our public share offer. Widespread pessimism about theshort-term prospects for the world economy cannot be ignored, and we expect tosee the defensive qualities of the company's portfolio put to the test, but itis our belief that our company has established a firm foundation for futureprogress. Dr Matt Ridley Chairman The audited financial statements for the year ended 31 January 2008 are set outbelow. INCOME STATEMENT for the year ended 31 January 2008 Year ended 31 January 2008 Year ended 31 January 2007 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000Gain on disposal of investments - 1,759 1,759 - 168 168Changes in fair value of investments - 802 802 - 957 957 ----- ----- ----- ----- ----- ----- - 2,561 2,561 - 1,125 1,125Income 2,111 - 2,111 2,036 - 2,036Investment management fee (253) (968) (1,221) (247) (784) (1,031)Other expenses (266) - (266) (224) - (224) ----- ----- ----- ----- ----- -----Return on ordinary activities before tax 1,592 1,593 3,185 1,565 341 1,906Tax on return on ordinary activities (416) 303 (113) (343) 243 (100) ----- ----- ----- ----- ----- -----Return on ordinary activities after tax 1,176 1,896 3,072 1,222 584 1,806 ----- ----- ----- ----- ----- -----Return per share 2.5p 3.9p 6.4p 2.5p 1.2p 3.7p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 31 January 2008 Year ended Year ended 31 January 2008 31 January 2007 £000 £000Equity shareholders' funds at 1 February 2007 42,909 38,675Return on ordinary activities after tax 3,072 1,806Dividends recognised in the year (3,109) (2,403)Net proceeds of share issues 2,038 6,168Shares purchased for cancellation (1,157) (1,322)Expenses charged to capital reserve - (15) ------ ------Equity shareholders' funds at 31 January 2008 43,753 42,909 ------ ------ BALANCE SHEET as at 31 January 2008 31 January 31 January 2008 2007 £000 £000Venture capital investments Unquoted 29,326 28,406 Quoted 2,349 4,706 ------ ------Total venture capital investments 31,675 33,112Listed fixed-interest investments 5,066 7,161 ------ ------Total fixed asset investments 36,741 40,273 ------ ------Current assets: Debtors 355 471 Cash at bank 7,452 2,410 ------ ------ 7,807 2,881Creditors (amounts falling due within one year) (795) (245) ------ ------Net current assets 7,012 2,636 ------ ------ Net assets 43,753 42,909 ------ ------ Capital and reserves:Called-up equity share capital 2,456 2,414Share premium 26,872 24,949Capital redemption reserve 300 227Capital reserve - realised 8,727 10,779Capital reserve - unrealised 4,396 3,519Revenue reserve 1,002 1,021 ------ ------Total equity shareholders' funds 43,753 42,909 ------ ------Net asset value per share 89.1p 88.9p CASH FLOW STATEMENT for the year ended 31 January 2008 Year ended Year ended 31 January 2008 31 January 2007 £000 £000 £000 £000Cash flow statementNet cash inflow from operating activities 1,283 799Taxation:Corporation tax paid (106) (184)Financial investment:Purchase of investments (8,066) (10,365)Sale/repayment of investments 14,159 7,053 ----- -----Net cash inflow/(outflow) from financial investment 6,093 (3,312)Equity dividends paid (3,109) (2,403) ----- -----Net cash inflow/(outflow) before financing 4,161 (5,100)Financing:Issue of shares 2,146 6,525Share issue expenses (108) (357)Purchase of shares for cancellation (1,157) (1,322) ----- -----Net cash inflow from financing 881 4,846 ----- -----Increase/(decrease) in cash at bank 5,042 (254) ----- -----Reconciliation of returnbefore tax to net cash flow fromoperating activitiesReturn on ordinary activities before tax 3,185 1,906Gain on disposal of investments (1,759) (168)Changes in fair value of investments (802) (957)Decrease/(increase) in debtors 116 (62)Increase in creditors 543 95Expenses charged to capital - (15) ----- -----Net cash inflow from operating activities 1,283 799 ----- -----Reconciliation of movementin net funds 1 February 2007 Cash flows 31 January 2008 £000 £000 £000Cash at bank 2,410 5,042 7,452 ----- ----- ----- INVESTMENT PORTFOLIO SUMMARY as at 31 January 2008 Valuation % of net assets £000 by valueFifteen largest venture capital investments Crantock Bakery 1,939 4.4Envirotec 1,692 3.9Liquidlogic 1,556 3.6TFB Group 1,543 3.5Britspace Holdings 1,507 3.4Paladin Group 1,500 3.4Product Support (Holdings) 1,412 3.2Longhirst Venues 1,296 3.0Stainton Metal Company 1,257 2.9Pivotal Laboratories Holdings 1,187 2.7IG Doors 1,186 2.7Arrow Industrial Group 1,092 2.5Astbury Marsden Holdings 1,000 2.3Foreman Roberts Group 1,000 2.3Promanex Group Holdings 1,000 2.3 ------ ----- 20,167 46.1Other venture capital investments 11,508 26.3 ------ -----Total venture capital investments 31,675 72.4Listed fixed-interest investments 5,066 11.6 ------ -----Total fixed asset investments 36,741 84.0Net current assets 7,012 16.0 ------ -----Net assets 43,753 100.0 ------ ----- The above summary of results for the year ended 31 January 2008 does notconstitute statutory financial statements within the meaning of Section 240 ofthe Companies Act 1985 and has not been delivered to the Registrar of Companies. Statutory financial statements will be filed with the Registrar of Companiesin due course; the independent auditors' report on those financial statementsunder Section 235 of the Companies Act 1985 is unqualified and does not containa statement under Section 237(2) or (3) of the Companies Act 1985. The proposed final dividend of 4.0p per share for the year ended 31 January 2008will, if approved by shareholders, be paid on 6 June 2008 to shareholders on theregister at the close of business on 2 May 2008. The full annual report including financial statements for the year ended 31January 2008 is expected to be posted to shareholders on 24 April 2008 and willbe available to the public at the registered office of the company atNorthumberland House, Princess Square, Newcastle upon Tyne NE1 8ER and on theNVM Private Equity Limited website, www.nvm.co.uk. ENDS This information is provided by RNS The company news service from the London Stock Exchange