Half-yearly financial report

nvm.co.uk

Half-yearly financial report

2006

Northern Venture Trust PLC

Interim Report 31 March 2006


Contents

Financial Summary 1

Chairman's Statement 2

Income Statement 4

Reconciliation of Movements in Shareholders' Funds 4

Balance Sheet 6

Cash Flow Statement 7

Notes to the Financial Statements 8

Investment Portfolio Summary 9

Northern Venture Trust is a Venture Capital Trust (VCT) managed by Northern

Venture Managers. The trust was one of the first VCTs launched on the London

Stock Exchange in 1995. It invests mainly in unquoted venture capital holdings

and aims to provide high long-term returns to shareholders through a

combination of dividend yield and capital growth.


Financial Summary

Six months ended 31 March 2006 2005

As re-stated

ORDINARY SHARES

Net assets* £32,053,000 £33,680,000

Net asset value per share* 82.4p 89.7p

Return per share

Revenue 1.2p 1.1p

Capital 1.2p (1.3)p

Total 2.4p (0.2)p

Interim dividend per share proposed in respect of the period

Revenue 1.0p 1.0p

Capital 2.0p 2.0p

Total 3.0p 3.0p

Cumulative returns to shareholders since launch

Dividends per share** 56.0p 47.0p

Net asset value plus dividends per share 135.4p 133.7p

* Before deducting proposed interim dividend

** Including proposed interim dividend

C SHARES

Net assets £15,020,000

Net asset value per share 94.5p

Return per share

Revenue 0.2p

Capital

(0.3)p

Total

(0.1)p

Interim dividend per share proposed in respect of the period

Nil

PAGE 1 Northern PAGE Venture 1 Trust Northern PLC Interim Venture Report Trust 2006 PLC Interim Report 2006


Chairman’s Statement

meeting). The comparative results for earlier periods

have been re-stated on the new basis.

Professor Sir Frederick Holliday CBE FRSE

I am delighted to report a successful outcome to our

company’s offer of new C shares for subscription in

the 2005/06 tax year, launched in November 2005. A

total of £20.7 million was raised by the closing date

on 5 April 2006, and I would like to take this

opportunity to welcome new shareholders and thank

them for their support. The proceeds of the issue will

be managed and accounted for as a separate pool of

funds until the scheduled date for conversion of the

C shares into ordinary shares in 2009.

The net asset value (NAV) per ordinary share at

31 March 2006 was 82.4p, compared with the restated

year-end figure of 86.0p at 30 September

2005. The movement of 3.6p over the half year

comprised a positive return per share of 2.4p as

shown in the income statement, less the final

dividend of 6.0p declared in respect of the year

ended 30 September 2005 and approved by

shareholders in December 2005.

The revenue return per ordinary share for the half

year was 1.2p, slightly up from the corresponding

period. The directors propose an unchanged interim

dividend of 3.0p per ordinary share, comprising

1.0p revenue and 2.0p capital distribution, which

will be paid on 9 June 2006 to shareholders on the

register on 19 May 2006. This takes the cumulative

ordinary dividends paid by the company to 56p per

share.

The timing of the C share issue was opportune, as

the Government has announced proposals to make

some radical changes to the VCT legislation relating

to funds raised after 6 April 2006 – including a

reduction in initial income tax relief from 40% to

30%, a minimum investment holding period of five

years and new restrictions on the size of company

which can be treated as a VCT-qualifying

investment.

As a result of the increase in share capital our

company now has total assets in excess of £50

million, which gives us a very strong foundation for

the future.

Results

The results for the six months ended 31 March

2006 have been affected by two changes in

accounting standards. Quoted investments are now

valued at bid price rather than mid-market price,

and proposed dividends are not deducted from

reported net assets until either payment has been

made or there is a firm commitment to make

payment (eg approval by the shareholders in general

15.9 million of the new C shares were issued in the

period up to 31 March 2006 and are reflected in the

balance sheet at that date. The net asset value per C

share, after deducting issue expenses, was 94.5p. As

indicated in the prospectus, no interim dividend will

be paid in respect of the C shares in the current

financial year.

Investments

During the six months to 31 March 2006, the

ordinary and C share funds invested a total of

£329,000 in Wear Inns, a new company formed to

acquire an estate of managed public houses in the

North East of England, and the C share fund

invested £198,000 in Twenty, an Aim-quoted

marketing services company. The unusually low

number of completions in the period does not reflect

our managers’ continuing activity aimed at

identifying and progressing suitable opportunities,

and we expect to report an increased level of new

investment in the second half; since the end of

March an investment of £993,000 in Nightingales,

the women's clothing retailer, has been completed

and two other investments have been approved.

PAGE 2 Northern Venture Trust PLC Interim Report 2006


Chairman’s Statement

Proceeds of disposals from the ordinary share

venture capital portfolio during the half year

totalled £3.7 million. The company's shareholding

in Omnico Plastics was sold to SIG plc for £1.3

million in cash and a surplus over cost of £649,000,

and £1.7 million was raised from the quoted

portfolio by selling BBI Holdings and BioFocus and

reducing Alizyme and Computer Software Group –

all realising at least twice their original cost.

The unquoted portfolio has generally made good

progress but there were two significant and

disappointing failures in the period. As reported at

the last year end, VPTA went into administration in

October 2005 after the discovery of apparent

financial reporting irregularities which led to

withdrawal of bank support. Investigations into the

circumstances are continuing. SMS Agencies, the

vehicle for a management buy-out/buy-in of a

recruitment business in 2004, was unable to achieve

planned levels of performance and suffered

mounting liquidity problems which led to the

appointment of administrators in February 2006.

The cost of these investments, totalling £2.3 million,

has been fully written off – £1.9 million was

provided for in the accounts at 30 September 2005

and the balance of £0.4 million in the half year to

31 March 2006.

Shareholder issues

Following the successful tender offer to ordinary

shareholders in 2005, the company has continued to

promote shareholder liquidity by purchasing its

shares in the market for cancellation. In the half

year to 31 March 2006 a total of 456,141 ordinary

shares, representing approximately 1.2% of the

issued ordinary capital, were re-purchased at a cost

of £344,000.

The dividend investment scheme introduced in 2004

will continue to operate in the current financial year.

A number of VCTs have recently announced the

suspension of such schemes in response to the recent

Budget changes, but your board wishes to keep this

facility available to shareholders and believes that it

remains potentially attractive under the new

legislation. Shareholders interested in joining the

scheme should contact the company secretary for

further information.

I recently wrote to shareholders with details of a

shareholder presentation to be held in London on

16 May 2006. The annual general meeting this year

will be held in Edinburgh on 14 December 2006.

Your directors look forward to meeting as many

shareholders as possible on these occasions.

Management performance incentive

At the annual general meeting in December 2005

shareholders gave approval to the new performance

incentive scheme recommended by the directors,

whereby executives of Northern Venture Managers

will co-invest in venture capital investments made by

the company. The scheme has recently begun to

operate and will be kept under close review by the

board. Our managers have continued to strengthen

their investment team.

VCT qualifying status

The company retains PricewaterhouseCoopers LLP

as advisers on matters relating to VCT status. The

directors are satisfied that the qualifying conditions

laid down by HM Revenue & Customs for VCT

approval have continued to be met.

Outlook

The past 18 months have been a busy period for our

company on several fronts, particularly through the

C share issue which has secured a good supply of

funds for future investment. Our managers are

continuing to identify attractive new opportunities

as well as seeking to generate further cash from

disposals to fund dividend distributions. Economic

conditions in the UK remain broadly favourable and

we believe that the long-term prospects for our

enlarged business are good.

Professor Sir Frederick Holliday

Chairman 10 May 2006

PAGE PAGE 3 3 Northern Venture Trust Trust PLC PLC Interim Interim Report Report 2006 2006


Income Statement

(unaudited) for the six months ended 31 March 2006

Six months ended 31 March 2006 Six months ended 31 March 2006

Ordinary Shares

C Shares

Revenue Capital Total Revenue Capital Total

£000 £000 £000 £000 £000 £000

(Loss)/gain on disposal of investments

held at fair value — (490) (490) — — —

Unrealised adjustments to

fair value of investments — 1,164 1,164 — — —

Income 806 — 806 37 — 37

Investment management fee (92) (276) (368) (7) (21) (28)

Other expenses (113) — (113) (15) — (15)

Return on ordinary activities before tax 601 398 999 15 (21) (6)

Tax on return on ordinary activities (134) 86 (48) (5) 5 —

Return on ordinary activities after tax 467 484 951 10 (16) (6)

Return per share 1.2p 1.2p 2.4p 0.2p (0.3)p (0.1)p

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 Trust 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 31 March 2006

Six months ended

Six months ended

31 March 2006 31 March 2006

Ordinary Shares

C Shares

£000 £000

Equity shareholders’ funds at 1 October 2005

As previously reported 31,285 —

Prior year adjustment 2,247 —

As re-stated 33,532 —

Return on ordinary activities after tax 951 (6)

Dividends recognised in the period (2,340) —

Net proceeds of share issues 254 15,026

Shares purchased for cancellation (344) —

Equity shareholders’ funds at 31 March 2006 32,053 15,020

PAGE 4 Northern Venture Trust PLC Interim Report 2006


Six months ended 31 March 2006 Six months ended 31 March 2005 Year ended 30 September 2005

Company Ordinary Shares – as re-stated Ordinary Shares – as re-stated

Revenue Capital Total Revenue Capital Total Revenue Capital Total

£000 £000 £000 £000 £000 £000 £000 £000 £000

— (490) (490) — 590 590 — 626 626

— 1,164 1,164 — (952) (952) — (1,638) (1,638)

843 — 843 813 — 813 1,601 — 1,601

(99) (297) (396) (104) (311) (415) (200) (599) (799)

(128) — (128) (121) — (121) (230) — (230)

616 377 993 588 (673) (85) 1,171 (1,611) (440)

(139) 91 (48) (151) 151 — (289) 278 (11)

477 468 945 437 (522) (85) 882 (1,333) (451)

1.1p 1.0p 2.1p 1.1p (1.3)p (0.2)p 2.3p (3.4)p (1.1)p

Six months ended Six months ended Year ended

31 March 2006 31 March 2005 30 September 2005

Company Ordinary Shares – as re-stated Ordinary Shares – as re-stated

£000 £000 £000

31,285 35,345 35,345

2,247 3,936 3,936

33,532 39,281 39,281

945 (85) (451)

(2,340) (3,943) (5,110)

15,280 1,386 2,901

(344) (2,959) (3,089)

47,073 33,680 33,532

PAGE 5 Northern Venture Trust PLC Interim Report 2006


Balance Sheet

(unaudited) as at 31 March 2006

31 March 2006 31 March 2006 31 March 2006 31 March 2005 30 September 2005

Ordinary Shares C Shares Company Ordinary Shares Ordinary Shares

– as re-stated – as re-stated

£000 £000 £000 £000 £000

Fixed asset investments held at fair value

Venture capital investments

Unquoted 23,736 198 23,934 24,288 25,446

Quoted 4,467 198 4,665 4,871 4,939

Total venture capital investments 28,203 396 28,599 29,159 30,385

Other quoted investments — 3,074 3,074 — —

Total fixed asset investments 28,203 3,470 31,673 29,159 30,385

Current assets

Debtors 250 47 283 315 165

Cash at bank 3,815 11,945 15,760 6,852 3,056

4,065 11,992 16,043 7,167 3,221

Creditors (amounts falling

due within one year) (215) (442) (643) (2,646) (74)

Net current assets 3,850 11,550 15,400 4,521 3,147

Net assets 32,053 15,020 47,073 33,680 33,532

Capital and reserves

Called-up equity share capital 9,720 11,926 21,646 9,384 9,752

Share premium 16,736 3,100 19,836 15,462 16,564

Capital redemption reserve 1,676 — 1,676 1,517 1,562

Capital reserve – realised 515 (16) 499 5,145 4,353

Capital reserve – unrealised 2,570 — 2,570 1,468 542

Revenue reserve 836 10 846 704 759

Total equity shareholders’ funds 32,053 15,020 47,073 33,680 33,532

Net asset value per share 82.4p 94.5p 85.9p 89.7p 86.0p

PAGE 6 Northern Venture Trust PLC Interim Report 2006


Cash Flow Statement

(unaudited) for the six months ended 31 March 2006

Six months ended Six months ended Six months ended Six months ended Year ended

31 March 2006 31 March 2006 31 March 2006 31 March 2005 30 September 2005

Ordinary Shares C Shares Company Ordinary Shares Ordinary Shares

– as re-stated – as re-stated

£000 £000 £000 £000 £000

Net cash inflow from

operating activities 250 389 639 2,745 565

Taxation

Corporation tax paid — — — — —

Financial investment

Purchase of investments (765) (3,470) (4,235) (4,391) (7,114)

Sale/repayment of investments 3,704 — 3,704 4,561 5,450

Net cash inflow/(outflow)

from financial investment 2,939 (3,470) (531) 170 (1,664)

Equity dividends paid (2,340) — (2,340) (3,943) (5,110)

Net cash inflow/(outflow)

before financing 849 (3,081) (2,232) (1,028) (6,209)

Financing

Issue of shares 264 15,901 16,165 1,438 3,000

Share issue expenses (10) (875) (885) (52) (99)

Purchase of ordinary shares for cancellation (344) — (344) (2,959) (3,089)

Net cash (outflow)/inflow from financing (90) 15,026 14,936 (1,573) (188)

Increase/(decrease) in cash at bank 759 11,945 12,704 (2,601) (6,397)

Reconciliation of return before tax

to net cash flow from operating activities

Return on ordinary activities before tax 999 (6) 993 (85) (440)

Loss/(gain) on disposal of

investments held at fair value 490 — 490 (590) (626)

Unrealised adjustments to

fair value of investments (1,164) — (1,164) 952 1,638

Increase in debtors (85) (47) (132) (120) (12)

Increase in creditors 10 442 452 2,588 5

Net cash inflow from operating activities 250 389 639 2,745 565

Analysis of movement in net funds

1 October 2005 Cash flows 31 March 2006

£000 £000 £000

Cash at bank 3,056 12,704 15,760

PAGE 7 Northern Venture Trust PLC Interim Report 2006


Notes to the Financial Statements

(unaudited) for the six months ended 31 March 2006

1 The company is required to comply with a number of new UK Financial Reporting Standards (FRS), which now

represent UK Generally Accepted Accounting Practice (UK GAAP), in presenting its financial statements for the

year ending 30 September 2006. These Standards have been introduced as part of the process of aligning UK

accounting principles with International Accounting Standards. The unaudited interim financial statements for

the six months ended 31 March 2006 have been prepared in compliance with the new Standards, with the result

that the accounting policies differ from those used in preparing the annual financial statements for the year

ended 30 September 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 investments held at fair value is now recognised in

the income statement, as required by FRS 26 “Financial Instruments: Measurement”;

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 rather than in the profit and loss account as previously.

The comparative figures for the six months ended 31 March 2005 and the year ended 30 September 2005 have

been re-stated accordingly.

The effect of the above changes on the reported net assets and net asset value per share of the company is as

follows:

30 September 2005 31 March 2005

Net asset value

Net asset value

Net assets per share Net assets per share

£000 p £000 p

As reported under previous UK GAAP 31,285 80.2 32,614 86.9

Less: adjustment in valuation

of quoted investments to bid price (93) (0.2) (101) (0.2)

Add: proposed dividends not

accounted for until declared and paid 2,340 6.0 1,167 3.0

As reported under revised UK GAAP 33,532 86.0 33,680 89.7

2 The calculation of return per ordinary share is based on the return on ordinary activities after tax for the six

months ended 31 March 2006 and on 38,994,129 (2005 39,393,680) ordinary shares, being the weighted average

number of shares in issue during the period.

3 The calculation of return per C share is based on the return on ordinary activities after tax for the period from

launch to 31 March 2006 and on 5,373,688 C shares, being the weighted average number of shares in issue

during the period.

4 The calculation of net asset value per ordinary share is based on the net assets at 31 March 2006 divided by the

38,880,193 (2005 37,536,841) ordinary shares in issue at that date.

5 The calculation of net asset value per C share is based on the net assets at 31 March 2006 divided by the

15,900,768 C shares in issue at that date.

6 The proposed interim ordinary share dividend of 3.0p per share for the year ending 30 September 2006 will be

paid on 9 June 2006 to ordinary shareholders on the register at the close of business on 19 May 2006.

7 The unaudited interim financial statements for the six months ended 31 March 2006 do not constitute statutory

accounts 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 30 September 2005 have been extracted from the

audited financial statements for that year, which have been delivered to the Registrar of Companies, adjusted in

respect of the changes in accounting policies as stated above; the independent auditors’ report on those

financial statements under Section 235 of the Companies Act 1985 was unqualified.

8 Copies of this interim report have been mailed to shareholders and are available to the public at the company’s

registered office.

PAGE 8 Northern Venture Trust PLC Interim Report 2006


Investment Portfolio Summary

as at 31 March 2006

ORDINARY SHARES

% of

Cost Valuation net assets

£000 £000 by value

CGI Group 2,325 3,237 10.1

Alaric Systems 1,578 1,578 4.9

Weldex (International) Offshore 200 1,242 3.9

Interlube Systems 880 1,190 3.7

Envirotec 812 1,167 3.6

TFB Group 1,000 1,000 3.1

DxS 975 940 2.9

Barony Universal Products 236 918 2.9

Union Snack 119 915 2.9

Computer Software Group** 329 903 2.8

Alizyme* 187 856 2.7

IRIS Technology 850 850 2.7

John Laing Partnership 355 729 2.3

Pivotal Laboratories Holdings 714 714 2.2

LEDA Holdings 688 688 2.1

Fifteen largest venture capital investments 11,248 16,927 52.8

Other venture capital investments 14,385 11,276 35.2

Total fixed asset investments 25,633 28,203 88.0

Net current assets 3,850 12.0

Net assets 32,053 100.0

C SHARES

% of

Cost Valuation net assets

£000 £000 by value

Wear Inns 198 198 1.3

Twenty** 198 198 1.3

Total venture capital investments 396 396 2.6

Listed fixed-interest investments 3,074 3,074 20.5

Total fixed asset investments 3,470 3,470 23.1

Net current assets 11,550 76.9

Net assets 15,020 100.0

* Listed on London Stock Exchange

** Quoted on Alternative Investment Market

PAGE 9 Northern Venture Trust PLC Interim Report 2006


Directors

Professor Sir Frederick Holliday (Chairman)

Michael Denny

John Hustler

Ross Peters

Primrose Scott

Clive Williams

Secretary

Christopher Mellor FCA MSI

Registered Office

Northumberland House

Princess Square

Newcastle upon Tyne NE1 8ER

Telephone: 0191 244 6000

E-mail: nvt@nvm.co.uk

Website: www.nvm.co.uk

Investment Manager

Northern Venture Managers Limited

Northumberland House

Princess Square

Newcastle upon Tyne NE1 8ER

Fixed-interest Investment Adviser

Sarasin Chiswell

Juxon House

100 St Paul’s Churchyard

London EC4M 8BU

Registrars

Lloyds TSB Registrars

The Causeway

Worthing BN99 6DA

Shareholder helpline: 0870 601 5366

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