Final Results
British SmallerTechCompaniesVCT2PLC
28 March 2003
BRITISH SMALLER TECHNOLOGY COMPANIES VCT 2 PLC
UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED
31 DECEMBER 2002
Current economic climate and entry valuations present excellent opportunities
Over £5m available for investment
British Smaller Technology Companies VCT 2 plc ("the Company"), the venture
capital trust specialising in growing smaller technology companies, today
announces its unaudited preliminary results for the year to 31 December 2002.
Financial highlights
Unaudited Audited
2002 2001
Income £296,000 £288,000
Net revenue return before and after tax £5,000 £28,000
Total return per share (2.41)p (0.48)p
Net assets £7.17m £6.44m
NAV per share 91.6p 93.7p
Commenting on the results, the Chairman, Sir Andrew Hugh Smith, said that
against the background where falls in the Techmark All Share Index and NASDAQ
indices during the period were considerably more than 30%, the Company's net
asset value had fallen by just 2.2% in the year.
Investments
During the year, almost £1.2m had been invested in six companies bringing the
total invested to £1.5m into eight businesses. Since the year end £125,000 had
been invested in Broadreach Networks Limited, a company providing broadband
internet access via both fixed terminals and wireless local area networks in
public locations throughout the UK.
The Chairman reported that the portfolio was at an early stage of development
with the majority of investments held at cost - the exceptions being Tamesis
Limited, Amino Holdings Limited and Cambridge Cognition Limited.
Although Tamesis had been fully provided for at the interim stage, significant
progress had been made in the second half of the year and the Board thought it
appropriate to write back 25% of the provision.
Amino Holdings has raised significant funding from a syndicate of investors
confident that the business has the potential for high capital growth.
However, in the current environment the pricing was at a lower level to the
previous round resulting in a lowering of the carrying value.
Early trading at Cambridge Cognition had been disappointing and a 25% provision
against cost had been taken to reflect this under performance.
Phil Cammerman, Managing Director of Yorkshire Fund Managers Limited, the
Company's Investment Adviser, said that the major challenge during the period
had been to put together strong investing syndicates to ensure that investees
had sufficient cash to develop their businesses.
He said that some of the eight businesses we had supported were continuing to
make initial sales of their products whilst others had moved along the value
chain in their markets and had developed prototypes .
"The priority for 2003," he said, is to "invest our liquid resources alongside
robust syndicates in both early and, more particularly, later stage technology
businesses to meet legislative targets. We believe too that the continuing
economic uncertainty could lead to investments being made in exciting revenue
generating businesses at very advantageous valuations. Finally we will be
working with portfolio companies to ensure they remain well funded and continue
their move along the value chain."
Financial Results and Dividend
The total return for the year was a net loss of 2.41p per share, reducing net
asset value per share to 91.6p.
Consistent with the stated aim of the Company, no dividend is proposed.
Shareholder Relations
The Chairman remarked on two initiatives to improve the liquidity of the
Company's shares. Firstly, net asset values are being announced quarterly to
improve information and to stimulate greater interest in the Company. Secondly,
procedures to enable the buy back of shares agreed at the Extraordinary General
Meeting on 14 November 2002 are well advanced.
In addition, and to improve communication with Shareholders, Yorkshire Fund
Managers hosted the first of a series of presentations to shareholders on 6
March 2003 in London. Further presentations are planned for London, Leeds,
Birmingham and Edinburgh.
Warrants
Warrantholders will be alerted in April 2003 to the dates on which their
Warrants can be exercised in this current year.
Outlook
Commenting on the Company's prospects, Sir Andrew said that the Board's
investment strategy had been widened to include later stage technology companies
that have more developed revenue streams as well as the earlier stage
businesses. He added that with significant liquid resources and with some
private equity funds exiting this market, "the quality of the deal flow and the
attractive valuations of businesses seeking funding gives rise to the
opportunity for your company to achieve good capital growth over the next few
years."
For further information, please contact:
Alan Davies/Michael White
Yorkshire Fund Managers Limited Tel 0113 294 5000
Neil Baldwin/Keith Williams
Brewin Dolphin Securities Limited Tel: 0113 241 0130
CHAIRMAN'S STATEMENT
The economic climate has remained difficult throughout the year under review and
this has been fully reflected in financial markets where falls, since the peak,
have been considerably more than 30% and in the case of markets dominated by
technology businesses, such as TechMark and NASDAQ, even more. Against this
background your Company's net asset value has fallen by just 2.2% in the year.
A substantial proportion of net assets were still in liquid resources, Gilt
investments and cash, at the year end. During this coming year the majority of
this will need investing in unquoted businesses to comply with the VCT
legislative requirement to hold at least 70% of total investments in qualifying
companies within three years. Your Board and its Investment Adviser, Yorkshire
Fund Managers Limited, are confident that there are sufficient investment
opportunities at attractive valuations offering medium to long term high capital
growth potential to enable us to meet this target.
Investments
During the year a total of £1,194,000 was invested in six companies, including
£150,000 as follow-on development funding to SynGenix Limited. At 31 December
2002, the portfolio comprised eight companies with 21% of net funds raised from
shareholders invested in qualifying businesses.
Since the year end your Company has completed an investment in Broadreach
Networks Limited. The investment, totalling £125,000, completed on 14 February
2003 and was by way of a mixture of loan and equity for 5.26% of the business.
This investment was the first tranche of a total £250,000 initial commitment to
this company. Broadreach Networks provides broadband internet access via both
fixed-terminals and wireless local area networks in public locations operated
throughout the UK under the ReadytoSurfTM brand name. The network is accessed
via pay-as-you go vouchers, which can be purchased within the premises where the
ReadytoSurfTM service is offered. Additionally, the Company has entered into
agreements with a number of leading service providers who will be providing
their customers with access to the ReadytoSurfTM network.
The portfolio is still at a relatively early stage in its development and the
majority of investments are still held at cost. The exceptions are Tamesis
Limited, Amino Holdings Limited and Cambridge Cognition Limited.
I reported in my interim statement that Tamesis had been fully provided against.
I am now pleased to report that the company made significant progress in the
second half of the year closing a major contract and positioning itself for
sustainable recovery. The market in which it operates remains very difficult but
your Board thought it appropriate to write back 25% of the provision.
Amino Holdings has just completed a further round of funding, backed by a number
of institutions, to provide the business with additional working capital. The
pricing of this fund raising was at a lower level to the previous round and the
carrying value of the investment has been adjusted to reflect this. It is your
Board's view that Amino still has the potential for significant capital growth.
Early trading at Cambridge Cognition has been disappointing although the company
is still actively developing its products and route to market. Following BVCA
guidelines it was felt appropriate to take a 25% provision against cost to
reflect this early under performance.
Financial Results
The net revenue return for the year was a small profit of £5,000, equivalent to
0.07p per share. After taking account of the capital loss, the total return for
the year was a net loss of £183,000, or 2.41p per share. Consistent with the
stated aim of the Company, no dividend is proposed.
The net asset value at 31 December 2002 was 91.6p per Ordinary share.
Shareholder Relations
Your Board and its Investment Adviser have continued to explore ways in which
shareholder liquidity can be improved. In line with a number of other VCT
companies, we have begun to announce net asset values to the market on a
quarterly basis in an attempt to both improve information and to stimulate
interest in the sector. We also continue to talk to our brokers and market
makers to explore other opportunities to create better liquidity.
Further to improving liquidity for Shareholders, the Extraordinary General
Meeting on 14 November 2002 passed the proposals put to that meeting, as
recommended by your Board, to facilitate the buying in by the Company of its own
shares. Procedures to complete the process for putting these arrangements in
place are well advanced.
As a means of extending our communication with our Shareholders, your Board's
Investment Adviser, Yorkshire Fund Managers Limited, is hosting a series of
presentations to Shareholders of all three VCTs under its management. The first
of these was held on 6 March in London and was very well attended. David
Cartwright of PricewaterhouseCoopers LLP, the VCT status adviser to the Company,
updated attendees on current and proposed VCT legislation and there were
presentations from two unquoted companies that have received VCT backing through
Yorkshire Fund Managers. Further presentations in London, Leeds, Birmingham and
Edinburgh are planned.
Warrants
A notice will be sent to Shareholders and Warrantholders in April alerting them
to the dates on which the Warrants can be exercised in this current year.
Outlook
The economic climate, both in the UK and internationally, remains depressed and
fragile. The timing of the end to the bear market will inevitably depend upon
the length of the current uncertainty and the depth of damage done to confidence
in the meantime.
Your Board's investment strategy is primarily focused on companies with strong
Intellectual Property Rights (IPR) and aims to invest in robust syndicates where
it can be reasonably confident that subsequent financing rounds can be funded.
As well as the early stage businesses that are typical to this type of portfolio
your Board is also seeking to invest in some later stage technology companies
that have a more developed revenue stream, although the IPR may be weaker.
Your Company has significant liquid resources on hand at the current time to
meet the investment opportunities as they materialise. With a number of private
equity funds exiting this market, the quality of the deal flow and the
attractive valuations of businesses seeking funding gives rise to the
opportunity for your Company to achieve good capital growth over the next few
years.
Sir Andrew Hugh Smith
Chairman
Unaudited Statement of Total Return
(incorporating the Revenue Account)
for the year ended 31 December 2002
Unaudited Year ended Audited Period ended
31 December 2002 31 December 2001
Notes Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Net losses on investments - (127) (127) - (13) (13)
Income 296 - 296 288 - 288
Investment advisory fee (141) (61) (202) (114) (49) (163)
Other expenses (150) - (150) (139) - (139)
------- ------ ------ -------- -------- --------
Net return on ordinary
activities before taxation
5 (188) (183) 35 (62) (27)
Tax on ordinary activities 2 - - - (7) 7 -
------- ------- ------ -------- -------- --------
Net return on ordinary
activities after taxation
5 (188) (183) 28 (55) (27)
Dividends in respect of equity 3 - - - - - -
shares
-------- -------- ------- -------- -------- --------
Transfer to (from) reserves 5 (188) (183) 28 (55) (27)
==== ==== ==== ===== ===== =====
Return per Ordinary share
Basic and diluted 4 0.07p (2.48)p (2.41)p 0.49p (0.97)p (0.48)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 (from) reserves in either period and their
historic cost equivalents.
Unaudited Balance Sheet
at 31 December 2002
Unaudited Audited
Notes 2002 2001
£000 £000
Fixed Assets
Investment portfolio 1,317 300
Current Assets
Investments 5,737 5,631
Debtors 116 109
Cash 34 437
-------- --------
5,887 6,177
Creditors: amounts payable within one year (31) (36)
-------- --------
Net Current Assets 5,856 6,141
-------- --------
Total Net Assets 7,173 6,441
===== =====
Capital and Reserves
Called-up share capital 783 688
Share premium account 6,595 5,780
Warrant reserve 5 -
Capital reserve
Realised (35) (30)
Unrealised (208) (85)
(243) (55)
Revenue reserve 33 28
-------- --------
Equity shareholders' funds 7,173 6,441
===== =====
Net asset value per Ordinary share 5 91.6p 93.7p
===== =====
Unaudited Cash Flow Statement
CashFlow Statement
for the year ended 31 December 2002
Unaudited Audited
Year ended Period ended
31 December 2002 31 December
2001
£000 £000
Net cash outflow from operating activities (68) (87)
-------- --------
Investing activities
Purchase of investments (1,194) (375)
-------- --------
Net cash outflow before management of liquid
resources and financing (1,262) (462)
-------- --------
Management of liquid resources
Purchase of fixed interest government stocks (650) (17,524)
Proceeds from the sale of fixed interest government stocks 594 11,955
-------- --------
Net cash outflow from management of liquid resources (56) (5,569)
-------- --------
Financing
Issue of Ordinary shares 956 6,876
Issue expenses (41) (408)
-------- --------
Net cash inflow from financing 915 6,468
-------- --------
(Decrease) increase in cash in the period (403) 437
===== =====
Notes to Financial Statements
for the year ended 31 December 2002
1. Basis of reporting
This preliminary announcement, which has been prepared on a basis consistent
with the previous year, does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. This announcement has been
agreed with the company's auditors for release.
The information for the year ended 31 December 2001 is an extract from the
statutory accounts to that date which have been delivered to the Registrar of
Companies. Those accounts included an audit report which was unqualified and
which did not contain a statement under Section 237(2) or (3) of the Companies
Act 1985. The statutory accounts for the year ended 31 December 2002, upon which
the auditors have still to report, will be delivered to the Registrar following
the Company's annual general meeting.
2. Taxation Charge
Year ended 31 December 2002 Year ended 31 December 2001
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Corporation tax payable at 19.25% - - - 7 (7) -
(2001: 20%)
------ ------ ------ ------ ------ ------
3. Dividends
No dividends have been paid or proposed in the year (2001: Nil).
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 £5,000 (2001: net revenue return £28,000) and
7,566,000 (2001: 5,682,000) 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 either period and hence the 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
£7,173,000 (2001: £6,441,000) and 7,832,693 (2001: 6,876,133) shares in issue at
the year end.
6. Annual General Meeting
Copies of the full financial statements for the period ended 31 December 2002
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 4.15 p.m. on 15 May 2003 at the above address.
This information is provided by RNS
The company news service from the London Stock Exchange
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