9 NOVEMBER 2009
NORTHERN INVESTORS COMPANY PLC
UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 30 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, it 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 highlights (comparative figures as at 30 September 2008):
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: 2.9p 3.9p
Revenue 17.9p (40.3)p
Capital 20.8p (36.4)p
Total
Interim dividend per share
declared in respect of the period 2.2p 2.2p
For further information, please contact:
NVM Private Equity Limited
Alastair Conn/Christopher Mellor 0191 244 6000
Website: www.nvm.co.uk
HALF-YEARLY MANAGEMENT REPORT TO SHAREHOLDERS
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
The following table 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:
+-------------------------------------------------------------------+
| | 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 | 28.4% | 60.6% | 39.0% |
| NAV | | | |
+-------------------------------------------------------------------+
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. The
following table 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:
+-------------------------------------------------------------------+
| Periods to 30 Sept | NAV per | Share price | FTSE All-Share |
| 2009 | share | | |
|---------------------+--------------+-------------+----------------|
| Six months | +6.4% | +93.8% | +32.8% |
|---------------------+--------------+-------------+----------------|
| 12 months | +1.4% | +19.2% | +6.1% |
+-------------------------------------------------------------------+
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.
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 re-stocking 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
The unaudited half-yearly financial statements for the six months
ended 30 September 2009 are set out below.
INCOME STATEMENT
(unaudited) for the six months ended 30 September 2009
Six months ended Six months ended
30 September 2009 30 September 2008
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gain on disposal
of investments - 1,766 1,766 - 1,679 1,679
Movements in fair
value
of investments - 1,922 1,922 - (9,251) (9,251)
------ ------ ------ ------ ------ ------
- 3,688 3,688 - (7,572) (7,572)
Income 970 - 970 1,271 - 1,271
Investment management (124) (289) (413) (152) (354) (506)
fee
Recoverable VAT - - - - - -
Other expenses (172) - (172) (178) - (178)
------ ------ ------ ------ ------ ------
Return on ordinary
activities before tax 674 3,399 4,073 941 (7,926) (6,985)
Tax on return on (117) 81 (36) (192) 99 (93)
ordinary activities
------ ------ ------ ------ ------ ------
Return on ordinary
activities after tax 557 3,480 4,037 749 (7,827) (7,078)
------ ------ ------ ------ ------ ------
Return per share 2.9p 17.9p 20.8p 3.9p (40.3)p (36.4)p
Year ended 31 March 2009
Revenue Capital Total
£000 £000 £000
Gain on disposal
of investments - 2,483 2,483
Movements in fair value
of investments - (12,387) (12,387)
------ ------ ------
- (9,904) (9,904)
Income 2,267 - 2,267
Investment management fee (303) (707) (1,010)
Recoverable VAT 115 - 115
Other expenses (325) - (325)
------ ------ ------
Return on ordinary activities
before tax 1,754 (10,611) (8,857)
Tax on return on ordinary activities (370) 198 (172)
------ ------ ------
Return on ordinary activities
after tax 1,384 (10,413) (9,029)
------ ------ ------
Return per share 7.1p (53.6)p (46.5)p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited) for the six months ended 30 September 2009
Six months ended Six months ended Year ended
30 September 30 September 31 March
2009 2008 2009
£000 £000 £000
Equity shareholders'
funds
at 1 April 2009 47,297 57,755 57,755
Return on ordinary
activities after tax 4,037 (7,078) (9,029)
Dividends recognised
in the period (989) (971) (1,399)
Shares purchased
for cancellation - - (30)
------ ------ ------
Equity shareholders'
funds
at 30 September 2009 50,345 49,706 47,297
------ ------ ------
BALANCE SHEET
(unaudited) as at 30 September 2009
30 September 30 September 31 March
2009 2008 2009
£000 £000 £000
Fixed asset investments
Unquoted 28,279 36,462 32,079
Quoted 349 736 333
------ ------ ------
Total fixed asset 28,628 37,198 32,412
investments
------ ------ ------
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 4,849 4,856 4,849
capital
Share premium 12,694 12,694 12,694
Capital redemption 306 299 306
reserve
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 259.6p 255.9p 243.9p
share
CASH FLOW STATEMENT
(unaudited) for the six months ended 30 September 2009
Six months ended Six months Year ended
30 September ended 31 March 2009
2009 30 September
2008
£000 £000 £000 £000 £000 £000
Cash flow statement
Net cash inflow from
operating 672 835 1,580
activities
Taxation:
Corporation tax paid - - (98)
Financial
investment:
Purchase of (379) (3,831) (5,701)
investments
Sale/repayment of 7,851 11,504 15,912
investments
------ ------ ------
Net cash inflow from
financial 7,472 7,673 10,211
investment
Equity dividends (989) (971) (1,399)
paid
------ ------ ------
Net cash inflow
before
use of liquid
resources
and financing 7,155 7,537 10,294
Financing:
Purchase of shares
for cancellation - - (30)
------ ------ ------
Net cash inflow
before
use of liquid 7,155 7,537 10,264
resources
Net cash
inflow/(outflow)
from use of liquid 2,195 (45) (1,566)
resources
------ ------ ------
Increase in cash at 9,350 7,492 8,698
bank
------ ------ ------
Reconciliation of
revenue
return before tax to
net
cash flow from
operating activities
Revenue return on
ordinary
activities before 674 941 1,754
tax
Decrease in debtors 273 398 666
Increase/(decrease) 14 (150) (133)
in creditors
Management fees (289) (354) (707)
charged to capital
------ ------ ------
Net cash inflow from
operating 672 835 1,580
activities
------ ------ ------
Reconciliation of
movement
in net funds
1 April 2009 Cash flows 30 September
2009
£000 £000 £000
Short-term 2,427 (2,195) 232
investments
Cash at bank 12,420 9,350 21,770
------ ------ ------
Net funds 14,847 7,155 22,002
------ ------ ------
INVESTMENT PORTFOLIO SUMMARY
as at 30 September 2009
Company Cost Valuation % of net assets
£000 £000 by valuation
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
------ -----
The above half-yearly financial statements for the six months ended
30 September 2009 do not constitute statutory financial statements
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.
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.
The directors of the company at the date of this announcement were Mr
P J Haigh (Chairman), Mr J C Barnsley, Mr E M P Denny, Mr F L G
Neale, Mr M P Nicholls and Mrs S L Stewart.
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.
The interim dividend of 2.2p for the year ending 31 March 2010 will
be paid on 8 January 2010 to shareholders on the register at the
close of business on 4 December 2009.
A copy of the half-yearly financial report for the six months ended
30 September 2009 is expected to be posted to shareholders on 20
November 2009 and will be available to the public at the registered
office of the company at Northumberland House, Princess Square,
Newcastle upon Tyne NE1 8ER and on the NVM Private Equity Limited
website, www.nvm.co.uk.
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