Northern 3 Vct Regulatory News (NTN)

23 May 2006 15:07

Northern 3 VCT PLC23 May 2006 23 MAY 2006 NORTHERN 3 VCT PLC UNAUDITED INTERIM RESULTSFOR THE SIX MONTHS ENDED 31 MARCH 2006 Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by Northern VentureManagers. It invests mainly in unquoted venture capital holdings and aims toprovide high long-term returns to shareholders through a combination of dividendyield and capital growth. Financial highlights:(comparative figures as at 31 March 2005 in italics) 2006 2005 Re-stated • Net assets* £30,294,000 £25,945,000 • Net asset value per share* 97.2p 94.6p • Investment income £770,000 £437,000 • Return on ordinary activities before tax Revenue £594,000 £280,000 Capital £425,000 £(23,000) Total £1,019,000 £257,000 • Return per share Revenue 1.4p 0.9p Capital 1.7p 0.1p Total 3.1p 1.0p • Interim dividend per share proposed in respect of the period Revenue 1.0p 0.7p Capital 1.0p - Total 2.0p 0.7p • Cumulative return to shareholders since launch Dividends per share** 10.9p 7.2p Net asset value plus dividends 106.1p 101.1p • Share price at end of period 85.0p 87.0p * Before deducting proposed interim dividend **Including proposed interim dividend For further information, please contact:Northern Venture Managers Limited 0191 244 6000Alastair Conn, Managing DirectorWebsite: www.nvm.co.ukLansons Communications 020 7294 3616Alison Boucher NORTHERN 3 VCT PLC CHAIRMAN'S STATEMENT The Chairman of Northern 3 VCT PLC, John Hustler, included the following pointsin his statement to shareholders: During 2005 we achieved our initial objective of increasing the company's assetbase to £30 million. The emphasis is now on building up the portfolio ofVCT-qualifying investments in order to ensure that the company continues tocomply with the conditions for maintaining VCT status. Although the rate of newinvestment in the six months to 31 March 2006 was lower than expected, the flowof potential new deals is currently strong and we expect an upturn in activityin the second half of the year. Net asset value The unaudited net asset value per share at 31 March 2006 was 97.2p, up by 1.5%from the re-stated figure of 95.8p at 30 September 2005. As explained below,net asset value is now stated before deducting proposed dividends. Revenue and dividend The revenue return per share for the half year was 1.4p, compared with 0.9p forthe corresponding six month period to 31 March 2005. The directors havedeclared an increased interim revenue dividend of 1.0p per share (correspondingperiod 0.7p), and an interim capital dividend of 1.0p (corresponding periodnil). The total interim dividend of 2.0p per share will be paid on 21 July 2006to shareholders on the register on 23 June 2006. This brings the cumulativetotal of dividends declared by the company to 10.9p per share. Shareholders may be aware that some VCTs have already announced the suspensionof dividend reinvestment schemes following the changes announced in the March2006 Budget, which include a reduction in the size limits for VCT-qualifyinginvestments made using funds raised after 6 April 2006. We would like to keepthe dividend reinvestment facility available to shareholders and will awaitfurther guidance from HM Revenue & Customs on the practical implications of theproposed legislation. Shares issued after 6 April 2006 will be subject to thenew conditions announced in the Budget, including 30% income tax relief and afive year holding period. Investments During the half year a total of £1.1 million was invested in the followingcompanies: • Inspicio (£100,000) - AIM-quoted provider of inspection and testing services, London • Intercytex Group (£250,000) - AIM-quoted drug development company specialising in human cell therapy, Cambridge • Adept Telecom (£235,000) - AIM-quoted provider of telecommunications services, Tunbridge Wells • Wear Inns (£282,000) - managed public houses, Newcastle upon Tyne • Twenty (£198,000) - AIM-quoted marketing services provider, Hertford Although only one new unquoted investment was completed during the half year,the underlying level of activity in developing and appraising new opportunitieshas remained high and we expect an increased number of completions in the secondhalf. In early April we completed an investment of £993,000 in Nightingales, aretailer of ladies clothing through mail order and retail outlets, and twofurther investments totalling £756,000 have been approved and are awaitingcompletion of due diligence. Most of the companies in the unquoted portfolio are making good progress and ina number of cases this has resulted in increases in valuation. The investmentin Omnico Plastics was sold to SIG plc in November 2005 for approximately twiceits original cost of £333,000. I reported at the last year end that SMSAgencies was trading behind expectations; regrettably the position deterioratedfurther and in February 2006 administrators were appointed, resulting in fullprovision being made against our investment of £500,000. Presentation of financial statements We have adopted the revised Statement of Recommended Practice for investmenttrust accounting published by the Association of Investment Trust Companies, asa result of which we now publish an Income Statement which is similar in formatand content to the Statement of Total Return presented in earlier years.Several new accounting policies have been implemented in order to comply withnew UK Financial Reporting Standards. The main consequences are that quotedinvestments are valued at bid rather than mid-market price; dividends payableto shareholders no longer appear in the Income Statement but are chargeddirectly to reserves; and dividends are not recognised in the accounts until aformal liability to pay has been established. A more detailed explanation ofthe accounting changes and their financial impact is set out in the notes below.Comparative figures in the financial statements have where appropriate beenre-stated on the new basis. Share buybacks At the annual general meeting in January 2006 shareholders renewed thedirectors' authority to make market purchases of shares for cancellation.During the half year to 31 March 2006 the company bought back for cancellation377,018 shares, representing approximately 1.2% of the issued capital. Thelevel of secondary market trading in our shares, like those of most VCTs,remains low; our managers are working with their colleagues in the sector toincrease investor awareness of the attractions of VCT shares, particularly thetax-free dividend yield. VCT qualifying status Your board continues to monitor progress towards the Inland Revenue qualifyingtargets, with the help of PricewaterhouseCoopers LLP who have been retained toadvise on this and other tax matters. We are satisfied that the company hascontinued to fulfil the conditions for maintaining VCT status. The Governmenthas made proposals in its 2006 Finance Bill which could adversely affect the wayin which VCTs manage their investments to comply with the VCT legislation, andrepresentations are being made to the Government with the objective of ensuringthat the resulting legislation does not impact on the commercial operation ofour company. Prospects The recent setback to the world's stock markets has interrupted a growth trendwhich had perhaps run too far. The outlook for the UK economy appears to begenerally positive but the road ahead will be bumpy at times. Our company has agood store of liquidity for future investment and the venture capital portfoliois developing well, though not without its challenging moments. The keyobjective for the next 18 months is to ensure that the 70% qualifying investmenttarget is attained in respect of the funds raised in 2004 and 2005, whilstmanaging the portfolio carefully with a view to capital growth and dividendgeneration. On behalf of the board I would like to thank shareholders for their continuinginterest and support. We have decided to hold our January 2007 annual generalmeeting in London and hope this will enable a greater number of shareholders toattend and take part in the meeting. JOHN HUSTLERChairman The unaudited interim financial statements for the six months ended 31 March2006 are set out below. INCOME STATEMENT (unaudited) for the six months ended 31 March 2006 Six months ended 31 March 2006 Six months ended 31 March 2005 Re-stated Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000(Loss)/gain on disposal of investments held at fair value - (185) (185) - 9 9Unrealised adjustments to fair value of investments - 926 926 - 169 169 ------ ------ ------ ------ ------ ------ - 741 741 - 178 178Income 770 - 770 437 - 437Investment management fee (80) (316) (396) (67) (201) (268)Other expenses (96) - (96) (90) - (90) ------ ------ ------ ------ ------ ------Return on ordinary activities before tax 594 425 1,019 280 (23) 257Tax on return on ordinary activities (158) 100 (58) (65) 54 (11) ------ ------ ------ ------ ------ ------Return on ordinary activities after tax 436 525 961 215 31 246 ------ ------ ------ ------ ------ ------Return per share 1.4p 1.7p 3.1p 0.9p 0.1p 1.0p Year ended 30 September 2005 Re-stated Revenue Capital Total £000 £000 £000Gain on disposal of investments held at fair value - 29 29Unrealised adjustments to fair value of investments - 491 491 ------ ------ ------ - 520 520Income 1,232 - 1,232Investment management fee (158) (475) (633)Other expenses (180) - (180) ------ ------ ------Return on ordinary activities before tax 894 45 939Tax on return on ordinary activities (233) 152 (81) ------ ------ ------Return on ordinary activities after tax 661 197 858 ------ ------ ------Return per share 2.4p 0.7p 3.1p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (unaudited) for the six months ended 31 March 2006 Six months Six months Year ended ended ended 30 31 March 2006 31 March 2005 September 2005 Re-stated Re-stated £000 £000 £000Equity shareholders' funds at 1 October 2005 As previously reported 29,610 20,802 20,802 Prior year adjustment 526 865 865 ------- ------- ------- As re-stated 30,136 21,667 21,667 Return on ordinary activities 961 246 858after taxDividends recognised in the (535) (868) (1,098)periodNet proceeds of share issues 56 5,077 9,208Shares purchased for (324) (177) (499)cancellation ------- ------- -------Equity shareholders' funds at 31 March 2006 30,294 25,945 30,136 ------- ------- ------- BALANCE SHEET (unaudited) as at 31 March 2006 31 March 31 March 30 2006 2005 September 2005 Re-stated Re-stated £000 £000 £000Fixed asset investments held atfair value:Venture capital investments Unquoted 8,665 6,760 8,433 Quoted 2,228 1,071 1,301 ------- ------- -------Total venture capital 10,893 7,831 9,734investmentsQuoted fixed-interest 15,466 12,000 14,308investments ------- ------- -------Total fixed asset investments 26,359 19,831 24,042 ------- ------- -------Current assets: Debtors 480 400 617 Cash at bank 3,657 5,878 5,631 ------- ------- ------- 4,137 6,278 6,248Creditors (amounts falling due (202) (164) (154)within one year) ------- ------- -------Net current assets 3,935 6,114 6,094 ------- ------- ------- Net assets 30,294 25,945 30,136 ------- ------- ------- Capital and reserves:Called-up equity share capital 1,558 1,371 1,573Share premium 22,693 18,731 22,641Capital redemption reserve 53 15 34Capital reserve - realised 4,291 5,425 5,031Capital reserve - unrealised 1,139 86 324Revenue reserve 560 317 533 ------- ------- -------Total equity shareholders' 30,294 25,945 30,136funds ------- ------- -------Net asset value per share 97.2p 94.6p 95.8p CASH FLOW STATEMENT (unaudited) for the six months ended 31 March 2006 Six months ended Six months ended Year ended 31 March 2005 30 September 2005 31 March 2006 Re-stated Re-stated £000 £000 £000 £000 £000 £000Net cash inflow from operating activities 486 146 204 Taxation:Corporation tax paid (81) - (24) Financial investment:Purchase of investments (4,399) (12,616) (17,372)Sale/repayment of investments 2,823 5,141 6,028 ------ ------ ------Net cash outflow from financial investment (1,576) (7,475) (11,344) Equity dividends paid (535) (877) (1,098) ------ ------ ------Net cash outflow before (1,706) (8,206) (12,262) financing Financing:Issue of ordinary shares 70 5,332 9,698Share issue expenses (14) (255) (490)Purchase of ordinary shares for cancellation (324) (177) (499) ------ ------ ------Net cash (outflow)/inflow from financing (268) 4,900 8,709 ------ ------ ------Decrease in cash at bank (1,974) (3,306) (3,553) ------ ------ ------ Reconciliation of returnbefore tax to net cash flow from operating activities Return on ordinary activities before tax 1,019 257 939Loss/(gain) on disposal of investments held at fair value 185 (9) (29)Unrealised adjustments to fair value of investments (926) (169) (491)Decrease/(increase) in debtors 137 (5) (222)Increase in creditors 71 72 7 ------ ------ ------Net cash inflow from operating activities 486 146 204 ------ ------ ------ Analysis of movement in netfunds 1 October 2005 Cash flows 31 March 2006 £000 £000 £000 Cash at bank 5,631 (1,974) 3,657 ------ ------ ------ INVESTMENT PORTFOLIO SUMMARY as at 31 March 2006 Cost Valuation % of net assets £000 £000 by valuationVenture capital investments:Pivotal Laboratories Holdings 679 679 2.2IG Doors 500 672 2.2Envirotec 455 655 2.2John Laing Partnership 304 639 2.1Crantock Bakery 442 536 1.8Longhirst Group 480 495 1.6Warmseal Windows (Newcastle) 339 440 1.5Arrow Industrial Group 245 375 1.2Abermed Group 375 375 1.2Arleigh International 210 344 1.1Adept Telecom* 235 340 1.1KCS Global Holdings 338 338 1.1Cello Group* 251 321 1.1Direct Valeting 427 320 1.1AFI Aerial Platforms 116 313 1.0 ------- ------- ------Fifteen largest venture capital investments 5,396 6,842 22.5Other venture capital investments 4,232 4,051 13.4 ------- ------- ------Total venture capital investments 9,628 10,893 35.9Quoted fixed-interest investments 15,591 15,466 51.1 ------- ------- ------Total fixed asset investments 25,219 26,359 87.0 -------Net current assets 3,935 13.0 ------- ------Net assets 30,294 100.0 ------- ------*Quoted on Alternative Investment Market The above summary of results for the six months ended 31 March 2006 does notconstitute statutory financial statements within the meaning of Section 240 ofthe Companies Act 1985 and has not been delivered to the Registrar of Companies.The figures for the year ended 30 September 2005 have been extracted from thefinancial statements for that year, which have been delivered to the Registrarof Companies, adjusted in respect of the changes in accounting policies asstated below; the independent auditors' report on those financial statementsunder Section 235 of the Companies Act 1985 was unqualified. The company is required to comply with a number of new UK Financial ReportingStandards (FRS), which now represent UK Generally Accepted Accounting Principles(UK GAAP), in presenting its financial statements for the year ending 30September 2006. These Standards have been introduced as part of the process ofaligning UK accounting principles with International Accounting Standards. The revised accounting policies differ from those used in preparing the annualfinancial statements for the year ended 30 September 2005 in the followingrespects: • The company's investments have been designated as fair value through profit and loss and accordingly the unrealised gain or loss resulting from the revaluation of investments held at fair value is now recognised in the income statement, as required by FRS 26 "Financial Instruments: Measurement". • Quoted investments are valued at bid price rather than mid-market price, as required by FRS 26 "Financial Instruments: Measurement". • Dividends to shareholders are accounted for in the period in which the company is liable to pay them, rather than in the period in respect of which they are declared, as required by FRS 21 "Events after the Balance Sheet Date". Dividends payable are treated as a charge on reserves and accounted for through the reconciliation of movements in shareholders' funds rather than in the profit and loss account as previously. The comparative figures for the year ended 30 September 2005 and the six monthsended 31 March 2005 have been re-stated accordingly. The effect of the above changes on the reported net assets and net asset valueper share of the company is as follows: 30 September 2005 31March 2005 Net assets Net asset Net assets Net asset £000 value £000 value per share per share p pAs reported under previous 29,610 94.1 25,736 93.8UK GAAPLess: adjustment in valuation of (9) - (21) -quoted investments to bid priceAdd: proposed dividends not 535 1.7 230 0.8accounted for until declaredand paid ------- ------- ------- -------As reported under revised 30,136 95.8 25,945 94.6UK GAAP ------- ------- ------- ------- The proposed interim dividend of 2.0p per share for the year ending 30 September2006 will be paid on 21 July 2006 to shareholders on the register at the closeof business on 23 June 2006. A copy of the interim report for the six months ended 31 March 2006 is expectedto be posted to shareholders on 2 June 2006 and will be available to the publicat the registered office of the company at Northumberland House, PrincessSquare, Newcastle upon Tyne NE1 8ER. ENDS This information is provided by RNS The company news service from the London Stock Exchange