TIDMNRI
14 NOVEMBER 2017
NORTHERN INVESTORS COMPANY PLC
UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHSED 30 SEPTEMBER 2017
Northern Investors Company PLC is a private equity investment trust
managed by NVM Private Equity LLP. The trust was launched in 1984 and
has been listed on the London Stock Exchange since 1990. In July 2011
shareholders approved a change in investment strategy, whereby the trust
ceased making new investments and began an orderly realisation of its
portfolio with a view to returning capital to shareholders. Since then
the trust has returned a total of GBP90.7 million to shareholders
through dividends and capital distributions.
Financial highlights (comparative figures as at 30 September 2016 and 31
March 2017):
Six months to Six months to Year to
30 September 30 September 31 March
2017 2016 2017
Net assets GBP5.8m GBP18.2m GBP12.7m
Number of shares in issue at end of period 2,496,767 2,496,767 2,496,767
Net asset value per share
(after capital distributions of 250.0p in January
2017 and 257.5p in June 2017) 233.4p 728.6p 508.4p
Cash distributions to shareholders
(dividends paid plus share buy-backs)
During period GBP7.2m GBP0.6m GBP6.8m
Since change in investment policy (July 2011) GBP90.7m GBP77.3m GBP83.5m
Return for the period
Pence per share 16.0p 67.2p 99.6p
As % of opening net asset value 3.1% 9.8% 14.5%
Dividend per share declared
in respect of the period - - 30.0p
Mid-market share price at end of period 236p 845p 525p
Share price (premium)/discount
to net asset value (1.1)% (16.0)% (3.3)%
For further information, please contact:
Northern Investors Company PLC
Nigel Guy/Christopher Mellor 0191 244 6000
Stifel Nicolaus Europe Limited
Neil Winward/Mark Bloomfield/Gaudi le Roux 020 7710 7600
HALF-YEARLY MANAGEMENT REPORT TO SHAREHOLDERS
Overview
Consistent with the now well-established orderly realisation strategy, a
further GBP7.2 million was distributed to shareholders during the six
months ended 30 September 2017, taking the cumulative amount since 2011
to GBP90.7 million. The unaudited net asset value (NAV) per share at 30
September 2017 was 233.4 pence which, after adding back distributions to
shareholders during the period totalling 287.6 pence per share,
represents a modest improvement of 2.5% on the 508.4 pence reported at
31 March 2017. The remaining portfolio now comprises five investments
with a total carrying value of GBP5.8 million. As noted in our last
report to shareholders in May 2017, the orderly realisation process will
continue through 2018 as we seek to realise acceptable value from the
last remaining holdings. We will keep shareholders updated as matters
progress. However with cash distributions to date already having
exceeded 150% of the company's net assets at the start of the process in
2011, we believe the overall outcome will be highly satisfactory.
Investment portfolio
Our largest holding at 31 March 2017, Optilan Group, was sold in April
2017 for GBP4.2 million, in line with the March carrying value. There
were no other outright disposals during the half year, but the income
statement includes a further GBP0.6 million in respect of deferred
proceeds from earlier investment sales which have either been received
or where payment is now reasonably certain. A further GBP0.2 million of
potential receipts have not yet been recognised due to uncertainty.
Two of the five remaining investments are currently the subject of
active discussions with a view to sale and we would hope to complete
exits during the current financial year. In each of the other cases NVM
is working with management teams and, where applicable, other external
investors to agree on a realistic timescale and strategy for exit. It
is still our objective to complete the realisation process by the end of
the calendar year 2018, but this will depend on market conditions, the
trading performance of individual companies and the attitude of the
other investors.
Financial performance
The unaudited NAV as at 30 September 2017 was 233.4 pence, compared with
508.4 pence (audited) as at 31 March 2017. The movement in the period
reflects the cash distribution of 257.5 pence per share in June 2017, by
means of a bonus issue and subsequent redemption of B shares, and the
payment of a final dividend of 30.0 pence per share in July 2017 in
respect of the preceding financial year. After adjusting for these
items the operating outcome, as shown in the income statement, was
positive with a reported return per share of 16.0 pence per share for
the period.
The level of regular investment income is now very low and there were no
significant non-recurring receipts during the half year. Against this
background the directors are conscious of the potential for running
costs to erode the capital value attributable to shareholders, and
whilst acknowledging that there is a residual fixed cost to managing the
portfolio and retaining the listing, we will be looking at the overall
cost base to identify areas of potential saving.
A further performance fee instalment of GBP0.8 million was paid to NVM
in May 2017, taking the cumulative payment to GBP3.6 million. The
remaining performance fee provision in the balance sheet as at 30
September 2017 was GBP1.7 million; GBP0.4 million of this is due for
payment in May 2018 based on amounts already distributed to shareholders,
but the balance will only become payable once the residual investments
are converted into cash.
Dividend
As is now usual, no interim dividend has been declared. Given the
company's reducing size and unpredictable investment income, it is not
possible at this stage to say whether a final dividend will be proposed
in respect of the current financial year. However the company will pay
a dividend should this be necessary to maintain the company's authorised
investment trust status.
Corporate strategy
The company has now returned a total of GBP90.7 million to shareholders
since the run-off strategy was adopted in July 2011. This has been
effected through a combination of tender offers, B share redemptions and
annual dividends. The financial projections prepared by our managers
and reviewed by the board suggest that when the five remaining
investments have been realised, the further amount available for
distribution to shareholders (including the existing cash balance of
GBP1.5 million and net of forecast costs including the NVM performance
fee) should be in the range from GBP5 million to GBP9 million -
equivalent to between 200 pence and 360 pence per share. This would
represent a final cash return of between 163% and 169% of the net assets
at the start of the process, substantially in line with our previous
estimates. It is emphasised that this is no more than an illustrative
projection which is designed to give shareholders an indication of the
eventual outcome and is clearly subject to various uncertainties.
Our preferred strategy for completing the run-off is to realise as many
as possible, if not all, of the remaining investments before putting the
company into members' voluntary liquidation so that the liquidator can
distribute cash in a tax-efficient manner. Following the recent series
of tender offers and B share redemptions, the company's capacity for
making further distributions which qualify for capital gains tax
treatment is extremely limited, but the board has been advised that
future distributions by a liquidator should be treated as capital
receipts in the hands of shareholders. Shareholders should also bear in
mind that the company's Stock Exchange listing will be cancelled when a
liquidator is appointed, following which the shares will cease to be
marketable and those investors holding shares through ISAs are likely to
be required by their ISA manager to remove them from their account to
maintain compliance with the ISA regulations. Whilst none of these
events is yet imminent, we will aim to keep shareholders informed as to
likely future developments on a continuing basis.
Outlook
The process of realising the company's investments is now well advanced
and the directors and manager are focussed on resolving the outstanding
issues. The current political and economic uncertainty does not create
an ideal backdrop for the small company M&A market but, whilst we do not
expect all of the remaining realisations to be entirely straightforward,
we should be in a position to report further progress during 2018.
On behalf of the Board
Nigel Guy
Chairman
The unaudited half-yearly financial statements for the six months ended
30 September 2017 are set out below.
INCOME STATEMENT
(unaudited) for the six months ended 30 September 2017
Six months ended Six months ended
30 September 2017 30 September 2016
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gain on
disposal of
investments - 653 653 - 277 277
Movements in
fair value
of
investments - 9 9 - 1,758 1,758
---------- ---------- ---------- ---------- ---------- ----------
- 662 662 - 2,035 2,035
Income 65 - 65 227 - 227
Investment
management
fee (23) (91) (114) (27) (349) (376)
Other
expenses (171) (42) (213) (185) (22) (207)
---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
before tax (129) 529 400 15 1,664 1,679
Tax on
return on
ordinary
activities - - - (3) 3 -
---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
after tax (129) 529 400 12 1,667 1,679
---------- ---------- ---------- ---------- ---------- ----------
Return per (5.2)p 21.2p 16.0p 0.5p 66.7p 67.2p
share
Year ended 31 March 2017
Revenue Capital Total
GBP000 GBP000 GBP000
Gain on disposal of investments - 2,056 2,056
Movements in fair value of investments - 305 305
---------- ---------- ----------
- 2,361 2,361
Income 1,093 - 1,093
Investment management fee (55) (568) (623)
Other expenses (322) (22) (344)
---------- ---------- ----------
Return on ordinary activities before
tax 716 1,771 2,487
Tax on return on ordinary activities (143) 143 -
---------- ---------- ----------
Return on ordinary activities after tax 573 1,914 2,487
---------- ---------- ----------
Return per share 22.9p 76.7p 99.6p
BALANCE SHEET
(unaudited) as at 30 September 2017
30 September 2017 30 September 2016 31 March 2017
GBP000 GBP000 GBP000
Fixed assets:
Investments 5,810 13,478 9,981
---------- ---------- ----------
Current assets:
Debtors 383 32 791
Cash and cash equivalents 1,516 7,182 4,570
---------- ---------- ----------
1,899 7,214 5,361
Creditors (amounts
falling due
within one year) (1,881) (2,500) (2,649)
---------- ---------- ----------
Net current assets 18 4,714 2,712
---------- ---------- ----------
Net assets 5,828 18,192 12,693
---------- ---------- ----------
Capital and reserves:
Called-up equity share
capital 624 624 624
Capital redemption
reserve - - 6,242
Capital reserve (10,688) (2,987) (7,018)
Special reserve 17,141 17,183 10,941
Revaluation reserve (2,288) 2,009 (17)
Revenue reserve 1,039 1,363 1,921
---------- ---------- ----------
Total equity
shareholders' funds 5,828 18,192 12,693
---------- ---------- ----------
Net asset value per share 233.4p 728.6p 508.4p
STATEMENT OF CHANGES IN EQUITY
(unaudited) for the six months ended 30 September 2017
--------Non-distributable ---------Distributable
reserves-------- reserves--------- Total
Capital
Share redemption Revaluation Capital Special Revenue
capital reserve reserve reserve reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April
2017 624 6,242 (17) (7,018) 10,941 1,921 12,693
Return on
ordinary
activities
after tax
for the
period - - (2,271) 2,842 (42) (129) 400
Bonus issue
of B shares - - - - (6,429) - (6,429)
Redemption of
B shares - 6,429 - (6,429) - - -
Related
expenses - - - (83) - - (83)
Cancellation
of capital
redemption
reserve - (12,671) - - 12,671 - -
Dividends
paid - - - - - (753) (753)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30
September
2017 624 - (2,288) (10,688) 17,141 1,039 5,828
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CHANGES IN EQUITY
(unaudited) for the six months ended 30 September 2016
--------Non-distributable ---------Distributable
reserves-------- reserves--------- Total
Capital
Share redemption Revaluation Capital Special Revenue
capital reserve reserve reserve reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April
2016 624 4,531 251 (2,918) 12,674 1,950 17,112
Return on
ordinary
activities
after tax
for the
period - - 1,758 (69) (22) 12 1,679
Cancellation
of capital
redemption
reserve - (4,531) - - 4,531 - -
Dividends
paid - - - - - (599) (599)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30
September
2016 624 - 2,009 (2,987) 17,183 1,363 18,192
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2017
------ Non-distributable reserves ------ ------ Distributable reserves ------ Total
Capital
Share redemption Revaluation Capital Special Revenue
capital reserve reserve reserve reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April
2016 624 4,531 251 (2,918) 12,674 1,950 17,112
Return on
ordinary
activities
after tax for
the year - - (268) 2,204 (22) 573 2,487
Bonus issue
of B shares - - - - (6,242) - (6,242)
Redemption of
B shares - 6,242 - (6,242) - - -
Related
expenses - - - (62) - - (62)
Cancellation
of capital
redemption
reserve - (4,531) - - 4,531 - -
Dividends
paid - - - - - (602) (602)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March
2017 624 6,242 (17) (7,018) 10,941 1,921 12,693
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CASH FLOWS
(unaudited) for the six months ended 30 September 2017
Six months ended Six months ended Year ended
30 September 2017 30 September 2016 31 March 2017
GBP000 GBP000 GBP000
Cash flows from operating
activities:
Return on ordinary
activities before tax 53 1,679 2,487
Adjustments for:
Gain on disposal of
investments (707) (277) (2,056)
Movement in fair value of
investments 392 (1,758) (305)
(Increase)/decrease in
debtors 783 (7) (766)
Increase/(decrease) in
creditors (768) (2,597) (2,448)
---------- ---------- ----------
Net cash outflow from
operating activities (247) (2,960) (3,088)
---------- ---------- ----------
Cash flows from investing
activities:
Purchase of investments - - -
Sale/repayment of
investments 4,458 277 4,100
---------- ---------- ----------
Net cash inflow from
investing activities 4,458 277 4,100
---------- ---------- ----------
Cash flows from financing
activities:
Redemption of B shares (6,429) - (6,242)
B share redemption
expenses (83) - (62)
Dividends paid on
ordinary and B shares (753) (599) (602)
---------- ---------- ----------
Net cash outflow from
financing activities (7,265) (599) (6,906)
---------- ---------- ----------
Net decrease in cash/cash
equivalents (3,054) (3,282) (5,894)
Cash and cash equivalents
at beginning of period 4,570 10,464 10,464
---------- ---------- ----------
Cash and cash equivalents
at end of period 1,516 7,182 4,570
---------- ---------- ----------
INVESTMENT PORTFOLIO SUMMARY
as at 30 September 2017
Cost Valuation % of net assets
Company GBP000 GBP000 by valuation
Axial Systems Holdings 2,311 1,977 33.9
Weldex (International) Offshore
Holdings 3,252 1,921 33.0
CGI Group Holdings 1,908 1,165 20.0
Lanner Group 561 747 12.8
S&P Coil Products 66 - -
---------- ---------- -------
Total fixed asset investments 8,098 5,810 99.7
----------
Net current assets 18 0.3
---------- -------
Net assets 5,828 100.0
---------- -------
BUSINESS RISKS
The board carries out a regular and robust review of the risk
environment in which the company operates. The principal risks and
uncertainties identified by the board which might affect the company's
business model and future performance, and the steps taken with a view
to their mitigation, are as follows:
Investment and liquidity risk: the majority of the company's
investments comprise minority holdings in small and medium-sized
unquoted companies, which by their nature entail a higher level of risk
and lower liquidity than investments in large quoted companies.
Mitigation: the investment manager aims to limit the risk attaching to
the portfolio as a whole by close monitoring of individual holdings,
including the appointment of investor directors where appropriate. The
board reviews the portfolio, including the schedule of projected exits,
with the investment manager on a regular basis with a view to ensuring
that the orderly realisation process remains on track.
Portfolio concentration risk: following the adoption of the company's
revised investment policy in July 2011, the portfolio has and will
continue to become more concentrated as investments are realised and
cash is returned to shareholders. This will increase the proportionate
impact of changes in the value of individual investments on the value of
the company as a whole. The directors' valuation of the company's
investments represents their best assessment of the fair value of the
investments as at the valuation date and the amounts eventually realised
from such investments may be more or less than the directors' valuation.
Mitigation: the directors and manager keep the changing composition of
the portfolio under review and focus closely on those holdings which
represent the largest proportions of total value.
Financial risk: most of the company's investments involve a medium- to
long-term commitment and many are relatively illiquid. Mitigation: the
directors consider that it is inappropriate to finance the company's
activities through borrowing except on an occasional short-term basis.
Accordingly they seek to maintain a proportion of the company's assets
in cash or cash equivalents in order to be in a position to meet
expenditure commitments including any investments which may be made
under the company's revised investment policy. 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. Mitigation: the company invests in a
diversified portfolio of investments spanning various industry sectors,
and maintains sufficient cash reserves to be able to provide additional
funding to investee companies should this be necessary.
Credit risk: the company holds a number of financial instruments and
cash deposits and is dependent on the counterparties discharging their
commitment. Mitigation: the directors review the creditworthiness of
the counterparties to these instruments and cash deposits and seek to
ensure there is no undue concentration of credit risk with any one
party.
Internal control risk: the company's assets could be at risk in the
absence of an appropriate internal control regime. Mitigation: 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.
OTHER MATTERS
The unaudited half-yearly financial statements for the six months ended
30 September 2017 do not constitute statutory financial statements
within the meaning of Section 434 of the Companies Act 2006, have not
been reviewed or audited by the company's independent auditor and have
not been delivered to the Registrar of Companies. The comparative
figures for the year ended 31 March 2017 have been extracted from the
audited financial statements for that year, which have been delivered to
the Registrar of Companies; the auditor's report on those financial
statements (i) was unqualified, (ii) drew attention by way of emphasis
of matter to the fact that the financial statements had not been
prepared on the going concern basis and (iii) did not contain a
statement under Section 498(2) or (3) of the Companies Act 2006.
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 2017. The financial statements have not been
prepared on the going concern basis, since the company's current
objective is to conduct an orderly realisation of the investment
portfolio and return cash to shareholders. No adjustments were
necessary to the investment valuations or other assets and liabilities
included in the financial statements as a consequence of the change in
the basis of preparation.
The directors of the company at the date of this announcement were Mr N
R A Guy (Chairman), Mr J C Barnsley, Mr P W F Marsden and Mr M P
Nicholls.
Each of the directors confirms that to the best of his 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 Rules 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 Rules 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 calculation of the revenue and capital return per share is based on
the return on ordinary activities after tax for the six months ended 30
September 2017 and on 2,496,767 (2016 2,496,767) ordinary shares, being
the weighted average number of shares in issue during the period.
The calculation of the net asset value per share is based on the net
assets at 30 September 2017 divided by the 2,496,767 (2016 2,496,767)
ordinary shares in issue at that date.
A copy of the half-yearly financial report for the six months ended 30
September 2017 is expected to be posted to shareholders by 24 November
2017 and will be available to the public at the registered office of the
company at Time Central, 32 Gallowgate, Newcastle upon Tyne NE1 4SN and
on the NVM Private Equity LLP website, www.nvm.co.uk
Neither the contents of the NVM Private Equity LLP website nor the
contents of any website accessible from hyperlinks on the NVM Private
Equity LLP website (or any other website) is incorporated into, or forms
part of, this announcement.
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Northern Investors Co PLC via Globenewswire
http://www.nvm.co.uk/investorarea/northern_investors_company_plc.php
(END) Dow Jones Newswires
November 14, 2017 10:00 ET (15:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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