Final Results
Northern 3 VCT PLC
19 December 2002
19 DECEMBER 2002
NORTHERN 3 VCT PLC
PRELIMINARY RESULTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2002
Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by Northern Venture
Managers. The trust was launched in September 2001 and its public share offers
raised a total of £13.9 million. The trust intends to invest mainly in unquoted
venture capital situations and aims to provide high long-term returns to
shareholders through a combination of dividend yield and capital growth.
Financial highlights (figures as at 30 September 2002):
• Net assets £13,531,000
• Net asset value per share 96.9p
• Share price 95.0p
• Investment income £269,000
• Net revenue before tax £111,000
• Revenue return per share* 1.2p
• Dividend per share 0.6p
*Based on weighted average of 7,727,133 shares in issue during the period
For further information, please contact:
Alastair Conn, Managing Director
Northern Venture Managers Limited 0191 244 6000
Website: www.nvm.co.uk
Lucy Copeman/Marlene Scott
Polhill Communications 020 7655 0540
CHAIRMAN'S STATEMENT
The Chairman of Northern 3 VCT PLC, John Hustler, included the following points
in his statement to shareholders:
I am pleased to present Northern 3 VCT's first annual report to shareholders,
covering the period from the date of incorporation to 30 September 2002. The
company's public share offer raised almost £14 million from investors,
representing around 10% of new VCT funds raised in the past year, and your
directors regard this as a creditable outcome given the prevailing market
conditions. I would again like to thank all of our shareholders for their
support, and I am pleased to report that we have made a satisfactory start to
the process of building our portfolio of qualifying venture capital investments.
Net asset value
The net asset value (NAV) at 30 September 2002 was 96.9p per share, compared
with a starting position, after deducting issue expenses, of 95p. The increase
is almost entirely due to a rise in the value of the listed fixed-interest
portfolio, as our unlisted venture capital investments are all still valued at
their original cost, but our sole AiM-listed investment to date has also
achieved a modest uplift in value against the market trend.
Investments
During the period our managers completed five VCT-qualifying investments,
further details of which are given in the annual report. Three more investments
have been added since the financial year end and your directors are encouraged
at this early stage by the way the portfolio is shaping up and by the standard
of the continuing flow of potential new investments.
Revenue and dividends
The statement of total return for the period to 30 September 2002 includes the
investment income earned on the proceeds of share allotments, which took place
on a phased basis on various dates from October 2001 onwards, and is not
representative of a normal year's ongoing activities. The net revenue after tax
was £89,000, equivalent to a return per share of 1.2p based on the weighted
average of 7,727,133 shares in issue during the period. The amount available
for distribution equates to just over 0.6p for each share in issue at the year
end, and the directors therefore recommend a final dividend of 0.6p per share,
which will be paid on 6 February 2003 to shareholders on the register on 6
January 2003. As mentioned below, we are also declaring an interim dividend of
0.4p in respect of the year ending 30 September 2003 and this will be payable on
the same date.
With interest rates continuing at a low level, and bearing in mind that funds
will be moved progressively from the listed fixed-interest portfolio into
venture capital investments, it is likely that in the short to medium term any
dividends paid will be relatively low. However our plans to increase the
overall size of the company will have the effect of spreading the fixed costs
over a wider base, thus enhancing the income yield. We also intend to ensure
that a substantial proportion of the company's venture capital portfolio
comprises mature income-producing holdings, complementing those earlier stage
investments which have the potential for above-average capital gains. In the
longer term we will seek to realise capital gains from investment disposals for
distribution to shareholders by way of tax-free dividend under the VCT rules.
VCT qualifying status
Your board has retained PricewaterhouseCoopers to monitor and report on the
company's progress towards meeting the qualifying investment requirements laid
down in the VCT legislation. We believe that the strong flow of potential deals
through our managers will enable us to meet all the relevant conditions in
advance of the first deadline in September 2004.
Share price
The company's mid-market share price has stood at 95p since December 2001 and,
as expected, very few shares have come onto the market. Although VCTs are
obliged to maintain a full listing on the London Stock Exchange, the market is
rarely sufficiently liquid to prevent VCT shares trading at a wide discount to
net asset value. Our managers are involved in ongoing discussions with other
VCT managers to identify ways of making investors more aware of the benefits of
buying VCT shares in the secondary market.
We will be asking shareholders at the annual general meeting to renew the
board's powers to purchase shares in the market for cancellation, thus providing
one avenue for shareholders to realise their investment. In line with the
intention expressed in the prospectus, Court consent has been obtained to a
reduction in the company's share premium account, so creating a new special
reserve which can be used to offset the cancellation of shares without drawing
on the company's revenue reserves.
Proposed public share offer
In my interim statement I reported that your board intended to consider
launching a further share issue with the objective of enlarging the company's
capital base to over £25 million. Although market conditions are still by no
means favourable, we have now decided to go ahead with a public offer commencing
in January 2003 for the 2002/03 and 2003/04 tax years. Accordingly shareholders
will receive with this annual report a circular giving details of an
extraordinary general meeting to be held on 22 January 2003, at which
resolutions will be proposed authorising the directors to allot new shares.
Existing shareholders will have preferential subscription rights in the new
issue, and we have declared an early interim dividend of 0.4p per share, payable
on 6 February 2003, to ensure that existing shareholders receive the fullest
possible benefit from the company's earnings up to the date of launch. Your
directors believe strongly that enlargement is in the interests of existing
shareholders and we hope you will support the resolutions.
Future prospects
The outcome of the public share offer and the steady progress made subsequently
have given us a sound foundation for the future. Although there is still
uncertainty as to the short-term outlook for the UK economy and the financial
markets, we continue to hold the view that the next two to three years will be a
good time to be building a portfolio of VCT-qualifying investments. This augurs
well for the longer term prospects of our company.
John Hustler
Chairman
The financial statements for the period from 3 September 2001 to 30 September
2002 will show the results set out below.
STATEMENT OF TOTAL RETURN (INCORPORATING THE REVENUE ACCOUNT)
for the period ended 30 September 2002
Period ended
30 September 2002
Revenue Capital Total
£000 £000 £000
Gains on investments - 344 344
Income 269 - 269
Investment management fee (34) (102) (136)
Other expenses (124) - (124)
------ ------ ------
Return on ordinary activities
before tax 111 242 353
Tax on ordinary activities (22) 20 (2)
------ ------ ------
Return on ordinary activities
after tax 89 262 351
Dividend (84) - (84)
------ ------ ------
Transfer to reserves 5 262 267
------ ------ ------
Return per share 1.2p 3.4p 4.6p
Dividend per share 0.6p - 0.6p
BALANCE SHEET
as at 30 September 2002
30 September 2002
£000
Fixed asset investments 9,493
Net current assets 4,038
-------
Net assets 13,531
-------
Capital and reserves
Called-up equity share capital 698
Share premium 12,566
Capital reserve:
Realised (82)
Unrealised 344
Revenue reserve 5
-------
Total equity shareholders' funds 13,531
-------
Net asset value per share 96.9p
CASH FLOW STATEMENT
for the period ended 30 September 2002
Period ended
30 September 2002
£000 £000
Cash flow statement
Net cash outflow from
operating activities (258)
Taxation:
Corporation tax paid -
Financial investment:
Purchase of investments (9,149)
Sale/repayment of investments -
------
Net cash outflow from
financial investment (9,149)
Equity dividends paid -
Net cash outflow from
management of liquid resources (2,867)
------
Net cash inflow/(outflow)
before financing (12,274)
Net cash inflow from financing:
Shares issued
Redeemable preference 50
Ordinary 13,976
Share issue expenses (698)
Share purchased for cancellation (14)
Redemption or preference shares (50)
------
(13,264)
------
Increase in cash at bank 990
------
Reconciliation of net revenue before
taxation to net cash flow from
operating activities
Net revenue from ordinary activities
before tax 111
Increase in debtors (296)
Increase in creditors 29
Management fees charged to capital (102)
------
Net cash outflow from
operating activities (258)
------
Analysis of cash at bank and
short-term investments
3 September 2001 Cash flows 30 September 2002
£000 £000 £000
Cash at bank - 990 990
Short-term investments - 2,867 2,867
------ ------ ------
- 3,857 3,857
------ ------ ------
INVESTMENT PORTFOLIO SUMMARY
as at 30 September 2002
Valuation % of net assets
£000 by valuation
Venture capital investments:
Horncastle Industries 750 5.5
Keith Prowse 280 2.1
PM Group* 176 1.3
Liquidlogic 88 0.6
Oxonica 20 0.2
------- ------
Total venture capital investments 1,314 9.7
Listed fixed-interest investments 8,179 60.4
------- ------
Total fixed asset investments 9,493 70.1
Net current assets 4,038 29.9
------- ------
Net assets 13,531 100.0
------- ------
*Traded on Alternative Investment Market
The above summary of results for the period ended 30 September 2002 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 auditors' report on those financial statements under S235 of
the Companies Act 1985 is unqualified and does not contain a statement under
S237(2) or (3) of the Companies Act 1985.
The proposed final dividend for the period ended 30 September 2002, if approved
by shareholders, and the interim dividend for the year ending 30 September 2003
will be paid on 6 February 2003 to shareholders on the register at the close of
business on 6 January 2003.
A copy of the full annual report and financial statements for the period ended
30 September 2002 is expected to be posted to shareholders on 20 December 2002
and will be available to the public at the registered office of the company at
Northumberland House, Princess Square, Newcastle upon Tyne NE1 8ER.
ENDS
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