Northern Inv. Co PLC – Final Results

14th May 2006

RNS Number:9531C
Northern Investors Co PLC
15 May 2006

15 MAY 2006



Northern Investors Company PLC is an investment trust managed by Northern
Venture Managers. 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 income
yield and capital growth.

Financial highlights (with re-stated comparative figures as at 31 March 2005):
2006 2005

* Net assets #50,417,000 #47,639,000
* Net asset value per share 255.7p 241.6p
* Net revenue before tax #1,664,000 #1,344,000
* Revenue return per share 6.7p 5.4p
* Dividend per share declared 6.0p 5.25p
in respect of the year
* Share price at end of year 200.0p 232.5p
* Discount to net asset value 21.8% 3.8%

For further information, please contact:

Northern Venture Managers Limited
Alastair Conn, Managing Director 0191 244 6000
Lansons Communications
Alison Boucher 020 7294 3616


The Chairman of Northern Investors Company PLC, Peter Haigh, included the
following points in his statement to shareholders:

Net asset value

The net asset value per share at 31 March 2006 was 255.7p, up by 5.8% from the
re-stated figure of 241.6p at 31 March 2005. Viewed in the context of the 24%
rise in the FTSE All-Share index over the same period this is a modest
performance, although the company’s long-term record remains strong. NAV growth
was adversely affected by the write-down of the investments in VPTA and SMS
Agencies during the year, which was equivalent to 11.5p per share.

Revenue and dividend

Investment income for the year increased by 16.9% from #2.02 million to #2.36
million, reflecting another period of strong income generation from the unquoted
investment portfolio. The revenue return before tax increased by 23.8% to #1.66
million and the revenue return per share by 24.1% to 6.7p. The directors are
pleased to be able to recommend an increased final dividend of 4.2p per share,
taking the total for the year to 6.0p – a 14.3% increase over the previous
year’s figure (adjusted for the July 2005 share split) of 5.25p. The annual
dividend is now 50% higher than in the year ended 31 March 2002. The proposed
final dividend will be paid on 7 July 2006 to shareholders on the register on 16
June 2006.

Investment portfolio

New investments were relatively low this year at #4.3 million, and realisation
proceeds of #8.7 million (boosted by our decision to reduce several
long-standing quoted holdings) contributed to an increase in cash and near-cash
balances to almost #8 million at the year end. Over #2 million has been
invested in the portfolio since the end of March and the flow of potential new
deals is currently looking strong.

Share price

Despite the increase in net asset value, the share price fell by 14.0% over the
year to 200p, leaving the shares at a 21.8% discount to net asset value compared
with 3.8% at 31 March 2005. The discount is now at its highest level for seven
years and the directors are keeping the position under close review.

Presentation of financial statements

I would like to draw shareholders’ attention to four factors which have had an
effect on the way in which our results are presented this year.

* We have adopted the revised Statement of Recommended Practice ‘
Financial Statements of Investment Trust Companies’ published by the Association
of Investment Trust Companies, as a result of which the Income Statement
replaces the Statement of Total Return.

* Several new accounting policies have been implemented in order
to comply with new UK Financial Reporting Standards. The main consequences are
that quoted investments are valued at bid rather than mid-market price;
dividends payable to shareholders no longer appear in the Income Statement but
are charged directly to reserves; and dividends are not recognised in the
accounts until a formal liability to pay has been established. A more detailed
explanation of the accounting changes and their financial impact is set out
later in this announcement. Comparative figures have been re-stated on the new

* The results and comparative figures have been adjusted where
appropriate to reflect the division of each of the company’s ordinary shares of
#1 into four ordinary shares of 25p with effect from July 2005.

* We are now required by company law to present a Business Review
as part of our annual report to shareholders.

Corporate governance

Your directors have kept the company’s corporate governance process under review
in the light of the Listing Rules, the Combined Code and the AITC’s updated Code
of Corporate Governance issued in February 2006. A statement covering the main
corporate governance matters relevant to the company is set out in the annual


The board, through its management engagement committee, has reviewed the
company’s contractual arrangements with Northern Venture Managers with the
objective of linking their remuneration more closely to investment performance.
As a result of recent discussions, during which I liaised with the chairmen of
other funds managed by NVM, a co-investment scheme has been introduced whereby
NVM’s investment executives are required to invest personally, and on the same
terms as the funds, in the ordinary shares of new investee companies. We
believe that this will not only align the interests of the managers more closely
with those of shareholders but also help NVM, which has continued to add to its
management team, to recruit and retain high-calibre executives in a marketplace
where such individuals are in great demand. We have also reduced the basic
level of NVM’s investment management fee and introduced a performance-related

Board of directors

Robert Dickinson retired from the board at the annual general meeting in June
2005 after over 20 years’ service as a director and 15 years as chairman and was
thanked for his significant contribution to the company’s achievements. I was
delighted to accept the directors’ invitation to take over as chairman.

The future

The board has continued its close review of the company’s investment strategy
with the objective of maximising capital growth performance in the future. We
have asked our managers to begin a process of rationalising the investment
portfolio with a view to reducing the number of holdings (some of which are
relatively small in value) and reaching a position over the next two years where
the top 20 venture capital investments represent a significantly larger
proportion of the company’s assets. Our managers are already seeking to
increase the average size of the new investments acquired. We believe that this
strategy will help deliver a level of performance satisfactory to shareholders.


The audited financial statements for the year ended 31 March 2006 will show the
results below.


for the year ended 31 March 2006
Year ended 31 March 2006 Year ended 31 March 2005
Revenue Capital Total Revenue Capital Total

#000 #000 #000 #000 #000 #000
Gain/(loss) on disposal of
investments held at fair value – (1,074) (1,074) – 1,644 1,644
Unrealised adjustments to
fair value of investments – 3,871 3,871 – (871) (871)
—— —— —— —— —— ——
– 2,797 2,797 – 773 773
Income 2,363 – 2,363 2,021 – 2,021
Investment management fee (372) (868) (1,240) (367) (857) (1,224)
Other expenses (327) – (327) (310) – (310)
—— —— —— —— —— ——
Return on ordinary activities
before tax 1,664 1,929 3,593 1,344 (84) 1,260
Tax on ordinary activities (336) 615 279 (287) 287 –
—— —— —— —— —— ——
Return on ordinary activities
after tax 1,328 2,544 3,872 1,057 203 1,260
—— —— —— —— —— ——
Return per share 6.7p 12.9p 19.6p 5.4p 1.0p 6.4p

for the year ended 31 March 2006
Year Year ended
31 March
31 March 2005
2006 Re-stated

#000 #000
Equity shareholders’ funds at 1 April 2005

As previously reported 47,005 46,739
Prior year adjustment 634 626
——- ——-
As re-stated 47,639 47,365
Return on ordinary activities after tax 3,872 1,260
Dividends recognised in the year (1,094) (986)
——- ——-
Equity shareholders’ funds at 31 March 2006 50,417 47,639
——- ——-

as at 31 March 2006
31 March 31 March
2006 2005
#000 #000
Fixed asset investments held at fair value:
Unquoted 38,201 36,914
Quoted 3,833 6,683
——- ——-
Total fixed asset investments 42,034 43,597
——- ——-
Current assets:
Investments 3,737 2,606
Debtors 472 241
Cash at bank 4,241 1,259
——- ——-
8,450 4,106
Creditors (amounts falling due within one year) (67) (64)
——- ——-
Net current assets 8,383 4,042
——- ——-

Net assets 50,417 47,639
——- ——-

Capital and reserves:
Called-up equity share capital 4,930 4,930
Share premium 12,694 12,694
Capital redemption reserve 225 225
Capital reserve:
Realised 24,542 23,408
Unrealised 5,994 4,584
Revenue reserve 2,032 1,798
——- ——-
Total equity shareholders’ funds 50,417 47,639
——- ——-
Net asset value per share 255.7p 241.6p

for the year ended 31 March 2006
Year ended Year ended
31 March 2006 31 March 2005
#000 #000 #000 #000
Cash flow statement
Net cash inflow from operating 847 916
Corporation tax recovered – 1
Financial investment:
Purchase of investments (4,327) (10,765)
Sale/repayment of investments 8,687 11,416
—— ——
Net cash inflow from financial 4,360 651
Equity dividends paid (1,094) (986)
—— ——
Net cash inflow before use of 4,113 582
liquid resources
Net cash outflow from management of liquid (1,131) (1,173)
—— ——
Increase/(decrease) in cash at 2,982 (591)
—— ——
Reconciliation of net revenue
taxation to net cash flow from
operating activities
Net revenue before taxation 1,664 1,344
Decrease in debtors 48 415
Increase in creditors 3 14
Management fees charged to (868) (857)
—— ——
Net cash inflow from operating 847 916
—— ——
Reconciliation of movement
in net funds
1 April 2005 Cash flows 31 March 2006
#000 #000 #000

Cash at bank 1,259 2,982 4,241
Short-term investments 2,606 1,131 3,737
—— —— ——
Net funds 3,865 4,113 7,978
—— —— ——

as at 31 March 2006

Valuation % of net assets
#000 by valuation
Venture capital investments:
AFI Aerial Platforms 2,552 5.1
John Laing Partnership 2,408 4.8
CGI Group 1,985 3.9
DMN 1,913 3.8
IG Doors 1,594 3.2
Longhirst Group 1,594 3.2
Envirotec 1,454 2.9
Crantock Bakery 1,284 2.5
Stainton Metal Company 1,270 2.5
Weldex (International) Offshore 1,242 2.5
——- ——-
Top ten investments 17,296 34.4
Arrow Industrial Group 1,179 2.3
Alaric Systems 1,175 2.3
Warmseal Windows (Newcastle) 1,062 2.1
Pivotal Laboratories Holdings 1,000 2.0
Interlube Systems 925 1.8
Union Snack 915 1.8
IRIS Technology 901 1.8
GB Industries 885 1.8
Computer Software Group* 879 1.7
Liquidlogic 852 1.7
——- ——
Top twenty investments 27,069 53.7
Other investments 14,965 29.7
——- ——
Total fixed asset investments 42,034 83.4
Net current assets 8,383 16.6
——- ——
Net assets 50,417 100.0
——- ——
*Quoted on Alternative Investment Market

The above summary of results for the year ended 31 March 2006 does not
constitute statutory financial statements within the meaning of Section 240 of
the Companies Act 1985 and has not been delivered to the Registrar of Companies.
Statutory financial statements will be filed with the Registrar of Companies
in due course; the auditors’ report on those financial statements under S235 of
the Companies Act 1985 is unqualified and does not contain a statement under
S237(2) or (3) of the Companies Act 1985.

The company is required to comply with a number of new UK Financial Reporting
Standards (FRS), which now represent UK Generally Accepted Accounting Principles
(UK GAAP), in presenting its financial statements for the year ended 31 March
2006. These Standards have been introduced as part of the process of aligning
UK accounting principles with International Accounting Standards.

The revised accounting policies differ from those used in preparing the annual
financial statements for the year ended 31 March 2005 in the following respects:

* The company’s investments have been designated as fair value through

profit and loss and accordingly the unrealised gain or loss resulting from the
revaluation of fixed asset investments held at fair value is now recognised in
the income statement, as required by FRS 26 ‘Financial Instruments:

* Quoted investments are valued at bid price rather than mid-market
price, as required by FRS 26 ‘Financial Instruments: Measurement’; and

* Dividends to shareholders are accounted for in the period in which
the company is liable to pay them, rather than in the period in respect of which
they are declared, as required by FRS 21 ‘Events after the Balance Sheet Date’.
Dividends payable are treated as a charge on reserves and accounted for through
the reconciliation of movements in shareholders’ funds, as required by FRS 26 ‘
Financial Instruments: Disclosure and Presentation’, rather than in the income
statement as previously.

The comparative figures for the year ended 31 March 2005 have been re-stated

The effect of the above changes on the reported net assets and net asset value
per share of the company as at 31 March 2005 and 2004 is as follows:

31 March 2005 31 March 2004
Net asset Net asset
Net value per Net value per
assets share* assets share*
#000 p #000 p

As reported under previous UK GAAP 47,005 238.4 46,739 237.0
Less: adjustment in valuation of quoted (105) (0.5) (64) (0.3)
investments to bid price
Add: proposed dividends not accounted for until 739 3.7 690 3.5
declared and paid
——- ——- ——- ——-
As reported under revised UK GAAP 47,639 241.6 47,365 240.2
——- ——- ——- ——-

*Adjusted to reflect the sub-division of each of the company’s ordinary shares
of #1 into four ordinary shares of 25p
in July 2005

The proposed final dividend of 4.2p per share for the year ended 31 March 2006
will, if approved by shareholders, be paid on 7 July 2006 to shareholders on the
register at the close of business on 16 June 2006.

A copy of the full annual report and financial statements for the year ended 31
March 2006 is expected to be posted to shareholders on 26 May 2006 and will be
available to the public at the registered office of the company at
Northumberland House, Princess Square, Newcastle upon Tyne NE1 8ER.


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The company news service from the London Stock Exchange