Interim Results
British Smaller Companies VCT PLC
02 November 2004
BRITISH SMALLER COMPANIES VCT PLC
Unaudited Interim results for the six months to 30 September 2004
• Successful flotation of Cozart plc
• Net asset value increase before distribution of 6.8%
• Interim dividend of 1.5 pence per share
• Cumulative total return of 102.7 pence per share
• C Share issue announced
British Smaller Companies VCT plc ('the Company') today announces its unaudited
interim results for the six months to 30 September 2004.
FINANCIAL SUMMARY
Restated*
Unaudited Unaudited Audited
6 months 6 months 12 months
to 30 Sept to 30 Sept to 31 Mar
2004 2003 2004
Gross revenue £157,000 £155,000 £364,000
Profit (loss) on ordinary
activities after tax £25,000 £(38,000) £(755,000)
Earnings (loss) per ordinary share 0.16p (0.25)p (4.88)p
Total dividend 1.50p - 4.80p
Net assets £11.80m £11.14m £11.35m
Net asset value per ordinary share 77.0p 72.1p 73.5p
Cash and liquid resources £2.07m £2.62m £2.84m
* See note 1
Announcing the results, the Chairman, Sir Andrew Hugh Smith, said he was pleased
with the continuing progress of the Company. The increase in net asset value
over the first six months of the year, before deduction of the declared dividend
distribution, was 6.8%. Based on the dividends paid and declared to date and the
remaining net asset value of the Company, the total return to 30 September 2004
is 102.7 pence per share.
INVESTMENT PORTFOLIO
The main event of the first half year was the successful flotation of Cozart plc
which was admitted to AIM at a price of 30 pence per share. The Company's
investment is subject to a six month lock-in arrangement and the valuation has
been discounted accordingly. Nevertheless, the post flotation share price
performance has seen an original investment costing £500,000 increase to a
current value of £1.5 million.
In the unquoted portfolio, there was one new investment in the period and one
full divestment. £225,000 was invested in Amino Technologies on its admission to
AIM. This was at a price of 120 pence per share. Since investment, the share
price has risen substantially.
During the period, the Company's investment in Voxar was realised by way of a
trade sale. The cash proceeds received were slightly higher than the carrying
value at 31 March 2004. There is the potential for a small amount of additional
proceeds in the future. Sir Andrew commented that, 'Although this is a
disappointing outturn against the original cost of £263,000, the sale
represented the best available course of action for all parties.'
RETURN AND DIVIDEND
The Company reported a profit for the first six months of £25,000, equivalent to
0.16 pence per share. Net investment revaluations taken to the revaluation
reserve added a further 4.84 pence per share, resulting in an increase in net
asset value, before dividend, in the first half of the year of 5.0 pence per
share.
Following the decisions taken earlier in the year to enable realised capital
profits to be distributed, an interim dividend of 1.5 pence per share has been
declared. The net asset value at 30 September was 77.0 pence per share.
SHAREHOLDER RELATIONS AND FUNDRAISING
The Chairman reported on the success of the most recent Shareholder presentation
and announced that further ones are planned; the next being in Manchester on 2
December.
Sir Andrew added that he was pleased that the share price was at last beginning
to show an improvement and better reflecting the increasing net asset value of
the Company. Nevertheless, the Board is still aiming to reduce further the
discount of the share price to net asset value.
In furtherance of its strategy to improve liquidity in the secondary market for
its shares, the Board has recently appointed Teather & Greenwood to act as
broker to the Company. Teather & Greenwood has extensive experience as brokers
to a number of VCTs and will work proactively with the Board in managing this
process.
Following the improved tax incentives announced in the last Budget and the
continued improvement in the performance of the Company's portfolio, the Board
has announced a C share issue of up to £15 million. Sir Andrew said, 'This will
enable both existing and new Shareholders to mutually benefit from a larger
investment fund and the spreading of costs over a larger base.' The full
Prospectus is expected very shortly.
It was also reported that, following positive feedback from Shareholders, the
Board is recommending a dividend reinvestment scheme. Details for Shareholders
to approve will follow in the near future.
BOARD STRUCTURE
The Board is being restructured in order to reduce its size and alter its
composition to be more in line with the VCT industry standard. It has been
agreed that Chris Brown, John Seed, Robert Lindemann and Clive Leach will step
down from the Board with immediate effect. The retiring directors will receive
an ex-gratia payment of up to six months' fees with the aggregate compensation
payment not exceeding £17,000.
In paying tribute to these colleagues, Sir Andrew said, 'I would like to thank
all of them for their collective and individual contributions to the Board's
work. Their commitment to the affairs of the Company has been unstinting and I
am deeply grateful to all of them.'
OUTLOOK
Sir Andrew reiterated that he is pleased with the Company's progress and that
there is evidence within the portfolio of the potential for further significant
growth. The new C Share issue will enable the Board to build a larger portfolio
over the longer term.
Sir Andrew said, 'The additional funding will improve the Company's capacity to
support the current portfolio whilst enabling us to invest in new business
opportunities arising through our Investment Adviser's strong deal flow.
For further information, please contact:
Alan Davies, YFM Private Equity Ltd Tel: 0113 294 5050
David Hall, YFM Private Equity Ltd Tel: 0113 294 5050
Michael Bellamy, Teather & Greenwood Tel: 0207 426 9547
Jonathan Becher, Teather & Greenwood Tel: 0207 426 3269
CHAIRMAN'S STATEMENT
Following the trend of the past two years, I am pleased to report continuing
progress by your Company. The first half of the current financial year has seen
an increase in net asset value per Ordinary share, before deduction of the
declared dividend distribution, of 6.8% and has seen a number of realisations,
mainly through disposals of AIM stock holdings. This has led your Board to
declare an interim dividend of 1.5 pence per share. Taking into account the net
asset value at the end of the period under review and the cumulative dividends
paid and declared to date, the total return to Shareholders who invested in the
first round of fundraising is now 102.7 pence per share.
Investment Portfolio
The first half of this financial year has seen considerable activity within the
portfolio. In particular, Cozart plc secured £6.75 million to finance its
continued expansion through a successful admission to AIM. Your Company's
investment is subject to a lock-in arrangement. Nevertheless, the post flotation
share price performance of Cozart has seen the value of your Company's
investment increase from an original cost of £500,000 to £1.5 million at 30
September 2004.
On 15 September 2004, your Company's investment in Voxar Limited was realised by
way of a trade sale of that company to Barco N.V., a Belgium based multinational
company. Cash consideration of £217,000 has been received with up to a further
£26,000 receivable in future years dependent upon certain conditions. Although
this is a disappointing outturn against the original cost of £263,000, the sale
represented the best available course of action for all parties.
Your Board has taken the opportunity to realise value in some of the AIM stock
holdings through the partial realisation of Connaught plc and Straight plc and a
full disposal of the holding in Spring Grove Property Maintenance plc. These
gains are available to distribute to Shareholders as tax free dividends.
During the period, £225,000 was invested into one new investment, Amino
Technologies plc on its admission to AIM. This company is a leading developer
and licensor of technologies for the secure and rapid deployment of networked,
multi-media solutions and benefits from the current developments in the home
entertainment industry. The business is well known to your Board and also to its
Investment Adviser, having been backed by the two other VCTs under its
management. The investment was made at a price of 120 pence per share. At 30
September, the bid price value had risen to 170 pence per share and has
continued to rise since that date. Some shares were disposed of in the period,
realising a small profit.
Your Board, in conjunction with its Investment Adviser, continues to seek to
maximise the value of the existing portfolio as well as selectively adding new
investments.
Financial Results
After taking account of the capital appreciation in the investment portfolio,
the profit for the six month period under review was equivalent 0.16 pence per
Ordinary share.
The net asset value per Ordinary share at 30 September 2004 was 77.0p. Liquid
funds at the period end totalled to £2.1m. The directors have approved an
interim dividend of 1.5 pence per Ordinary share, amounting to £230,000 of the
Company's reserves.
Shareholder Relations
YFM Private Equity Limited, the Company's Investment Adviser, continues to host
presentations to Shareholders of all three VCTs under its management. The
presentation in April at the British Museum was extremely well attended making
it the most successful to date. It has become clear that this provides an
excellent forum for updating Shareholders on recent developments in both the
Company and the industry and to informally discuss the portfolio with the
directors and Investment Adviser. Another workshop will be held on 2 December in
Manchester with further events planned for next year in Birmingham and London.
I am pleased to report that the share price performance of your Company has seen
some improvement over the past six months reflecting the increased net asset
value and total return per share, as well as the Board's policy to actively buy
back shares in the market where it is in the best interests of the remaining
Shareholders to do so. This trend has continued since the period end. The
Board's current aim is to reduce the discount of the share price to net asset
value to no more than 10%.
As I have previously reported, the Board is continually looking at ways to
improve Shareholder liquidity. In furtherance of this strategy, I am pleased to
tell you that the Board has recently appointed Teather & Greenwood to act as
broker to the Company. The firm is widely experienced in the investment company
market and has a particular focus on the VCT sector, acting for a number of
other venture capital trusts. Teather & Greenwood will work proactively with the
Board in refining its overall Shareholder relations strategy.
Following feedback from Shareholders, your Board will be recommending a dividend
reinvestment scheme that will enable Shareholders to elect to receive additional
shares instead of cash when a dividend is declared. Formal details of this will
be issued to Shareholders for approval in the very near future.
Fundraising
In light of the new incentives introduced in the Finance Act 2004, and
encouraged by the continued improving performance of the existing portfolio,
your Board will be seeking to raise up to £15 million by way of a C share issue.
This is subject to Shareholder approval and it is intended that full details of
these and related proposals will be issued to Shareholders for approval
imminently.
The proceeds of the issue will enable your Company to take advantage of the
increasing flow of investment opportunities available to your Investment
Adviser, whilst allowing the existing portfolio to continue to mature. Your
Board considers that a C share issue is the most effective way of enhancing
value in the Company, enabling both existing and new Shareholders to mutually
benefit from a larger investment fund and spreading costs over a larger base.
Your Board
In line with independent advice we have received that the size of the Board of
this Company is relatively large when compared to the industry standard and that
it is unusual in the number of directors who are not independent of the
Investment Adviser and its associates, we have decided that the Board should be
reconstructed. It has been agreed that Chris Brown, John Seed, Robert Lindemann
and Clive Leach will step down from the Board with immediate effect. The
retiring directors will receive an ex-gratia payment of up to six months' fees
with the aggregate compensation payment not exceeding £17,000.
I would like to take this opportunity to thank all of them for their collective
and individual contributions to the Board's work. Their commitment to the
affairs of your Company has been unstinting and I am deeply grateful to all of
them.
Following this restructure, there will be a total of four directors, one of
whom, Philip Cammerman, who is the executive chairman of the Investment Adviser,
is not remunerated by this Company. The other directors are all independent of
the Investment Adviser.
Outlook
Your Board is encouraged by the continued progress of the portfolio and the
evidence of the potential for further significant growth. It is being selective
in its investment policy with the majority of liquid resources reserved for
supporting the current portfolio.
If authorised by Shareholders, the additional funding will improve the Company's
capacity to support the current portfolio whilst enabling us to invest in new
business opportunities arising through our Investment Adviser's strong deal
flow. In this way, the Board can focus on realising maximum value, giving us
confidence in the outlook for the foreseeable future.
Sir Andrew Hugh Smith
BRITISH SMALLER COMPANIES VCT PLC
UNAUDITED FINANCIAL STATEMENTS
Profit & Loss Account for the 6 months ended 30 September 2004
Restated*
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2004 2003 2004
£000 £000 £000
Notes
Income 157 155 364
Administrative expenses:
Investment advisory fee (133) (119) (250)
Other expenses (116) (113) (214)
------ ------ ------
(249) (232) (464)
Gain on realisation of investments 82 144 111
Net impairment reversal (charge)
on investments 35 (105) (766)
------ ------ ------
Profit (loss) on ordinary
activities before taxation 25 (38) (755)
Tax on profit (loss) on ordinary
activities 2 - - -
------ ------ ------
Profit (loss) for the financial period 25 (38) (755)
Dividends (230) - (741)
------ ------ ------
Retained deficit for the period (205) (38) (1,496)
Basic and diluted earnings (loss)
per Ordinary share 3 0.16p (0.25)p (4.88)p
Statement of Total Recognised Gains and Losses
Profit (loss) for the financial period 25 (38) (755)
Unrealised gain on valuation of investments 720 1,328 2,746
---------- --------- --------
Total recognised gains for the period 745 1,290 1,991
---------- --------- --------
All activity has arisen from continuing operations.
* See note 1
BRITISH SMALLER COMPANIES VCT PLC
UNAUDITED FINANCIAL STATEMENTS
Balance Sheet as at 30 September 2004
Restated*
Unaudited Unaudited Audited
30 September 30 September 31 March
2004 2003 2004
Notes £000 £000 £000
Fixed assets
Investment portfolio 9,711 8,295 9,216
------ ------ ------
Current assets
Debtors 301 285 101
Investments 1,777 2,344 2,656
Cash 288 278 184
------ ------ ------
2,366 2,907 2,941
Creditors: amounts payable within one year (276) (63) (805)
------ ------ ------
Net current assets 2,090 2,844 2,136
------ ------ ------
Total net assets 11,801 11,139 11,352
------ ------ ------
Capital and reserves
Called-up share capital 1,532 1,544 1,544
Capital redemption reserve 55 43 43
Revaluation reserve 5,511 3,427 5,039
Special reserve 3,805 13,615 3,871
Profit and loss account 898 (7,490) 855
------ ------ ------
Equity Shareholders' funds 11,801 11,139 11,352
------ ------ ------
Net asset value per Ordinary share 4 77.0p 72.1p 73.5p
------ ------ ------
* See note 1
BRITISH SMALLER COMPANIES VCT PLC
UNAUDITED FINANCIAL STATEMENTS
Summarised Cash Flow Statement for the 6 months ended 30 September 2004
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2004 2003 2004
£000 £000 £000
Net cash outflow from operating activities (311) (220) (58)
Taxation - - -
Financial investment 374 1,199 1,301
Equity dividends paid to shareholders (741) (93) (93)
------ ------ ------
Net cash (outflow) inflow before management
of liquid resources and financing (678) 886 1,150
Management of liquid resources 848 (893) (1,248)
Financing (66) (32) (35)
------ ------ ------
Increase (decrease) in cash 104 (39) (133)
------ ------ ------
BRITISH SMALLER COMPANIES VCT PLC
UNAUDITED FINANCIAL STATEMENTS
for the 6 months ended 30 September 2004
Notes to the Financial Statements
1 The unaudited interim financial statements have been prepared on a basis
consistent with the statutory financial statements for the year ended 31 March
2004. The interim financial statements, which have been approved by the
directors, are unaudited and do not constitute full financial statements as
defined in section 240 of the Companies Act 1985. The comparative figures for
the year ended 31 March 2004 do not constitute full financial statements and
have been extracted from the Company's financial statements for the year ended
31 March 2004 which have been reported upon without qualification by the
auditors and have been delivered to the Registrar of Companies.
On 29 March 2004, the Company revoked its investment company status and,
consequently, is now required to prepare its financial statements in compliance
with Schedule 4 of the Companies Act 1985. The unaudited interim results to 30
September 2003, which were originally prepared in accordance with the provisions
of the Statement of Recommended Practice, Financial Statements of Investment
Trust Companies, have been restated for comparative purposes.
2 The taxation charge comprises:
Restated
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 September 30 September 31 March
2004 2003 2004
£000 £000 £000
Corporation tax at 19% (2003: 19%) - - -
------ ------ ------
Profit (loss) on ordinary activities before tax 25 (38) (755)
------ ------ ------
Return on ordinary activities
multiplied by standard small
company rate of corporation
tax in the UK of 19% (2003: 19%) 5 (7) (143)
Effect of:
Expenses not deductible for tax purposes
UK dividends (i) (11) (9) (29)
Non taxable (gains) loses on investments (i) (22) (7) 124
Movement in excess management expenses (ii) 28 23 48
------ ------ ------
Current tax charge for the period - - -
------ ------ ------
(i) Venture capital trusts are not subject to corporation tax on these items
(ii)The Company has no deferred tax liability
Due to the Company's status as a venture capital trust, and the continued
intention to meet the conditions required to comply with the Section 842AA of
the Income and Corporation Taxes Act 1988, the Company has not provided deferred
tax on any capital gains and losses on the revaluation or disposal of
investments.
3 The earnings (loss) per share is based on profit from ordinary activities
after tax attributable to shareholders of £25,000 (30 September 2003: net loss
of £38,000, 31 March 2004: net loss of £755,000) and on 15,407,000 shares (30
September 2003: 15,477,000, 31 March 2004: 15,457,000), being the weighted
average number of shares in issue during the period. The Company has no
securities that would have a dilutive effect and hence basic and diluted
earnings (loss) per share are the same.
4 The net asset value per Ordinary share is calculated on
attributable assets of £11,801,000 and 15,317,838 shares in issue at the period
end (30 September 2003: assets of £11,139,000 and 15,440,838 shares, 31 March
2004: assets of £11,352,000 and 15,435,838 shares).
5 Copies of the interim report can be obtained from the
Company's registered office: Saint Martins House, 210-212 Chapeltown Road,
Leeds, LS7 4HZ. Unaudited interim accounts will be lodged with the Registrar of
Companies.
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