Share Name Share Symbol Market Type Share ISIN Share Description
Northern 3 Vct Plc LSE:NTN London Ordinary Share GB0031152027 ORD 5P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00p +0.00% 86.50p 85.50p 87.50p 86.50p 86.50p 86.50p 0 01:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Equity Investment Instruments 2.5 1.8 1.8 48.1 82

Northern 3 VCT plc Annual Financial Report

17/05/2019 8:31am

UK Regulatory (RNS & others)

   16 MAY 2019 
   Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by NVM 
Private Equity.  It invests mainly in unquoted venture capital holdings 
and aims to provide high long-term tax-free returns to shareholders 
through a combination of dividend yield and capital growth. 
   Financial highlights (comparative figures as at 31 March 2018): 
                                                        2019      2018 
                                                    --------  -------- 
Net assets                                          GBP82.7m  GBP84.3m 
Net asset value per share                              94.2p     94.0p 
Return per share: 
Revenue                                                 1.8p      1.9p 
Capital                                                 3.8p    (4.0)p 
Total                                                   5.6p    (2.1)p 
Dividend per share for the year: 
Interim dividend                                        2.0p      2.0p 
Proposed final dividend                                 2.0p      3.5p 
Total                                                   4.0p      5.5p 
Cumulative return to shareholders since launch: 
Net asset value per share                              94.2p     94.0p 
Dividends paid per share*                              91.4p     85.9p 
Net asset value plus dividends paid per share         185.6p    179.9p 
Mid-market share price at end of year                 86.00p    89.50p 
Share price discount to net asset value                 8.7%      4.8% 
Tax-free dividend yield (based on net asset value 
 per share at the start of the year)                    4.3%      5.2% 
   *Excluding proposed final dividend payable on 19 July 2019 
   For further information, please contact: 
   NVM Private Equity LLP 
   Simon John/James Bryce                    0191 244 6000 
   Northern 3 VCT has had a productive year during which ten new 
VCT--qualifying investments were completed and a successful public share 
offer was launched and fully subscribed. Cashflow remained strong, 
supported by a number of notable investment sales and as a result, your 
company is well placed to support our evolving portfolio. 
   Results and dividend 
   The net asset value (NAV) per share at 31 March 2019, after deducting 
dividends totalling 5.5p paid during the year, was 94.2p compared with 
94.0p as at 31 March 2018. The total return per share for the year as 
shown in the income statement was 5.6p (last year minus 2.1p), 
equivalent to 6.0% of the opening NAV.  The company's NAV total return 
over five years remains ahead of the UK equity market total return index 
which we use as a comparator. 
   We are continuing to build a portfolio of investments in innovative 
earlier stage UK companies with significant growth potential, with a 
view to achieving a capital return rather than income generation.  The 
potential returns are attractive, however the investment holding period 
required will typically be longer and there may be greater fluctuations 
in short term results.  Paying regular dividends whilst seeking to 
sustain the NAV per share is a priority for your board and future 
distributions will continue to have regard to the level of returns 
generated.  As stated in the latest half-yearly report, our medium term 
aim, subject to regular review, is to provide a dividend yield of 4% per 
annum.  After careful consideration, we have proposed a final dividend 
of 2.0p in respect of the year, which together with the interim dividend 
of 2.0p paid in January makes a total of 4.0p. The total dividend 
equates to a tax-free yield of 4.3% based on the opening NAV per share. 
The proposed final dividend will, subject to approval by shareholders at 
the annual general meeting, be paid on 19 July 2019 to shareholders on 
the register on 21 June 2019. 
   Investment portfolio 
   The rate of new investment has been encouraging over the past year with 
the ten new VCT-qualifying investments costing GBP6.3 million.  Taken 
with follow-on investments totalling GBP3.7 million, the overall venture 
capital investment rate was GBP10.0 million for the second successive 
year.  We expect to continue to allocate a significant proportion of our 
annual investment activity to providing additional growth capital to our 
existing portfolio companies.  Around 50% by value of the unquoted 
portfolio consists of investments in more mature businesses acquired 
under previous iterations of the VCT scheme rules.  Healthy gains were 
realised from the successful sales of several investments from the 
mature portfolio, a trend we hope will continue in the coming years as 
the earlier stage portfolio develops. 
   In the quoted venture capital portfolio, a number of investee companies 
made progress during the year, with valuations increasing overall 
accordingly.  Both Cityfibre Infrastructure Holdings and Sinclair Pharma 
were the subjects of agreed takeover bids during the year, supporting 
the overall positive return. 
   Shareholder issues 
   Having reviewed the likely cash requirements over the coming years, we 
launched a 'top-up' share issue in January 2019 in order to maintain a 
comfortable margin of liquidity for future investment activity.  We 
raised our full target of GBP6.6 million in 12 days and would like to 
thank all investors for the vote of confidence shown in Northern 3 VCT. 
   Our dividend investment scheme, under which dividends can be re-invested 
in new ordinary shares free of dealing costs and with the benefit of the 
tax reliefs available on new VCT share subscriptions, continues to 
operate.  Shareholders who wish to join the scheme or amend their 
current participation in the scheme may obtain an updated scheme mandate 
form from NVM's website at 
   Share buy-backs 
   We have maintained our policy of buying back our shares in the market, 
where necessary to maintain market liquidity, at a discount of 5% to 
NAV.  During the year 2,565,184 shares, equivalent to approximately 2.9% 
of the opening share capital, were re-purchased for cancellation at an 
average cost of 88.5p per share. 
   VCT qualifying status 
   The company has continued to meet the qualifying conditions laid down by 
HM Revenue & Customs for maintaining its approval as a VCT.  The board 
reviews the company's compliance position on a regular basis with the 
manager.  A professional firm of accountants which specialises in VCT 
compliance continues to act as independent adviser to the company on VCT 
taxation matters. 
   VCT legislation and regulation 
   We have grown accustomed to frequent legislative change in recent years, 
however the past 12 months has provided a welcome period of stability 
with no further amendments to the VCT scheme rules proposed in the most 
recent Autumn Budget Statement.  Previously announced measures are still 
being implemented on a phased basis and as previously reported, from 
April 2020 your company will be required to hold at least 80% of its 
funds in VCT qualifying assets (previously 70%).  The board and our 
investment manager are monitoring progress towards this target very 
closely and are encouraged by the strong investment rate. 
   Until recently, most VCTs have submitted their potential investment 
opportunities to HMRC via the advanced assurance service, whereby an 
indicative opinion as to the qualifying nature of a proposed investment 
may be sought.  HMRC has a long stated aim of limiting the focus of this 
non-statutory service to those cases which are deemed to be more 
subjective and to therefore encourage VCTs to self-assure their more 
straight-forward cases.  Your board is encouraged that efforts to 
clarify how self-assurance should work in practice have recently 
resulted in HMRC issuing updates to their VCT guidance notes.  In future, 
our intention is to self-assure cases which satisfy certain criteria and 
on which an opinion has been issued by a professional adviser. 
   We have been operating for some time against a backdrop of political and 
economic uncertainty and these conditions look set to continue for some 
time as the deadline for the UK to leave the European Union has been 
extended.  The uncertainty created by this delay in conjunction with 
other macro-economic factors is causing a certain degree of volatility 
in financial markets.  Whilst limited clarity has yet emerged as to the 
future trading relationship between the UK and the EU, our manager's 
approach has been to work with individual portfolio companies to assess 
specific risks and plan for a variety of potential outcomes.  Our 
manager has a good record of dealing with periods of change and we 
remain confident in their ability to deliver good results for 
shareholders in the medium to long term. 
   James Ferguson 
   Extracts from the audited financial statements for the year ended 31 March 2019 are set out below. 
   for the year ended 31 March 2019 
                     Year ended 31 March 2019            Year ended 31 March 2018 
                 Revenue     Capital      Total      Revenue     Capital      Total 
                  GBP000      GBP000      GBP000      GBP000      GBP000      GBP000 
Gain on 
 disposal of 
 investments             -       3,204       3,204           -         698         698 
Movements in 
 fair value of 
 investments             -       1,195       1,195           -     (2,892)     (2,892) 
                ----------  ----------  ----------  ----------  ----------  ---------- 
                         -       4,399       4,399           -     (2,194)     (2,194) 
Income               2,541           -       2,541       2,436           -       2,436 
 fee                 (397)     (1,190)     (1,587)       (384)     (1,150)     (1,534) 
Other expenses       (373)           -       (373)       (335)        (11)       (346) 
                ----------  ----------  ----------  ----------  ----------  ---------- 
Return on 
 before tax          1,771       3,209       4,980       1,717     (3,355)     (1,638) 
Tax on return 
 on ordinary 
 activities          (219)         219           -       (209)         209           - 
                ----------  ----------  ----------  ----------  ----------  ---------- 
Return on 
 after tax           1,552       3,428       4,980       1,508     (3,146)     (1,638) 
                ----------  ----------  ----------  ----------  ----------  ---------- 
Return per 
 share                1.8p        3.8p        5.6p        1.9p      (4.0)p      (2.1)p 
Dividends             1.5p        2.5p        4.0p        1.5p        4.0p        5.5p 
 in respect of 
 the year 
   as at 31 March 2019 
                                                  31 March 2019  31 March 2018 
                                                      GBP000         GBP000 
Fixed assets: 
 Investments                                             69,811         62,770 
                                                     ----------     ---------- 
Current assets: 
 Debtors                                                    211            167 
 Cash and cash equivalents                               19,405         21,458 
                                                     ----------     ---------- 
                                                         19,616         21,625 
Creditors (amounts falling due within one year)         (6,696)          (135) 
                                                     ----------     ---------- 
Net current assets                                       12,920         21,490 
                                                     ----------     ---------- 
Net assets                                               82,731         84,260 
                                                     ----------     ---------- 
Capital and reserves: 
Called-up equity share capital                            4,393          4,483 
Share premium                                               840            214 
Capital redemption reserve                                  299            171 
Capital reserve                                          65,665         69,721 
Revaluation reserve                                       9,166          8,463 
Revenue reserve                                           2,368          1,208 
                                                     ----------     ---------- 
Total equity shareholders' funds                         82,731         84,260 
                                                     ----------     ---------- 
Net asset value per share                                 94.2p          94.0p 
   for the year ended 31 March 2019 
               ---------------Non-distributable reserves---------------  Distributable reserves        Total 
               Called up share     Share     redemption    Revaluation     Capital      Revenue 
                   capital        premium     reserve        reserve*      reserve      reserve 
                   GBP000         GBP000      GBP000         GBP000        GBP000      GBP000         GBP000 
At 1 April 
 2018                    4,483         214          171           8,463      69,721        1,208      84,260 
Return on 
after tax                    -           -            -             703       2,725        1,552          4,980 
 paid                        -           -            -               -     (4,512)        (392)     (4,904) 
Net proceeds 
 of share 
 issues                     38         626            -               -           -            -         664 
purchased for 
cancellation             (128)           -          128               -     (2,269)            -     (2,269) 
                    ----------  ----------   ----------      ----------  ----------   ----------  ---------- 
At 31 March 
 2019                    4,393         840          299           9,166      65,665        2,368      82,731 
                    ----------  ----------   ----------      ----------  ----------   ----------  ---------- 
   for the year ended 31 March 2018 
               ---------------Non-distributable reserves---------------  Distributable reserves     Total 
               Called up share     Share     redemption    Revaluation     Capital      Revenue 
                   capital        premium     reserve        reserve*      reserve      reserve 
                   GBP000         GBP000      GBP000         GBP000        GBP000      GBP000       GBP000 
At 1 April 
 2017                    3,290       2,223          113          12,124      50,850        1,292      69,892 
Return on 
after tax                    -           -            -         (3,661)         515        1,508     (1,638) 
 paid                        -           -            -               -     (6,127)      (1,592)     (7,719) 
Net proceeds 
 of share 
 issues                  1,251      23,560            -               -           -            -      24,811 
purchased for 
cancellation              (58)           -           58               -     (1,086)            -     (1,086) 
of share 
reserve                      -    (25,569)            -               -      25,569            -           - 
                    ----------  ----------   ----------      ----------  ----------   ----------  ---------- 
At 31 March 
 2018                    4,483         214          171           8,463      69,721        1,208      84,260 
                    ----------  ----------   ----------      ----------  ----------   ----------  ---------- 
   *The revaluation reserve is generally non-distributable other than that 
part of the reserve relating to gains/losses on readily realisable 
quoted investments, which is distributable. 
   for the year ended 31 March 2019 
                                               Year ended          Year ended 
                                              31 March 2019     31 March 2018 
                                                 GBP000                GBP000 
Cash flows from operating activities: 
Return on ordinary activities before tax              4,980        (1,638) 
Adjustments for: 
Gain on disposal of investments                     (3,204)             (698) 
Movement in fair value of investments               (1,195)             2,892 
(Increase)/decrease in debtors                         (44)               485 
 Increase/(decrease) in creditors                        68             (872) 
                                                 ----------        ---------- 
Net cash inflow from operating activities               605            169 
                                                 ----------        ---------- 
Cash flows from investing activities: 
Purchase of investments                            (18,342)          (10,117) 
Sale/repayment of investments                        15,700             7,870 
                                                 ----------        ---------- 
Net cash outflow from investing activities          (2,642)           (2,247) 
                                                 ----------        ---------- 
Cash flows from financing activities: 
Issue of ordinary shares                                702            25,357 
Share issue expenses                                   (38)             (546) 
Share subscriptions held pending allotment            6,493           (4,281) 
Purchase of ordinary shares for cancellation        (2,269)           (1,086) 
Equity dividends paid                               (4,904)           (7,719) 
                                                 ----------        ---------- 
Net cash (outflow)/inflow from financing 
 activities                                            (16)         11,725 
                                                 ----------        ---------- 
(Decrease)/increase in cash and cash 
 equivalents                                        (2,053)             9,647 
Cash and cash equivalents at beginning of 
 year                                                21,458            11,811 
                                                 ----------        ---------- 
Cash and cash equivalents at end of year             19,405            21,458 
                                                 ----------        ---------- 
   as at 31 March 2019 
                                                                      % of 
                                              Cost      Valuation   net assets 
                                             GBP000      GBP000      by value 
Venture capital investments: 
Sorted Holdings                                2,542        3,393          4.1 
MSQ Partners Group                             1,478        3,082          3.7 
Lineup Systems                                   974        2,910          3.5 
Agilitas IT Holdings                           1,448        2,888          3.5 
No 1 Lounges                                   1,748        2,614          3.2 
Ideagen*                                         541        2,190          2.6 
Volumatic Holdings                             1,078        2,110          2.6 
SHE Software Group                             1,850        2,083          2.5 
Entertainment Magpie Group                     1,360        1,733          2.1                                1,270        1,634          2.0 
It's All Good                                  1,131        1,606          1.9 
Idox*                                            530        1,587          1.9 
Knowledgemotion                                1,437        1,561          1.9 
Biological Preparations Group                  1,915        1,553          1.9 
AVID Technology Group                          1,210        1,537          1.9 
                                          ----------   ----------     -------- 
Fifteen largest venture capital 
 investments                                  20,512       32,481         39.3 
Other venture capital investments             29,666       26,755         32.3 
                                          ----------   ----------     -------- 
Total venture capital investments             50,178       59,236         71.6 
Listed equity investments                     10,467       10,575         12.8 
                                          ----------   ----------     -------- 
Total fixed asset investments                 60,645       69,811         84.4 
Net current assets                                         12,920         15.6 
                                                       ----------     -------- 
Net assets                                                 82,731        100.0 
                                                       ----------     -------- 
   *Quoted on AIM 
   The board carries out a regular and robust review of the risk 
environment in which the company operates. The principal risks and 
uncertainties identified by the board which might affect the company's 
business model and future performance, and the steps taken with a view 
to their mitigation, are as follows: 
   Investment and liquidity risk: investment in smaller and unquoted 
companies, such as those in which the company invests, involves a higher 
degree of risk than investment in larger listed companies because they 
generally have limited product lines, markets and financial resources 
and may be more dependent on key individuals. The securities of smaller 
companies in which the company invests are typically unlisted, making 
them illiquid, and this may cause difficulties in valuing and disposing 
of the securities. The company may invest in businesses whose shares are 
quoted on AIM -- the fact that a share is quoted on AIM does not mean 
that it can be readily traded and the spread between the buying and 
selling prices of such shares may be wide. Mitigation: the directors aim 
to limit the risk attaching to the portfolio as a whole by careful 
selection, close monitoring and timely realisation of investments, by 
carrying out rigorous due diligence procedures and maintaining a wide 
spread of holdings in terms of financing stage and industry sector. The 
board reviews the investment portfolio with the manager on a regular 
   Financial risk: most of the company's investments involve a medium to 
long term commitment and many are relatively illiquid. Mitigation: the 
directors consider that it is inappropriate to finance the company's 
activities through borrowing except on an occasional short-term basis. 
Accordingly they seek to maintain a proportion of the company's assets 
in cash or cash equivalents in order to be in a position to pursue new 
unquoted investment opportunities and to make follow-on investments in 
existing portfolio companies. The company has very little direct 
exposure to foreign currency risk and does not enter into derivative 
   Economic risk: events such as economic recession or general fluctuation 
in stock markets, exchange rates and interest rates may affect the 
valuation of investee companies and their ability to access adequate 
financial resources, as well as affecting the company's own share price 
and discount to net asset value. Mitigation: the company invests in a 
diversified portfolio of investments spanning various industry sectors, 
and maintains sufficient cash reserves to be able to provide additional 
funding to investee companies where appropriate. 
   Stock market risk: some of the company's investments are quoted on the 
London Stock Exchange or AIM and will be subject to market fluctuations 
upwards and downwards. External factors such as terrorist activity can 
negatively impact stock markets worldwide. In times of adverse sentiment 
there may be very little, if any, market demand for shares in smaller 
companies quoted on AIM. Mitigation: the company's quoted investments 
are actively managed by specialist managers, including NVM in the case 
of the AIM-quoted investments, and the board keeps the portfolio and the 
actions taken under ongoing review. 
   Credit risk: the company holds a number of financial instruments and 
cash deposits and is dependent on the counterparties discharging their 
commitment. Mitigation: the directors review the creditworthiness of the 
counterparties to these instruments and cash deposits and seek to ensure 
there is no undue concentration of credit risk with any one party. 
   Legislative and regulatory risk: in order to maintain its approval as a 
VCT, the company is required to comply with current VCT legislation in 
the UK, which reflects the European Commission's State-aid rules. 
Changes to the UK legislation or the State-aid rules in the future could 
have an adverse effect on the company's ability to achieve satisfactory 
investment returns whilst retaining its VCT approval. Mitigation: the 
board and the manager monitor political developments and where 
appropriate seek to make representations either directly or through 
relevant trade bodies. 
   Internal control risk: the company's assets could be at risk in the 
absence of an appropriate internal control regime. Mitigation: the board 
regularly reviews the system of internal controls, both financial and 
non-financial, operated by the company and the manager. These include 
controls designed to ensure that the company's assets are safeguarded 
and that proper accounting records are maintained. 
   VCT qualifying status risk: while it is the intention of the directors 
that the company will be managed so as to continue to qualify as a VCT, 
there can be no guarantee that this status will be maintained. A failure 
to continue meeting the qualifying requirements could result in the loss 
of VCT tax relief, the company losing its exemption from corporation tax 
on capital gains, to shareholders being liable to pay income tax on 
dividends received from the company and, in certain circumstances, to 
shareholders being required to repay the initial income tax relief on 
their investment. Mitigation: the investment manager keeps the company's 
VCT qualifying status under continual review and its reports are 
reviewed by the board on a quarterly basis. The board has also retained 
Philip Hare & Associates LLP to undertake an independent VCT status 
monitoring role. 
   The directors are responsible for preparing the annual report and the 
financial statements in accordance with applicable law and regulations. 
   Company law requires the directors to prepare financial statements for 
each financial year. Under that law they have elected to prepare the 
financial statements in accordance with UK Accounting Standards, 
including FRS 102 "The Financial Reporting Standard applicable in the UK 
and Republic of Ireland". 
   Under company law the directors must not approve the financial 
statements unless they 
   are satisfied that they give a true and fair view of the state of 
affairs of the company and of 
   its profit or loss for the year. 
   In preparing the financial statements, the directors are required to (i) 
select suitable accounting policies and then apply them consistently; 
(ii) make judgements and estimates that are reasonable and prudent; 
(iii) state whether applicable UK Accounting Standards have been 
followed, subject to any material departures disclosed and explained in 
the financial statements;  (iv) assess the company's ability to continue 
as a going concern, disclosing, as applicable, matters related to going 
concern; and (v) prepare the financial statements on the going concern 
basis unless they either intend to liquidate the company or to cease 
operations, or have no realistic alternative but to do so. 
   The directors are responsible for keeping adequate accounting records 
that are sufficient to show and explain the company's transactions and 
disclose with reasonable accuracy at any time the financial position of 
the company and enable them to ensure that the financial statements 
comply with the Companies Act 2006. They are responsible for such 
internal control as they determine is necessary to enable the 
preparation of financial statements that are free from material 
misstatement, whether due to fraud or error, and have general 
responsibility for taking such steps as are reasonably open to them to 
safeguard the assets of the company and to prevent and detect fraud and 
other irregularities. 
   Under applicable law and regulations, the directors are also responsible 
for preparing a strategic report, directors' report, directors' 
remuneration report and corporate governance statement that comply with 
that law and those regulations. 
   The directors are responsible for the maintenance and integrity of the 
corporate and financial information included on the company's website. 
Legislation in the UK governing the preparation and dissemination of 
financial statements may differ from legislation in other jurisdictions. 
   The directors have confirmed that to the best of their knowledge (i) the 
financial statements, prepared in accordance with the applicable 
accounting standards, give a true and fair view of the assets, 
liabilities, financial position and profit or loss of the company;  and 
(ii) the directors' report and strategic report include a fair review of 
the development and performance of the business and the position of the 
company, together with a description of the principal risks and 
uncertainties that they face. 
   The directors consider that the annual report and accounts, taken as a 
whole, is fair, balanced and understandable and provides the information 
necessary for shareholders to assess the company's position and 
performance, business model and strategy. 
   The directors of the company at the date of this announcement were Mr J 
G D Ferguson (Chairman), Mr C J Fleetwood, Mr T R Levett and Mr J M O 
   The above summary of results for the year ended 31 March 2019 does not 
constitute statutory financial statements within the meaning of Section 
435 of the Companies Act 2006 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 auditor's 
report on those financial statements under Section 495 of the Companies 
Act 2006 is unqualified, does not include any reference to matters to 
which the auditor drew attention by way of emphasis without qualifying 
the report and does not contain a statement under Section 498 (2) or (3) 
of the Companies Act 2006. 
   The calculation of the return per share is based on the profit on 
ordinary activities after tax for the year of GBP4,980,000 (2018: minus 
GBP1,638,000) and on 89,416,452 (2018: 77,868,025) shares, being the 
weighted average number of shares in issue during the year. 
   The calculation of the net asset value per share as at 31 March 2019 is 
based on net assets of GBP82,731,000 (2018: GBP84,260,000) divided by 
the 87,866,505 (2018: 89,662,373) ordinary shares in issue at that date. 
   If approved by shareholders, the proposed final dividend of 2.0p per 
share for the year ended 31 March 2019 will be paid on 19 July 2019 to 
shareholders on the register at the close of business on 21 June 2019. 
   The full annual report including financial statements for the year ended 
31 March 2019 is expected to be posted to shareholders on 21 June 2019 
and will be available to the public at the registered office of the 
company at Time Central, 32 Gallowgate, Newcastle upon Tyne NE1 4SN and 
on the NVM Private Equity LLP website, 
   Neither the contents of the NVM Private Equity LLP website nor the 
contents of any website accessible from hyperlinks on the NVM Private 
Equity LLP website (or any other website) is incorporated into, or forms 
part of, this announcement. 

(END) Dow Jones Newswires

May 17, 2019 03:31 ET (07:31 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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