2009 30 Northern Investors Company PLC Half-yearly Financial Report September 2009
Northern Investors Company PLC is an investment trust managed by NVM Private Equity Limited. Launched in 1984 and listed on the London Stock Exchange since 1990, the trust invests mainly in unquoted venture capital holdings and aims to provide high long-term returns to shareholders through a combination of capital growth and dividend yield. Financial summary 1 Half-yearly management report 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
Financial Summary (unaudited) Six months ended 30 September 2009 2008 Net assets 50.3m 49.7m Net asset value per share 259.6p 255.9p Mid-market share price 186.0p 156.0p Share price discount to net asset value 28.4% 39.0% Return per share after tax Revenue 2.9p 3.9p Capital 17.9p (40.3)p Total 20.8p (36.4)p Interim dividend per share declared in respect of the period 2.2p 2.2p Key dates Half-yearly results announced 9 November 2009 Shares quoted ex dividend 2 December 2009 "On record" date for interim dividend 4 December 2009 Interim dividend paid 8 January 2010 Northern Investors Company PLC Half-yearly Financial Report 2009 1
Half-yearly Management Report to Shareholders for the six months ended 30 September 2009 During the past six months our company has continued to operate against a background of economic recession and wide fluctuations in the financial markets. We are therefore pleased to be able to report an increase in net asset value (NAV) per share, a maintained interim dividend, a further strengthening of the company s cash reserves through several successful realisations and a strong recovery in the share price. Net asset value and share price Table 1 shows the NAV per share, mid-market share price and discount as at 30 September 2009 compared with the corresponding figures at 31 March 2009 and 30 September 2008. The steep fall in the Northern Investors share price during late 2008 and early 2009 appears to have been largely due to a change in market sentiment towards private equity investment trusts, driven by concerns about investment valuations and unfunded investment commitments. Over the past six months, however, the share price has almost doubled, perhaps reflecting a better appreciation by the market of our conservative valuation methodology and strong cash position. The directors have continued to take a cautious view in assessing the value of the unquoted investment portfolio, notwithstanding the remarkable upturn in the quoted markets over the past six months, and as a result the recent increase in NAV has been only modest. Table 2 shows the movement in NAV and share price over the latest six and 12 month periods compared with the movement in the FTSE All-Share index. Revenue and dividend Investment income for the half year was lower than in the corresponding period, reflecting the continuing depressed level of interest rates as well as the present inability of some investee companies fully to service their loans whilst under pressure from severe bank lending covenants. Consequently the revenue return per share fell to 2.9p (corresponding period 3.9p). The interim dividend is maintained at 2.2p per share, payable on 8 January 2010 to shareholders on the register on 4 December 2009. Investment portfolio The period under review has seen a continuation of the strong flow of investment realisations which began in the preceding year, with sales proceeds in the period totalling 7.9 million. The most significant event was the sale of DxS, the Manchester-based molecular diagnostics business which NVM funds backed as an early-stage investment in 2001. The sale to Qiagen NV in September 2009 produced 5.9 million in cash from our original investment of 841,000, with the possibility of further payments over the next three years dependent on future performance overall an outstanding result. Our holding in public sector software developer Liquidlogic was sold to the AIM-quoted System C Healthcare for 1.2 million, compared with an original cost (net of previous loan stock repayments) of 175,000. Subsequent to the period end we have also exited from the occupational healthcare group Abermed at a price reflected in the carrying value at 30 September 2009. Table 1: NAV, share price and discount 30 September 31 March 30 September 2009 2009 2008 NAV per share 259.6p 243.9p 255.9p Share price 186.0p 96.0p 156.0p Share price discount to NAV 28.4% 60.6% 39.0% Table 2: Relative performance to 30 September 2009 NAV per share Share price FTSE All-Share Past six months +6.4% +93.8% +32.8% Past 12 months +1.4% +19.2% +6.1% 2 Northern Investors Company PLC Half-yearly Financial Report 2009
Peter Haigh Chairman There were no significant additions to the portfolio during the period, although our managers report an upturn recently in the volume and quality of enquiries received. It has been our previous experience that attractively-priced investment opportunities can become available in the aftermath of recession, and following the recent series of realisations we expect the emphasis to turn over the next 12 months to making new additions to the portfolio. We are also prepared to provide additional funding to existing portfolio companies where appropriate, particularly in those cases where bank financing is not available on acceptable terms. Corporate strategy At the annual general meeting in June 2009, the directors asked shareholders to approve their strategy of postponing the next continuation vote until the 2012 meeting, with subsequent resolutions at the customary five-yearly interval. This proposal was strongly endorsed, giving us a helpful additional visibility at a time when long-term decision-making is inevitably subject to a measure of uncertainty. On behalf of the board I would like to thank shareholders for their ongoing support. Risk management The board carries out a regular review of the risk environment in which the company operates. There has been no significant change to the key risks discussed on page 9 of the annual report for the year ended 31 March 2009, including those resulting from the size and relative illiquidity of the unquoted and AIM-quoted investments held by the company. Prospects A year ago we noted that conditions in the UK economy would probably worsen further before any improvement became apparent. This expectation has subsequently been fulfilled and the search for the UK economy s green shoots continues to be largely frustrated. Nevertheless our managers have been successful in reaping some excellent gains. The next phase of the cycle is likely to see a move to restocking the portfolio with a new vintage of investments, carefully redeploying the substantial liquidity which has been built up over the past two years. There are few short cuts available in this process, but we believe that the consistent application of our established approach to selection and management of venture capital holdings will continue to produce good returns for shareholders in the future. On behalf of the Board Peter Haigh Chairman Northern Investors Company PLC Half-yearly Financial Report 2009 3
Income Statement (unaudited) for the six months ended 30 September 2009 Six months ended 30 September 2009 Revenue Capital Total 000 000 000 Gain on disposal of investments 1,766 1,766 Movements in fair value of investments 1,922 1,922 3,688 3,688 Income 970 970 Investment management fee (124) (289) (413) Recoverable VAT Other expenses (172) (172) Return on ordinary activities before tax 674 3,399 4,073 Tax on ordinary activities (117) 81 (36) Return on ordinary activities after tax 557 3,480 4,037 Return per share 2.9p 17.9p 20.8p The Total column of this statement is the profit and loss account of the company. The supplementary Revenue and Capital columns have been prepared in accordance with guidance published by the Association of Investment 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 30 September 2009 Six months ended 30 September 2009 000 Equity shareholders' funds at 1 April 2009 47,297 Return on ordinary activities after tax 4,037 Dividends recognised in the period (989) Shares purchased for cancellation Equity shareholders' funds at 30 September 2009 50,345 4 Northern Investors Company PLC Half-yearly Financial Report 2009
Six months ended 30 September 2008 Year ended 31 March 2009 Revenue Capital Total Revenue Capital Total 000 000 000 000 000 000 1,679 1,679 2,483 2,483 (9,251) (9,251) (12,387) (12,387) (7,572) (7,572) (9,904) (9,904) 1,271 1,271 2,267 2,267 (152) (354) (506) (303) (707) (1,010) 115 115 (178) (178) (325) (325) 941 (7,926) (6,985) 1,754 (10,611) (8,857) (192) 99 (93) (370) 198 (172) 749 (7,827) (7,078) 1,384 (10,413) (9,029) 3.9p (40.3)p (36.4)p 7.1p (53.6)p (46.5)p Six months ended Year ended 30 September 2008 31 March 2009 000 000 57,755 57,755 (7,078) (9,029) (971) (1,399) (30) 49,706 47,297 Northern Investors Company PLC Half-yearly Financial Report 2009 5
Balance Sheet (unaudited) as at 30 September 2009 30 September 2009 30 September 2008 31 March 2009 000 000 000 Fixed asset investments Unquoted 28,279 36,462 32,079 Quoted 349 736 333 Total fixed asset investments 28,628 37,198 32,412 Current assets Investments 232 906 2,427 Debtors 50 675 323 Cash and deposits 21,770 11,214 12,420 22,052 12,795 15,170 Creditors (amounts falling due within one year) (335) (287) (285) Net current assets 21,717 12,508 14,885 Net assets 50,345 49,706 47,297 Capital and reserves Called-up equity share capital 4,849 4,856 4,849 Share premium 12,694 12,694 12,694 Capital redemption reserve 306 299 306 Capital reserve 32,962 30,631 31,582 Revaluation reserve (2,424) (957) (4,524) Revenue reserve 1,958 2,183 2,390 Total equity shareholders funds 50,345 49,706 47,297 Net asset value per share 259.6p 255.9p 243.9p 6 Northern Investors Company PLC Half-yearly Financial Report 2009
Cash Flow Statement (unaudited) for the six months ended 30 September 2009 Six months ended Six months ended Year ended 30 September 2009 30 September 2008 31 March 2009 000 000 000 Net cash inflow from operating activities 672 835 1,580 Taxation Corporation tax paid (98) Financial investment Purchase of investments (379) (3,831) (5,701) Sale/repayment of investments 7,851 11,504 15,912 Net cash inflow from financial investment 7,472 7,673 10,211 Equity dividends paid (989) (971) (1,399) Net cash inflow before use of liquid resources and financing 7,155 7,537 10,294 Financing Re-purchase of ordinary shares for cancellation (30) Net cash inflow before use of liquid resources 7,155 7,537 10,264 Net cash inflow/(outflow) from management of liquid resources 2,195 (45) (1,566) Increase in cash at bank 9,350 7,492 8,698 Reconciliation of return before tax to net cash flow from operating activities Revenue return on ordinary activities before tax 674 941 1,754 Decrease in debtors 273 398 666 Increase/(decrease) in creditors 14 (150) (133) Management fees charged to capital reserve (289) (354) (707) Net cash inflow from operating activities 672 835 1,580 Reconciliation of movement in net funds 1 April 2009 Cash flows 30 Sept 2009 000 000 000 Short-term investments 2,427 (2,195) 232 Cash at bank 12,420 9,350 21,770 Net funds 14,847 7,155 22,002 Northern Investors Company PLC Half-yearly Financial Report 2009 7
Notes to the Financial Statements (unaudited) for the six months ended 30 September 2009 1 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 (GAAP). Where presentational guidance set out in the Statement of Recommended Practice (SORP) "Financial Statements of Investment Trust Companies", revised in January 2009, 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 the revenue and capital return per share is based on the return on ordinary activities after tax for the period and on 19,395,440 (2008 19,425,440) 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 the end of the period divided by the 19,395,440 (2008 19,425,440) ordinary shares in issue at that date. 4 The interim dividend of 2.2p per share for the year ending 31 March 2010 will be paid on 8 January 2010 to shareholders on the register on 4 December 2009. 5 The unaudited interim financial statements for the six months ended 30 September 2009 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 March 2009 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. The half-yearly financial statements have been prepared on the basis of the accounting policies set out in the annual financial statements for the year ended 31 March 2009. 6 Each of the directors confirms that to the best of his or her knowledge the half-yearly financial statements have been prepared in accordance with the Statement "Half-yearly financial reports" issued by the UK Accounting Standards Board and the half-yearly financial report includes a fair review of the information required by (a) DTR 4.2.7R of the "Disclosure and Transparency Rules", being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year, and (b) DTR 4.2.8R of the "Disclosure and Transparency Rules", being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so. 7 Copies of this half-yearly report have been mailed to shareholders and are available to the public at the company's registered office, and on the NVM Private Equity Limited website, www.nvm.co.uk. 8 Northern Investors Company PLC Half-yearly Financial Report 2009
Investment Portfolio Summary as at 30 September 2009 Cost Valuation % of net assets 000 000 by value Weldex (International) Offshore 200 4,880 9.7 Axial Systems Holdings 2,311 2,542 5.1 Britspace Holdings 3,603 2,205 4.4 Paladin Group 1,407 2,066 4.1 Crantock Bakery 1,061 1,782 3.5 Envirotec 1,008 1,772 3.5 Optilan Group 1,900 1,558 3.1 Promanex Group Holdings 1,974 1,480 2.9 Abermed 800 1,432 2.8 CloserStill Holdings 1,234 1,234 2.5 Ten largest investments 15,498 20,951 41.6 Arleigh International 480 1,010 2.0 Longhirst Venues 397 998 2.0 IG Doors 1,185 889 1.8 S&P Coil Products 510 880 1.8 Promatic Group 968 726 1.4 Wear Inns 762 643 1.3 e-know.net 480 623 1.2 Direct Valeting 764 573 1.1 CGI Group Holdings 1,723 431 0.9 Alaric Systems 1,618 350 0.7 Twenty largest investments 24,385 28,074 55.8 Other investments 6,667 554 1.1 Total fixed asset investments 31,052 28,628 56.9 Net current assets 21,717 43.1 Net assets 50,345 100.0 Northern Investors Company PLC Half-yearly Financial Report 2009 9
Company Information Directors Peter Haigh (Chairman) John Barnsley Michael Denny Frank Neale Mark Nicholls Sarah Stewart Secretary Christopher Mellor FCA MSI Registered Office Northumberland House Princess Square Newcastle upon Tyne NE1 8ER Telephone: 0191 244 6000 E-mail: nic@nvm.co.uk Website: www.nvm.co.uk Designed and produced by The Roundhouse Newcastle upon Tyne Investment Manager NVM Private Equity Limited Northumberland House Princess Square Newcastle upon Tyne NE1 8ER Registrars Equiniti Limited Aspect House Spencer Road Lancing BN99 6DA Shareholder helpline: 0871 384 2030 Investors can buy shares in the company through regular savings, ISA and pension plans offered by Aberdeen Asset Managers. For further information call the Aberdeen Investors Services Team on 0500 00 00 40 or visit the Aberdeen investment trust website at www.invtrusts.co.uk Northern Investors Company PLC Northumberland House Princess Square Newcastle upon Tyne NE1 8ER Tel: 0191 244 6000 Fax: 0191 244 6001 E-mail: nic@nvm.co.uk www.nvm.co.uk