Final Results
Northern 3 VCT PLC
17 November 2004
17 NOVEMBER 2004
NORTHERN 3 VCT PLC
PRELIMINARY RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2004
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
have to date raised a total of over £23 million. The trust 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 highlights - year ended 30 September 2004:
(comparative figures as at 30 September 2003 in italics)
2004 2003
• Net assets £20,802,000 £16,701,000
• Net asset value per share 93.4p 94.9p
• Return on ordinary activities
before tax:
Revenue £505,000 £376,000
Capital £101,000 £(410,000)
Total £606,000 £(34,000)
• Return per share:
Revenue 2.0p 1.8p
Capital 1.0p (2.2)p
Total 3.0p (0.4)p
• Dividend per share:
Revenue 1.6p 1.5p
Capital 2.8p -
Total 4.4p 1.5p
• Cumulative return to shareholders
since launch:
Dividends per share 6.5p 2.1p
Net asset value plus dividends
per share 99.9p 97.0p
• Share price 90p 90p
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 report on a year of steady progress which has resulted in the
total return to shareholders (net asset value plus cumulative dividends)
increasing by 2.9p, from 97.0p to 99.9p. Despite a marked slowdown in the rate
of new investment activity in the venture capital market generally, we completed
six new investments during the year and achieved our first significant exit
through the sale of Keith Prowse. The gain realised on this disposal has
enabled us to pay a capital dividend of 2.8p per share. £4.8 million was raised
through the issue of new ordinary shares, and the changes to tax reliefs on VCT
subscriptions announced by the Chancellor in his March 2004 Budget should
improve the prospects for fund-raising over the next 18 months.
The economic background to our third year's activity has been mixed and the
medium-term outlook is uncertain, with UK industry feeling the adverse effect of
interest rate rises designed primarily to bring a measure of stability to the
housing market. However, we are seeking to build a portfolio of investments
capable of performing well across the entire economic cycle and will continue to
have regard to longer-term as well as short-term considerations.
Net asset value
The net asset value (NAV) at 30 September 2004, after providing for dividends
totalling 4.4p in respect of the year, was 93.4p per share - marginally down
from the corresponding figure of 94.9p at 30 September 2003. We have recorded
gains, both realised and unrealised, on the three quoted investments in the
venture capital portfolio, but the unquoted portfolio is showing a small deficit
against cost, equivalent overall to approximately 1.3p per share. This is not
unexpected at this early stage in the company's development. The issues of new
shares during the year have been priced at a level calculated to avoid dilution
of net asset value per share.
Investments
Further details of new investments completed during the year are given in the
investment manager's review in the annual report. We noted a slowdown in the
rate of new investment in the second half of the preceding financial year and
this continued into the first half of the year under review. A welcome upturn
in activity has taken place since mid-2004 and this has been reflected in four
further completions subsequent to the end of the financial year on 30 September.
The portfolio continues to develop, though in my interim statement I reported
that one investment, GB Industries, had been the subject of a full provision.
This remains the case six months later and although prospects for the company
are better, it is not considered appropriate to recognise any value. Four other
investments are now valued above cost by virtue of sustained profit performance
and we expect others to be added in due course once they meet the relevant
criteria set out in our valuation policy.
Revenue and dividends
Income from investments in the year increased to £796,000 from £615,000 in the
preceding year, and the revenue surplus before tax rose from £376,000 to
£505,000. The revenue return per share rose from 1.8p to 2.0p per share. The
directors propose an unchanged final dividend of 1.1p per share, making a total
revenue dividend of 1.6p for the year (last year 1.5p). The final dividend
will, if approved by shareholders, be paid on 14 January 2005 to shareholders on
the register on 26 November 2004. As previously mentioned, an interim capital
dividend of 2.8p per share was declared on 28 September 2004 for payment on 26
November 2004. The total of dividends paid and proposed for the year is
therefore 4.4p (last year 1.5p).
I wrote to shareholders on 18 October 2004 with details of the company's new
dividend investment scheme, which provides shareholders with an opportunity to
re-invest their Northern 3 VCT dividends in new ordinary shares with the benefit
of the enhanced tax reliefs announced in the 2004 Budget. I am pleased to
report that over 20% of shareholders have already joined the scheme and this
opportunity remains available to shareholders who have not yet elected to
re-invest their dividends.
Share offers
In June 2004 shareholders received a letter setting out the board's plans to
issue additional ordinary shares in the 2004/05 tax year through a series of
small top-up offers. The extraordinary general meeting on 8 July 2004 approved
the enabling resolutions and the first top-up offer of 2,000,000 shares closed
on 29 October. It is intended that a further offer will be launched shortly
after today's announcement of the preliminary results for the year ended 30
September 2004.
Your board believes that it is in the interests of shareholders that the size of
the company be increased, and subject to market conditions we intend to raise up
to a further £18 million during the remainder of the current tax year.
VCT qualifying status
PricewaterhouseCoopers LLP have continued to monitor and report on the company's
progress towards meeting the qualifying investment requirements laid down in the
VCT legislation. Because of the slower than expected rate of new qualifying
investment completions and, generally, a lower quality of proposals, it was
necessary to follow the precedent set by an number of other trusts and place
£7.3 million on non-interest bearing deposit, which falls outside the definition
of an investment for VCT purposes, pending investment in qualifying holdings.
We are determined to maintain the rigorous standards applied in the selection of
new investments; I am pleased to report that we have already completed new
qualifying investments totalling £1.3 million since the year end and hope to
have utilised a substantial proportion of the non-interest bearing funds for
investment purposes by 31 March 2005. The board is satisfied that the company's
VCT qualifying status has been and will be maintained.
Share buy-backs
There continues to be relatively little trading in the company's shares. We
remain willing to buy shares back in the market for cancellation in order to
provide an exit route where necessary for shareholders and, in line with what is
increasingly the market norm, will seek to do so at a discount to net asset
value of approximately 10%. As usual a resolution will be proposed at the
annual general meeting to renew the board's powers to purchase shares in the
market up to a maximum of 10% of the issued share capital.
Future prospects
The current environment and prospects for our company are encouraging:
following their management buy-out from Edinburgh Fund Managers our managers
have increased their resources with the appointment of two new investment
executives, deal flow has increased in both number and quality, and under the
Chancellor's newly enhanced VCT tax reliefs the climate for fund-raising has
improved.
We are building a diversified portfolio with the objective of providing
shareholders with a strong flow of dividends, both revenue and capital, and your
board remains confident for the future of the company.
We hope that shareholders will take advantage of the opportunity to invest
further in Northern 3 VCT in the continuing share offers, particularly given the
attractive tax reliefs now available on investments up to a maximum of £200,000
per tax year. I look forward to reporting further progress on both fund-raising
and investment in my next statement to shareholders.
John Hustler
Chairman
The audited financial statements for the year ended 30 September 2004 will show
the results set out below.
STATEMENT OF TOTAL RETURN (INCORPORATING THE REVENUE ACCOUNT)
for the year ended 30 September 2004
Year ended 30 September 2004 Year ended 30 September 2003
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains/(losses) on investments:
Realised on disposals - 615 615 - 118 118
Unrealised revaluation movements - (157) (157) - (248) (248)
------ ------ ------ ------ ------ ------
- 458 458 - (130) (130)
Income 796 - 796 615 - 615
Investment management fee (119) (357) (476) (86) (258) (344)
Other expenses (172) - (172) (153) (22) (175)
------ ------ ------ ------ ------ ------
Return on ordinary activities
before tax 505 101 606 376 (410) (34)
Tax on ordinary activities (116) 94 (22) (81) 59 (22)
------ ------ ------ ------ ------ ------
Return on ordinary activities
after tax 389 195 584 295 (351) (56)
Dividends (336) (623) (959) (251) - (251)
------ ------ ------ ------ ------ ------
Transfer to/(from) reserves 53 (428) (375) 44 (351) (307)
------ ------ ------ ------ ------ ------
Return per share 2.0p 1.0p 3.0p 1.8p (2.2)p (0.4)p
Dividend per share 1.6p 2.8p 4.4p 1.5p - 1.5p
BALANCE SHEET
as at 30 September 2004
30 September 2004 30 September
2003
£000 £000
Venture capital
investments:
Unquoted 4,312 2,685
Quoted 456 441
------- -------
4,768 3,126
Listed fixed-interest 7,413 10,210
investments
------- -------
Total fixed asset 12,181 13,336
investments
------- -------
Current assets:
Investments - 2,371
Debtors 395 408
Cash at bank 9,184 836
------- -------
9,579 3,615
Creditors (amounts
falling due
within one year) (958) (250)
------- -------
Net current assets 8,621 3,365
------- -------
Net assets 20,802 16,701
------- -------
Capital and reserves:
Called-up equity share 1,113 880
capital
Share premium 13,922 9,622
Capital redemption 5 1
reserve
Special reserve 6,177 6,238
Capital reserve:
Realised (456) (185)
Unrealised (61) 96
Revenue reserve 102 49
------- -------
Total equity 20,802 16,701
shareholders' funds
------- -------
Net asset value per share 93.4p 94.9p
CASH FLOW STATEMENT
for the year ended 30 September 2004
Year ended Year ended
30 September 2004 30 September 2003
£000 £000 £000 £000
Cash flow statement
Net cash inflow/(outflow)
from
operating activities 192 (10)
Taxation:
Corporation tax paid (22) -
Financial investment:
Purchase of investments (12,015) (8,191)
Sale of investments 13,628 4,218
------ ------
Net cash inflow/(outflow)
from
financial investment 1,613 (3,973)
Equity dividends paid (282) (144)
------ ------
Net cash inflow/(outflow)
before use
of liquid resources and 1,501 (4,127)
financing
Net cash inflow from
management of liquid 2,371 496
resources
Financing:
Issue of ordinary shares 4,776 3,668
Share issue expenses (239) (170)
Purchase of ordinary
shares
for cancellation (61) (21)
------ ------
Net cash inflow from 4,476 3,477
financing
------ ------
Increase/(decrease) in 8,348 (154)
cash at bank
------ ------
Reconciliation of revenue
before tax
to net cash flow from
operating activities
Net revenue before tax 505 376
Decrease/(increase) in 13 (112)
debtors
Increase in creditors 31 6
Management fees charged to (357) (258)
capital
Other expenses charged to - (22)
capital
------ ------
Net cash inflow/(outflow)
from
operating activities 192 (10)
------ ------
Reconciliation of movement
in net funds
1 October Cash flows 30
2003 September
2004
£000 £000 £000
Cash at bank 836 8,348 9,184
Current asset investments 2,371 (2,371) -
------ ------ ------
Net funds 3,207 5,977 9,184
------ ------ ------
INVESTMENT PORTFOLIO SUMMARY
as at 30 September 2004
Valuation % of net assets
£000 By valuation
15 largest venture capital investments:
IG Doors 500 2.4
Longhirst Group 495 2.4
Crantock Bakery 442 2.1
RBF Industries 438 2.1
Warmseal Windows (Newcastle) 339 1.6
Omnico Plastics 333 1.6
Arrow Industrial Group 312 1.5
John Laing Partnership 300 1.4
PM Group** 269 1.3
DxS 263 1.3
S&P Coil Products 240 1.2
Crabtree of Gateshead 237 1.1
Liquidlogic 165 0.8
AFI Aerial Platforms 116 0.6
Alizyme* 96 0.5
------- ------
4,545 21.9
Other venture capital investments 223 1.1
------- ------
Total venture capital investments 4,768 23.0
Listed fixed-interest investments 7,413 35.6
------- ------
Total fixed asset investments 12,181 58.6
Net current assets 8,621 41.4
------- ------
Net assets 20,802 100.0
------- ------
* Listed on the London Stock Exchange
**Traded on the Alternative Investment Market
The above summary of results for the year ended 30 September 2004 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 proposed final dividend of 1.1p per share for the year ended 30 September
2004 will, if approved by shareholders, be paid on 14 January 2005 to
shareholders on the register at the close of business on 26 November 2004.
The full annual report including financial statements for the year ended 30
September 2004 is expected to be posted to shareholders by 10 December 2004 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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