Interim Results
Northern 3 VCT PLC
20 May 2005
20 MAY 2005
NORTHERN 3 VCT PLC
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 MARCH 2005
Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by Northern Venture
Managers. It 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 (comparative figures as at 31 March 2004):
• Net assets £25,736,000 £18,592,000
• Net asset value per share 93.8p 94.7p
• Profit/(loss) on ordinary
activities before tax:
Revenue £280,000 £198,000
Capital £(192,000) £(175,000)
• Earnings/(loss) per share:
Revenue 0.9p 0.8p
Capital (0.6)p (0.7)p
• Interim dividend per share 0.7p 0.5p
• Cumulative return to
shareholders since launch:
Dividends per share 7.2p 2.6p
Net asset value plus dividends 101.0p 97.3p
For further information, please contact:
Alastair Conn, Managing Director 0191 244 6000
Northern Venture Managers Limited
Website: www.nvm.co.uk
Charles Ansdell/Marlene Scott 020 7655 0540
Polhill Communications
NORTHERN 3 VCT PLC
CHAIRMAN'S STATEMENT
The Chairman of Northern 3 VCT PLC, John Hustler, included the following points
in his statement to shareholders:
Since my last report to shareholders in November 2004, conditions have remained
favourable for VCT fund-raising and I am pleased to report that in the tax year
2004/05 our series of top-up share issues raised a total of £10.2 million before
expenses. The company's net assets at 31 March 2005 were £25.7 million and
subsequent share allotments during April have taken the total to just under £30
million. Your directors consider that the initial objective of raising
sufficient funds to ensure long-term viability has been attained, so that we can
now concentrate on the continuing build-up of the VCT-qualifying investment
portfolio. On behalf of the board I would like to thank all our existing and new
shareholders for their support.
Net asset value
The unaudited net asset value per share at 31 March 2005 was 93.8p, marginally
up from the corresponding figure of 93.4p at 30 September 2004. This reflects
the fact that the unquoted investment portfolio is relatively immature at this
stage, with 16 of the 24 holdings still valued at cost.
Investments
As I noted in my last report, there has been a welcome upturn in new investment
activity since the middle of 2004. During the half year ten new investments
totalling £2.9 million were completed in the following companies:
• SMS Agencies (£500,000) - vehicle driver staffing agency, Crawley
• LEDA Holdings (£385,000) - temporary staff recruitment agency, Leeds
• Arleigh International (£210,000) - supplier of spares and consumables
for caravans and leisure boats, Nuneaton
• Cello Group (£251,000) - AIM-quoted marketing and communication services
provider, London
• Direct Valeting (£427,000) - car valeting contractor,
Newcastle-under-Lyme
• Andor Technology (£201,000) - AIM-quoted manufacturer of scientific
imaging and spectroscopy equipment, Belfast
• Envirotec (£455,000) - manufacturer of air curtains and air handling
units, High Wycombe
• e-know.net (£225,000) - application service provider, Telford
• Daniolabs (£75,000) - development of therapeutics for neurological and
ophthalmological diseases, Cambridge
• Computer Software Group (£133,000) - AIM-quoted developer of business
solutions software, Wimbledon
Four further investments totalling £1.2 million have been completed since the
end of March. The increase in the size of the company now allows us to take a
larger share of each new investment made by Northern Venture Managers' funds.
Our managers have increased the size of their investment team from 13 to 16 over
the past 12 months in order to resource the increased rate of new investment as
well as the resulting portfolio management workload.
The unquoted portfolio continues to develop well. The majority of the
investments are, as mentioned above, still held at cost, but in several cases it
is now appropriate to reflect improved performance by increasing the valuation.
GB Industries, which was fully provided against last year, continues its gradual
recovery but at this stage a revaluation would be premature. Our six quoted
venture capital investments (one fully listed and five on AIM) are all making
satisfactory progress.
Earnings and dividend
The revenue earnings per share for the half year were 0.9p, compared with 0.8p
for the corresponding period to 31 March 2004. The directors have declared an
increased interim revenue dividend of 0.7p (last year 0.5p), payable on 22 July
2005 to shareholders on the register on 17 June 2005. This brings the cumulative
total of dividends declared by the company to 7.2p per share.
The dividend investment scheme introduced in October 2004 was taken up by 20% of
shareholders, representing approximately 17% of the company's issued capital.
£148,000 was reinvested in ordinary shares during the half year, with
subscribers benefiting from the attractive tax reliefs currently available on
new VCT investments. Shareholders who are interested in joining the scheme
should contact the company secretary for further information.
Format of financial statements
In October 2004 Northern 3 VCT revoked its status as an investment company under
the Companies Act 1985 in order to allow the payment of dividends out of
realised capital gains. This means that the company is now obliged to include a
profit and loss account, a statement of total recognised gains and losses and a
note of historical cost profits and losses in its financial statements and these
are set out below.
Share buybacks
At the annual general meeting in January 2005 shareholders renewed the
directors' authority to make market purchases of shares for cancellation. During
the half year to 31 March 2005 the company bought back for cancellation 207,110
shares at a discount of approximately 10% to net asset value. The secondary
market for VCT shares is currently very quiet, due largely to the relative
attraction of subscribing for new shares with the benefit of 40% income tax
relief, and subject to market conditions we will continue to buy back shares
within the limits of our authority.
VCT qualifying status
Your board continues to monitor progress towards the Inland Revenue qualifying
targets, with the help of PricewaterhouseCoopers LLP who have been retained to
advise on this and other tax matters. In November 2004 I stated that it had been
necessary to place funds on non-interest bearing deposit in order to remain
within the 70% qualifying investment limits; I am very pleased to report that as
a result of the increase in the level of VCT-qualifying holdings this measure is
now no longer necessary. We are satisfied that the company has continued to
fulfil the conditions for maintaining VCT status.
Prospects
There are increasing signs of an economic slowdown in the UK, with the
housebuilding and retail sectors reporting reduced activity. Against this
background our managers are focussed on building a portfolio of investments
which will come through difficult conditions in good shape and produce
satisfactory long-term returns for shareholders.
JOHN HUSTLER
Chairman
The unaudited interim financial statements for the six months ended 31 March
2005 are set out below.
PROFIT AND LOSS ACCOUNT
(unaudited) for the six months ended 31 March 2005
Six months Six months
ended 31 March ended 31 March
2005 2004
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Profit/(loss)
recognised in the
period
on realisation
of investments - 9 9 - (5) (5)
Income 437 - 437 338 - 338
Investment
management fee (67) (201) (268) (57) (170) (227)
Other expenses (90) - (90) (83) - (83)
------ ------ ------ ------ ------ ------
Profit/(loss) on
ordinary activities
before tax 280 (192) 88 198 (175) 23
Tax on profit
on ordinary
activities (65) 54 (11) (47) 43 (4)
------ ------ ------ ------ ------ ------
Profit/(loss) on
ordinary activities
after tax for
the period 215 (138) 77 151 (132) 19
Dividends -
interim (230) - (230) (91) - (91)
- final - - - - - -
------ ------ ------ ------ ------ ------
Retained
profit/(loss)
for the period (15) (138) (153) 60 (132) (72)
------ ------ ------ ------ ------ ------
Earnings/(loss)
per share 0.9p (0.6)p 0.3p 0.8p (0.7)p 0.1p
Dividend per
share 0.7p - 0.7p 0.5p - 0.5p
Year ended 30
September 2004
Revenue Capital Total
£000 £000 £000
Profit recognised in the year
on realisation of investments - 442 442
Income 796 - 796
Investment management fee (119) (357) (476)
Other expenses (172) - (172)
------ ------ ------
Profit on ordinary activities
before tax 505 85 590
Tax on profit on ordinary activities (116) 94 (22)
------ ------ ------
Profit on ordinary activities
after tax for the financial year 389 179 568
Dividends - interim (91) - (91)
- final (245) (623) (868)
------ ------ ------
Retained profit/(loss) for the year 53 (444) (391)
------ ------ ------
Earnings per share 2.0p 0.9p 2.9p
Dividend per share 1.6p 2.8p 4.4p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
(unaudited) for the six months ended 31 March 2005
Six months Six months
ended 31 March ended 31 March
2005 2004
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Profit/(loss) on
ordinary activities
after tax 215 (138) 77 151 (132) 19
Unrealised gains on
revaluation of
investments - 187 187 - 23 23
------ ------ ------ ------ ------ ------
Total recognised gains
and losses
during the
period 215 49 264 151 (109) 42
------ ------ ------ ------ ------ ------
Year ended 30
September 2004
Revenue Capital Total
£000 £000 £000
Profit on ordinary activities
after tax 389 179 568
Unrealised gains on
revaluation of investments - 16 16
------ ------ ------
Total recognised gains and losses
during the period 389 195 584
------ ------ ------
NOTE OF HISTORICAL COST PROFITS AND LOSSES
(unaudited) for the six months ended 31 March 2005
Six months Six months
ended 31 March ended 31 March
2005 2004
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Reported profit/(loss)
on ordinary
activities
before tax 280 (192) 88 198 (175) 23
Realisation of
investment
revaluation
gains of prior
periods - 19 19 - 111 111
------ ------ ------ ------ ------ ------
Historical cost profit
/(loss)
for the period
before tax 280 (173) 107 198 (64) 134
------ ------ ------ ------ ------ ------
Historical cost profit
/(loss) for the
period after
tax and
dividends (15) (119) (134) 60 (21) 39
------ ------ ------ ------ ------ ------
Year ended 30
September 2004
Revenue Capital Total
£000 £000 £000
Reported profit on ordinary activities
before tax 505 85 590
Realisation of investment revaluation
gains of prior periods - 173 173
------ ------ ------
Historical cost profit
for the period before tax 505 258 763
------ ------ ------
Historical cost profit for the
period after tax and dividends 53 (271) (218)
------ ------ ------
BALANCE SHEET
(unaudited) as at 31 March 2005
31 March 2005 31 March 2004 30 September
2004
£000 £000 £000
Venture capital investments:
Unquoted 6,760 3,859 4,312
Quoted 1,092 380 456
------- ------- -------
Total venture capital
investments 7,852 4,239 4,768
Listed fixed-interest
investments 12,000 8,675 7,413
------- ------- -------
Total fixed asset
investments 19,852 12,914 12,181
------- ------- -------
Current assets:
Investments - 2,992 -
Debtors 400 244 395
Cash at bank 5,878 2,685 9,184
------- ------- -------
6,278 5,921 9,579
Creditors (amounts falling due
within one year) (394) (243) (958)
------- ------- -------
Net current assets 5,884 5,678 8,621
------- ------- -------
Net assets 25,736 18,592 20,802
------- ------- -------
Capital and reserves:
Called-up equity share
capital 1,371 982 1,113
Share premium 18,731 11,480 13,922
Capital redemption reserve 15 3 5
Revaluation reserve 107 8 (61)
Profit and loss account 5,512 6,119 5,823
------- ------- -------
Total equity shareholders'
funds 25,736 18,592 20,802
------- ------- -------
Net asset value per share 93.8p 94.7p 93.4p
CASH FLOW STATEMENT
(unaudited) for the six months ended 31 March 2005
Six months Six months Year ended
ended ended
31 March 2005 31 March 2004 30 September
2004
£000 £000 £000 £000 £000 £000
Cash flow statement
Net cash inflow from
operating activities 146 283 192
Taxation:
Corporation tax paid - - (22)
Financial investment:
Purchase of investments (12,616) (6,315) (12,015)
Sale/repayment of
investments 5,141 6,755 13,628
------ ------ ------
Net cash inflow/
(outflow) from
financial investment (7,475) 440 1,613
Equity dividends paid (877) (193) (282)
------ ------ ------
Net cash inflow/
(outflow) before use
of liquid resources and
financing (8,206) 530 1,501
Net cash inflow/
(outflow) from
management of liquid
resources - (621) 2,371
Financing:
Issue of ordinary shares 5,332 2,065 4,776
Share issue expenses (255) (103) (239)
Purchase of ordinary
shares
for cancellation (177) (22) (61)
------ ------ ------
Net cash inflow from
financing 4,900 1,940 4,476
------ ------ ------
Increase/(decrease) in
cash at bank (3,306) 1,849 8,348
------ ------ ------
Reconciliation of profit
before
tax to net cash flow
from
operating activities
Profit on ordinary
activities
before tax 88 23 590
(Increase)/decrease in
debtors (5) 164 13
Increase in creditors 72 91 31
(Profit)/loss recognised
on
realisation of (9) 5 (442)
investments
------ ------ ------
Net cash inflow from
operating activities 146 283 192
------ ------ ------
Analysis of movement in
net funds
1 October 2004 Cash flows 31 March 2005
£000 £000 £000
Cash at bank 9,184 (3,306) 5,878
------ ------ ------
INVESTMENT PORTFOLIO SUMMARY
as at 31 March 2005
Valuation % of net assets
£000 by valuation
Venture capital investments:
IG Doors 500 1.9
SMS Agencies 500 1.9
Longhirst Group 495 1.9
Envirotec 455 1.8
Arrow Industrial Group 443 1.7
Crantock Bakery 442 1.7
Direct Valeting 427 1.7
Omnico Plastics 414 1.6
LEDA Holdings 385 1.5
RBF Industries 361 1.4
Warmseal Windows (Newcastle) 339 1.3
Cello Group** 338 1.3
John Laing Partnership 300 1.2
Crabtree of Gateshead 289 1.1
DxS 263 1.0
Andor Technology** 253 1.0
S&P Coil Products 240 0.9
e-know.net 225 0.9
Arleigh International 210 0.8
PM Group** 170 0.7
Liquidlogic 165 0.7
Computer Software Group** 129 0.5
AFI Aerial Platforms 115 0.4
Fountains** 104 0.4
Alizyme* 97 0.4
Daniolabs 75 0.3
Survey Inspection Systems 73 0.3
Oxonica 45 0.2
GB Industries - -
GSM-Central - -
------- ------
Total venture capital investments 7,852 30.5
Listed fixed-interest investments 12,000 46.6
------- ------
Total fixed asset investments 19,852 77.1
Net current assets 5,884 22.9
------- ------
Net assets 25,736 100.0
------- ------
*Listed on the London Stock Exchange
**Quoted on the Alternative Investment Market
The above summary of results for the six months ended 31 March 2005 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.
The figures for the year ended 30 September 2004 have been extracted from the
financial statements for that year, which have been delivered to the Registrar
of Companies; the independent auditors' report on those financial statements
under Section 235 of the Companies Act 1985 was unqualified.
The proposed interim dividend of 0.7p per share for the year ending 30 September
2005 will be paid on 22 July 2005 to shareholders on the register at the close
of business on 17 June 2005.
A copy of the interim report for the six months ended 31 March 2005 is expected
to be posted to shareholders by 3 June 2005 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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