TIDMNRI
23 MAY 2018
NORTHERN INVESTORS COMPANY PLC
RESULTS FOR THE YEARED 31 MARCH 2018
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. The company has subsequently returned a total of GBP90.7
million to shareholders by way of tender offers and dividend
distributions.
Financial highlights (comparative figures as at 31 March 2017):
2018 2017
Net assets GBP5.8m GBP12.7m
Number of shares in issue at end of year 2,496,767 2,496,767
Net asset value per share
(2018 stated after 257.5p per share distribution in
June 2017) 232.1p 508.4p
Cash distributions to shareholders:
During year GBP7.2m GBP6.8m
Since change in investment policy in July 2011 GBP90.7m GBP83.5m
Total return for the year:
Pence per share 13.5p 99.6p
As % of opening net asset value 2.7% 14.5%
Proposed dividend per share for the year - 30.0p
Mid-market share price at end of year 224p 525p
Share price discount/(premium) to net asset value 3.5% (3.3)%
For further information, please contact:
Northern Investors Company PLC
Nigel Guy/James Bryce 0191 244 6000
Stifel Nicolaus Europe Limited
Neil Winward/Mark Bloomfield/Gaudi Le Roux
020 7710 7600
Website: www.nvm.co.uk
NORTHERN INVESTORS COMPANY PLC
CHAIRMAN'S STATEMENT
Overview
We have continued to implement the phased run-off of the investment
portfolio which was initiated in 2011. During the financial year to 31
March 2018 a further GBP7.2 million was returned to shareholders, taking
the cumulative total since 2011 to GBP90.7 million. This represents a
significant uplift on the GBP59 million of net assets at the start of
the realisation programme. The residual investment portfolio now
comprises only four unquoted investments, two of which have reasonable
prospects of being realised during 2018.
We are still working towards the eventual appointment of a liquidator to
complete the winding-up process through a members' voluntary liquidation
of the company. Whilst your directors would ideally prefer to take this
step only when all the remaining investments have been sold, we are
conscious that maintaining listed investment trust status for a further
period of time has cost implications and we need to take a realistic
view of the two investments whose sale is unlikely to take place before
2019. Although clearly dependent on progress with realisations, and
indeed on the general economic and political climate which has become
less favourable over the past six months, in the absence of unforeseen
circumstances we envisage that proposals for the appointment of a
liquidator will be put to shareholders for approval before the end of
2018, enabling the liquidator to make an early distribution of such
funds as are immediately available, with further payments following as
the remaining investments are sold.
Financial results
The residual net assets at 31 March 2018 totalled GBP5.8 million,
comprising investments at directors' valuation of GBP5.7 million and net
current assets of GBP0.1 million. The net asset value (NAV) per share
at 31 March 2018 was 232.1 pence which, after adding back the 257.5
pence per share returned to shareholders through a B share redemption in
June 2017 and the 30.0 pence per share dividend paid in July 2017,
represents a marginal uplift from the corresponding figure of 508.4
pence at 31 March 2017.
The return per share for the year as reported in the income statement
was 13.5 pence (preceding year 99.6 pence). Income from the reduced
investment portfolio is now running at a much lower level than in
previous years, and is no longer sufficient to cover annual running
costs. Consequently the return for the year comprises a deficit on the
revenue account of 9.1 pence per share, offset by a positive return of
22.6 pence on the capital account.
Dividend
In recent years the annual dividend has been paid in the form of a
single final dividend, with no interim dividend being declared. A
dividend of 30.0 pence per share was paid in July 2017 in respect of the
year ended 31 March 2017. As flagged in the interim report, the
directors, having taken into account the low level of investment income
received in the year and the relative tax inefficiency for many
shareholders of dividend payments now compared with future distributions
from the liquidator, have decided not to propose a dividend in respect
of the year ended 31 March 2018. No further dividends are likely to be
declared unless it becomes necessary to do so in order to preserve the
company's authorised investment trust status.
Investment portfolio
During the year the investments in Optilan Group and S&P Coil Products
were sold. Optilan Group realised a total of GBP4.2 million in cash, a
highly satisfactory outcome, but S&P Coil Products, which had been
carried at nil value for a number of years, was sold for a token
consideration with only a limited prospect of further payments in the
future. A further GBP0.8 million was received during the year in
deferred proceeds from investments sold in earlier years, principally
Kitwave One and Alaric Systems. Since adoption of the portfolio run-off
strategy in July 2011, 26 of the original 30 investments have been sold
outright and almost GBP83 million in cash has been realised from the
portfolio.
Following the board's latest portfolio review with the managers, we
believe that there are good prospects of achieving exits from two of the
four remaining holdings within the next nine months. This leaves two
investments where a sale is unlikely to be achieved before 2019.
Northern Investors is a minority investor in each of these companies and
does not have the power to compel an early sale, although we have a good
relationship with the other investors and will continue to work with
them to obtain an exit on terms satisfactory to all parties.
Corporate strategy
As a result of distributions totalling GBP7.2 million over the past 12
months, the total cash returned to shareholders since our change of
investment policy in July 2011 now exceeds GBP90 million. This is
already an excellent outcome from a portfolio originally valued
(together with cash balances) at GBP59 million in 2011.
Distributions have taken the form of revenue dividends (GBP6.7 million),
tender offers (GBP71.3 million) and most recently two bonus issues and
redemptions of B shares (GBP12.7 million). The company's capital base
is now too small for further tender offers to be practicable, and we
have exhausted those balance sheet reserves which could be
tax-efficiently paid out in the form of capital by way of B share
redemptions. We have been advised that once the company is in members'
voluntary liquidation, distributions by the liquidator will be treated
as capital receipts in the hands of shareholders. In the circumstances
it seems right that the company should now move towards the liquidation
stage, and we expect to write to shareholders with our proposals later
in the year.
In the meantime your directors have taken steps to reduce ongoing
running costs where possible, so as to minimise any erosion of the
company's remaining assets. In particular we have agreed a lower base
level for NVM's management and administration fees with effect from 1
April 2018; we have also reduced board and other operating costs and
will not be replacing Mark Nicholls when he retires from the board as
mentioned below.
Shareholders may recall that in 2011 we estimated that the eventual cash
return to shareholders from the realisation process would be in the
range from 120% to 160% of the initial net assets of GBP59 million.
Having already exceeded 150%, we are now projecting a total outcome
(including distributions from the liquidator, and net of all costs) in
the range from 162% to 167%. In cash terms this implies further returns
of between GBP4.9 million and GBP7.6 million, equivalent to between 196
pence and 304 pence per share. These estimates are given for
illustrative purposes and are subject to various uncertainties,
including actions that may be taken by the liquidator once appointed, so
reliance should not be placed on them.
It is likely that the company's Stock Exchange listing will be cancelled
on or shortly after the appointment of a liquidator, and shareholders
should be aware that the share register will be frozen at the date of
liquidation, with any requests for shares to be transferred needing to
be authorised by the liquidator. Those shareholders whose shares are
held in ISAs or other investment wrappers should consult with their plan
manager in good time so as to determine whether they need to take any
action prior to the company going into liquidation.
Manager's remuneration and performance incentive
In recognition of the reduced size of the company, it has been agreed
with NVM Private Equity that with effect from 1 April 2018 the fixed
element of their management fee will reduce from GBP100,000 to GBP75,000
and their secretarial/administration fee will reduce from GBP35,000 to
GBP25,000.
A further performance incentive fee instalment of GBP0.7 million was
paid to NVM in May 2017 on the basis of cash generated for distribution
up to 31 March 2017. The balance sheet as at 31 March 2018 includes a
provision of GBP1.8 million for amounts expected to become payable in
the future, of which GBP0.5 million is due shortly after publication of
the 31 March 2018 financial statements.
Board of directors
Mark Nicholls, who joined the board in 2006, has indicated that he does
not wish to seek re-election as a director at the annual general meeting
on 10 July 2018. Mark's knowledge and experience of corporate financial
matters have been invaluable to our company through a period of
strategic change, and I would like to thank him on behalf of
shareholders and board colleagues for his important contribution.
Company secretary
Chris Mellor retired as company secretary on 31 March 2018, having
served in that role since 1989. I would like to thank Chris for his
excellent service to the company and wish him well in his retirement.
We welcome James Bryce, NVM's new head of legal and compliance, as our
new company secretary and look forward to working with him.
Outlook
Your directors and manager will continue to focus on the investment
realisation process with a view to resolving as many issues as possible
before the company goes into liquidation. It is now almost seven years
since the run-off process commenced; we believe that shareholders'
patience over that period has been well rewarded and we look forward to
a very satisfactory final result.
Nigel Guy
Chairman
Extracts from the audited financial statements for the year ended 31
March 2018 are set out below.
INCOME STATEMENT
for the year ended 31 March 2018
Year ended 31 March 2018 Year ended 31 March 2017
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gain on
disposal of
investments - 776 776 - 2,056 2,056
Movements in
fair value of
investments - 26 26 - 305 305
---------- ---------- ---------- ---------- ---------- ----------
- 802 802 - 2,361 2,361
Income 130 - 130 1,093 - 1,093
Investment
management
fee (39) (194) (233) (55) (568) (623)
Other expenses (319) (42) (361) (322) (22) (344)
---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
before tax,
being total
comprehensive
income (228) 566 338 716 1,771 2,487
Tax on return
on ordinary
activities - - - (143) 143 -
---------- ---------- ---------- ---------- ---------- ----------
Return on
ordinary
activities
after tax (228) 566 338 573 1,914 2,487
---------- ---------- ---------- ---------- ---------- ----------
Return per (9.1)p 22.6p 13.5p 22.9p 76.7p 99.6p
share
BALANCE SHEET
as at 31 March 2018
31 March 2018 31 March 2017
GBP000 GBP000
Fixed assets:
Investments 5,737 9,981
---------- ----------
Current assets:
Debtors 19 791
Cash and cash equivalents 1,867 4,570
---------- ----------
1,886 5,361
Creditors (amounts falling due within one year) (1,827) (2,649)
---------- ----------
Net current assets 59 2,712
---------- ----------
Net assets 5,796 12,693
---------- ----------
Capital and reserves:
Called-up equity share capital 624 624
Capital redemption reserve - 6,242
Capital reserve 6,437 (7,018)
Special reserve - 10,941
Revaluation reserve (2,205) (17)
Revenue reserve 940 1,921
---------- ----------
Total equity shareholders' funds 5,796 12,693
---------- ----------
Net asset value per share 232.1p 508.4p
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2018
------
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
2017 624 6,242 (17) (7,018) 10,941 1,921 12,693
Return on
ordinary
activities
after tax for
the year - - (2,188) 2,796 (42) (228) 338
Cancellation
of capital
redemption
reserve - (12,671) - - 12,671 - -
Bonus issue
of B shares - - - - (6,429) - (6,429)
Redemption of
B shares - 6,429 - (6,429) - - -
B share
redemption
expenses - - - (53) - - (53)
Transfer to
capital
reserve - - - 17,141 (17,141) - -
Dividends
paid - - - - - (753) (753)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March
2018 624 - (2,205) 6,437 - 940 5,796
---------- ---------- ---------- ---------- ---------- ---------- ----------
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
Cancellation
of capital
redemption
reserve - (4,531) - - 4,531 - -
Bonus issue
of B shares - - - - (6,242) - (6,242)
Redemption of
B shares - 6,242 - (6,242) - - -
B share
redemption
expenses - - - (62) - - (62)
Dividends
paid - - - - - (602) (602)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 31 March
2017 624 6,242 (17) (7,018) 10,941 1,921 12,693
---------- ---------- ---------- ---------- ---------- ---------- ----------
STATEMENT OF CASH FLOWS
for the year ended 31 March 2018
Year ended Year ended
31 March 2018 31 March 2017
GBP000 GBP000
Cash flows from operating activities:
Return on ordinary activities before tax 338 2,487
Adjustments for:
Gain on disposal of investments (776) (2,056)
Movement in fair value of investments (26) (305)
(Increase)/decrease in debtors 772 (766)
Increase/(decrease) in creditors (822) (2,448)
---------- ----------
Net cash inflow/(outflow) from operating
activities (514) (3,088)
---------- ----------
Cash flows from investing activities:
Purchase of investments - -
Sale/repayment of investments 5,046 4,100
---------- ----------
Net cash inflow from investing activities 5,046 4,100
---------- ----------
Cash flows from financing activities:
Redemption of B shares (6,429) (6,242)
Expenses associated with redemption/repurchase of
shares (53) (62)
Dividends paid on ordinary shares and B shares (753) (602)
---------- ----------
Net cash outflow from financing activities (7,235) (6,906)
---------- ----------
Net increase/(decrease) in cash and cash
equivalents (2,703) (5,894)
Cash and cash equivalents at beginning of year 4,570 10,464
---------- ----------
Cash and cash equivalents at end of year 1,867 4,570
---------- ----------
INVESTMENT PORTFOLIO SUMMARY
as at 31 March 2018
% of
Cost Valuation net assets
GBP000 GBP000 by value
Weldex (International) Offshore Holdings 3,252 1,921 33.1
CGI Group Holdings 1,908 1,656 28.6
Axial Systems Holdings 2,311 1,483 25.6
Lanner Group 471 677 11.7
---------- ---------- --------
Total fixed asset investments 7,942 5,737 99.0
----------
Net current assets 59 1.0
---------- --------
Net assets 5,796 100.0
---------- --------
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: the company's investments 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.
Liquidation risk: in order to complete the implementation of the
company's corporate strategy it is envisaged that a liquidator will be
appointed and that the company's shares will cease to be listed on the
London Stock Exchange. This may result in shareholders having a lesser
degree of influence over the affairs of the company than previously and
to a loss of liquidity as regards their shareholdings. Mitigation: the
directors will keep shareholders informed as to intended strategic
developments and will liaise with the prospective liquidator with a view
to ensuring a smooth transition.
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.
DIRECTORS' RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the annual report and the
financial statements 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 including FRS 102 "The Financial Reporting Standard applicable
in the UK and Republic of Ireland".
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the company and of the profit or loss of the
company for the year. In preparing the 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. As explained below, the directors do not believe it is
appropriate to prepare the financial statements for the year ended 31
March 2018 on a going concern basis.
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the company's transactions and
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, strategic report, directors'
remuneration report and corporate governance statement that comply with
that law and those regulations.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company's website.
Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
In relation to the financial statements for the year ended 31 March
2018, the directors confirm that to the best of their knowledge (i)
taken as a whole the financial statements, prepared in accordance with
the applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit of the company; and
(ii) the strategic report and directors' report include 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 that they face. The directors consider that the annual
report and financial statements, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders
to assess the company's position and performance, business model and
strategy.
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.
OTHER MATTERS
The above summary of results for the year ended 31 March 2018 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
auditor's report on those financial statements under Section 495 of the
Companies Act 2006 is unqualified, draws attention to the non-going
concern basis of preparing the accounts by way of emphasis without
qualifying the report and does not contain a statement under Section
498(2) or (3) of the Companies Act 2006.
In July 2011 shareholders approved a change in the investment policy of
the company, with the objective of conducting an orderly realisation of
the assets of the company in a manner that seeks to achieve a balance
between an efficient return of cash to shareholders and maximising the
value of the company's investments. As it is likely that this process
will ultimately lead to the liquidation of the company, the financial
statements have not been prepared on a going concern basis. 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 calculation of the revenue and capital return per share is based on
the return on ordinary activities after tax for the year and on
2,496,767 (2017 2,496,767) ordinary shares, being the weighted average
number of shares in issue during the year.
The calculation of the net asset value per share is based on the net
assets at 31 March 2018 divided by the 2,496,767 (2017 2,496,767)
ordinary shares in issue at that date.
The full annual report including financial statements for the year ended
31 March 2018 is expected to be posted to shareholders by 8 June 2018
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
May 23, 2018 11:00 ET (15:00 GMT)
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