Northern 2 Vct Regulatory News (NTV)

30 Mar 2007 08:42

Northern 2 VCT PLC30 March 2007 30 MARCH 2007 NORTHERN 2 VCT PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2007 Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by NVM PrivateEquity (formerly known as Northern Venture Managers). The trust invests mainlyin unquoted venture capital holdings and aims to provide high long-term tax-freereturns to shareholders through a combination of dividend yield and capitalgrowth. Financial highlights - year ended 31 January 2007:(comparative figures as at 31 January 2006 in italics) 2007 2006• Net assets £42.9m £38.7m • Net asset value per share 88.9p 90.4p • Return per share: Revenue 2.5p 2.9p Capital 1.2p (1.4)p Total 3.7p 1.5p • Dividend per share declared in respect of the year: Revenue 2.5p 2.5p Capital 3.0p 3.0p Total 5.5p 5.5p • Cumulative return to shareholders since launch: Net asset value per share 88.9p 90.4p Dividends paid per share* 28.9p 23.4p Net asset value plus dividends paid per share 117.8p 113.8p • Share price at end of year 75.0p 80.0p *Excluding proposed final dividend For further information, please contact: NVM Private Equity Limited Alastair Conn, Managing Director 0191 244 6000 Website: www.nvm.co.uk Lansons Communications Alison Boucher 020 7294 3616 CHAIRMAN'S STATEMENT The chairman of Northern 2 VCT PLC, Dr Matt Ridley, included the followingpoints in his statement to shareholders: In the year to 31 January 2007 the company achieved a total return of 4.0p pershare, with the net asset value before taking account of dividends recognised inthe year increasing from 90.4p to 94.4p. After deducting dividends totalling5.5p charged to reserves during the year, the net asset value per share as shownin the year-end balance sheet was 88.9p per share. Total net assets, includingthe proceeds of the share issue completed in April 2006, rose from £38.7 millionto £42.9 million. Investment portfolio The venture capital portfolio at 31 January 2007 comprised 52 holdings with atotal value of £33.1 million. During the year seven new venture capitalinvestments were completed at a cost of £4.1 million. Disposal proceeds wererelatively low at £2.7 million, but there has been an upturn in exit activitysince the year end with four disposals totalling £2.6 million agreed andcurrently in progress. Revenue and dividends Although the revenue return per share fell to 2.5p, compared with 2.9p in thepreceding year, we have been able to maintain the revenue dividend at 2.5p pershare for the sixth year in succession. Realised gains from the venture capitalportfolio are sufficient to maintain the capital dividend at last year's figureof 3.0p per share. The total dividend for the year is therefore unchanged at5.5p per share, comprising the interim dividend of 1.0p per share which was paidin December 2006 and a proposed final dividend of 4.5p per share which will, ifapproved by shareholders at the annual general meeting, be paid on 8 June 2007. The tax-free total dividend of 5.5p is equivalent to a 9.2% gross yield to ahigher-rate taxpayer subscribing for shares at 100p, and 11.5% if the 20% incometax relief on subscriptions obtained by subscribers in 1999 is taken intoaccount. The cumulative total of dividends declared by the company over eightyears is 33.4p per share, an average of 4.2p per year. Our dividend investment scheme has continued to operate, and shareholdersinterested in joining the scheme should contact the company secretary forfurther information. Management arrangements I reported last year that with effect from 1 February 2006 our managers, NVM,had agreed to reduce their annual management fee from 2.5% to 2.0% of netassets, but with the ability to earn an additional fee based on the extent towhich an agreed performance target was exceeded. The target is expressed interms of the total return (net asset value growth plus dividend distributions)achieved in each financial year. In the year to 31 January 2007 the totalreturn of 4.0p was equivalent to 4.4% of opening net assets, exceeding thestipulated minimum of 3.5%, and an additional fee of £37,000 became payable.The total management fee (excluding VAT) for the year was £877,000, comparedwith the £1,050,000 which would have been payable under the previousarrangements. A year ago your board agreed, following consultation with the boards of otherfunds managed by NVM, to the introduction of a new co-investment scheme underwhich NVM executives are required to invest personally in the ordinary shares ofcompanies in which Northern 2 VCT invests. We intend to keep this arrangementunder regular review to ensure that it meets our objective of enabling NVM torecruit and retain high-calibre investment executives in a competitive marketenvironment, whilst ensuring that the interests of both NVM and Northern 2 VCTshareholders remain fairly aligned. Shareholder issues Our limited public offer of new ordinary shares launched in March 2006, whichclosed on 5 April, raised a total of £6.3 million before expenses. The 2005/06tax year saw a record level of fund-raising in the VCT market, with over £750million subscribed. With effect from 6 April 2006 the rate of income tax reliefon new VCT investments was cut from 40% to 30%, and there has been a markedreduction in subscriptions in the 2006/07 tax year. Your directors consideredraising further funds this year but decided not to do so in view of the likelyscarcity of investors and the company's strong cash position. During the year the company bought back for cancellation 1,700,647 shares,equivalent to approximately 4.0% of the issued capital at the start of the year,at an average cost of 78p per share. A resolution will as usual be proposed atthe annual general meeting to renew the board's authority to make marketpurchases of shares. The level of secondary market trading in most VCTs' shares remains low and, withthe intention of helping improve VCTs' communication with government and theinvesting public, your company and approximately 70 other VCTs joined theAssociation of Investment Companies in October 2006. VCT qualifying status The company has continued to retain PricewaterhouseCoopers LLP as advisers onVCT taxation matters, and has throughout the year met the qualifying conditionslaid down by HM Revenue & Customs for approval as a VCT. The future The new financial year has started well, with exit discussions in progress aboutseveral portfolio companies in addition to those mentioned above. We have asound balance sheet, with over £9 million of liquid assets available for futureinvestment, and a healthy trend of dividend distributions is emerging. Theshort-term prospects for the UK economy are mixed, with a recent background ofrising inflation and interest rates, but forecasters seem to be in generalagreement that modest economic growth should continue at least into 2008 and weexpect most of our investments to make further progress in this environment. Dr Matt RidleyChairman The audited financial statements for the year ended 31 January 2007 will showthe results set out below. INCOME STATEMENTfor the year ended 31 January 2007 Year ended 31 January 2007 Year ended 31 January 2006 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Gain/(loss) on disposal of investments - 168 168 - (388) (388)Unrealised adjustments to fair value of investments - 957 957 - 265 265 ---------- ---------- ---------- ---------- ---------- ---------- - 1,125 1,125 - (123) (123)Income 2,036 - 2,036 2,226 - 2,226Investment management fee (247) (784) (1,031) (287) (861) (1,148)Other expenses (224) - (224) (203) - (203) ---------- ---------- ---------- ---------- ---------- ----------Return on ordinary activities before tax 1,565 341 1,906 1,736 (984) 752Tax on return on ordinary activities (343) 243 (100) (455) 352 (103) ---------- ---------- ---------- ---------- ---------- ----------Return on ordinary activities after tax 1,222 584 1,806 1,281 (632) 649 ---------- ---------- ---------- ---------- ---------- ----------Return per share 2.5p 1.2p 3.7p 2.9p (1.4)p 1.5p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDSfor the year ended 31 January 2007 Year ended 31 January Year ended 31 January 2007 2006 £000 £000Equity shareholders' funds at 1 February 2006 38,675 40,272Return on ordinary activities after tax 1,806 649Dividends recognised in the year (2,403) (1,092)Net proceeds of share issues 6,168 97Shares purchased for cancellation (1,322) (1,251)Expenses charged to capital reserve (15) - ---------- ----------Equity shareholders' funds at 31 January 2007 42,909 38,675 ---------- ---------- BALANCE SHEETas at 31 January 2007 31 January 2007 31 January 2006 £000 £000 Venture capital investments: Unquoted 28,406 25,259 Quoted 4,706 4,548 ---------- ---------- 33,112 29,807Listed fixed-interest investments 7,161 6,029 ---------- ----------Total fixed asset investments 40,273 35,836 ---------- ----------Current assets: Debtors 471 409 Cash at bank 2,410 2,664 ---------- ---------- 2,881 3,073Creditors (amounts falling due within one year) (245) (234) ---------- ----------Net current assets 2,636 2,839 ---------- ---------- Net assets 42,909 38,675 ---------- ---------- Capital and reserves:Called-up equity share capital 2,414 2,139Share premium 24,949 34,141Capital redemption reserve 227 142Capital reserve: Realised 10,779 351 Unrealised 3,519 977Revenue reserve 1,021 925 ---------- ----------Total equity shareholders' funds 42,909 38,675 ---------- ----------Net asset value per share 88.9p 90.4p CASH FLOW STATEMENTfor the year ended 31 January 2007 Year ended Year ended 31 January 2007 31 January 2006 £000 £000 £000 £000Net cash inflow from operating activities 799 972Taxation:Corporation tax paid (184) (115)Financial investment:Purchase of investments (10,365) (6,293)Sale/repayment of investments 7,053 6,551 ---------- ----------Net cash (outflow)/inflow from financial investment (3,312) 258Equity dividends paid (2,403) (1,092) ---------- ----------Net cash (outflow)/inflow before financing (5,100) 23Financing:Issue of ordinary shares 6,525 112Share issue expenses (357) (15)Purchase of ordinary shares for cancellation (1,322) (1,251) ---------- ----------Net cash inflow/(outflow) from financing 4,846 (1,154) ---------- ----------Decrease in cash at bank (254) (1,131) ---------- ----------Reconciliation of return beforetax to net cash flow fromoperating activitiesReturn on ordinary activities before tax 1,906 752(Gain)/loss on disposal of investments (168) 388Unrealised adjustments to fair value of investments (957) (265)(Increase)/decrease in debtors (62) 89Increase in creditors 95 8Expenses charged to capital (15) -reserve ---------- ----------Net cash inflow from operating activities 799 972 ---------- ----------Analysis of movement in net funds 1 February Cash flows 31 January 2007 2006 £000 £000 £000Cash at bank 2,664 (254) 2,410 ---------- ---------- ---------- INVESTMENT PORTFOLIO SUMMARYas at 31 January 2007 Valuation % of net assets £000 by valuationFifteen largest venture capital investments:Longhirst Group 2,290 5.3John Laing Partnership 2,146 5.0Envirotec 1,750 4.1Crantock Bakery 1,438 3.4Computer Software Group* 1,400 3.3IG Doors 1,274 3.0TFB Group 1,171 2.7Arrow Industrial Group 1,127 2.6KCS Global Holdings 1,065 2.5Liquidlogic 1,002 2.3Product Support (Holdings) 1,000 2.3Ithaca Holdings 995 2.3Direct Valeting 915 2.1Touchstone Asset Management 900 2.1Pivotal Laboratories Holdings 895 2.1 ---------- ---------- 19,368 45.1Other venture capital investments 13,744 32.1 ---------- ----------Total venture capital investments 33,112 77.2Listed fixed-interest investments 7,161 16.7 ---------- ----------Total fixed asset investments 40,273 93.9Net current assets 2,636 6.1 ---------- ----------Net assets 42,909 100.0 ---------- ----------*Quoted on Alternative Investment Market The above summary of results for the year ended 31 January 2007 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 4.5p per share for the year ended 31 January 2007will, if approved by shareholders, be paid on 8 June 2007 to shareholders on theregister at the close of business on 20 April 2007. The full annual report including financial statements for the year ended 31January 2007 is expected to be posted to shareholders on 13 April 2007 and willbe available to the public at the registered office of the company atNorthumberland House, Princess Square, Newcastle upon Tyne NE1 8ER. ENDS This information is provided by RNS The company news service from the London Stock Exchange