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    NTN   GB0031152027


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Northern 3 VCT : Annual Financial Report

07/08/2020 | 11:26am EST

8 July 2020



Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by Mercia Fund Management Limited.  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 2019):


 2020 2019
Net assets£72.5m£82.7m
Net asset value per share78.1p94.2p
Return per share:  
Dividend per share for the year:  
Interim dividend2.0p2.0p
Proposed final dividend2.0p2.0p
Cumulative return to shareholders since launch:  
Net asset value per share78.1p94.2p
Dividends paid per share*95.4p91.4p
Net asset value plus dividends paid per share173.5p185.6p
Mid-market share price at end of year70.00p86.00p
Share price discount to net asset value10.4%8.7%
Tax-free dividend yield (based on net asset value per share at the start of the year)4.2%4.3%

*Excluding proposed final dividend payable on 4 September 2020.

Simon John/James Bryce, NVM Private Equity LLP - 0191 244 6000
Website:  www.nvm.co.uk

Martin Glanfield, Chief Financial Officer, Mercia Asset Management PLC – 0330 223 1430


The latter part of last year was dominated by the coronavirus (COVID-19) pandemic which has caused significant disruption to the UK economy. This has required our investment manager to work closely with the companies in our portfolio to support them. The successful public share offer raising gross proceeds of £13 million, means that we are well placed to continue to provide additional financing if we consider that it is sensible.

Results and dividend
The net asset value (NAV) per share at 31 March 2020, after deducting dividends totalling 4.0p paid during the year, was 78.1p compared with 94.2p as at 31 March 2019. The total return per share for the year as shown in the income statement was minus 11.8p (2019: positive return of 5.6p), equivalent to 12.5% of the opening NAV.  The negative total return was mainly caused by the unrealised decrease in the value of investments, related to COVID-19. The company’s NAV total return over five years remains ahead of the broad 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.  Our medium term aim, is to provide a dividend yield of 4% per annum.  We are proposing 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 4.2% 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 4 September 2020 to shareholders on the register on 14 August 2020.

Investment manager
As announced on 3 December 2019, the company consented to the novation of its existing investment management agreement with NVM Private Equity LLP (NVM) to Mercia Fund Management Limited (Mercia) which became effective on 23 December 2019.  Your directors concluded that the change in management arrangements would be a positive development for the company.  We identified a number of potential benefits, including the increased deal flow from Mercia’s extensive network, enhanced regional presence and access to further resources provided by the wider Mercia group.  In order to ensure continuity, the NVM VCT team, led by Tim Levett and Charlie Winward, transferred to Mercia and now constitute a new division within the wider Mercia group. We believe that the combination of NVM’s long established record as a successful investor and Mercia’s credentials will create one of the leading regionally based UK venture fund management groups.  No material changes were made to the terms of the investment management agreement. 

I am pleased to report that Anna Brown, a highly experienced corporate finance professional and partner at law firm Addleshaw Goddard, is expected to join the board in August 2020.   Anna brings a valuable complimentary perspective and we look forward to benefiting from her contribution during the years ahead.

Investment portfolio
Following the first reports of COVID-19 in Asia, the initial effects on UK businesses principally affected those with international supply chains or overseas customers in certain territories. As the outbreak of the virus developed into a pandemic in March, the effect on the UK economy has become much more pronounced.  Our portfolio is diversified, with no particular concentration on any particular sector and so the impact on our companies varies. 

In March 2020 the UK Government introduced measures intended to reduce the spread of the virus. A small number of our investments faced the prospect of an immediate and significant drop in revenues as a result of the lockdown, whereas certain others observed early signs of an increase in activity, particularly those that employ an ecommerce business model. A full review of the portfolio was undertaken to identify key risks.  Our manager has provided an investment executive to support the board of each company.

We continue to follow the International Private Equity and Venture Capital Valuation Guidelines (IPEV), when determining the fair value of investments. Although the majority of our portfolio is represented by unquoted investments, IPEV requires calibration of investment valuations to reflect the market conditions prevailing as at the valuation date.  By reference to the quoted markets, the valuation metrics for many of the sectors in which we invest reduced during the first quarter of 2020.  Having most recently undertaken a valuation of the portfolio as at 24 March 2020 to support the NAV which the company announced as at that date, we have since considered all relevant information that could have been known as at 31 March 2020 in order to assess the valuations as at the financial year end.  We have also taken account of supplementary IPEV guidance relating to the COVID-19 pandemic, issued on 31 March 2020.  The passage of time since the last NAV announcement has enabled the directors to receive more up to date trading information for our companies as at 31 March 2020 and to refine our estimates, which has contributed to the increase in NAV to 78.1p from 72.0p on 24 March 2020.

Venture capital investment activity
During the year, further progress has been made in the development of the portfolio, with seven new VCT-qualifying investments completed at a total cost of £4.3 million. A number of our companies are pursuing trends that may be accelerated in the current environment, such as innovative delivery and distribution, the digitisation of traditional off-line business processes and the development of innovative medical technologies.  As previously highlighted, the businesses in the earlier stage portfolio are likely to require multiple rounds of funding as they develop.  Follow-on investments totalling £5.6 million were made in 16 companies in the portfolio during the year.

Share offers and liquidity
Having reviewed the pipeline of follow-on investment opportunities and continued flow of new businesses seeking capital to develop innovative products or services, we launched a public offer of new shares in January 2020 which concluded shortly after the year end.  The offer raised gross proceeds of £13 million and on behalf of the board, I would like to thank all applicants for their support.

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 the company secretary.

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 2,666,301 shares, equivalent to approximately 3.0% of the opening share capital, were purchased for cancellation.

VCT legislation and 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.

There were no further amendments to the VCT scheme rules announced during the period under review and our manager ensured that the company can comply with previously announced measures contained in the Finance Act 2018.  From 1 April 2020 the company is required to hold at least 80% of its funds in VCT qualifying assets (previously 70%) and the target was met before the deadline. 

COVID-19 has caused a great deal of volatility in financial markets and whilst many quoted indices have staged a recovery since the lows experienced in March 2020, it is difficult to predict the future path of the UK economy. Many businesses are facing significant challenges, but we remain generally optimistic about the prospects for the companies in our portfolio.

James Ferguson

8 July 2020

Extracts from the audited financial statements for the year ended 31 March 2020 are set out below.                                                                                                                                         


for the year ended 31 March 2020

 Year ended 31 March 2020Year ended 31 March 2019
(Loss)/gain on disposal of investments(168) (168) 3,204 3,204 
Movements in fair value of investments(9,943) (9,943) 1,195 1,195 
 ---------- ---------- ---------- ---------- ---------- ---------- 
 (10,111) (10,111) 4,399 4,399 
Income1,126 1,126 2,541 2,541 
Investment management fee(435)(1,304)(1,739)(397)(1,190)(1,587)
Other expenses(363)(363)(373)(373)
 ---------- ---------- ---------- ---------- ---------- ---------- 
Return on ordinary activities before tax328 (11,415) (11,087) 1,771 3,209 4,980 
Tax on return on ordinary activities-(219)219 
 ---------- ---------- ---------- ---------- ---------- ---------- 
Return on ordinary activities after tax328 (11,415) (11,087) 1,552 3,428 4,980 
 ---------- ---------- ---------- ---------- ---------- ---------- 
Return per share0.3p(12.1)p(11.8)p1.8p3.8p5.6p

as at 31 March 2020

 31 March 2020 
31 March 2019 
Fixed assets:  
 Investments63,776 69,811 
 ---------- ---------- 
Current assets:  
 Debtors28 211 
 Cash and cash equivalents8,876 19,405 
 ---------- ---------- 
 8,904 19,616 
Creditors (amounts falling due within one year)(137)(6,696)
 ---------- ---------- 
Net current assets8,767 12,920 
 ---------- ---------- 
Net assets72,543 82,731 
 ---------- ---------- 
Capital and reserves:  
Called-up equity share capital4,647 4,393 
Share premium7,428 840 
Capital redemption reserve432 299 
Capital reserve60,786 65,665 
Revaluation reserve(1,653) 9,166 
Revenue reserve903 2,368 
 ---------- ---------- 
Total equity shareholders’ funds72,543 82,731 
 ---------- ---------- 
Net asset value per share78.1p94.2p

for the year ended 31 March 2020

 ---------------Non-distributable reserves---------------Distributable reservesTotal  
 Called up share 




 £000 £000 £000 £000 £000 £000 £000  
At 1 April 20194,393 840 299 9,166 65,665 2,368 82,731  
Return on ordinary activities        
after tax(10,819) (596) 328 (11,087) 
Dividends paid(1,967)(1,793)(3,760) 
Net proceeds of share issues387 6,588 6,975  
Shares purchased for cancellation 







 ---------- ---------- ---------- ---------- ---------- ---------- ----------  
At 31 March 20204,647 7,428 432 (1,653) 60,786 903 72,543  
 ---------- ---------- ---------- ---------- ---------- ---------- ----------  

for the year ended 31 March 2019

 ---------------Non-distributable reserves---------------Distributable reservesTotal 
 Called up share 




 £000 £000 £000 £000 £000 £000 £000 
At 1 April 20184,483 214 171 8,463 69,721 1,208 84,260 
Return on ordinary activities       
after tax703 2,725 1,552 4,980 
Dividends paid(4,512)(392)(4,904)
Net proceeds of share issues38 626 664 
Shares purchased for cancellation 







 ---------- ---------- ---------- ---------- ---------- ---------- ---------- 
At 31 March 20194,393 840 299 9,166 65,665 2,368 82,731 
 ---------- ---------- ---------- ---------- ---------- ---------- ---------- 

*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 2020

 Year ended Year ended 
 31 March 2020 31 March 2019 
 £000 £000 
Cash flows from operating activities:  
Return on ordinary activities before tax(11,087) 4,980  
Adjustments for:  
Loss/(gain) on disposal of investments168(3,204)
Movement in fair value of investments9,943(1,195)
Decrease/(increase) in debtors183(44)
(Decrease)/increase in creditors(65) 68 
 ---------- ---------- 
Net cash (outflow)/inflow from operating activities(858) 605  
 ---------- ---------- 
Cash flows from investing activities:  
Purchase of investments(12,772)(18,342)
Sale/repayment of investments8,696 15,700 
 ---------- ---------- 
Net cash outflow from investing activities(4,076)(2,642)
 ---------- ---------- 
Cash flows from financing activities:  
Issue of ordinary shares7,109 702 
Share issue expenses(135)(38)
Share subscriptions held pending allotment  (6,493)  6,493
Purchase of ordinary shares for cancellation(2,316)(2,269)
Equity dividends paid(3,760)(4,904)
 ---------- ---------- 
Net cash inflow/(outflow) from financing activities(5,595)(16) 
 ---------- ---------- 
Decrease in cash and cash equivalents(10,529)(2,053)
Cash and cash equivalents at beginning of year19,405 21,458 
 ---------- ---------- 
Cash and cash equivalents at end of year8,876 19,405 
 ---------- ---------- 

as at 31 March 2020



% of
net assets
by value
Venture capital investments:   
Agilitas IT Holdings  8224,6116.4
Lineup Systems  9744,1355.7
Currentbody.com  1,7483,0004.1
Sorted Holdings  2,5422,7693.8
SHE Software Group  2,1682,6863.7
Entertainment Magpie Group  1,3602,5823.6
Volumatic Holdings  9061,8982.6
Ideagen*  4061,8252.5
It’s All Good  1,1311,6862.3
Knowledgemotion  1,7401,5482.1
GRIP-UK t.a. Climbing Hangar   1,9041,5032.1
Idox*  5301,4862.0
Medovate  1,4321,4322.0
Biological Preparations Group  1,9151,4121.9
Soda Software Labs t.a. Hello Soda  1,4641,3591.9
Fifteen largest venture capital investments21,042  33,93246.7
Other venture capital investments34,13921,00028.9
Total venture capital investments55,181  54,93275.6
Listed equity investments10,2488,84412.3
Total fixed asset investments65,42963,77687.9
Net current assets 8,76712.1
Net assets 72,543100.0

*Quoted on AIM


Risk management
The board carries out a regular and robust assessment of the risk environment in which the company operates and seeks to identify new risks as they emerge.  The principal and emerging 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, within the rules of the VCT scheme. The board reviews the investment portfolio with the manager on a regular basis.

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 transactions.

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. The level of economic risk has been elevated by the COVID-19 pandemic which is widely predicted to cause a global recession after the balance sheet date.  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 it is appropriate and in the interests of the company to do so.  The manager typically provides an investment executive to actively support the board of each unquoted investee company.  At all times, and particularly during periods of heightened economic uncertainty, the investment executives share best practice from across the portfolio with investee management teams in order to mitigate economic risk.

Brexit risk: the implementation of the decision for the UK to withdraw from the European Union (EU) is a process which involves significant uncertainty.  The impact on the future business environment in the UK is therefore difficult to predict.  Mitigation: whilst we do not expect that Brexit will have a significant impact on the operations of Northern 3 VCT itself, the board and the manager follow Brexit developments closely with a view to identifying changes which might affect the company’s investment portfolio.  The manager works closely with investee companies in order to plan for a range of possible outcomes. 

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 or global health crises, such as the COVID-19 pandemic, 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 Mercia 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 which is able to operate effectively even during times of disruption, such as that caused by COVID-19. 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 set of 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 Waddell.


The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2020 or 2019 but is derived from those accounts. Statutory accounts for 2019 have been delivered to the registrar of companies, and those for 2020 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did 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 loss on ordinary activities after tax for the year of £11,087,000 (2019: profit of £4,980,000) and on 94,141,026 (2019: 89,416,452) 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 2020 is based on net assets of £72,543,000 (2019: £82,731,000) divided by the 92,939,827 (2019: 87,866,505) ordinary shares in issue at that date.

If approved by shareholders, the proposed final dividend of 2.0 pence per share for the year ended 31 March 2020 will be paid on 4 September 2020 to shareholders on the register at the close of business on 14 August 2020.

The full annual report including financial statements for the year ended 31 March 2020 is expected to be posted to shareholders on or around 28 July 2020 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 company’s website.

Neither the contents of the NVM Private Equity LLP or the Mercia Asset Management PLC website, nor the contents of any website accessible from hyperlinks on the NVM Private Equity LLP or Mercia Asset Management PLC website (or any other website) is incorporated into, or forms part of, this announcement.

© OMX, source OMX

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08/19Northern 3 VCT PLC Approves Final Dividend for the Year Ended 31 March 2021
07/20NORTHERN 3 VCT : Net Asset Value
07/20NORTHERN 3 VCT : Annual Financial Report
07/19NORTHERN 3 VCT : Statement re intention to fund raise
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Sales 2021 41,3 M 54,8 M 54,8 M
Net income 2021 37,4 M 49,6 M 49,6 M
Net cash 2021 23,4 M 31,1 M 31,1 M
P/E ratio 2021 2,68x
Yield 2021 4,95%
Capitalization 112 M 149 M 148 M
EV / Sales 2020 -6,25x
EV / Sales 2021 1,85x
Nbr of Employees -
Free-Float 98,7%
Duration : Period :
Northern 3 VCT PLC Technical Analysis Chart | NTN | GB0031152027 | MarketScreener
Technical analysis trends NORTHERN 3 VCT PLC
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Income Statement Evolution
Managers and Directors
James Gordon Dickson Ferguson Chairman
Christopher John Fleetwood Independent Non-Executive Director
John McLaren Ogilvie Waddell Independent Non-Executive Director
Timothy Roland Levett Non-Executive Director
Anna Brown Non-Executive Director
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