Final Results
Northern 3 VCT PLC
15 November 2007
15 NOVEMBER 2007
NORTHERN 3 VCT PLC
UNAUDITED INTERIM RESULTS FOR THE
TWELVE MONTHS ENDED 30 SEPTEMBER 2007
Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by NVM Private
Equity. It invests mainly in UK unquoted companies and aims to provide high
long-term tax-free returns to shareholders through a combination of dividend
yield and capital growth.
Financial highlights - twelve months ended 30 September 2007:
(comparative figures as at 30 September 2006 in italics)
2007 2006
• Net assets £29.5m £29.3m
• Net asset value per share 97.9p 95.2p
• Return per share:
Revenue 2.9p 2.4p
Capital 3.6p 0.5p
Total 6.5p 2.9p
• Dividend per share declared in
respect of the twelve month period:
Revenue 2.8p 2.0p
Capital 1.2p 2.0p
Total 4.0p 4.0p
• Cumulative return to shareholders
since launch:
Net asset value per share 97.9p 95.2p
Dividends paid per share* 14.9p 10.9p
Net asset value plus
dividends paid per share 112.8p 106.1p
• Share price at end of period 85.0p 83.0p
*Excluding proposed second interim dividend
For further information, please contact:
NVM Private Equity Limited
Christopher Mellor, Director 0191 244 6000
Website: www.nvm.co.uk
Lansons Communications
Karen Mignon 020 7294 3685
CHAIRMAN'S STATEMENT
The directors present the company's second interim report to shareholders in
respect of the 18 month accounting period ending on 31 March 2008. This report
covers the 12 month period which ended on 30 September 2007. As explained in
last year's annual report, the company's year end has been changed from 30
September to 31 March in order to allow a full three years for the investment of
the proceeds of the share issues in the 2004/05 tax year.
Results
The unaudited net asset value (NAV) per share at 30 September 2007 was 97.9p,
compared with 97.0p at 31 March 2007 and 95.2p at 30 September 2006. The return
per share for the 12 month period to 30 September 2007 was 6.5p, compared with
2.9p in the preceding financial year. The revenue element of the return per
share for the period was 2.9p (preceding year 2.4p).
A first interim dividend of 2.0p per share was paid on 20 July 2007. The
directors have declared a second interim dividend of 2.0p per share, comprising
1.4p revenue and 0.6p capital distribution, which will be paid on 18 January
2008 to shareholders on the register on 14 December 2007. The total of the two
interim dividends is 4.0p per share (year to 30 September 2006 4.0p per share).
It is envisaged that a final dividend for the 18 month period to 31 March 2008
will be paid in July 2008, subject to shareholders' approval at the annual
general meeting.
Including the proposed second interim dividend, the cumulative total of
dividends declared by the company since inception is 16.9p per share.
Investments
During the six months to 30 September 2007 seven new investments totalling £3.9
million were completed:
Maelor (£199,000) - AIM-quoted specialist hospital medicines developer, Chester
IDOX (£298,000) - AIM-quoted information management software developer, London
Foreman Roberts Group (£1,000,000) - building services consultants, London
Astbury Marsden Holdings (£1,000,000) - specialist recruitment consultancy,
London
Shieldtech (£248,000) - AIM-quoted manufacturer of body armour systems, London
Promatic Group (£568,000) - manufacturer of clay target launch equipment,
Ellesmere Port
Frontier Foods (£542,000) - specialist food products manufacturer, Rotherham
This takes the total of new investments in the past year to twelve, with a total
of £6.3 million invested - a considerable step up from the preceding year, when
eight investments were completed at a cost of £2.8 million. This welcome
increase in activity reflects not only the enhanced flow of new opportunities
generated by NVM's enlarged executive team but also a planned increase in the
average size of new deals.
Whilst the majority of new investments are either in established unquoted
companies or in AIM new issues, it is still your board's policy to commit a
small part of the portfolio to early stage ventures with high growth potential.
Disposals completed in the six months to 30 September 2007 were as follows:
Original Disposal Realised
Company cost proceeds gain/(loss)
£000 £000 £000
Computer Software Group 135 353 218
Ithaca Holdings 308 816 508
PM Group 107 157 50
RBF Industries 251 131 (120)
The AIM-quoted investments in Computer Software Group and PM Group were both
realised as a result of agreed cash bids completed in April 2007. Ithaca
Holdings, the business-to-business media and exhibitions company whose
management buy-out we backed in 2005, was sold to United Business Media plc for
£14 million of which our share was £0.8 million. The investment in RBF
Industries was sold back to the company's management after a protracted period
of under-performance.
Since the end of September our investment in human resources software developer
KCS Global Holdings has been sold to Sage Group plc for £0.9 million in cash,
realising a gain of £0.6 million over original cost.
Most of our venture capital holdings continue to make good progress and this has
been reflected in a number of valuation increases. However we have reduced the
valuation of housebuilder John Laing Partnership by £0.3 million in recognition
of a deterioration of conditions in the housing market, and it is extremely
disappointing to report that Nightingales Holdings, the mail order clothing
retailer, has been written off at a cost of £1.2 million after a period of
disappointing trading performance compounded by the impact of postal strikes,
which eventually led to the company going into administration in October 2007.
Shareholder issues
In my report six months ago I mentioned that the directors were considering ways
of encouraging the development of a more active secondary market in the
company's shares. As part of this process we have reviewed the provision of
corporate broking services to the company, as a result of which we have
announced the appointment of Landsbanki Securities (UK) Limited (formerly
Teather & Greenwood Limited) as our brokers in succession to Brewin Dolphin
Securities Limited. Landsbanki will also make a market in the company's shares
and we hope that this will initially lead to a reduction in the quoted bid-offer
spread. We recognise that in the longer term the most effective stimulus to
market liquidity will be strong investment performance and an attractive
maintainable dividend. A number of other VCTs have announced measures aimed at
improving market liquidity and reducing the outflow of funds through company
share buy-backs, and we will keep our own strategy under regular review.
I would like to remind shareholders about the company's dividend investment
scheme, through which shareholders can re-invest their dividends in new ordinary
shares with the benefit of VCT tax reliefs at the current rates. Further
information can be obtained from the company secretary.
The annual general meeting in April 2007 was held in London and the directors
had the opportunity to meet a number of shareholders. The next annual general
meeting will be held in Edinburgh on 3 July 2008.
VCT qualifying status
Your board continues to monitor progress towards the HM Revenue & Customs
qualifying targets with the help of PricewaterhouseCoopers LLP, who are retained
to advise on this and other tax matters. The company has continued to meet the
conditions for maintaining VCT status and we are well on track to meet our
immediate objective of investing the necessary proportion of the 2004/05 share
issue proceeds by 31 March 2008.
Prospects
The past year has seen a high level of new investment activity and the venture
capital portfolio continues to mature and diversify. Our managers are working
on several further exit opportunities. Recent developments in the financial
markets suggest that the business environment for small and medium-sized
unquoted companies is likely to become more rather than less challenging over
the next six months, and the Chancellor's proposed changes to capital gains tax
have created an unwelcome disincentive to entrepreneurs. However we believe
that our well-established approach to investment monitoring and management will
help to offset the overall impact of the current economic uncertainty and that
the nature of our portfolio will lead to good total returns for shareholders in
the medium term.
John Hustler
Chairman
The unaudited interim financial statements for the twelve months ended 30
September 2007 are set out below.
INCOME STATEMENT
(unaudited) for the twelve months ended 30 September 2007
Twelve months ended Year ended
30 September 2007 30 September 2006
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gain/(loss) on disposal of - 414 414 - (106) (106)
investments
Unrealised adjustments to - 1,049 1,049 - 605 605
fair value of investments
------ ------ ------ ------- ------- ------
- 1,463 1,463 - 499 499
Income 1,544 - 1,544 1,372 - 1,372
Investment management fee (173) (518) (691) (167) (502) (669)
Other expenses (197) - (197) (180) - (180)
------ ------ ------ ------ ------ ------
Return on ordinary activities
before tax 1,174 945 2,119 1,025 (3) 1,022
Tax on ordinary activities (291) 164 (127) (265) 160 (105)
------ ------ ------ ------ ------ ------
Return on ordinary activities
after tax 883 1,109 1,992 760 157 917
------ ------ ------ ------ ------ ------
Return per share 2.9p 3.6p 6.5p 2.4p 0.5p 2.9p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited) for the twelve months ended 30 September 2007
Twelve months ended Year ended
30 September 2007 30 September 2006
£000 £000
Equity shareholders' funds
at 1 October 2006 29,281 30,136
Return on ordinary activities
after tax 1,992 917
Dividends recognised in the period (1,217) (1,153)
Net proceeds of share issues 141 126
Shares purchased for cancellation (675) (745)
Expenses charged to capital reserve (18) -
------ ------
Equity shareholders' funds
at 30 September 2007 29,504 29,281
------ ------
BALANCE SHEET
(unaudited) as at 30 September 2007
30 September 2007 30 September 2006
£000 £000
Venture capital investments:
Unquoted 16,089 10,012
Quoted 2,487 1,997
------ ------
18,576 12,009
Listed fixed-interest investments 9,382 13,229
------ ------
Total fixed asset investments 27,958 25,238
------ ------
Current assets:
Debtors 463 600
Cash at bank 1,250 3,606
------ ------
1,713 4,206
Creditors (amounts falling due
within one year) (167) (163)
------ ------
Net current assets 1,546 4,043
------ ------
Net assets 29,504 29,281
------ ------
Capital and reserves:
Called-up equity share capital 1,506 1,538
Share premium 7,893 22,759
Capital redemption reserve 116 77
Capital reserve - realised 17,413 3,703
Capital reserve - unrealised 1,847 629
Revenue reserve 729 575
------ ------
Total equity shareholders' funds 29,504 29,281
------ ------
Net asset value per share 97.9p 95.2p
CASH FLOW STATEMENT
(unaudited) for the twelve months ended 30 September 2007
Twelve months ended Year ended
30 September 2007 30 September 2006
£000 £000 £000 £000
Net cash inflow from
operating activities 757 525
Taxation:
Corporation tax paid (105) (81)
Financial investment:
Purchase of investments (13,282) (9,740)
Sale/repayment of investments 12,025 9,043
------ ------
Net cash outflow from
financial investment (1,257) (697)
Equity dividends paid (1,217) (1,153)
------ ------
Net cash outflow before financing (1,822) (1,406)
Financing:
Issue of ordinary shares 147 145
Share issue expenses (6) (19)
Purchase of ordinary shares
for cancellation (675) (745)
------ ------
Net cash outflow from financing (534) (619)
------ ------
Decrease in cash at bank (2,356) (2,025)
------ ------
Reconciliation of return before
tax to net cash flow from
operating activities
Return on ordinary activities
before tax 2,119 1,022
(Gain)/loss on disposal of
investments (414) 106
Unrealised adjustments to
fair value of investments (1,049) (605)
Decrease in debtors 137 17
Decrease in creditors (18) (15)
Expenses charged to capital reserve (18) -
------ ------
Net cash inflow from
operating activities 757 525
------ ------
Analysis of movement in net funds
1 October 2006 Cash flows 30 September 2007
£000 £000 £000
Cash at bank 3,606 (2,356) 1,250
------ ------ ------
INVESTMENT PORTFOLIO SUMMARY
(unaudited) as at 30 September 2007
% of
Cost Valuation net assets
£000 £000 by value
Envirotec 455 1,012 3.4
Product Support (Holdings) 1,000 1,000 3.4
Promanex Group Holdings 1,000 1,000 3.4
Foreman Roberts Group 1,000 1,000 3.4
Astbury Marsden Holdings 1,000 1,000 3.4
KCS Global Holdings 338 898 3.1
John Laing Partnership 305 856 2.9
Pivotal Laboratories Holdings 679 843 2.9
Paladin Group 593 773 2.6
Crantock Bakery 442 732 2.5
IG Doors 500 625 2.1
Promatic Group 568 568 1.9
DxS 325 561 1.9
Frontier Foods 542 542 1.8
Abermed 375 490 1.7
------ ------ ------
Fifteen largest venture capital investments 9,122 11,900 40.4
Other venture capital investments 7,519 6,676 22.6
------ ------ ------
Total venture capital investments 16,641 18,576 63.0
Listed fixed-interest investments 9,470 9,382 31.8
------ ------ ------
Total fixed asset investments 26,111 27,958 94.8
------
Net current assets 1,546 5.2
------ ------
Net assets 29,504 100.0
------ ------
The above financial statements for the twelve months ended 30 September 2007 do
not constitute statutory financial statements within the meaning of Section 240
of the Companies Act 1985 and have not been delivered to the Registrar of
Companies. The figures for the year ended 30 September 2006 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
financial statements for the twelve month period ended 30 September 2007 have
been prepared on the basis of the accounting policies set out in the annual
financial statements for the year ended 30 September 2006.
The proposed second interim dividend of 2.0p per share for the period ending 31
March 2008 will be paid on 18 January 2008 to shareholders on the register at
the close of business on 14 December 2007.
A copy of the interim report for the twelve months ended 30 September 2007 is
expected to be posted to shareholders on 30 November 2007 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
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