Final Results

RNS Number : 9190U

Northern 3 VCT PLC

20 May 2008

 



20 MAY 2008

NORTHERN 3 VCT PLC

RESULTS FOR THE 18 MONTH PERIOD ENDED 31 MARCH 2008

Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by NVM Private Equity.  The trust invests mainly in unquoted venture capital holdings and aims to provide high long-term tax-free returns to shareholders through a combination of dividend yield and capital growth.

Financial highlights - 18 months ended 31 March 2008:

(comparative figures for year ended 30 September 2006 in italics):

	31 March 2008	30 September 2006
Net assets	£28.6m	£29.3m
Net asset value per share	96.3p	95.2p
Return per share:   Revenue   Capital   Total	4.1p 4.7p 8.8p	2.4p 0.5p 2.9p
Dividend per share declared in respect of the period:   Revenue   Capital   Total	4.2p 1.8p 6.0p	2.0p 2.0p 4.0p
Cumulative return to shareholders since launch:   Net asset value per share   Dividends paid per share   Net asset value plus dividends     paid per share	96.3p 18.9p 115.2p	95.2p 10.9p 106.1p
Mid-market share price at period end	84.5p	83.0p

For further information, please contact:

NVM Private Equity Limited Christopher Mellor, Director Website:  www.nvm.co.uk	0191 244 6000
Lansons Communications Karen Mignon	020 7294 3685

NORTHERN 3 VCT PLC

CHAIRMAN'S STATEMENT

Our company has made further progress during the extended 18 month period to 31 March 2008 and we can report a healthy level of new investment activity, an increasing flow of exit opportunities and an overall increase in net asset value per share after recognising dividends paid during the period. The return per share after tax as shown in the income statement was 8.8p, equivalent to 9.2% of the opening net asset value. Over the same period the FTSE All-share (total return) index rose by 0.8%.

Results and dividend

The net asset value (NAV) per share at 31 March 2008 was 96.3p, a pleasing increase from the corresponding figure of 95.2p as at 30 September 2006 given that dividends totalling 8.0p per share were paid during the period (including 2.0p relating to the year ended 30 September 2006). Three interim dividends each of 2.0p per share were declared and paid in respect of the 18 month period to 31 March 2008, maintaining the annual rate of 4.0p established in the preceding year. No final dividend is proposed. The cumulative return to shareholders since launch, comprising net asset value plus cumulative dividends paid, increased from 106.1p to 115.2p over the period. In respect of the financial year ending 31 March 2009, we presently intend that an interim dividend will be paid in January 2009 and a final dividend in July 2009.

Investment portfolio

The business review in the annual report gives details of recent developments in the investment portfolio. The flow of new investment opportunities was strong for most of the period under review and in total 14 new deals were completed at a cost of £8.4 million. A number of our earlier investments are now beginning to mature and several satisfactory exits were achieved during the period, notably the sales of Ithaca Holdings to United Business Media plc and KCS Global Holdings to Sage Group plc. As previously reported, there was also a significant disappointment in the failure of Nightingales Holdings. We believe that the overall condition of the portfolio is good although some companies, particularly those involved in construction-related sectors, are finding current conditions challenging. This has been taken into account in arriving at investment valuations at the balance sheet date.

Shareholder issues

The company has continued to buy back shares in the market for cancellation at a 10% discount to net asset value. During the 18 months to 31 March 2008 approximately 1.3 million shares, representing 4.3% of the issued capital at the beginning of the period, were re-purchased at an average cost of 86.7p per share. The secondary market in VCT shares has remained subdued and we intend, subject to periodic review by the board and to market conditions, to maintain our buy-back policy in the coming year. In the longer term, stimulation of market demand for the company's shares will depend on our ability to generate an attractive flow of tax-free dividend income for investors. We are encouraging our managers to communicate the merits of secondary VCT investment as widely as possible and through our membership of the Association of Investment Companies we are contributing to generic marketing efforts. As reported earlier in the year, following a review of broking arrangements we have appointed Landsbanki Securities (UK) Limited as brokers to the company; they are also making a market in the company's shares which has led to a narrowing in the quoted bid-offer spread.

Your directors would like to be able to increase the size of the company through further public offers of new shares in the future, although changes in the rules defining VCT-qualifying investments together with the reduction in initial income tax relief to 30% have restricted recent fund-raising by VCTs. We will continue to keep the position under review.

The annual general meeting this year will be held in Edinburgh on 3 July 2008 and your directors look forward to meeting shareholders on that occasion.

VCT qualifying status

I am pleased to report that the company has satisfied the requirements laid down by HM Revenue & Customs for maintaining its approved status as a venture capital trust as at 31 March 2008. It will be recalled that the directors changed the company's year end from 30 September to 31 March in order to allow a full three years for the investment of the funds raised in our share issue in 2005. The challenge now is to maintain the required 70% qualifying investment level at a time when we are achieving a good level of realisations and sensibly-priced new opportunities are relatively thin on the ground. Our managers continue to monitor the position closely and the board is independently advised in relation to VCT taxation matters by PricewaterhouseCoopers LLP.

VAT on management fees

The Government has recently announced that VCTs will be exempt from paying VAT on investment management fees with effect from 1 October 2008. This follows a European Court of Justice judgment against the Government in a case relating to VAT payable by investment trusts. It is not yet clear whether it will be possible to obtain a repayment of VAT paid on management fees prior to the new measure taking effect, and we will follow developments with the help of our advisers. However the future annual saving in VAT should amount to around £100,000, based on the company's present level of net assets and a management fee at the rate of 2% per annum.

Board of directors

In September 2007 Barry Sealey retired from the board, having served since the company was launched in 2001. On behalf of shareholders I thank him for his excellent contribution to our business. John Waddell, chief executive of Archangel Informal Investment, was appointed to the board on Barry's retirement and we are benefiting from his extensive experience of private equity investment.

Your board has agreed that in January 2009 I should stand down as chairman of Northern 3 VCT, a position I will by then have held for over seven years, in order to take up the chair of Northern Venture Trust on the retirement of Sir Fred Holliday. I will continue to serve as a director and am delighted to report that James Ferguson has accepted an invitation from the board to become chairman of Northern 3 VCT in my place.

Future prospects

The company's investment portfolio is maturing well and there appear to be good prospects of further profitable realisations, which will contribute to future dividends. The present depressed state of the UK economy and financial markets is a cause for concern, as it may not only have an adverse impact on some of our existing companies but also affect the availability of attractive new investment opportunities. However our managers will continue to apply their well-established procedures and disciplines to the portfolio and we expect to see the company make further progress over the next year.

John Hustler

Chairman

The audited financial statements for the 18 months ended 31 March 2008 are set out below.

INCOME STATEMENT

for the 18 months ended 31 March 2008

	18 months ended 31 March 2008			Year ended 30 September 2006
	Revenue  £000	Capital  £000	Total  £000	Revenue  £000	Capital  £000	Total  £000
Gain/(loss) on disposal
of investments	-	85	85	-	(106)	(106)
Changes in fair value
of investments	-	1,969	1,969	-	605	605
	-----	-----	-----	-----	-----	-----
	-	2,054	2,054	-	499	499
Income	2,228	-	2,228	1,372	-	1,372
Investment management fee	(259)	(903)	(1,162)	(167)	(502)	(669)
Other expenses	(295)	-	(295)	(180)	-	(180)
	-----	-----	-----	-----	-----	-----
Return on ordinary
activities before tax	1,674	1,151	2,825	1,025	(3)	1,022
Tax on return on
ordinary activities	(441)	271	(170)	(265)	160	(105)
	-----	-----	-----	-----	-----	-----
Return on ordinary
activities after tax	1,233	1,422	2,655	760	157	917
	-----	-----	-----	-----	-----	-----
Return per share	4.1p	4.7p	8.8p	2.4p	0.5p	2.9p

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

for the 18 months ended 31 March 2008

		18 months ended  31 March 2008  £000	Year ended  30 September 2006  £000
Equity shareholders' funds
at 1 October 2006		29,281	30,136
Return on ordinary
activities after tax		2,655	917
Dividends recognised
in the period		(2,418)	(1,153)
Net proceeds of share issues		287	126
Shares purchased for
cancellation		(1,142)	(745)
Expenses charged to capital reserve		(18)	-
		------	------
Equity shareholders' funds
at 31 March 2008		28,645	29,281
		------	------

BALANCE SHEET

as at 31 March 2008

		31 March  2008  £000	30 September  2006  £000
Venture capital investments
Unquoted		17,852	10,012
Quoted		1,851	1,997
		------	------
Total venture capital investments		19,703	12,009
Listed fixed-interest investments		7,497	13,229
		------	------
Total fixed asset investments		27,200	25,238
		------	------
Current assets:
Debtors		265	600
Cash at bank		1,526	3,606
		------	------
		1,791	4,206
Creditors (amounts falling due
within one year)		(346)	(163)
		------	------
Net current assets		1,445	4,043
		------	------
Net assets		28,645	29,281
		------	------
Capital and reserves:
Called-up equity share capital		1,487	1,538
Share premium		8,031	22,759
Capital redemption reserve		143	77
Capital reserve - realised		15,997	3,703
Capital reserve - unrealised		2,749	629
Revenue reserve		238	575
		------	------
Total equity shareholders' funds		28,645	29,281
		------	------
Net asset value per share		96.3p	95.2p

CASH FLOW STATEMENT

for the 18 months ended 31 March 2008

			18 months ended  31 March 2008		Year ended  30 September 2006
			£000	£000	£000	£000
Cash flow statement
Net cash inflow from
operating activities				1,206		525
Taxation:
Corporation tax paid				(105)		(81)
Financial investment:
Purchase of investments			(16,041)		(9,740)
Sale/repayment of
investments			16,133		9,043
			------		------
Net cash inflow/(outflow)
from financial investment				92		(697)
Equity dividends paid				(2,418)		(1,153)
				-----		-----
Net cash outflow
before financing				(1,225)		(1,406)
Financing:
Issue of shares			293		145
Share issue expenses			(6)		(19)
Purchase of shares
for cancellation			(1,142)		(745)
			-----		-----
Net cash outflow from financing				(855)		(619)
				-----		-----
Decrease in
cash at bank				(2,080)		(2,025)
				-----		-----
Reconciliation of return
before tax to net cash flow from
operating activities
Return on ordinary
activities before tax				2,825		1,022
Gain on disposal of investments				(85)		106
Changes in fair value of investments				(1,969)		(605)
Decrease in debtors				335		17
Increase/(decrease) in creditors				118		(15)
Expenses charged to capital reserve				(18)		-
				-----		-----
Net cash inflow from
operating activities				1,206		525
				-----		-----
Reconciliation of movement
in net funds
	1 October 2006		Cash flows		31 March 2008
		£000		£000		£000
Cash at bank		3,606		(2,080)		1,526
		-----		-----		-----

INVESTMENT PORTFOLIO SUMMARY

as at 31 March 2008

	Valuation £000	% of net assets by value
Fifteen largest venture capital investments:
Product Support (Holdings)	1,547	5.4
Paladin Group	1,236	4.3
Britspace Holdings	1,058	3.7
Astbury Marsden Holdings	1,000	3.5
Axial Systems Holdings	1,000	3.5
Foreman Roberts Group	1,000	3.5
Optilan Group	1,000	3.5
Promanex Group Holdings	1,000	3.5
Pivotal Laboratories Holdings	908	3.2
Envirotec	812	2.8
Crantock Bakery	762	2.7
Promatic Group	568	2.0
DxS	561	2.0
Frontier Foods	542	1.9
John Laing Partnership	522	1.8
	------	-----
	13,516	47.3
Other venture capital investments	6,187	21.5
	------	-----
Total venture capital investments	19,703	68.8
Listed fixed-interest investments	7,497	26.2
	------	-----
Total fixed asset investments	27,200	95.0
Net current assets	1,445	5.0
	------	-----
Net assets	28,645	100.0
	------	-----

The above summary of results for the 18 months ended 31 March 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 full annual report including financial statements for the 18 months ended 31 March 2008 is expected to be posted to shareholders on 30 May 2008 and will be available to the public at the registered office of the company at Northumberland House, Princess Square, Newcastle upon Tyne NE1 8ER and on the NVM Private Equity Limited website, www.nvm.co.uk.

ENDS

 

END

 

 

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