Northern 2 VCT PLC. Interim Report 31 July 2006

Transcription

1 2006 Northern 2 VCT PLC Interim Report 31 July 2006

2 Contents Financial Summary 1 Chairman s Statement 2 Income Statement 4 Reconciliation of Movements in Shareholders Funds 4 Balance Sheet 6 Cash Flow Statement 7 Notes to the Financial Statements 8 Investment Portfolio Summary 9 Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by Northern Venture Managers. The trust invests mainly in unquoted venture capital holdings and aims to provide high long-term returns to shareholders through a combination of dividend yield and capital growth. Key dates Interim results announced 19 September 2006 Shares quoted ex dividend 1 November 2006 Interim dividend paid (to shareholders on register on 3 November 2006) 1 December 2006

3 Financial Summary Six months ended 31 July Net assets* 41,507,000 38,867,000 Net asset value per share* 84.5p 89.0p Investment income 955, ,000 Return on ordinary activities before tax Revenue 724, ,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 returns to shareholders since launch Dividends per share** 28.9p 23.4p Net asset value plus dividends per share 112.4p 111.4p Share price at end of period 78.0p 78.0p * Before deducting proposed interim dividend **Including proposed interim dividend PAGE 1 Northern 2 VCT PLC Interim Report 2006

4 Chairman s Statement 3.0 million were completed during the 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 Dr Matt Ridley I am pleased to report that the new issue of ordinary shares launched in March 2006 raised a total of 6.3 million before expenses, and I would like to take this opportunity to welcome our new investors. As a result of new investments completed during the period the size of the venture capital portfolio has been maintained at over 75% of total assets, and we intend to continue to invest actively whilst seeking to achieve a higher level of realisations from existing holdings. Net asset value The net asset value per share at 31 July 2006, before providing for the proposed interim dividend of 1.0p per share, was 84.5p. The corresponding figure at 31 January 2006 was 90.4p which, after adjusting for the 2005/06 final dividend of 4.5p per share paid in June 2006, means a reduction of 1.4p over the six month period. Your board has reduced the valuation of several investments to reflect difficult trading conditions, against a background of increases in energy and other costs and the recent upward movement in interest rates. Investments Six new venture capital investments totalling 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 made in existing portfolio companies. Since the end of the half year we have realised our shareholding in AFI Aerial Platforms through a secondary management buyout. Our investment of 347,000 produced income and capital receipts of 1,016,000 in just over two years. Our managers are actively engaged in seeking to exit from a number of other companies and as the unquoted portfolio matures it is important that we achieve a steady turnover of investments so as to generate funds for dividend payments and reinvestment in new holdings. In the quoted venture capital portfolio, Computer Software Group has continued to perform well and is now our largest investment despite some profit-taking in the period. PAGE 2 Northern 2 VCT PLC Interim Report 2006

5 Chairman s Statement Revenue and dividend The revenue return per share for the half year was unchanged at 1.2p, with total investment income marginally up at 955,000. Your board has declared an unchanged interim revenue dividend of 1.0p per share, which will be paid on 1 December 2006 to shareholders on the register on 3 November This takes the cumulative total of dividends declared by the company since launch to 28.9p per share. As in the previous year, no interim capital dividend is proposed but we expect to be able to declare a capital dividend at the year end. The company continues to operate its dividend investment scheme, which enables shareholders to re-invest their dividends in new ordinary shares in the company with 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 dividend re-investment scheme, adding 194,000 to our funds available for investment. A total of 786,017 shares, representing approximately 1.6% of the issued share capital, were bought in the market for cancellation during the half year at an average price of 79p and it remains the board s policy to buy back shares in the market 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 2006 Finance Act will have any impact on the secondary market for VCT shares, but your board is conscious of the importance of market liquidity for shareholders. Together with approximately 70 other VCTs we have recently applied for membership of the Association of Investment Trust Companies (AITC), a step which we believe will play an important role in helping communicate the unique attractions and developing performance record of VCTs to the wider investment community. VCT qualifying status The company has continued to satisfy the qualifying conditions laid down by HM Revenue & Customs for approval as a VCT. Recent legislative changes have tightened the conditions applying to VCTs, and we will continue to work closely with our managers and our tax advisers at PricewaterhouseCoopers LLP to ensure that a comfortable safety margin is maintained in relation to the relevant tests. Prospects After a period of two years with the benefit of 40% income tax relief on new investments in VCTs, the sector is in the process of adapting to the new regime introduced in the 2006 Finance Act. The precise effect of this on future fund-raising prospects is not yet clear but it may be presumed that the volume of funds flowing into VCTs will be significantly lower this year than last. However we have substantial cash resources available for investment, and our venture capital portfolio will continue to be actively managed with the intention of generating gains for distribution as well as funds for re-investment. Dr Matt Ridley Chairman 19 September 2006 PAGE 3 Northern 2 VCT PLC Interim Report 2006

6 Income Statement (unaudited) for the six months ended 31 July 2006 Six months ended 31 July 2006 Revenue Capital Total (Loss)/gain on disposal of investments held at fair value (107) (107) Unrealised adjustments to fair value of investments (929) (929) (1,036) (1,036) Income Investment management fee (119) (357) (476) Other expenses (112) (112) Return on ordinary activities before tax 724 (1,393) (669) Tax on return on ordinary activities (181) 113 (68) Return on ordinary activities after tax 543 (1,280) (737) Return per share 1.2p (2.7)p (1.5)p The total column of this statement is the profit and loss account of the company. The supplementary revenue return and capital return columns have been prepared under guidance published by the Association of Investment Trust Companies. There are no recognised gains or losses other than those disclosed in the income statement. All items in the above statement derive from continuing operations. Reconciliation of Movements in Shareholders Funds (unaudited) for the six months ended 31 July 2006 Six months ended 31 July Equity shareholders funds at 1 February ,675 Return on ordinary activities after tax (737) Dividends recognised in the period (1,915) Net proceeds of share issues 6,123 Shares purchased for cancellation (624) Expenses charged to capital reserve (15) Equity shareholders funds at 31 July ,507 PAGE 4 Northern 2 VCT PLC Interim Report

7 Six months ended 31 July 2005 Year ended 31 January 2006 Revenue Capital Total Revenue Capital Total (388) (388) (718) (718) (601) (601) (123) (123) ,226 2,226 (146) (437) (583) (287) (861) (1,148) (108) (108) (203) (203) 694 (1,038) (344) 1,736 (984) 752 (170) (455) 352 (103) 524 (820) (296) 1,281 (632) p (1.9)p (0.7)p 2.9p (1.4)p 1.5p Six months ended Year ended 31 July January ,272 40,272 (296) 649 (664) (1,092) (503) (1,251) 38,867 38,675 PAGE 5 PAGE Northern 5 Northern 2 VCT PLC 2 VCT Interim PLC Report Interim 2006 Report 2005

8 Balance Sheet (unaudited) as at 31 July July July January Fixed 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 29,807 Quoted fixed-interest investments 8,646 6,508 6,029 Total fixed asset investments 40,044 37,726 35,836 Current assets Debtors Cash at bank ,664 1,588 1,335 3,073 Creditors (amounts falling due within one year) (125) (194) (234) 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 2,139 Share premium 24,907 34,104 34,141 Capital redemption reserve Capital reserve realised 11,539 1, unrealised 1, Revenue reserve Total equity shareholders funds 41,507 38,867 38,675 Net asset value per share 84.5p 89.0p 90.4p PAGE 6 Northern 2 VCT PLC Interim Report 2006

9 Cash Flow Statement (unaudited) for the six months ended 31 July 2006 Six months ended Six months ended Year ended 31 July July January Net cash inflow from operating activities Taxation 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) 258 Equity dividends paid (1,915) (664) (1,092) Net cash (outflow)/inflow before financing (7,311) (2,433) 23 Financing Issue of ordinary shares 6, Share 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 tax to net cash flow from operating activities Return on ordinary activities before tax (669) (344) 752 Loss/(gain) on disposal of investments held at fair value 107 (117) 388 Unrealised adjustments to fair value of investments (265) (Increase)/decrease in debtors (93) 2 89 (Decrease)/increase in creditors (7) 5 8 Net cash inflow from operating activities Analysis of movement in net funds 1 February 2006 Cash flows 31 July Cash at bank 2,664 (1,812) 852 PAGE 7 Northern 2 VCT PLC Interim Report 2006

10 Notes to the Financial Statements (unaudited) for the six months ended 31 July The financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments, and in accordance with UK Generally Accepted Accounting Practice (UK GAAP). Where presentational guidance set out in the Statement of Recommended Practice (SORP) "Financial Statements of Investment Trust Companies", revised in December 2005, is consistent with the requirements of UK GAAP, the directors have sought to prepare the financial statements on a consistent basis compliant with the recommendations of the SORP. 2 The calculation of return per share is based on the return on ordinary activities after tax for the six months ended 31 July 2006 and on 47,043,653 ( ,022,616) ordinary shares, being the weighted average number of shares in issue during the period. 3 The calculation of net asset value per share is based on the net assets at 31 July 2006 divided by the 49,130,414 ( ,667,697) ordinary shares in issue at that date. 4 The proposed interim dividend of 1.0p per share for the year ending 31 January 2007 will be paid on 1 December 2006 to shareholders on the register at the close of business on 3 November The unaudited interim financial statements for the six months ended 31 July 2006 do not constitute statutory accounts within 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 2006 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. 6 Copies of this interim report have been mailed to shareholders and are available to the public at the company's registered office. PAGE 8 Northern 2 VCT PLC Interim Report 2006

11 Investment Portfolio Summary as at 31 July 2006 Company Cost Valuation % of net assets by value Longhirst Group 1,440 1, Computer Software Group* 611 1, DMN 1,145 1, Envirotec 975 1, IG Doors 1,000 1, John Laing Partnership 507 1, Crantock Bakery 1,107 1, Arrow Industrial Group 735 1, Nightingales Holdings Liquidlogic AFI Aerial Platforms Alaric Systems Touchstone Asset Management Pivotal Laboratories Holdings TFB Group Fifteen largest venture capital investments 12,802 17, Other venture capital investments 16,987 14, Total venture capital investments 29,789 31, Quoted fixed-interest investments 8,663 8, Total fixed asset investments 38,452 40, Net current assets 1, Net assets 41, * Quoted on the Alternative Investment Market PAGE 9 Northern 2 VCT PLC Interim Report 2006

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 Sarasin Chiswell Juxon House 100 St Paul s Churchyard London EC4M 8BU Registrars Lloyds TSB Registrars The Causeway Worthing BN99 6DA Shareholder helpline: