Northern AIM VCT PLC – Final Results

17th December 2008

RNS Number : 3333K
Northern AIM VCT PLC
17 December 2008
 

17 DECEMBER 2008

NORTHERN AIM VCT PLC

RESULTS FOR THE YEAR ENDED 31 OCTOBER 2008

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 2008:

(comparative figures as at 31 October 2007 in italics):

   2008 

   2007 

  • Net assets

£7.2m

£13.9m

  • Net asset value per share

32.8p

64.0p

  • Return/(loss) per share

Revenue

1.0p

0.3p

Capital

(29.2)p

6.8p

Total

(28.2)p

7.1p

  • Dividend per share proposed
    in respect of the year

Revenue

1.0p

0.3p

Capital

2.0p

2.7p

Total

3.0p

3.0p

  • Cumulative return to
    shareholders since launch

Net asset value per share

32.8p

64.0p

Dividends paid per share*

16.3p

13.3p

Net asset value plus dividends

paid per share

49.1p

77.3p

  • Share price at end of year

40.0p

52.0p

*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

Lansons Communications

Karen Mignon

020 7294 3685

NORTHERN AIM VCT PLC

CHAIRMAN’S STATEMENT

The Chairman of Northern AIM VCT PLC, James Dawnay, included the following points in his statement to shareholders:

Overview of the year

Market conditions over the past year have been the most challenging in the lifetime of our company and indeed in living memory. The FTSE AIM All-share index fell by over 60% during the 12 months to 31 October 2008 against a background of crisis in the banking system and the onset of recession in the UK economy. Although the fall in our company’s net asset value (NAV) per share over the year has not been on quite the same scale, the investment portfolio (both AIM-quoted and unquoted) has inevitably been affected by the decline in price-earnings ratios and the downward pressure on company profitability, and has in broad terms halved in value. As a result the encouraging progress of the preceding financial year has been more than reversed.

Net asset value, return and dividend

The NAV per share as at 31 October 2008 was 32.8p, compared with 64.0p a year earlier. The return per share for the year as shown in the income statement was minus 28.2p compared with a positive return of 7.1p in the previous year, reflecting the impact of £5.3 million of unrealised revaluation losses resulting from the fall in the markets.

The company’s unaudited NAV per share at 30 November 2008 was 31.7p, down by 3.4% from the year-end figure.  The FTSE AIM All-share index fell by 9.4% over the month.

Last year your board announced a dividend of 3.0p per share and stated its objective of maintaining the dividend at this level on a continuing basis, subject to the availability of sufficient distributable profits. There were relatively few investment realisations during the year and the balance sheet at 31 October 2008 shows only a small cash balance, but I am pleased to report that our largest investment, Stainton Metal Company, was sold shortly after the year end for £1.4 million in cash and another of our unquoted holdings is in advanced sale discussions. Given these developments, and in view of the limited availability of new investment opportunities at the present time, your board has decided to propose a dividend of 3.0p per share in respect of the year, in line with our objective. The dividend will, subject to shareholders’ approval at the annual general meeting, be paid on 6 March 2009 to shareholders on the register on 6 February 2009.

Investments

The portfolio has continued to be relatively fully invested. The AIM new issue market has remained subdued and only two new AIM-quoted investments were made during the year, at a cost of £439,000, whilst two new unquoted investments were completed at a cost of £500,000. It is encouraging to note that all of the new holdings appear to be making good progress despite difficult market conditions, but several of the companies in which we invested in earlier periods have reported a deterioration in performance and this has been reflected in the year-end valuations. We also suffered a significant disappointment in the demise of DMN, our largest unquoted holding a year ago, where an improving outlook was overturned by severe problems arising from a contract for a major telecommunications group, as a result of which the company was eventually sold for a nominal consideration.

Shareholder issues

A year ago we announced that the company would cease buying back its own shares in the market for cancellation at a fixed 10% discount to net asset value. We felt that this practice was likely to lead to a gradual diminution in the company’s capital base and that returns of cash to shareholders should be in the form of dividend distributions which would benefit all shareholders equally. Market conditions over the past year have brought about a much more significant reduction in our assets. Whilst we would expect a measure of recovery at some point in the future, this may be long delayed and in the meantime we will continue to give careful consideration to the best strategic way forward for shareholders from our present position.

It was also announced last year that the directors had appointed Landsbanki Securities (formerly Teather & Greenwood) as brokers to the company, on the basis that they would also act as market-makers in the company’s shares. Unsurprisingly there has been relatively little secondary market activity in the shares over the past 12 months. As shareholders may be aware, Landsbanki Securities was affected by the recent financial difficulties of its Icelandic parent and had to cease its market-making activities. Following a further review, the directors have appointed Teathers, a new firm which has recruited a number of former Landsbanki Securities personnel, as brokers to the company.

VAT on management fees

The Government announced in the 2008 Budget that, with effect from 1 October 2008, investment management fees paid by VCTs would be exempt from VAT. HM Revenue & Customs has subsequently accepted that under European Union VAT law the exemption of management fees from VAT should have applied from 1990 onwards, and has indicated that claims may be made for repayment of VAT previously paid by VCTs, subject to certain restrictive time limits. At this stage the directors are reasonably certain that the amount of past VAT recoverable by the company will be at least £100,000 and this amount has been recognised in the accounts as a separate credit in the income statement.

VCT qualifying status

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

Prospects

Although there is no doubt that by historical standards many of our holdings look very good value at current price levels, it is difficult to foresee any sustained recovery in valuations whilst the current gloom in the world’s economy and financial markets persists. There is no obvious reason why an upturn should be anticipated in the near term and it therefore seems likely that another difficult year lies ahead of us. Nevertheless the directors believe that a number of our portfolio companies have excellent prospects for the longer term.

James Dawnay

Chairman

The audited financial statements for the year ended 31 October 2008 are set out below.

INCOME STATEMENT

for the year ended 31 October 2008

Year ended 31 October 2008 

Year ended 31 October 2007 

Revenue 

£000 

Capital 

£000 

Total 

£000 

Revenue 

£000 

Capital 

£000 

Total 

£000 

Gain/(loss) on disposal

  of investments

– 

(1,009)

(1,009)

– 

380 

380 

Movements in fair value

  of investments

 

(5,254)

(5,254)

 

1,393 

1,393 

—- 

—— 

—— 

—— 

—— 

—— 

 

(6,263)

(6,263)

 

1,773 

1,773 

Income

467 

 

467 

318 

 

318 

Investment management fee

(65)

(194)

(259)

(79)

(236)

(315)

Recoverable VAT

25 

75 

100 

 

 

 

Other expenses

(190)

 

(190)

(170)

 

(170)

—— 

—— 

—— 

—— 

—— 

—— 

Return/(loss) on ordinary

  activities before tax

237 

(6,382)

(6,145)

69 

1,537 

1,606 

Tax on return/(loss) on

  ordinary activities

(29)

29 

– 

– 

– 

– 

—— 

—— 

—— 

—— 

—— 

—— 

Return/(loss) on ordinary

  activities after tax

208 

(6,353)

(6,145)

69 

1,537 

1,606 

—— 

—— 

—— 

—— 

—— 

—— 

Return/(loss) per share

1.0p

(29.2)p

(28.2)p

0.3p

6.8p

7.1p

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS

for the year ended 31 October 2008

Year ended 

31 October 2008 

£000 

Year ended 

31 October 2007 

£000 

Equity shareholders’ funds

  at 1 November 2007

13,914 

13,250 

Return/(loss) on ordinary

  activities after tax

(6,145)

1,606 

Dividends recognised in the year

(652)

(228)

Net proceeds of share issues

77 

26 

Shares purchased for cancellation

(42)

(722)

Expenses charged to capital

– 

(18)

Equity shareholders’ funds

—— 

—— 

  at 31 October 2008

7,152 

13,914 

—— 

—— 

BALANCE SHEET

as at 31 October 2008

31 October 

2008 

£000 

31 October 

2007 

£000 

Fixed asset investments

  Quoted on AIM

2,995 

7,491 

  Unquoted

3,914 

5,560 

—— 

—— 

Total fixed asset investments

6,909 

13,051 

—— 

—— 

Current assets:

  Debtors

252 

73 

  Cash at bank

38 

837 

—— 

—— 

290 

910 

Creditors (amounts falling due

  within one year)

(47)

(47)

—— 

—— 

Net current assets

243 

863 

—— 

—— 

Net assets

7,152 

13,914 

—— 

—— 

Capital and reserves:

Called-up equity share capital

1,089 

1,087 

Share premium

1,989 

1,919 

Capital redemption reserve

183 

178 

Capital reserve – realised

7,760 

8,981 

Capital reserve – unrealised

(4,139)

1,622 

Revenue reserve

270 

127 

—— 

—— 

Total equity shareholders’ funds

7,152 

13,914 

—— 

—— 

Net asset value per share

32.8p

64.0p

CASH FLOW STATEMENT

for the year ended 31 October 2008

Year ended 

31 October 2008 

Year ended 

31 October 2007 

£000 

£000 

£000 

£000 

Net cash outflow from operating activities

(61)

(164)

Taxation:

Corporation tax paid

 

 

Financial investment:

Purchase of investments

(1,472)

(544)

Sale/repayment of investments

1,351 

2,237 

—— 

—— 

Net cash inflow/(outflow) from financial investment

(121)

1,693 

Equity dividends paid

(652)

(228)

—— 

—— 

Net cash inflow/(outflow) before financing

(834)

1,301 

Financing:

Issue of shares

77 

30 

Share issue expenses

– 

(4)

Purchase of shares for cancellation

(42)

(722)

—— 

—— 

Net cash inflow/(outflow) from financing

35 

(696)

—— 

—— 

Increase/(decrease) in cash at bank

(799)

605 

—— 

—— 

Reconciliation of return before tax

to net cash flow from operating activities

Return/(loss) on ordinary activities before tax

(6,145)

1,606 

Gain/(loss) on disposal of investments

1,009 

(380)

Movements in fair value of investments

5,254 

(1,393)

(Increase)/decrease in debtors

(179)

24 

Increase/(decrease) in creditors

– 

(3)

Expenses charged to capital

– 

(18)

—— 

—— 

Net cash outflow from operating activities

(61)

(164)

—— 

—— 

Reconciliation of movement in net funds

November 2007 

Cash flows 

31 October 2008 

£000 

£000 

£000 

Cash at bank

837 

(799)

38 

—— 

—— 

—— 

INVESTMENT PORTFOLIO SUMMARY

as at 31 October 2008

Valuation

£000

% of net assets

by value

Venture capital investments

(*denotes unquoted, others quoted on AiM)

Stainton Metal Company*

1,379

19.3

Crantock Bakery*

573

8.0

Britspace Holdings*

456

6.4

Longhirst Venues*

435

6.1

Pivotal Laboratories Holdings*

413

5.8

Aero Inventory

389

5.4

RCG Holdings

270

3.8

Optilan Group*

250

3.5

Axial Systems Holdings*

250

3.5

Jelf Group

249

3.5

Andor Technology

211

2.9

IDOX

193

2.7

Pilat Media Global

180

2.5

Prologic

180

2.5

Bond International Software

169

2.4

——

—–

Fifteen largest holdings

5,597

78.3

Advanced Computer Software

163

2.3

IG Doors*

158

2.2

IS Pharma

150

2.1

Cello Group

126

1.8

Quadnetics Group

111

1.5

SectorGuard

88

1.2

Fountains

80

1.1

1st Dental Laboratories

75

1.0

Intercytex Group

74

1.0

Shieldtech

49

0.7

Colliers CRE

38

0.5

Adept Telecom

33

0.5

Zenith Hygiene Group

33

0.5

First Artist Corporation

27

0.4

Belgravium Technologies

23

0.3

Twenty

20

0.3

Hartest Holdings

17

0.2

Spectrum Interactive

13

0.2

Individual Restaurant Company

13

0.2

Advance AIM Value Realisation Company

9

0.1

Baydonhill

8

0.1

Widney

4

0.1

John Laing Partnership*

——

—–

Total fixed asset investments

6,909

96.6

Net current assets

243

3.4

——

—–

Net assets

7,152

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 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.

Stock market risk:  The majority of the company’s investments are quoted on AIM and will be subject to market fluctuations upwards and downwards. External factors such as terrorist activity can negatively impact stock markets worldwide and AIM 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:

  • select suitable accounting policies and then apply them consistently;

  • make judgements and estimates that are reasonable and prudent;

  • state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;  and

  • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors confirm that to the best of their knowledge:

  • the financial statements for the year ended 31 October 2008 comply with the requirements set out above; and

  • the annual financial report includes (i) a fair review of important events that have occurred during the financial year and their impact on the condensed set of financial statements (ii) a description of the principal risks and uncertainties facing the company and (iii) details of related party transactions that have taken place during the year and that have materially affected the financial position or performance of the company during the year.

The above summary of results for the year ended 31 October 2008 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 independent auditors’ report on those financial statements under Section 235 of the Companies Act 1985 is unqualified and does not contain a statement under Section 237(2) or (3) of the Companies Act 1985.

The proposed final dividend of 3.0p per share for the year ended 31 October 2008 will, if approved by shareholders, be paid on 6 March 2009 to shareholders on the register at the close of business on 6 February 2009.

The full annual report including financial statements for the year ended 31 October 2008 is expected to be posted to shareholders on 16 January 2009 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.

ENDS

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

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