Contents 1 Half-Yearly Financial Report to Stock Retirement Fund in UK

Transcription

1 Northern 2VCT PLC Half-yearly financial report 30 September

2 Northern 2 VCT is a Venture Capital Trust (VCT) managed by NVM Private Equity. It invests mainly in unquoted venture capital holdings and aims to provide high long-term tax-free returns to shareholders through a combination of dividend yield and capital growth. Contents 1 Financial summary 2 Half-yearly management report 4 Income statement 4 Reconciliation of movements in shareholders' funds 6 Balance sheet 7 Cash flow statement 8 Notes to the financial statements 9 Investment portfolio summary

3 Financial summary Six months ended 30 September 31 July Net assets 45.1m 43.3m Net asset value per share 78.5p 76.7p Return per share Revenue 1.3p 1.1p Capital 2.1p 1.0p Total 3.4p 2.1p Interim dividend per share declared in respect of the period 2.0p 2.0p Cumulative return to shareholders since launch Net asset value per share 78.5p 76.7p Dividends paid per share* 56.9p 50.4p Net asset value plus dividends paid per share 135.4p 127.1p Share price at end of period 67.5p 64.5p Share price discount to net asset value 14.0% 15.9% *Excluding interim dividend payable on 6 January 2012 Key dates Half-yearly results announced 1 November 2011 Shares quoted ex dividend 2 November 2011 Interim dividend paid (to shareholders on register on 4 November 2011) 6 January 2012 Northern 2 VCT PLC Half-yearly financial report 30 September

4 Half-yearly management report for the six months ended 30 September 2011 Results and dividend The unaudited net asset value (NAV) per share at 30 September 2011, after deducting the 2010/11 second interim and final dividends totalling 4.5p per share paid in July 2011, was 78.5p (31 March p). The return per share for the period before dividends, as shown in the income statement, was 3.4p compared with 2.1p in the six months to 31 July In a period characterised by turbulence and erosion of value in the economy and financial markets, this may be seen as an encouraging result. By comparison the FTSE All-Share index fell by 13.5% over the six months. Investment income for the period amounted to 1.27 million, a 25% increase over the corresponding period, having benefitted from a non-recurring receipt of 0.5 million from Promanex Group Holdings as mentioned below. The revenue return per share rose from 1.1p to 1.3p. The board has declared an unchanged interim dividend of 2.0p per share, which will be paid on 6 January 2012 to shareholders on the register on 4 November It remains the board s objective to maintain the total annual dividend at not less than 5.5p per share, a level of distribution which has now been achieved for seven successive financial years despite the steep drop in market interest rates, thus providing a highly attractive and consistent tax-free yield to our shareholders. Investments During the six months ended 30 September 2011 the company completed an investment of 988,000 in Tinglobal Holdings, a Cirencester-based supplier of refurbished mid-range computer equipment, as well as making small additional investments in two existing portfolio companies. This took the amount invested since the beginning of 2011 to over 4 million, with further investments totalling 3 million approved and awaiting completion subject to due diligence. It was announced in August 2011 that the company s investment in Promanex Group Holdings, the support services and facilities management contractor, had been sold to Costain Group PLC. Cash totalling 2.6 million was received at completion, comprising 2.1 million for the sale of the investment and 0.5 million of accrued investment income not previously recognised in the financial statements. Although the gain realised over the original cost of the holding was only some 0.4 million, this was ultimately a pleasing outcome to an investment which had faced considerable difficulties during our four year period of ownership. A further 0.8 million was received by way of deferred proceeds from the sale of DxS in September Many of the companies in the venture capital portfolio have made encouraging progress during the past six months, especially when viewed against the adverse market conditions. Proposed tender offer and share issue On23September2011yourdirectorssenttoshareholders a circular containing outline proposals for a tender offer to re-purchase 10% of the company s issued share capital and a public offer of new ordinary shares. Enabling resolutions were passed at a general meeting of shareholders held on 20 October 2011, including a resolution extending the life of the company by postponing the next continuation vote until the 2017 annual general meeting. It is expected that the following documents will be published during November 2011: a circular to shareholders setting out details of the terms and conditions of the tender offer and the procedure to be followed by shareholders who wish to participate. It is envisaged that the company will offer to re-purchase 10% of the company s issued ordinary shares at a price of 74.2p, representing a 3% discount to the unaudited NAV of 78.5p as at 30 September 2011, net of the interim dividend of 2.0p per share payable on 6 January Shareholders will be entitled to have 10% (or such lesser proportion as they choose) of their shareholding purchased by the company, and may offer to sell in excess of 10% of their shares on the basis that some shareholders may not wish to participate in the tender offer, in which case any entitlements not taken up will be reallocated on a pro rata basis to shareholders making excess applications. Applications under the tender offer must be made by 6 January 2012 and cash proceeds will be paid to shareholders by 13 January Northern 2 VCT PLC Half-yearly financial report 30 September 2011

5 David Gravells Chairman a prospectus in relation to the proposed issue of new shares. It is expected that up to 15 million (before expenses) will be raised through an offer of up to 20,000,000 new shares at a price of 81.0p per share, set at a small premium to the latest NAV so as to allow for issue expenses and avoid dilution to existing shareholders. Shares will be available for subscription in both the 2011/12 and 2012/13 tax years. Shareholders in Northern 2 VCT and other VCTs managed by NVM Private Equity who apply for new shares before 6 February 2012 will receive an incentive equivalent to 2% of their subscription in the form of additional shares at no extra cost. Investors will be eligible for income tax relief at 30% on their subscriptions under the current legislation. If the tender offer and the share issue are both fully subscribed, the resulting net increase in the company s capital base will be approximately 10 million. This will take Northern 2 VCT s net assets to around 55 million, placing it amongst the largest VCTs in the market, and in recognition of the consequent economies of scale the cap on the company s annual running costs will be reduced from 3.5% to 3.0% of net assets. Share buy-back policy Inordertoassistintheprovisionofliquiditytoshareholders, the company has maintained its policy of buying back its shares in the market at a 15% discount to the latest published NAV, subject to market conditions and the availability of cash resources and distributable reserves. During the six months ended 30 September ,000 shares, representing 0.6% of the company s issued capital, were purchased at an average price of 66p per share. The share price ranged between a low of 64p and a high of 68½p during the period. VCT qualifying status The company has continued to meet the qualifying conditions laid down by HM Revenue & Customs for maintaining its approval as a VCT. The board retains PricewaterhouseCoopers LLP as independent advisers on VCT taxation matters. Board of directors Professor Sir Fred Holliday retired from the board at the close of the annual general meeting on 19 July We would like to reiterate our thanks to him for giving us the benefit of his wisdom, knowledge and experience over the past 12 years. 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 10 of the annual report for the 14 month period ended 31 March 2011, including those resulting from the size and relative illiquidity of the unquoted and AIM-quoted investments held by the company. Prospects The company s portfolio has demonstrated a high degree of resilience in the face of a market environment which is particularly testing for small growing companies. Our robust balance sheet should be further strengthened by the inflow of cash from the forthcoming share issue, and our managers are currently seeing a steady flow of interesting new investment opportunities. The progress made over the past six months confirms that the simple combination of careful selection and close monitoring can produce good investment performance in adverse as well as benign conditions. On behalf of the Board David Gravells Chairman 1 November 2011 Northern 2 VCT PLC Half-yearly financial report 30 September

6 Income statement (unaudited) for the six months ended 30 September 2011 Six months ended 30 September 2011 Revenue Capital Total Gain on disposal of investments Movements in fair value of investments ,427 1,427 Income 1,266 1,266 Investment management fee (115) (346) (461) Recoverable VAT Other expenses (161) (161) Return on ordinary activities before tax 990 1,081 2,071 Tax on return on ordinary activities (245) 112 (133) Return on ordinary activities after tax 745 1,193 1,938 Return per share 1.3p 2.1p 3.4p 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 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 2011 Six months ended 30 September 2011 Equity shareholders' funds at 1 April ,713 Return on ordinary activities after tax 1,938 Dividends recognised in the period (2,579) Net proceeds of share issues 234 Shares purchased for cancellation (213) Equity shareholders' funds at 30 September ,093 4 Northern 2 VCT PLC Half-yearly financial report 30 September 2011

7 Six months ended 31 July months ended 31 March 2011 Revenue Capital Total Revenue Capital Total ,065 1, ,206 2, ,271 3,271 1,012 1,012 2,034 2,034 (114) (343) (457) (263) (983) (1,246) (155) (155) (329) (329) ,222 1,514 2,503 4,017 (134) 99 (35) (321) 215 (106) ,187 1,193 2,718 3, p 1.0p 2.1p 2.1p 4.8p 6.9p Six months ended 31 July months ended 31 March ,349 44,349 1,187 3,911 (1,983) (3,113) 174 1,272 (381) (706) 43,346 45,713 Northern 2 VCT PLC Half-yearly financial report 30 September

8 Balance sheet (unaudited) as at 30 September September July March 2011 Fixed asset investments 39,654 36,795 41,984 Current assets Debtors Cash and deposits 5,367 5,986 3,996 6,004 6,803 4,794 Creditors (amounts falling due within one year) (565) (252) (1,065) Net current assets 5,439 6,551 3,729 Net assets 45,093 43,346 45,713 Capital and reserves Called-up equity share capital 2,873 2,827 2,873 Share premium 35,679 34,434 35,461 Capital redemption reserve Capital reserve 3,262 7,079 6,167 Revaluation reserve 1,850 (2,193) (31) Revenue reserve 1, Total equity shareholders' funds 45,093 43,346 45,713 Net asset value per share 78.5p 76.7p 79.5p 6 Northern 2 VCT PLC Half-yearly financial report 30 September 2011

9 Cash flow statement (unaudited) for the six months ended 30 September 2011 Six months ended 30 September 2011 Six months ended 31 July months ended 31 March 2011 Net cash inflow from operating activities Taxation Corporation tax paid (22) Financial investment Purchase of investments (1,401) (7,906) (14,839) Sale/repayment of investments 4,646 1,562 6,385 Net cash inflow/(outflow) from financial investment 3,245 (6,344) (8,454) Equity dividends paid (2,579) (1,983) (3,113) Net cash inflow/(outflow) before financing 1,350 (7,987) (10,750) Financing Issue of ordinary shares ,340 Share issue expenses (6) (10) (68) Purchase of ordinary shares for cancellation (213) (381) (706) Net cash inflow/(outflow) from financing 21 (207) 566 Increase/(decrease) in cash and deposits 1,371 (8,194) (10,184) Reconciliation of return before tax to net cash flow from operating activities Return on ordinary activities before tax 2,071 1,222 4,017 Gain on disposal of investments (766) (692) (1,065) Movements in fair value of investments (661) (130) (2,206) (Increase)/decrease in debtors 161 (159) (140) Increase/(decrease) in creditors (121) Net cash inflow from operating activities Analysis of movement in net funds 1 April 2011 Cash flows 30 September 2011 Cash and deposits 3,996 1,371 5,367 Northern 2 VCT PLC Half-yearly financial report 30 September

10 Notes to the financial statements (unaudited) for the six months ended 30 September 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 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 return per share is based on the return on ordinary activities after tax for the six months ended 30 September 2011 and on 57,422,400 (six months ended 31 July ,759,926) 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 30 September 2011 divided by the 57,468,342 (31 July ,547,998) ordinary shares, being the number of shares in issue at that date. 4 The proposed interim dividend of 2.0p per share for the year ending 31 March 2012 will be paid on 6 January 2012 to shareholders on the register at the close of business on 4 November The unaudited half-yearly financial statements for the six months ended 30 September 2011 do not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006, have not been reviewed or audited by the company's independent auditors and have not been delivered to the Registrar of Companies. The figures for the 14 month period ended 31 March 2011 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the independent auditors' report on those financial statements 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 14 month period ended 31 March The directors confirm that to the best of their 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 Rules 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 Rules 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 website, 8 Northern 2 VCT PLC Half-yearly financial report 30 September 2011

11 Investment portfolio summary as at 30 September 2011 Cost Valuation % of net assets by value Kerridge Commercial Systems 1,740 3, CloserStill Holdings 1,000 1, Envirotec 975 1, Alaric Systems 1,269 1, Paladin Group 1,538 1, Arleigh International 900 1, IG Doors 615 1, Kitwave One 1,246 1, Axial Systems Holdings 1,004 1, Wear Inns 1,116 1, Cawood Scientific 1,031 1, RCC Lifesciences Evolve Investments Tinglobal Holdings Advanced Computer Software Group* Fifteen largest venture capital investments 15,793 20, Other venture capital investments 14,126 11, Total venture capital investments 29,919 32, Listed fixed-interest investments 7,767 7, Total fixed asset investments 37,686 39, Net current assets 5, Net assets 45, *Quoted on AIM Northern 2 VCT PLC Half-yearly financial report 30 September

12 Directors David Gravells (Chairman) Alastair Conn Michael Denny Christopher Fletcher Frank Neale Secretary Christopher Mellor FCA MCSI Registered Office Northumberland House Princess Square Newcastle upon Tyne NE1 8ER T E n2vct@nvm.co.uk Investment Manager NVM Private Equity Limited Northumberland House Princess Square Newcastle upon Tyne NE1 8ER Fixed-interest Investment Advisers Sarasin & Partners LLP Juxon House 100 St Paul's Churchyard London EC4M 8BU Registrars Equiniti Limited Aspect House Spencer Road Lancing BN99 6DA Shareholder helpline: Stockbroker Singer Capital Markets Limited 1 Hanover Street London W1S 1YZ Designed and produced by The Roundhouse Newcastle upon Tyne