Northern 2 Vct Regulatory News (NTV)

26 Sep 2005 08:58

Northern 2 VCT PLC26 September 2005 26 SEPTEMBER 2005 NORTHERN 2 VCT PLC UNAUDITED INTERIM RESULTSFOR THE SIX MONTHS ENDED 31 JULY 2005 Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by Northern VentureManagers. The trust was launched in 1999 and has to date raised a total of £46million from private investors. The trust invests mainly in unquoted venturecapital holdings and aims to provide high long-term returns to shareholdersthrough a combination of dividend yield and capital growth. Financial highlights (comparative figures as at 31 July 2004): 2005 2004 Re-stated• Net assets £38,867,000 £44,149,000• Net asset value per share 89.0p 99.7p• Investment income £948,000 £1,138,000• Profit/(loss) on ordinary activities before tax: Revenue £694,000 £874,000 Capital £(1,038,000) £527,000• Earnings/(loss) per share: Revenue 1.2p 1.4p Capital (1.9)p 1.5p• Interim dividend per share proposed in respect of the period: Revenue 1.0p 1.0p Capital Nil 3.0p• Cumulative return to shareholders since launch*: Dividends per share 23.4p 17.6p Net asset value plus dividends 112.4p 117.3p• Share price 78p 85p *Including dividends proposed in respect of the period For further information, please contact:Northern Venture Managers Limited Alastair Conn, Managing Director 0191 244 6000 Website: www.nvm.co.ukLansons 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: The half year to 31 July 2005 has seen a continuing high level of new investmentactivity, with the result that venture capital investments now represent 80% ofthe company's net assets. The portfolio overall is making good progress,although we have continued to take a conservative approach to determining thefair value of individual investments. Over the past 12 months shareholders havereceived tax-free dividends totalling 8.8p per share, mainly as a result ofsuccessful investment realisations. Net asset value The net asset value per share at 31 July 2005, before providing for the proposedinterim dividend of 1.0p per share, was 89.0p. This represents a slight fallfrom the re-stated figure of 91.0p at 31 January 2005, largely due to areduction in the valuation of two investments whose results are currently behindexpectations. Investments Six new venture capital investments were completed during the half year: • e-know.net (£435,000) - application service provider, Telford • Daniolabs (£145,000) - evaluation of therapeutics for neurological and ophthalmological diseases, Cambridge • Spectrum Interactive (£166,000) - AiM-quoted operator of payphones and public access internet terminals, Hemel Hempstead • Penton Media Europe (£595,000) - integrated business-to-business media and exhibitions company, London • Abermed Industrial Doctors (£725,000) - provider of medical and occupational heath services, Aberdeen • KCS Global Holdings (£702,000) - developer of human resources and payroll software and outsourcing services, London In addition a follow-on investment of £265,000 was made in Computer SoftwareGroup as part of a share placing on AiM to finance an acquisition. There were no major realisations in the unquoted portfolio during the half year. The investment in PrismTech, acquired in 2000 at a cost of £743,000 but fullyprovided against for most of its life because of poor trading performance, wassold to a management buy-out vehicle for £120,000 in cash plus warrants tosubscribe for a small amount of equity in the new company. There were relatively few movements in the quoted venture capital portfolio,which currently comprises one fully listed and 14 AiM quoted companies. Part ofthe investment in BBI Holdings, which floated on AiM in April 2004, was sold,realising a gain of £108,000. The nanomaterials developer Oxonica, a newunquoted investment in 2002, floated on AiM in July 2005 and its shares arecurrently trading at approximately twice our original cost; however the venturecapital investors are "locked in" until July 2006 and in line with our usualpractice a discount has been applied to the valuation. Revenue and dividend The revenue element of earnings per share for the half year was 1.2p, down from1.4p in the corresponding period to 31 July 2004. Investment income was down by17% to £948,000, mainly due to there being some large non-recurring items ofincome in the corresponding period from investments which have subsequently beensold or floated. Your board has declared an unchanged interim revenue dividendof 1.0p per share, which will be paid on 2 December 2005 to shareholders on theregister on 4 November 2005. This takes the cumulative total of dividendsdeclared by the company since launch to 23.4p per share. As there were no significant investment realisations during the period, nointerim capital dividend is proposed (corresponding period 3.0p). Our managersare currently working on two strong exit prospects and we hope to be in aposition to declare a capital dividend at the year end, although it is notpossible to give an indication of the amount at this stage. The company continues to operate its dividend investment scheme, which enablesshareholders to re-invest their dividends in new ordinary shares in the companywith the benefit of zero transaction costs plus income tax relief (currently40%) on the amount re-invested. Further details can be obtained from thesecretary at the company's registered office. Share price The mid-market share price fell slightly from 80p to 78p during the period.75,994 new shares were issued in June under the company's dividend re-investmentscheme, adding £68,000 to our funds available for investment. A total of652,560 shares, representing approximately 1.5% of the issued share capital,were bought in the market for cancellation at an average price of 76p. Whilstsecondary demand for VCT shares remains low, we recognise that it is importantfor shareholders to have an exit route should they wish to realise theirinvestment and we have set an objective, subject to market conditions, of buyingback shares at a discount to net asset value of not more than 10% in future. VCT qualifying status The company has continued to retain PricewaterhouseCoopers LLP as advisers onmatters relating to VCT status, and the directors are satisfied that thequalifying conditions laid down by the Inland Revenue for VCT approval have beenmet. Accounting policies The company's accounting policies have been revised for the current financialyear in order to comply with new UK Financial Reporting Standards introduced foraccounting periods beginning on or after 1 January 2005. The main changes arethat • all gains and losses (whether realised or unrealised) relating to investments are now included in the profit and loss account • quoted investments are valued at bid rather than mid-market prices • dividends payable to shareholders no longer appear in the profit and loss account, and • dividends are not recognised as a balance sheet liability until they have been formally declared (dividends are usually declared after the end of the period to which they relate). We have continued to present the profit and loss account in a three-columnformat so that a clear distinction is made between revenue and capital items. Adetailed explanation of the accounting changes and their financial impact is setout later in this announcement. Management Your directors have recently commenced a review of Northern Venture Managers'management fees and performance incentive arrangements, with the objective ofensuring that their remuneration is structured so as to reward success inachieving results for shareholders. This review is still in progress and I willreport further to shareholders once it has been completed. Prospects The process of building the investment portfolio is now well advanced, and asthe underlying investments mature we expect to see further realisations. Thiswill not only release funds for new investment opportunities but also generaterealised gains for distribution to shareholders. In my year-end chairman's statement six months ago, I reminded shareholders thata continuation vote is scheduled for the annual general meeting in 2006. Yourdirectors presently intend to recommend that the company's life be extended fora further five years. We are also conscious that the attractive tax reliefscurrently available on new investments in VCTs are due to be phased out at theend of the 2005/06 tax year and we will be considering whether your companyshould seek to raise further funds while this window of opportunity remainsopen. The unaudited interim financial statements for the six months ended 31 July 2005are set out below. PROFIT AND LOSS ACCOUNT (unaudited) for the six months ended 31 July 2005 Six months ended Six months ended 31 July 2005 31 July 2004 (re-stated) Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000Gains on disposal of investments held at fair value - 117 117 - 107 107Unrealised adjustments to fair value of investments - (718) (718) - 896 896Income 948 - 948 1,138 - 1,138Investment management fee (146) (437) (583) (159) (476) (635)Other expenses (108) - (108) (105) - (105) ------ ------ ------ ------ ------ ------Profit/(loss) on ordinary activities before tax 694 (1,038) (344) 874 527 1,401Tax on ordinary activities (170) 218 48 (250) 151 (99) ------ ------ ------ ------ ------ ------Profit/(loss) on ordinary activities after tax 524 (820) (296) 624 678 1,302 ------ ------ ------ ------ ------ ------Earnings/(loss) per share 1.2p (1.9)p (0.7)p 1.4p 1.5p 2.9p Year ended 31 January 2005 (re-stated) Revenue Capital Total £000 £000 £000Gains on disposal of investments held at fair value - 1,164 1,164Unrealised adjustments to fair value of investments - (1,008) (1,008)Income 2,074 - 2,074Investment management fee (315) (943) (1,258)Other expenses (201) - (201) ------ ------ ------Profit/(loss) on ordinary activities before tax 1,558 (787) 771Tax on ordinary activities (422) 301 (121) ------ ------ ------Profit/(loss) on ordinary activities after tax 1,136 (486) 650 ------ ------ ------Earnings/(loss) per share 2.6p (1.1)p 1.5p BALANCE SHEET (unaudited) as at 31 July 2005 31 July 31 July 2004 31 January 2005 2005 (re-stated) (re-stated) £000 £000 £000Fixed asset investments held at fair valueVenture capitalinvestments:Unquoted 26,854 24,834 25,391Quoted 4,364 2,810 3,938 ------- ------- ------- 31,218 27,644 29,329Listed fixed-interest 6,508 6,856 6,965investments ------- ------- -------Total fixed asset 37,726 34,500 36,294investments ------- ------- -------Current assets: Debtors 418 353 420 Cash at bank 917 9,604 3,795 ------- ------- ------- 1,335 9,957 4,215Creditors (amounts fallingdue within one year) (194) (308) (237) ------- ------- -------Net current assets 1,141 9,649 3,978 ------- ------- ------- Net assets 38,867 44,149 40,272 ------- ------- ------- Capital and reserves:Called-up equity share 2,183 2,214 2,212capitalShare premium 34,104 33,761 34,050Capital redemption reserve 96 45 63Revaluation reserve 775 2,572 948Profit and loss account 1,709 5,557 2,999 ------- ------- -------Total equity shareholders' 38,867 44,149 40,272funds ------- ------- -------Net asset value per share 89.0p 99.7p 91.0p STATEMENT OF CHANGES IN EQUITY (unaudited) for the six months ended 31 July 2005 Capital Revalu- Profit Share Share redemption ation and loss capital premium reserve reserve account Total £000 £000 £000 £000 £000 £000At 1 February 2005 2,212 34,050 63 948 2,999 40,272(re-stated)Loss after tax for the - - - - (296) (296)periodEquity dividends - - - - (664) (664)Shares purchased for (33) - 33 - (503) (503)cancellationIssue of ordinary 4 54 - - - 58sharesNet decrease inunrealised revaluation surplus - - - (718) 718 -Previously recognisedgains/losses now realised - - - 545 (545) - ------- ------- ------- ------- ------- ------ -At 31 July 2005 2,183 34,104 96 775 1,709 38,867 ------- ------- ------- ------- ------- ------ CASH FLOW STATEMENT (unaudited) for the six months ended 31 July 2005 Six months ended Six months ended Year ended 31 July 2005 31 July 2004 31 January 2005 (re-stated) (re-stated) £000 £000 £000 £000 £000 £000Cash flow statementNet cash inflow from operating 264 395 539activitiesTaxation:Corporation tax paid - - (88)Financial investment:Purchase of (4,196) (4,915) (10,341)investmentsSale of investments 2,163 6,358 9,142 ------- ------- ------- Net cash inflow/(outflow) from financial (2,033) 1,443 (1,199)investmentEquity dividends paid (664) (1,335) (4,563) ------- ------- -------Net cash inflow/(outflow) before financing (2,433) 503 (5,311)Financing:Issue of ordinary 68 - 305sharesShare issue costs (10) - -Shares purchased for (503) (399) (699)cancellation ------- ------- ------- Net cash outflow from (445) (399) (394)financing ------- ------- -------Increase/(decrease) (2,878) 104 (5,705)in cash at bank ------- ------- -------Reconciliation ofprofit beforetax to net cash flowfromoperating activitiesProfit on ordinary activities (344) 1,401 771before taxGains on disposal ofinvestments held at fair value (117) (107) (1,164)Unrealisedadjustments to fairvalue of investments 718 (896) 1,008Decrease/(increase) 2 (3) (70)in debtorsIncrease/(decrease) 5 - (6)in creditors ------- ------- -------Net cash inflow from 264 395 539operating activities ------- ------- -------Analysis of cash atbank 1 February 2005 Cash flows 31 July 2005 £000 £000 £000Cash at bank 3,795 (2,878) 917 ----- ------- ------- INVESTMENT PORTFOLIO SUMMARY as at 31 July 2005 Valuation % of net assets £000 by valuationFifteen largest venture capital investmentsDMN Installations 1,901 4.9Omnico Plastics 1,546 4.0Longhirst Group 1,484 3.8Crantock Bakery 1,107 2.8Arrow Industrial Group 1,010 2.6Stainton Metal Company 1,002 2.6IG Doors 1,000 2.6Computer Software Group* 994 2.6Envirotec 975 2.5VPTA 942 2.4Direct Valeting 915 2.4LEDA Holdings 825 2.1Warmseal Windows (Newcastle) 818 2.1RBF Industries 783 2.0Crabtree of Gateshead 775 2.0 ------- ------ 16,077 41.4Other venture capital investments 15,141 39.0 ------- ------Total venture capital investments 31,218 80.4Listed fixed-interest investments 6,508 16.7 ------- ------Total fixed asset investments 37,726 97.1Net current assets 1,141 2.9 ------- ------Net assets 38,867 100.0 ------- ------* Quoted on Alternative Investment Market The above summary of results for the six months ended 31 July 2005 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. The figures for the year ended 31 January 2005 have been extracted from thefinancial statements for that year, which have been delivered to the Registrarof Companies; the independent auditors' report on those financial statementsunder Section 235 of the Companies Act 1985 was unqualified. The company is required to comply with the requirements of a number of new UKFinancial Reporting Standards (FRS), which now represent UK Generally AcceptedAccounting Principles (UK GAAP), in presenting its financial statements for theyear ending 31 January 2006. These Standards have been introduced as part ofthe process of aligning UK accounting principles with International AccountingStandards. The unaudited interim financial statements for the six months ended31 July 2005 have been prepared in compliance with the new Standards, with theresult that the accounting policies differ from those used in preparing theannual financial statements for the year ended 31 January 2005 in the followingrespects: • The unrealised gain or loss resulting from the revaluationof fixed asset investments held at fair value is now recognised in the profitand loss account, as required by FRS 25 "Financial Instruments: Disclosure andPresentation" • Quoted investments are valued at bid price rather thanmid-market price, as required by FRS 26 "Financial instruments: Measurement" • Dividends to shareholders are accounted for in the periodin which the company is liable to pay them, rather than in the period in respectof which they are declared, as required by FRS 21 "Events after the BalanceSheet Date". The comparative figures for the six months ended 31 July 2004 and the year ended31 January 2005 have been re-stated accordingly. The effect of the above changes on the reported net assets and net asset valueper share of the company is as follows: 31 July 2005 31 July 2004 31 January 2005 Net asset Net asset Net asset Net value per Net value per Net value per assets share assets share assets share £000 p £000 p £000 pAs reported under previous UK GAAP 38,506 88.2 42,442 95.8 39,693 89.7Adjustment in valuation of quoted investments to bid price (76) (0.2) (65) (0.1) (84) (0.2)Proposed dividends not accounted for until declared and paid 437 1.0 1,772 4.0 663 1.5 ------- ------ ------- ------ ------- ------As reported under revised UK GAAP 38,867 89.0 44,149 99.7 40,272 91.0 ------- ------ ------- ------ ------- ------ The interim dividend of 1.0p per share in respect of the year ending 31 January2006 will be paid on 2 December 2005 to shareholders on the register at theclose of business on 4 November 2005. A copy of the interim report for the six months ended 31 July 2005 is expectedto be posted to shareholders on 7 October 2005 and will be available to thepublic at the registered office of the company at Northumberland House, PrincessSquare, Newcastle upon Tyne NE1 8ER. END This information is provided by RNS The company news service from the London Stock Exchange