Northern 2 Vct Regulatory News (NTV)

19 Sep 2006 07:00

Northern 2 VCT PLC19 September 2006 19 SEPTEMBER 2006 NORTHERN 2 VCT PLC UNAUDITED INTERIM RESULTSFOR THE SIX MONTHS ENDED 31 JULY 2006 Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by Northern VentureManagers. The trust invests mainly in unquoted venture capital holdings andaims to provide high long-term returns to shareholders through a combination ofdividend yield and capital growth. Financial highlights:(comparative figures as at 31 July 2005 in italics) 2006 2005 • Net assets* £41,507,000 £38,867,000 • Net asset value per share* 84.5p 89.0p • Investment income £955,000 £948,000 • Return on ordinary activities before tax Revenue £724,000 £694,000 Capital £(1,393,000) £(1,038,000) Total £(669,000) £(344,000) • Return per share Revenue 1.2p 1.2p Capital (2.7)p (1.9)p Total (1.5)p (0.7)p • Interim dividend per share proposed in respect of the period Revenue 1.0p 1.0p Capital - - Total 1.0p 1.0p • Cumulative return to shareholders since launch Dividends per share** 28.9p 23.4p Net asset value plus dividends 112.4p 111.4p • Share price at end of period 78.0p 78.0p * Before deducting proposed interim dividend **Including proposed interim dividend For further information, please contact:Northern Venture Managers LimitedAlastair Conn, Managing Director 0191 244 6000Website: www.nvm.co.ukLansons CommunicationsAlison Boucher 020 7294 3616 NORTHERN 2 VCT PLCCHAIRMAN'S STATEMENT The Chairman of Northern 2 VCT PLC, Dr Matt Ridley, included the followingpoints in his statement to shareholders: I am pleased to report that the new issue of ordinary shares launched in March2006 raised a total of £6.3 million before expenses, and I would like to takethis opportunity to welcome our new investors. As a result of new investmentscompleted during the period the size of the venture capital portfolio has beenmaintained at over 75% of total assets, and we intend to continue to investactively whilst seeking to achieve a higher level of realisations from existingholdings. Net asset value The net asset value per share at 31 July 2006, before providing for the proposedinterim dividend of 1.0p per share, was 84.5p. The corresponding figure at 31January 2006 was 90.4p which, after adjusting for the 2005/06 final dividend of4.5p per share paid in June 2006, means a reduction of 1.4p over the six monthperiod. Your board has reduced the valuation of several investments to reflectdifficult trading conditions, against a background of increases in energy andother costs and the recent upward movement in interest rates. Investments Six new venture capital investments totalling £3.0 million were completed duringthe half year: • Intercytex Group (£250,000) - developer of cell therapy products for woundcare and aesthetic medicine, Manchester • Adept Telecom (£235,000) - provider of voice telephone services, Tunbridge Wells • Wear Inns (£375,000) - owner of an estate of managed public houses, Newcastle upon Tyne • Twenty (£198,000) - marketing services group, Northampton • Nightingales Holdings (£993,000) - mail order retailer of women's clothing, Craven Arms • Touchstone Asset Management (£900,000) - provider of property management services, Bath Several small follow-on investments totalling approximately £200,000 were madein existing portfolio companies. Since the end of the half year we have realised our shareholding in AFI AerialPlatforms through a secondary management buyout. Our investment of £347,000produced income and capital receipts of £1,016,000 in just over two years. Ourmanagers are actively engaged in seeking to exit from a number of othercompanies and as the unquoted portfolio matures it is important that we achievea steady turnover of investments so as to generate funds for dividend paymentsand re-investment in new holdings. In the quoted venture capital portfolio,Computer Software Group has continued to perform well and is now our largestinvestment overall despite some profit-taking in the period. Revenue and dividend The revenue return per share for the half year was unchanged at 1.2p, with totalinvestment income marginally up at £955,000. Your board has declared anunchanged interim revenue dividend of 1.0p per share, which will be paid on 1December 2006 to shareholders on the register on 3 November 2006. This takesthe cumulative total of dividends declared by the company since launch to 28.9pper share. As in the previous year, no interim capital dividend is proposed butwe expect to be able to declare a capital dividend at the year end. 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 (now at 30%)on the amount re-invested. Share price The mid-market share price fell slightly from 80p to 78p during the period.226,023 new shares were issued in June under the company's dividendre-investment scheme, adding £194,000 to our funds available for investment. Atotal of 786,017 shares, representing approximately 1.6% of the issued sharecapital, were bought in the market for cancellation during the half year at anaverage price of 79p and it remains the board's policy to buy back shares in themarket at a discount of not more than 10% to net asset value. It is too soon to tell whether the changes to VCT tax reliefs in the 2006Finance Act will have any impact on the secondary market for VCT shares, butyour board is conscious of the importance of market liquidity for shareholders.Together with approximately 70 other VCTs we have recently applied formembership of the Association of Investment Trust Companies (AITC), a step whichwe believe will play an important role in helping communicate the uniqueattractions and developing performance record of VCTs to the wider investmentcommunity. VCT qualifying status The company has continued to satisfy the qualifying conditions laid down by HMRevenue & Customs for approval as a VCT. Recent legislative changes havetightened the conditions applying to VCTs, and we will continue to work closelywith our managers and our tax advisers at PricewaterhouseCoopers LLP to ensurethat a comfortable safety margin is maintained in relation to the relevanttests. Prospects After a period of two years with the benefit of 40% income tax relief on newinvestments in VCTs, the sector is in the process of adapting to the new regimeintroduced in the 2006 Finance Act. The precise effect of this on futurefund-raising prospects is not yet clear but it may be presumed that the volumeof funds flowing into VCTs will be significantly lower this year than last.However we have substantial cash resources available for investment, and ourventure capital portfolio will continue to be actively managed with theintention of generating gains for distribution as well as funds forre-investment. Dr Matt RidleyChairman The unaudited interim financial statements for the six months ended 31 July 2006are set out below. INCOME STATEMENT (unaudited) for the six months ended 31 July 2006 Six months ended 31 July 2006 Six months ended 31 July 2005 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000(Loss)/gain on disposal of investments held at fair value - (107) (107) - 117 117Unrealised adjustments to fair value of investments - (929) (929) - (718) (718) ------ ------ ------ ------ ------ ------ - (1,036) (1,036) - (601) (601)Income 955 - 955 948 - 948Investment management fee (119) (357) (476) (146) (437) (583)Other expenses (112) - (112) (108) - (108) ------ ------ ------ ------ ------ ------Return on ordinary activities before tax 724 (1,393) (669) 694 (1,038) (344)Tax on return on ordinary activities (181) 113 (68) (170) 218 48 ------ ------ ------ ------ ------ ------Return on ordinary activities after tax 543 (1,280) (737) 524 (820) (296) ------ ------ ------ ------ ------ ------Return per share 1.2p (2.7)p (1.5)p 1.2p (1.9)p (0.7)p Year ended 31 January 2006 Revenue Capital Total £000 £000 £000Loss on disposal of investments held at fair value - (388) (388)Unrealised adjustments to fair value of investments - 265 265 ------ ------ ------ - (123) (123)Income 2,226 - 2,226Investment management fee (287) (861) (1,148)Other expenses (203) - (203) ------ ------ ------Return on ordinary activities before tax 1,736 (984) 752Tax on return on ordinary activities (455) 352 (103) ------ ------ ------Return on ordinary activities after tax 1,281 (632) 649 ------ ------ ------Return per share 2.9p (1.4)p 1.5p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (unaudited) for the six months ended 31 July 2006 Six months Six months Year ended ended ended 31 July 2006 31 July 2005 31 January 2006 £000 £000 £000Equity shareholders' funds at 1 38,675 40,272 40,272February 2006Return on ordinary activities after tax (737) (296) 649Dividends recognised in the period (1,915) (664) (1,092)Net proceeds of share issues 6,123 58 97Shares purchased for cancellation (624) (503) (1,251)Expenses charged to capital reserve (15) - - ------- ------- -------Equity shareholders' funds at 31 July 41,507 38,867 38,6752006 ------- ------- ------- BALANCE SHEET (unaudited) as at 31 July 2006 31 July 2006 31 July 2005 31 January 2006 £000 £000 £000Fixed asset investments held at fair value:Venture capital investments Unquoted 26,356 26,854 25,259 Quoted 5,042 4,364 4,548 ------- ------- -------Total venture capital investments 31,398 31,218 29,807Quoted fixed-interest investments 8,646 6,508 6,029 ------- ------- -------Total fixed asset investments 40,044 37,726 35,836 ------- ------- -------Current assets: Debtors 736 418 409 Cash at bank 852 917 2,664 ------- ------- ------- 1,588 1,335 3,073Creditors (amounts falling due within one (125) (194) (234)year) ------- ------- -------Net current assets 1,463 1,141 2,839 ------- ------- ------- Net assets 41,507 38,867 38,675 ------- ------- ------- Capital and reserves:Called-up equity share capital 2,457 2,183 2,139Share premium 24,907 34,104 34,141Capital redemption reserve 182 96 142Capital reserve - realised 11,539 1,112 351Capital reserve - unrealised 1,592 775 977Revenue reserve 830 597 925 ------- ------- -------Total equity shareholders' funds 41,507 38,867 38,675 ------- ------- -------Net asset value per share 84.5p 89.0p 90.4p CASH FLOW STATEMENT (unaudited) for the six months ended 31 July 2006 Six months ended Six months ended Year ended 31 July 2006 31 July 2005 31 January 2006 £000 £000 £000 £000 £000 £000Net cash inflow from operating activities 267 264 972Taxation:Corporation tax paid (185) - (115)Financial investment:Purchase of investments (8,288) (4,196) (6,293)Sale/repayment of investments 2,810 2,163 6,551 ------ ------ ------Net cash (outflow)/inflow from financial investment (5,478) (2,033) 258Equity dividends paid (1,915) (664) (1,092) ------ ------ ------Net cash (outflow)/inflow before financing (7,311) (2,433) 23Financing:Issue of ordinary shares 6,488 68 112Share issue expenses (365) (10) (15)Purchase of ordinary shares for cancellation (624) (503) (1,251) ------ ------ ------Net cash inflow/(outflow) from financing 5,499 (445) (1,154) ------ ------ ------Decrease in cash at bank (1,812) (2,878) (1,131) ------ ------ ------ Reconciliation of return before taxto net cash flow from operatingactivities Return on ordinary activities before tax (669) (344) 752Loss/(gain) on disposal of investments held at fair value 107 (117) 388Unrealised adjustments to fair value of investments 929 718 (265)(Increase)/decrease in debtors (93) 2 89(Decrease)/increase in creditors (7) 5 8 ------ ------ ------Net cash inflow from operating activities 267 264 972 ------ ------ ------ Analysis of movement in net funds 1 February 2006 Cash flows 31 July 2006 £000 £000 £000Cash at bank 2,664 (1,812) 852 ------ ------ ------ INVESTMENT PORTFOLIO SUMMARY as at 31 July 2006 Cost Valuation % of net assets £000 £000 by valuationVenture capital investments:Longhirst Group 1,440 1,699 4.1Computer Software Group* 611 1,575 3.8DMN 1,145 1,471 3.5Envirotec 975 1,467 3.5IG Doors 1,000 1,387 3.3John Laing Partnership 507 1,119 2.7Crantock Bakery 1,107 1,107 2.7Arrow Industrial Group 735 1,061 2.6Nightingales Holdings 993 993 2.4Liquidlogic 564 985 2.4AFI Aerial Platforms 347 934 2.2Alaric Systems 921 921 2.2Touchstone Asset Management 900 900 2.2Pivotal Laboratories Holdings 857 857 2.1TFB Group 700 829 2.0 ------- ------- ------Fifteen largest venture capital investments 12,802 17,305 41.7Other venture capital investments 16,987 14,093 34.0 ------- ------- ------Total venture capital investments 29,789 31,398 75.7Quoted fixed-interest investments 8,663 8,646 20.8 ------- ------- ------Total fixed asset investments 38,452 40,044 96.5 -------Net current assets 1,463 3.5 ------- ------Net assets 41,507 100.0 ------- ------*Quoted on Alternative Investment Market The above summary of results for the six months ended 31 July 2006 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 2006 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 proposed interim dividend of 1.0p per share for the year ending 31 January2007 will be paid on 1 December 2006 to shareholders on the register at theclose of business on 3 November 2006. A copy of the interim report for the six months ended 31 July 2006 is expectedto be posted to shareholders on 29 September 2006 and will be available to thepublic at the registered office of the company at Northumberland House, PrincessSquare, Newcastle upon Tyne NE1 8ER. ENDS This information is provided by RNS The company news service from the London Stock Exchange