Northern 2 VCT PLC. Interim Report 31 July 2003

Transcription

1 2003 Interim Report 31 July 2003

2 Contents Financial Summary 1 Comparative Performance 1 Chairman s Statement 2 Statement of Total Return 4 Balance Sheet 6 Cash Flow Statement 7 Notes to the Financial Statements 8 Investment Portfolio Summary 9 is a Venture Capital Trust (VCT) managed by Northern Venture Managers. The trust was launched in 1999 and has to date raised a total of 46 million from private investors. The trust invests mainly in unquoted venture capital situations and aims to provide high long-term returns to shareholders through a combination of dividend yield and capital growth.

3 Financial Summary Six months ended 31 July Net assets 42,925,000 40,169,000 Net asset value per share 95.5p 89.1p Investment income 1,067, ,000 Net revenue before tax 813, ,000 Revenue return per share 1.3p 1.2p Interim dividend per share 1.0p 1.0p Comparative Performance Movement to 31 July 2003 over: Last 6 months Last 12 months Northern 2 VCT net asset value +1.1% +7.2% Northern 2 VCT share price No change +6.7% FTSE All-Share index +18.8% -0.2% FTSE Small Cap index (excluding investment trusts) +32.4% +10.7% PAGE 1

4 Chairman s Statement share price compared with the FTSE All- Share and Small Cap indices. Investments Four new investments have been completed since 31 January 2003: Dr Matt Ridley The half year to 31 July 2003 has been a period of consolidation for our company. The rate of new investment slackened for several months due to a lack of new venture capital deals in the marketplace, although there has been an upturn in activity since the end of July. The sharp falls in the stock market which occurred in the corresponding period last year have been partly reversed, but our low exposure to quoted equities has again insulated us from the market s volatility. The venture capital portfolio is generally making satisfactory progress, but has required especially close attention from our managers during a period when underlying confidence in the UK economy has remained fragile. Net asset value The net asset value per share at 31 July 2003 was 95.5p, up by 7.2% over the past 12 months and by 1.1% over the six months since 31 January The table on page 1 shows the movements in the company s net asset value and Crabtree of Gateshead ( 640,000) manufacturer of metal printing machinery, Gateshead (March 2003) Survey Inspection Systems ( 195,000) provider of ground and airborne surveying services, Stockton-on-Tees (August 2003) GSM-Central ( 128,000) provision of mobile telephone call routing services, Oxford (September 2003) John Laing Partnership ( 500,000) management buy-out of the social housing division of John Laing plc, Elstree (September 2003) The existing portfolio has made steady progress, with no major valuation movements during the half year. Two failed investments, SMP Multi-Shot and CLM Building Services, were written off having been fully provided against in earlier periods. There were trade sales of T&D Packaging, at a modest surplus included in these accounts but with the likelihood of a substantial additional deferred payment, and Chorus Application Software, which was acquired in a sharefor-share deal by the AiM-listed Computer Software Group. The net realised loss on disposal of investments in the period was 406,000. PAGE 2

5 Chairman s Statement Our quoted venture capital investments achieved little increase in value during the half year, but since 31 July there have been significant share price movements for Alizyme (up 222%), BioFocus (up 35%), PM Group (up 38%) and Computer Software Group (up 125%). The net uplift in value of the quoted venture capital portfolio between 31 July and 9 October was over 1.3 million (equivalent to approximately 2.9p per Northern 2 VCT share). Revenue and dividend The revenue return per share for the half year was 1.3p, compared with 1.2p in the corresponding period to 31 July Total investment income was up by 7.2% to 1,067,000, despite a further fall in interest rates during the period. The directors have declared an unchanged interim dividend of 1.0p per share, which will be paid on 11 December 2003 to shareholders on the register on 7 November Share price There has been very little trading in the company s shares during the past six months and the mid-market share price has remained at 80p throughout the period. A total of 148,900 shares were bought in for cancellation at an average price of 72p. VCT qualifying status Your board monitors closely the company s continuing observance of the Inland Revenue s VCT rules, and receives sixmonthly compliance reports from PricewaterhouseCoopers. Although the rate of new investment during the current year has been slower than we would wish, the level of activity has risen during the past three months. The company s overall qualifying investment position is carefully managed and the board is satisfied that the company s VCT qualifying status has been and will be maintained. Northern Venture Managers Edinburgh Fund Managers Group plc, the parent company of Northern Venture Managers, has recently announced an agreed takeover by Aberdeen Asset Management PLC which is expected to become unconditional by the end of October Your board is following developments closely and will seek to ensure that there is no adverse change to the management of Northern 2 VCT. Prospects Our company has substantial liquid funds available for investment and there are signs that the flow of new deals is beginning to improve. The venture capital portfolio includes some very promising holdings, and it is to be hoped that the recent signs of recovery in the UK economy and the financial markets will prove to be sustainable. Given reasonable conditions we expect to see an increasing number of disposal opportunities as the portfolio continues to mature. Matt Ridley Chairman 10 October 2003 PAGE 3

6 Statement of Total Return (incorporating the Revenue Account) (unaudited) for the six months ended 31 July 2003 Six months ended 31 July 2003 Revenue Capital Total Gains/(losses) on investments Realised on disposals (406) (406) Unrealised revaluation movements Income 1,067 1,067 Investment management fee (156) (470) (626) Other expenses (98) (98) Return/(loss) on ordinary activities before tax Tax on ordinary activities (208) 148 (60) Return/(loss) on ordinary activities after tax Dividends interim (449) (449) final Transfer to/(from) reserves Return per share 1.3p 0.6p 1.9p Dividend per share 1.0p 1.0p PAGE 4

7 Six months ended 31 July 2002 Year ended 31 January 2003 Revenue Capital Total Revenue Capital Total (313) (313) (494) (494) (114) (114) 2,978 2,978 (427) (427) 2,484 2, ,983 1,983 (150) (450) (600) (297) (893) (1,190) (98) (98) (193) (193) 747 (877) (130) 1,493 1,591 3,084 (188) 117 (71) (428) 289 (139) 559 (760) (201) 1,065 1,880 2,945 (451) (451) (451) (451) (677) (677) 108 (760) (652) (63) 1,880 1, p (1.7)p (0.5)p 2.3p 4.2p 6.5p 1.0p 1.0p 2.5p 2.5p PAGE 5

8 Balance Sheet (unaudited) as at 31 July July July January Fixed asset investments Venture capital investments unlisted 21,641 13,482 21,656 listed 1,736 1,579 1,205 Total venture capital investments 23,377 15,061 22,861 Listed fixed-interest investments 15,830 20,225 17,285 Total fixed asset investments 39,207 35,286 40,146 Net current assets 3,718 4,883 2,476 Net assets 42,925 40,169 42,622 Capital and reserves Called-up equity share capital 2,247 2,255 2,254 Share premium 33,761 33,761 33,761 Capital redemption reserve Special reserve 7,825 7,948 7,932 Capital reserve realised (3,001) (1,821) (2,273) unrealised 1,894 (2,180) 912 Revenue reserve Total equity shareholders funds 42,925 40,169 42,622 Net asset value per share 95.5p 89.1p 94.5p PAGE 6

9 Cash Flow Statement (unaudited) for the six months ended 31 July 2003 Six months ended Six months ended Year ended 31 July July January Cash flow statement Net cash inflow from operating activities Taxation Corporation tax paid (125) Financial investment Purchase of investments (4,218) (7,734) (14,365) Sale/repayment of investments 5,751 5,493 10,189 Net cash inflow/(outflow) from financial investment 1,533 (2,241) (4,176) Equity dividends paid (675) (678) (1,129) Cash inflow/(outflow) before use of liquid resources and financing 1,164 (2,581) (4,692) Net cash (outflow)/inflow from management of liquid resources (1,300) 1,500 1,500 Financing Purchase of ordinary shares for cancellation (107) (40) (56) Decrease in cash at bank (243) (1,121) (3,248) Reconciliation of net revenue before tax to net cash flow from operating activities Net revenue from operating activities before tax ,493 (Increase)/decrease in debtors (9) (Decrease)/increase in creditors (28) 35 (8) Management fees charged to capital reserve (470) (450) (893) Net cash inflow from operating activities Reconciliation of movement in net funds 1 February 2003 Cash flows 31 July Cash at bank 2,614 (243) 2,371 Short-term investments 1,300 1,300 Net funds 2,614 1,057 3,671 PAGE 7

10 Notes to the Financial Statements (unaudited) for the six months ended 31 July The calculation of the revenue and capital return per share is based on the return on ordinary activities after tax for the period and on 45,016,052 ordinary shares, being the weighted average number of shares in issue during the period. 2 The interim dividend for the year ending 31 January 2004 will be paid on 11 December 2003 to shareholders on the register at the close of business on 7 November The unaudited financial statements for the six months ended 31 July 2003 do not constitute statutory accounts with the meaning of Section 240 of the Companies Act 1985 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 January 2003 have been extracted from the audited financial statements for that year, which have been delivered to the Registrar of Companies; the independent auditors' report on those financial statements under Section 235 of the Companies Act 1985 was unqualified. 4 Copies of this interim report have been mailed to shareholders and are available to the public at the company's registered office. PAGE 8

11 Investment Portfolio Summary as at 31 July 2003 Company Valuation % of net assets 000 by valuation DMN Installations 3, T J Brent 1, John Fredericks Plastics 1, TFB Group 1, Stainton Metal Company 1, Crantock Bakery 1, Longhirst Group Horncastle Industries Keith Prowse Arrow Industrial Group RBF Industries Crabtree of Gateshead Tolwood Alizyme * Fitzhardinge ** Fifteen largest venture capital investments 17, Other venture capital investments 5, Total venture capital investments 23, Listed fixed-interest investments 15, Total fixed asset investments 39, Net current assets 3, Net assets 42, * Listed on London Stock Exchange ** Traded on Alternative Investment Market PAGE 9

12 Directors Dr Matt Ridley (Chairman) Alastair Conn Michael Denny Christopher Fletcher Professor Sir Frederick Holliday Frank Neale Secretary Christopher Mellor FCA MSI Registered Office Northumberland House Princess Square Newcastle upon Tyne NE1 8ER Telephone: Website: Investment Manager Northern Venture Managers Limited Northumberland House Princess Square Newcastle upon Tyne NE1 8ER Fixed-interest Investment Adviser Chiswell Associates Limited 4 Chiswell Street Finsbury Square London EC1Y 4UP Registrars Lloyds TSB Registrars Scotland PO Box Finance House Orchard Brae Edinburgh EH4 1WR Shareholder helpline: