Final Results
November 21 2003 - 2:30AM
UK Regulatory
RNS Number:3252S
Northern 3 VCT PLC
21 November 2003
21 NOVEMBER 2003
NORTHERN 3 VCT PLC
PRELIMINARY RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2003
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 #17.6 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 - year ended 30 September 2003:
(comparative figures as at 30 September 2002 in italics)
* Net assets #16,701,000 #13,531,000
* Net asset value per share 94.9p 96.9p
* Investment income #615,000 #269,000
* Net revenue before tax #376,000 #111,000
* Revenue return per share 1.8p 1.2p
* Dividends per share 1.5p 0.6p
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
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:
Northern 3 VCT's second financial year has passed against a background of
fluctuating economic and market conditions. The brief stock market recovery in
the last quarter of 2002 was followed by a sharp drop in investor confidence as
a result of the conflict in the Middle East, with the low point reached in March
2003. Subsequently there has been a market rally, with the AIM index advancing
particularly strongly. However the prospect of interest rate increases is
unlikely to strengthen economic confidence in the short term.
Net asset value
The net asset value (NAV) at 30 September 2003 was 94.9p per share, down by 2.1%
from the corresponding figure of 96.9p at 30 September 2002. The prospect of
interest rate rises has had a mildly negative effect on the value of the listed
fixed-interest portfolio in the short term, but your board is satisfied that its
established policy of holding surplus funds in high-grade gilts and bonds
remains appropriate. As reported in the investment manager's review in the
annual report, we have seen gains in our listed venture capital portfolio.
However the unquoted portfolio is still relatively immature and, reflecting our
prudent valuation policy, we consider it is too early to recognise any uplift in
value.
Investments
During the year nine new venture capital investments were completed, further
details of which are given in the investment managers' review. The rate of new
investment slowed noticeably during the second half of the financial year,
reflecting the experience of the venture capital industry generally. However
the current level of activity is encouraging and since the end of September new
deals totalling #1.8 million have been completed or approved. We are pleased
that the unquoted portfolio, generally, is making satisfactory progress,
although one investment has under-performed sufficiently to require a partial
provision against cost and has been receiving particularly close attention from
our managers.
Revenue and dividends
Income from investments totalled #615,000 compared with #269,000 in the
preceding year, and the revenue surplus before tax rose from #111,000 to
#376,000. The revenue return per share was 1.8p (last year 1.2p). Comparisons
between the two periods are significantly affected by the timing of receipt of
share issue proceeds in each period. The directors propose a final dividend of
1.1p per share, making a total of 1.5p for the year (last year 0.6p). The final
dividend will, if approved by shareholders, be paid on 5 February 2004 to
shareholders on the register on 5 January 2004.
As I have previously indicated, it is likely that in the short to medium term
the dividends paid to shareholders will remain relatively low. As the venture
capital portfolio matures we will be aiming to realise capital profits from
investment disposals which, under the VCT rules, can be distributed to
shareholders by way of tax free dividends.
Share offers
I reported at the interim stage on the disappointing outcome of our public share
offers during the year. We had aimed to raise up to #15 million of additional
capital for future investment, but in the event only #3.7 million was
subscribed. Market conditions were very difficult for those VCTs which issued
new shares this year, and it is estimated that the total raised was only #50
million compared to three times as much in the previous year.
There is no doubt that the capital gains tax deferral relief available to VCT
investors has become less attractive over the past three years, due to a general
dearth of capital gains and also the effect of tapering relief on marginal CGT
rates. The Government has been undertaking a consultation process on the future
of VCTs, and it is to be hoped that this will lead to a re-focussing of the tax
incentives in recognition of the significant role VCTs have played in providing
funds for small enterprising companies in the UK over the past eight years.
We still have it as a medium-term objective to increase the size of our company,
believing that this is very much in the interests of existing shareholders, and
we are currently reviewing the prospects of raising further funds over the next
six months in the light of market conditions.
VCT qualifying status
PricewaterhouseCoopers LLP have been retained to monitor and report on the
company's progress towards meeting the qualifying investment requirements laid
down in the VCT legislation. The company has complied with all the relevant
conditions so far. The next important deadline is 30 September 2004, when the
requirement to have 70% of our investment portfolio in VCT qualifying holdings
must be satisfied in respect of funds raised in the accounting period ended 30
September 2002. Although the rate of investment over the past year has been
slower than expected, our managers currently report an increase in deal flow.
The overall qualifying investment position is carefully managed in conjunction
with our advisers and the board is satisfied that the company's VCT qualifying
status will be maintained.
Share price
There continues to be little trading in the company's shares, as is to be
expected at this stage. In line with the intention expressed when the company
was launched, Court consent has been obtained to the cancellation of part of the
share premium account, so creating a new balance sheet reserve which we are
using to repurchase the small number of holdings which come onto the market.
This marginally enhances the company's net asset value. A resolution will be
proposed at the annual general meeting to renew the board's powers, to allow us
to continue to purchase shares in the market.
Northern Venture Managers
Edinburgh Fund Managers Group plc, the parent company of Northern Venture
Managers, was acquired by Aberdeen Asset Management PLC in October 2003. Your
board does not expect that this will result in any adverse change to the
arrangements for the management of Northern 3 VCT.
Future prospects
We wait to see how sustained the present modest economic recovery in the UK will
be. The manufacturing sector has recently been weak, and the boom in the
housing market has fuelled an unusually high level of consumer expenditure.
Public sector spending however looks set to remain strong for some time to come.
Our objective remains to build a diversified portfolio of later-stage
development capital and buy-out investments, together with a modest exposure to
earlier stage technology investments whose management can satisfy our demanding
criteria. We believe this will create the profits to allow us to pay increasing
dividends once we are fully invested.
We continue to seek ways to promote awareness of the long term investment value
of VCTs, so helping to ensure that the market value of our shares reflects their
true value based on a progressive yield.
John Hustler
Chairman
The audited financial statements for the year ended 30 September 2003 will show
the results set out below.
STATEMENT OF TOTAL RETURN (INCORPORATING THE REVENUE ACCOUNT)
for the year ended 30 September 2003
Year ended 30 September 2003 Period ended 30 September 2002
Revenue Capital Total Revenue Capital Total
#000 #000 #000 #000 #000 #000
Gains/(losses) on investments:
Realised on disposals - 118 118 - - -
Unrealised revaluation movements - (248) (248) - 344 344
------ ------ ------ ------ ------ ------
- (130) (130) - 344 344
Income 615 - 615 269 - 269
Investment management fee (86) (258) (344) (34) (102) (136)
Other expenses (153) (22) (175) (124) - (124)
------ ------ ------ ------ ------ ------
Return on ordinary activities
before tax 376 (410) (34) 111 242 353
Tax on ordinary activities (81) 59 (22) (22) 20 (2)
------ ------ ------ ------ ------ ------
Return on ordinary activities
after tax 295 (351) (56) 89 262 351
Dividends (251) - (251) (84) - (84)
------ ------ ------ ------ ------ ------
Transfer to/(from) reserves 44 (351) (307) 5 262 267
------ ------ ------ ------ ------ ------
Return per share 1.8p (2.2)p (0.4)p 1.2p 3.4p 4.6p
Dividend per share 1.5p - 1.5p 0.6p - 0.6p
BALANCE SHEET
as at 30 September 2003
30 September 2003 30 September 2002
#000 #000
Venture capital investments:
Unlisted 2,685 1,138
Listed 441 176
------- -------
3,126 1,314
Listed fixed-interest 10,210 8,179
investments
------- -------
Total fixed asset 13,336 9,493
investments
------- -------
Current assets:
Investments 2,371 2,867
Debtors 408 296
Cash at bank 836 990
------- -------
3,615 4,153
Creditors (amounts falling (250) (115)
due within one year) ------- -------
Net current assets 3,365 4,038
------- -------
Net assets 16,701 13,531
------- -------
Capital and reserves:
Called-up equity share 880 698
capital
Share premium 9,622 12,566
Capital redemption reserve 1 -
Special reserve 6,238 -
Capital reserve:
Realised (185) (82)
Unrealised 96 344
Revenue reserve 49 5
------- -------
Total equity shareholders' 16,701 13,531
funds
------- -------
Net asset value per share 94.9p 96.9p
CASH FLOW STATEMENT
for the year ended 30 September 2003
Year ended Period ended
30 September 30 September
2003 2002
#000 #000 #000 #000
Cash flow statement
Net cash outflow from
operating activities (10) (258)
Taxation:
Corporation tax paid - -
Financial investment:
Purchase of investments (8,191) (9,149)
Sale of investments 4,218 -
------ ------
Net cash outflow from (3,973) (9,149)
financial investment
Equity dividends paid (144) -
------ ------
Net cash outflow before use of (4,127) (9,407)
liquid resources and financing
Net cash inflow/(outflow) from 496 (2,867)
management of liquid resources
Financing:
Issue of preference shares - 50
Issue of ordinary shares 3,668 13,975
Share issue expenses (170) (698)
Purchase of ordinary shares
for cancellation (21) (13)
Redemption of preference shares - (50)
------ ------
Net cash inflow from financing 3,477 13,264
------ ------
Increase/(decrease) in cash at bank (154) 990
------ ------
Reconciliation of revenue before tax
to net cash flow from
operating activities
Net revenue before tax 376 111
(Increase) in debtors (112) (296)
Increase in creditors 6 29
Management fees charged to capital (258) (102)
Other expenses charged to capital (22) -
------ ------
Net cash outflow from
operating activities (10) (258)
------ ------
Reconciliation of movement
in net funds
1 October 2002 Cash flows 30 September 2003
#000 #000 #000
Cash at bank 990 (154) 836
Current asset investments 2,867 (496) 2,371
------ ------ ------
Net funds 3,857 (650) 3,207
------ ------ ------
INVESTMENT PORTFOLIO SUMMARY
as at 30 September 2003
Valuation % of net assets
#000 by valuation
Venture capital investments:
Horncastle Industries 438 2.6
Crantock Bakery 399 2.4
Longhirst Group 300 1.8
John Laing Partnership 300 1.8
Keith Prowse 280 1.7
PM Group** 266 1.6
RBF Industries 250 1.5
Arrow Industrial Group 245 1.5
Crabtree of Gateshead 219 1.3
Alizyme* 175 1.1
Liquidlogic 88 0.5
Survey Inspection Systems 73 0.4
GSM-Central 52 0.3
Oxonica 41 0.2
------- ------
3,126 18.7
Listed fixed-interest investments 10,210 61.2
------- ------
Total fixed asset investments 13,336 79.9
Net current assets 3,365 20.1
------- ------
Net assets 16,701 100.0
------- ------
* Listed on the London Stock Exchange
**Traded on the Alternative Investment Market
The above summary of results for the year ended 30 September 2003 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
2003 will, if approved by shareholders, be paid on 5 February 2004 to
shareholders on the register at the close of business on 5 January 2004.
The full annual report including financial statements for the year ended 30
September 2003 is expected to be posted to shareholders on 2 December 2003 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
This information is provided by RNS
The company news service from the London Stock Exchange
END
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