Northern AIM VCT PLC – Annual Financial Report

17th December 2009

RNS Number : 3119E
Northern AIM VCT PLC
17 December 2009
 



17 DECEMBER 2009

NORTHERN AIM VCT PLC

RESULTS FOR THE YEAR ENDED 31 OCTOBER 2009

Northern AIM VCT PLC is a Venture Capital Trust (VCT) managed by NVM Private Equity. The trust was launched in October 2000. Its portfolio of VCT-qualifying investments is focused on companies quoted on AIM but also includes a number of later-stage unquoted holdings.

Financial highlights - year ended 31 October 2009:

(comparative figures as at 31 October 2008 in italics):

        2009 

        2008 

  • Net assets

£7.6m

£7.2m

  • Net asset value per share

34.4p

32.8p

  • Return per share

Revenue

0.1p

1.0p

Capital

4.6p

(29.2)p

Total

4.7p

(28.2)p

  • Dividend per share proposed

in respect of the year

Revenue

  

1.0p

Capital

3.0p

2.0p

Total

3.0p

3.0p

  • Cumulative returns to

shareholders since launch

Net asset value per share

34.4p

32.8p

Dividends paid per share*

19.3p

16.3p

Net asset value plus dividends

paid per share

53.7p

49.1p

  • Share price at end of year

26.0p

40.0p

*Excluding proposed final dividend

For further information, please contact:

NVM Private Equity Limited

Alastair Conn/Christopher Mellor

Website:  www.nvm.co.uk

0191 244 6000

NORTHERN AIM VCT PLC

CHAIRMAN’S STATEMENT

Overview of the year

The past year has seen a continuation of difficult conditions in the financial markets and the UK economy.  The AIM market has been particularly volatile.  The long-awaited return to economic growth remains elusive despite interest rates being cut to extraordinarily low levels. The company’s net asset value rose marginally over the year. However the positive impact of successful investment realisations was offset by the unexpected failure of our largest investment, Aero Inventory, which brought an unsatisfactory end to what would otherwise have been a solid year of reasonable progress. Nevertheless your board feels able to recommend maintaining the dividend at 3.0p per share for the third year in succession.

Net asset value, return and dividend

The net asset value per share as at 31 October 2009 was 34.4p, a rise of 4.9% from the 32.8p reported a year earlier.  As shown in the income statement, the return per share for the year was 4.7p, or 14.3% of the opening net asset value per share, compared to a negative return of 28.2p in the preceding year.

Two years ago your board stated its intention to maintain the annual dividend at 3.0p per share, subject to the availability of sufficient distributable profits.  I am pleased to report that in the light of the results for the past year, the directors feel able to propose a dividend of 3.0p once again.  Subject to shareholders’ approval at the annual general meeting, the dividend will be paid on 5 March 2010 to shareholders on the register as at 5 February 2010.

Taking into account the 19.3p per share previously distributed to shareholders by way of dividend, the cumulative total of net asset value plus dividends paid is now 53.7p per share.

Investments

The portfolio was fully invested at the beginning of the financial year.  During the year our unquoted investments in Stainton Metal Company and Pivotal Laboratories Holdings were sold, enabling us to realise a total of £2.3 million. Against a challenging economic background, attractive investment opportunities have been in short supply, particularly in the AIM market. As a result, with new investments in the year totalling less than £0.5 million, our cash balances increased by £1.4 million and currently represent some 20% of net assets.

The demise of Aero Inventory came shortly after the company’s announcement in September 2009 of its plans to move from AIM to a full listing on the London Stock Exchange.  In October trading in its shares were suspended pending clarification of issues relating to inventory valuation, and administrators were appointed in early November following the withdrawal of banking facilities. There have subsequently been reports of a possible investigation by the Serious Fraud Office. In the circumstances the directors have decided to write off Northern AIM VCT’s shareholding, which had a book value of approximately £628,000 immediately prior to the suspension, recognising a loss equivalent to 2.8p per Northern AIM VCT share. This is naturally a very disappointing outcome.

Shareholder issues

The company has not bought back any of its own shares in the market during the past year. The directors remain of the view that, in current market conditions, available reserves and cash resources should be focused on dividend distributions – which benefit all shareholders equally. Given the recent volatility of the AIM market and the increasing legislative restrictions on the investment of new funds raised by VCTs, we consider it unlikely that the company will seek to issue additional shares other than through the dividend investment scheme.  The directors are also concerned to protect the capital gains deferral which has been of benefit to many of our shareholders.  In these different respects corporate strategy is kept under review on a continuing basis.

VAT on management fees and VCT qualifying status

Following the European Court decision in the JPMorgan Claverhouse case, management fees paid to our managers have been exempt from VAT since July 2008. We have been able to recover £129,000 of VAT paid in earlier periods, and negotiations are continuing with HM Revenue & Customs over possible further repayments.

Your company continues to meet the qualifying conditions laid down by HM Revenue & Customs for maintaining its approval as a venture capital trust.  Your board retains PricewaterhouseCoopers LLP as advisers on taxation matters.

Prospects

Although a return to modest economic growth is forecast for 2010 and 2011, it is clear that the impact of the events of the past two years will be felt for some time to come as governments attempt to restore public finances to good order. This will inevitably overshadow the prospects for the development of many of the UK‘s small and medium-sized businesses. However past experience suggests that, as the economy emerges from recession, well-managed companies should be able to capitalise on the growth opportunities that will become available. We believe that a number of such companies are represented in our portfolio, and the managers will seek to add to them on a selective basis.

James Dawnay

Chairman

The audited financial statements for the year ended 31 October 2009 are set out below.

INCOME STATEMENT

for the year ended 31 October 2009

Year ended 31 October 2009 

Year ended 31 October 2008 

Revenue 

£000 

Capital 

£000 

Total 

£000 

Revenue 

£000 

Capital 

£000 

Total 

£000 

Gain/(loss) on disposal of

  investments

135 

135 

(1,009)

(1,009)

Movements in fair value

  of investments

 

895 

895 

 

(5,254)

(5,254)

———- 

———- 

———- 

———- 

———- 

———- 

 

1,030 

1,030 

 

(6,263)

(6,263)

Income

236 

 

236 

467 

 

467 

Investment management fee

(18)

(55)

(73)

(65)

(194)

(259)

Recoverable VAT

7 

22 

29 

25 

75 

100 

Other expenses

(199)

 

(199)

(190)

 

(190)

———- 

———- 

———- 

———- 

———- 

———- 

Return on ordinary

  activities before tax

26 

997 

1,023 

237 

(6,382)

(6,145)

Tax on return on

  ordinary activities

 

(29)

29 

———- 

———- 

———- 

———- 

———- 

———- 

Return on ordinary

  activities after tax

26 

997 

1,023 

208 

(6,353)

(6,145)

———- 

———- 

———- 

———- 

———- 

———- 

Return per share

0.1p

4.6p

4.7p

1.0p

(29.2)p

(28.2)p

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS

for the year ended 31 October 2009

Year ended 

31 October 2009 

£000 

Year ended 

31 October 2008 

£000 

Equity shareholders’ funds

  at 1 November 2008

7,152 

13,914 

Return on ordinary

  activities after tax

1,023 

(6,145)

Dividends recognised in the year

(653)

(652)

Net proceeds of share issues

63 

77 

Shares purchased for cancellation

(42)

Equity shareholders’ funds

———- 

———- 

  at 31 October 2009

7,585 

7,152 

———- 

———- 

BALANCE SHEET

as at 31 October 2009

31 October 

2009 

£000 

31 October 

2008 

£000 

Fixed asset investments

  Quoted on AIM

3,734 

2,995 

  Unquoted

2,138 

3,914 

———- 

———- 

Total fixed asset investments

5,872 

6,909 

———- 

———- 

Current assets:

  Debtors

353 

252 

  Cash at bank

1,461 

38 

———- 

———- 

1,814 

290 

Creditors (amounts falling due

  within one year)

(101)

(47)

———- 

———- 

Net current assets

1,713 

243 

———- 

———- 

Net assets

7,585 

7,152 

———- 

———- 

Capital and reserves:

Called-up equity share capital

1,103 

1,089 

Share premium

2,038 

1,989 

Capital redemption reserve

183 

183 

Capital reserve

7,272 

7,760 

Revaluation reserve

(3,089)

(4,139)

Revenue reserve

78 

270 

———- 

———- 

Total equity shareholders’ funds

7,585 

7,152 

———- 

———- 

Net asset value per share

34.4p

32.8p

CASH FLOW STATEMENT

for the year ended 31 October 2009

Year ended 

31 October 2009 

Year ended 

31 October 2008 

£000 

£000 

£000 

£000 

Net cash inflow/(outflow) from operating activities

267 

(61)

Taxation:

Corporation tax paid

 

 

Financial investment:

Purchase of investments

(476)

(1,472)

Sale/repayment of investments

2,222 

1,351 

———- 

———- 

Net cash inflow/(outflow) from financial investment

1,746 

(121)

Equity dividends paid

(653)

(652)

———- 

———- 

Net cash inflow/(outflow) before financing

1,360 

(834)

Financing:

Issue of shares

77 

77 

Share issue expenses

(14)

Purchase of shares for cancellation

(42)

———- 

———- 

Net cash inflow from financing

63 

35 

———- 

———- 

Increase/(decrease) in cash at bank

1,423 

(799)

———- 

———- 

Reconciliation of return before tax

to net cash flow from operating activities

Return on ordinary activities before tax

1,023 

(6,145)

Gain/(loss) on disposal of investments

(135)

1,009 

Movements in fair value of investments

(895)

5,254 

(Increase)/decrease in debtors

220 

(179)

Increase in creditors

54 

———- 

———- 

Net cash inflow/(outflow) from operating activities

267 

(61)

———- 

———- 

Reconciliation of movement in net funds

November 2008 

Cash flows 

31 October 2009 

£000 

£000 

£000 

Cash at bank

38 

1,423 

1,461 

———- 

———- 

———- 

INVESTMENT PORTFOLIO SUMMARY

as at 31 October 2009

Valuation

£000

% of net assets

by value

Venture capital investments

(*denotes unquoted, others quoted on AIM)

Crantock Bakery*

724

9.5

RCG Holdings

508

6.7

IS Pharma

421

5.6

Advanced Computer Software

408

5.4

Andor Technology

405

5.3

Longhirst Venues*

353

4.7

Britspace Holdings*

334

4.4

Axial Systems Holdings*

287

3.8

Bond International Software

267

3.5

IG Doors*

236

3.1

Optilan Group*

204

2.7

IDOX

203

2.7

Connaught

192

2.5

Pilat Media Global

184

2.4

Jelf Group

148

2.0

———-

———-

Fifteen largest holdings

4,874

64.3

Quadnetics Group

142

1.9

CVS Group

124

1.6

Prologic

120

1.6

Cello Group

111

1.5

Legion Group

88

1.2

Shieldtech

84

1.1

Colliers CRE

68

0.9

1st Dental Laboratories

39

0.5

Adept Telecom

37

0.5

Belgravium Technologies

36

0.5

Baydonhill

33

0.4

Hartest Holdings

26

0.3

Twenty

25

0.3

First Artist Corporation

23

0.3

Spectrum Interactive

19

0.2

Brulines Group

14

0.2

Individual Restaurant Company

5

0.1

Advance AIM Value Realisation Company

4

Intercytex Group

———-

———-

Total fixed asset investments

5,872

77.4

Net current assets

1,713 

22.6

———-

———-

Net assets

7,585

100.0

———-

———-

BUSINESS RISKS

The board carries out a regular review of the risk environment in which the company operates. The main areas of risk identified by the board are as follows:

Investment risk:  The majority of the company’s investments are in small and medium-sized unquoted and AIM-quoted companies which are VCT qualifying holdings, and which by their nature entail a higher level of risk and lower liquidity than investments in large quoted companies. The directors aim to limit the risk attaching to the portfolio as a whole by careful selection and timely realisation of investments, by carrying out rigorous due diligence procedures and by maintaining a wide spread of holdings in terms of financing stage, industry sector and geographical location. The board reviews the investment portfolio with the investment managers on a regular basis.

Financial risk:  As most of the company’s investments involve a medium to long-term commitment and many are relatively illiquid, the directors consider that it is inappropriate to finance the company’s activities through borrowing except on an occasional short-term basis. The company has very little exposure to foreign currency risk and does not enter into derivative transactions.

Economic risk:  Events such as economic recession or general fluctuations in stock markets and interest rates may affect the valuation of investee companies and their ability to access adequate financial resources, as well as affecting the company’s own share price and discount to net asset value.

Stock market risk:  The majority of the company’s investments are quoted on the AIM market and will be subject to market fluctuations upwards and downwards.  External factors such as terrorist activity can negatively impact stock markets worldwide and the AIM market is no exception to this. In times of adverse sentiment there tends to be very little, if any, market demand for shares in the smaller companies quoted on AIM.

Liquidity risk:  The company’s investments may be difficult to realise. The fact that a stock is quoted on AIM does not guarantee its liquidity and there may be a large spread between bid and offer prices. Unquoted investments are not traded on a recognised stock exchange and are inherently illiquid.

Internal control risk:  The board regularly reviews the system of internal controls, both financial and non-financial, operated by the company and the manager.  These include controls designed to ensure that the company’s assets are safeguarded and that proper accounting records are maintained.

VCT qualifying status risk:  The company is required at all times to observe the conditions laid down in the Income Tax Act 2007 for the maintenance of approved VCT status. The loss of such approval could lead to the company losing its exemption from corporation tax on capital gains, to investors being liable to pay income tax on dividends received from the company and, in certain circumstances, to investors being required to repay the initial income tax relief on their investment.  The manager keeps the company’s VCT qualifying status under continual review and reports to the board on a quarterly basis.  The board has also retained PricewaterhouseCoopers LLP to undertake an independent VCT status monitoring role.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The directors are responsible for preparing the annual financial report in accordance with applicable law and regulations.  Company law requires the directors to prepare financial statements for each financial year.  Under that law the directors have elected to prepare the financial statements in accordance with UK Accounting Standards.  The financial statements are required by law to give a true and fair view of the state of affairs of the company at the end of the financial period and of the return of the company for that period.  In preparing these financial statements, the directors are required to (i) select suitable accounting policies and then apply them consistently;  (ii) make judgements and estimates that are reasonable and prudent;  (iii) state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;  and (iv) prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

In relation to the financial statements for the year ended 31 October 2009, each of the directors has confirmed that to the best of his knowledge (i) the financial statements, which have been prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company; and (ii) the directors’ report includes a fair review of the development and performance of the business and the position of the company together with a description of the principal risks and uncertainties which it faces.

The directors are also responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that its financial statements comply with the Companies Act 2006 They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a directors’ report, directors’ remuneration report and corporate governance statement that comply with that law and those regulations.

The company’s financial statements are published on the NVM Private Equity Limited website. The maintenance and integrity of this website is the responsibility of NVM and not of the company.  Visitors to the website should be aware that legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

OTHER MATTERS

The above summary of results for the year ended 31 October 2009 does not constitute statutory financial statements within the meaning of Section 435 of the Companies Act 2006 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 independent auditors’ report on those financial statements under Section 495 of the Companies Act 2006 is unqualified and does not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The proposed final dividend of 3.0p per share for the year ended 31 October 2009 will, if approved by shareholders, be paid on 5 March 2010 to shareholders on the register at the close of business on 5 February 2010.

The full annual report including financial statements for the year ended 31 October 2009 is expected to be posted to shareholders on 15 January 2010 and will be available to the public at the registered office of the company at Northumberland House, Princess SquareNewcastle upon Tyne NE1 8ER and on the NVM Private Equity Limited website, www.nvm.co.uk.

This information is provided by RNS
The company news service from the London Stock Exchange
 

END

 
 

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