Final Results
British Smaller Companies VCT PLC
13 June 2002
For Immediate Release 13 June 2002
BRITISH SMALLER COMPANIES VCT plc
Unaudited preliminary results for the year ended 31 March 2002
• £2.33m invested during year
• Diversification into innovative businesses continues
• Portfolio has significant potential for capital growth
British Smaller Companies VCT plc ('the Company') today announces preliminary
results for the year ended 31 March 2002.
FINANCIAL HIGHLIGHTS
Unaudited Audited
Year ended Year ended
31 March 2002 31 March 2001
Income: £667,000 £730,000
Net revenue return before tax: £346,000 £424,000
Net revenue return after tax: £323,000 £376,000
Revenue return per share: 2.05p 2.38p
Total return per share: (13.02)p (4.38p)
Total dividend per share (net): 2.00p 2.30p
Net assets: £10.68m £13.09m
Net asset value per share: 68.0p 82.9p
Number of qualifying investments: 32 28
Value of qualifying investments: £8.61m £9.61m
Announcing the results, the Chairman, Sir Andrew Hugh Smith, reported that,
while the flow of investment enquiries remained satisfactory, the Company was
continuing to be selective in its choice of potential investments as a result of
the uncertain economic climate. The portfolio was being built with a mixture
of traditional and new economy businesses with a view to realising capital
growth in the medium to long term. To reflect the medium term performance of
the AIM portfolio and to avoid unnecessary constraints on investment
opportunities, the Board has increased the maximum holding of these stocks from
15% to 20% of original shareholders' funds.
Investments
The increased time being taken to close deals, combined with the uncertain
political and economic climate, meant that only £400,000 was invested in the
second half-year, compared with £1.93m in the first half. A further five
investments, totalling £1.16m, have been approved by the Board, of which three,
totalling £611,000, have completed since the year-end.
During the year, £1.35m was invested in three new unquoted companies, £450,000
in AIM quoted companies and £520,000 as follow-on funding in existing portfolio
companies. Of the total of £2.33m, £1.42m was invested in companies with
products that had an innovative or technological advantage.
The main valuation movement in the second half-year was in TIB plc, which was
placed into a Creditors Voluntary Arrangement in April 2002. The Board has
decided to provide for the equity in full, resulting in an unrealised loss on
capital account of £926,000.
Realisations
The Board has been actively looking for realisation opportunities, where
appropriate, both to liquidate under-performing assets and to lock-in capital
gains. In the first half-year, the Company disposed of its holding in GB
International Limited, realising a capital gain of £260,000, which represented
an annualised return on that investment of 22%.
The investment in Denison Mayes Group Limited was sold back to the management at
a discount to cost, although the sale produced an accounting profit of £200,000.
The Board has also sold some AIM stocks to realise gains.
The prevailing market conditions meant that there were no opportunities for
further realisations during the second half. Some opportunities currently
exist, but they are very much at an early stage and there are no expectations of
completion in the short term.
Portfolio Overview
Phil Cammerman, Managing Director of Yorkshire Fund Managers Limited, the
Company's investment adviser, said that the Board's policy of diversifying into
high-growth innovative businesses has resulted in a holding comprising six such
investments at a total cost of £2.42m. Of this, more than half was in the
healthcare sector with the remainder in telecommunications, investment banking
and consumer products.
'Our exposure to companies in the consumer/services, healthcare and construction
sectors should also result in substantial realisations in the medium term and
may indeed provide increases in valuations in the shorter term,' he said. 'The
funds available for investment will allow your Company to take advantage of
selective investment opportunities as they arise.'
Results and dividend
A final dividend of 0.9p per share is being recommended, bringing the total
dividend payout for the year to 2.0p (2001: 2.3p). Although the Board has taken
a prudent view of the portfolio valuation, since formation original shareholders
will have received a total of 18.5p in dividends which, together with the
current net asset value per share, results in a total return of 86.5p per share,
compared with a net investment of 80p per share before taking any credit for the
value of deferring capital gains tax.
Outlook
Commenting on the Company's prospects for the current year, the Chairman said:
'Your Board is confident that the portfolio has the potential for significant
capital growth from which shareholders will benefit in the longer term. We are
also encouraged by the current trading experience of a number of companies in
the portfolio, which are benefiting from the improvement in confidence and
economic activity. It is too early to recognise this in the valuations of our
investments but, if the trend continues, it may be possible to do so when we
reconsider our valuations later in the current year.'
For further information, please contact:
Phil Cammerman Yorkshire Fund Managers Ltd Tel: 0113 294 5050
David Hardy Binns & Co PR Ltd Tel: 020 7786 9600
Simon Mountford Simon Mountford Communications Tel: 01347 844844
Chairman's Statement
I reported in my interim statement that the events of 11 September and the
resulting uncertainty in economic confidence would present challenges both to
the investee companies and to the Company itself. Although there are now
positive signs that confidence is returning there are still doubts as to the
extent to which this is sustainable. This uncertainty has been reflected in
our valuations of companies within the portfolio at this point in time.
Investments
It is disappointing to have to report a fall in the value of qualifying
investments of almost £1m. The main valuation movement in the second half year
was in TIB plc. Following financial problems resulting from a sudden,
unexpected and large loss of business, the company was placed into a Creditors
Voluntary Arrangement on 26 April 2002. Your Board has taken the decision to
provide for the equity in full, resulting in an unrealised loss on capital
account of £926,000. The outstanding loan of £137,000 is secured on the
company's building and remains valued at cost.
The flow of enquiries to your Board's investment adviser, Yorkshire Fund
Managers Limited, has continued at satisfactory levels but the time taken to
close deals has been much longer than normal. This stems mainly from the
uncertainties, political and economic, following the attacks on the World Trade
Centre and the Pentagon in September. Largely as a result, after investment
of £1.93m during the first half of the year, this fell to £0.4m in the second
half. A further £1.16m has been approved for investment, of which £0.6m has
been invested in three companies since the year end.
Of the total of £2.33m invested during the year, £1.35m was invested in three
new unquoted companies, £0.45m in new AIM quoted companies and £0.53m as
follow-on funding to companies within the existing portfolio, the majority of
which were AIM quoted companies. Of the £2.33m, £1.42m was invested into
companies that were able to demonstrate that their product or product concept
had an innovative or technological advantage. This is in line with the policy
highlighted and developed in previous reports to Shareholders. A summary of
investments made during the year can be found in the Investment Advisers' Review
that follows this statement.
Your Board continues to review the investment strategy of your Company. In
January, the decision was taken to increase the existing portfolio limit on AIM
investments from 15% to 20%, calculated at cost on original Shareholders' funds.
The AIM portfolio has performed well to date and this increase will enable
your Board to extend it further as suitable opportunities arise.
Realisations
Your Board has been actively looking for realisation opportunities, where
appropriate, both to liquidate under-performing assets and to lock-in capital
gains where the directors are of the opinion that the valuation of the investee
company is appropriate.
In the first half of the year, as I stated in my interim report, your Company
successfully disposed of its holding in GB International Limited, realising a
capital gain of £260,000 which represented an annualised return on that
investment of 22%. The equity investment in Denison Mayes Group Limited, a
company that had under-performed over the past two years, was sold back to
management at a discount to cost but produced an accounting profit of £200,000
due to interest arrears and capital value having been fully provided for in a
previous year. Your Board has also taken the opportunity to sell some AIM
stocks in order to realise gains.
Your Board's intention was to continue this selective realisation process in the
second half of the year. However, given the prevailing general market
conditions that existed there were no satisfactory opportunities that could be
closed within that period. At the current time, it is envisaged that this
process will continue to be difficult. Although some realisation opportunities
do exist they are very much at an early stage and there are no expectations of
completion in the short term.
Results and Dividend
The net revenue for the year was a return of £323,000 (2001: £376,000) resulting
in a revenue return per share of 2.05p (2001: 2.38p). However, the net loss on
capital account after the write down on TIB plc and certain other investments
was £2,372,000 bringing the net total return loss per share to 13.02p (2001:
4.38p).
Your Board is recommending a final dividend of 0.9p per share to be paid on 12
August 2002 to shareholders on the register on 21 June 2002. This brings the
total dividend for the year to 2.0p (2001: 2.3p).
Although the Board has taken a prudent view of the portfolio valuation, since
formation original shareholders will have received a total of 18.5p in dividends
which, together with the current net asset value per share, results in a total
return of 86.5p per share, compared with a net investment of 80p per share
before taking any credit for the value of deferring capital gains tax.
Shareholder Relations
The Board recognises that shareholdings in venture capital trusts are, by
nature, relatively illiquid and has, therefore, for some time had a policy of
buying back shares in the market where this is of benefit to the remaining
shareholders. During the year a total of 70,000 shares were bought back at
prices of 63p and 50p per share. Shortly after the year end, on 2 April 2002,
the Company bought back a further 100,000 shares at a price of 45p per share.
Your Board is looking to actively maintain the Company's ability to buy back
shares in the market and improve shareholder liquidity as far as possible. To
this end, the directors will put a special resolution to the Annual General
Meeting to enable this programme to continue. A resolution will also be put to
the meeting to renew the directors' authority to allot shares where Shareholders
wish to take advantage of the tax benefits available on the subscription for new
VCT shares.
In response to Shareholder requests, you will receive, together with your
dividend payment, a mandate instruction enabling you to receive dividends direct
into your bank or building society account. Should you wish to take advantage
of this offer please complete the form and send it direct to Northern Registrars
Limited, who will ensure that future dividends, starting with those relating to
the 2003 financial year, will be paid by this method.
VCT Qualifying Status
Your Company has maintained its VCT qualifying company ratio targets throughout
the year. Procedures are in place to monitor these legislative requirements on
an ongoing basis and the policy is to always maintain an adequate margin above
the minimum levels to allow for contingencies.
Outlook
Your Board will continue its policy of being very selective in the companies it
invests in. In the case of established companies in traditional business
sectors, the emphasis is on critical mass and an ability to ride out further
market downturns. In new economy sectors offering minimal revenue returns but
the potential for significantly higher capital appreciation, the emphasis is on
ensuring that adequate future funding streams are identified and in place.
Your Board continues to build the portfolio with a mix of traditional and new
economy businesses with a view to realising capital growth in the medium to long
term.
As previously reported, the incorporation of early stage businesses with
innovative products and services reduces the running yield from the portfolio.
Nevertheless, your Board is confident that the portfolio has the potential for
significant capital growth from which shareholders will benefit in the longer
term. We are also encouraged by the current trading experience of a number of
companies in the portfolio, which are benefiting from the improvement in
confidence and economic activity. It is too early to recognise this in the
valuations of our investments but, if the trend continues, it may be possible to
do so when we reconsider our valuations later in the current year.
Sir Andrew Hugh Smith
Chairman
Unaudited Statement of Total Return
(incorporating the Revenue Account)
For the year ended 31 March 2002
Year ended Year ended
31 March 2002 31 March 2001
Notes Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Net losses on investments - (2,164) (2,164) - (868) (868)
Income 667 - 667 730 - 730
Investment advisory fee (77) (231) (308) (81) (243) (324)
Other expenses (244) - (244) (225) - (225)
-------- -------- -------- -------- -------- --------
Net return on ordinary
activities before taxation 346 (2,395) (2,049) 424 (1,111) (687)
Tax on ordinary activities 2 (23) 23 - (48) 42 (6)
-------- -------- -------- -------- -------- --------
Net return on ordinary
activities after taxation 323 (2,372) (2,049) 376 (1,069) (693)
Dividends in respect of equity 3 (315) - (315) (363) - (363)
shares
-------- -------- -------- -------- -------- --------
Transfer to (from) reserves 8 (2,372) (2,364) 13 (1,069) (1,056)
===== ===== ===== ===== ===== =====
Return per Ordinary share
Basic and fully diluted 4 2.05p (15.07)p (13.02)p 2.38p (6.76)p (4.38)p
Notes
The revenue column of this statement is the profit and loss account of the
Company.
All activity has arisen from continuing operations.
There is no difference between the net revenue return on ordinary activities
before taxation and the transfer to revenue reserves for the financial year and
their historic cost equivalents.
UNAUDITED BALANCE SHEET
At 31 March 2002
2002 2001
Notes £000 £000
Fixed Assets
Investment Portfolio 8,612 9,605
------ ------
Current Assets
Investments 1,921 2,698
Debtors 68 353
Cash 275 665
------ ------
2,264 3,716
Creditors: amounts payable within one year (195) (235)
------ ------
Net current assets 2,069 3,481
------ ------
Total net assets 10,681 13,086
===== =====
Capital and Reserves
Called up share capital 1,571 1,578
Capital redemption reserve 16 9
Capital reserve (4,659) (2,287)
Special reserve 13,728 13,769
Revenue reserve 25 17
------ ------
Equity shareholders' funds 10,681 13,086
===== =====
Net asset value per Ordinary share 5 68.0p 82.9p
===== =====
UNAUDITED CASH FLOW STATEMENT
For the year ended 31 March 2002
Year ended Year ended
31 March 2002 31 March 2001
£000 £000
Net cash inflow from operating activities 206 362
------ ------
Taxation
Tax repayments received 186 70
------ ------
Investing activities
Purchase of investments (2,327) (3,237)
Proceeds from disposal of investments 1,188 1,147
------ ------
Net cash outflow from investing activities (1,139) (2,090)
------ ------
Equity dividends to shareholders (346) (442)
------ ------
Net cash outflow before management of liquid resources
and financing (1,093) (2,100)
------ ------
Management of liquid resources
Purchase of fixed interest government stocks (437) -
Proceeds from the sale of fixed interest government
stocks 1,182 2,790
------ ------
Net cash inflow from management of liquid resources 745 2,790
------ ------
Financing
Purchase of own shares (42) (46)
------ ------
Net cash outflow from financing (42) (46)
------ ------
(Decrease) increase in cash (390) 644
===== =====
Notes To The Financial Statements
1. Basis of Reporting
This preliminary announcement does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. The announcement has been
agreed with the Company's auditors for release. The financial information has
been prepared on a basis consistent with the previous year.
Comparative figures for the year ended 31 March 2001 have been extracted from
the statutory accounts on which the auditors gave an unqualified report and
which did not contain a statement under Sections 237(2) or 273(3) of the
Companies Act 1985. These accounts have been filed with the Registrar of
Companies.
2. Taxation Charge (Credit)
Year ended 31 March 2002 Year ended 31 March 2001
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Corporation tax at 20% (2001: 20%) 23 (23) - 48 (48) -
Under provision in prior years - - - - 6 6
------ ------ ------ ------ ------ ------
23 (23) - 48 (42) 6
==== ==== ==== ==== ==== ====
3. Dividends
2002 2001
£000 £000
Interim paid - 1.10p per share (2001: 1.20p) 173 189
Final proposal - 0.90p per share (2001: 1.10p) 142 174
------ ------
315 363
===== =====
4. Revenue Return per Ordinary Share
The basic revenue return per Ordinary share is based on net revenue return from
ordinary activities after tax of £323,000 (2001: £376,000) and 15,740,441 (2001:
15,798,161) shares being the weighted average number of shares in issue during
the year.
The Company has no securities that would have a dilutive effect in the year to
31 March 2002 and hence basic and fully diluted return per share are the same.
5. Net Asset Value per Ordinary Share
The net asset value per Ordinary share is calculated on attributable assets of
£10,681,000 (2001: £13,086,000) and 15,707,838 (2001: 15,777,838) shares in
issue at the year-end.
6. Annual General Meeting
Copies of the full financial statements for the year ended 31 March 2002 are
expected to be posted to shareholders on 21 June 2002 and will be available to
the public at the registered office of the Company at Saint Martins House,
210-212 Chapeltown Road, Leeds, LS7 4HZ thereafter. The Company's AGM is due to
be held at 12.00 noon on 22 July 2002 at 23 Berkeley Square, London, W1J 6HE.
This information is provided by RNS
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