Half Yearly Report

RNS Number : 2761P
British Smaller Companies VCT2 Plc
15 August 2014
 

British Smaller Companies VCT2 plc

Unaudited interim Results and Interim Management Report

For the 6 months ended 30 June 2014

British Smaller Companies VCT2 plc ("the Company") today announces its unaudited interim results for the six months to 30 June 2014.

Chairman's Statement

Investment rates continue to climb as the improved economic climate increases confidence amongst business owners.  Your Company has made seven new unquoted investments in the last year, including four in the six months to 30 June 2014.

I am pleased to report a strong six months of investment activity, with £5.5 million invested in the period and a total of £10.0 million in the 12 months to 30 June 2014.  Your Company continues to focus on investing in established businesses with strong potential for growth located in the UK regions.  Of the seven investments completed, three were in the midlands; two were in the South East and one each in Wales and Scotland.

As at 30 June 2014 your board had approved a further £2.0 million of investment and since the period end has approved another £2.1 million. These investments, totalling £4.1 million, are expected to complete in the near future.

I am delighted to report the success of our recent share offers which closed on 29 May 2014 and raised new funds of £10.2 million, which is approximately the same amount the Company invested in the last twelve months.  Demand for investment continues to increase and the pipeline of new investments is extremely encouraging.

Financial Results and Dividends

In the six months to 30 June 2014 the Company's total return increased by 0.1 pence per ordinary share from 104.6 pence per ordinary share at 31 December 2013.

Significant progress has been made by many of the portfolio companies however, due to timing delays in the closure of new sales, provisions totalling £0.74 million were made against two of our investments. These were offset by gains elsewhere across the portfolio and both investments continue to be held above cost.

During the period a final dividend of 2.5 pence per ordinary share was paid, bringing cumulative dividends paid to date to 41.5 pence per ordinary share.  For the period to 30 June 2014 the Board has proposed an interim dividend of 2.0 pence per ordinary share, making a total of 4.5 pence per ordinary share over the last year.    It is intended that of the total interim dividend 0.27 pence per ordinary share will be paid from revenue reserves and 1.73 pence per ordinary share from capital reserves. The interim dividend will be paid on 7 October 2014 to shareholders on the register at 5 September 2014.

Shareholder Relations

Following the success of the 19th Shareholder workshop in February 2014, the Company is pleased to announce that its next workshop will be held at Freemasons Hall, London on 4 February 2015. Details will be circulated nearer the time.

Regulatory Changes

The EU Alternative Investment Fund Managers Directive (AIFMD) became part of UK law in July 2013, with a 12 month transitional period to July 2014.  The Directive regulates the management of alternative investment funds, including venture capital funds such as VCTs.  The Board is pleased to announce that the Financial Conduct Authority approved the Company's application to become a Small Registered UK Alternative Investment Fund Manager on 21 July 2014. YFM Private Equity Limited continues to provide investment advisory and administrative services to the Company.

As expected, the 2014 Finance Bill, which received Royal Assent on 17 July 2014, included measures to prevent "enhanced" share buy-backs, where a VCT offers to buy back shares from investors on condition that the proceeds are applied in subscribing for a fresh issue of shares. Income tax relief for subscriptions of shares in a VCT is also restricted where an investor disposes of shares in the same VCT within six months of the subscription.  Furthermore, where new VCT shares are allotted on or after 6 April 2014, VCTs will be prevented for a specified period from paying dividends to shareholders out of share capital or distributable reserves created by cancelling the share premium account arising on the allotment of such shares.  The Company's balance sheet already has ample distributable reserves amounting to £13.43 million and we do not expect the new rules to have any impact on future dividend streams.

Outlook

Good progress continues to be made across the portfolio to position businesses to grow and realise shareholder value.  At the same time our Company continues to see strong demand for investment in the UK regions, with £10 million deployed in the last twelve months which has significantly increased the diversity of the portfolio.

The Company continues to see an increase in new investment opportunities. In order for the Company to continue to take advantage of these new opportunities the Board will be seeking to raise further funds, details of which will follow in due course.

Strategic Report

Investment Review

The Company currently has an increasingly diversified portfolio which at 30 June 2014 had a value of £20.66 million consisting of £18.26 million (88.4 per cent) unquoted investments and £2.40 million (11.6 per cent) quoted investments.  The high level of current investment rates has significantly increased the portfolio diversity with the largest single investment representing just 5.2 per cent of the net asset value.

Over the six months to 30 June 2014 the portfolio saw a small underlying value gain of £0.01 million and good progress has been made across the portfolio to position businesses to grow and realise shareholder value.  This has been displayed in a mixture of strong profit growth from some businesses as well as some strategic and organisational restructuring of others to maximise profits in the year ahead. The most significant movements in valuations in the period were:

 

-       Waterfall Services Limited (increase of £0.30 million) saw strong profit growth from new contracts last year and expects to also benefit from the imminent introduction of free primary school meals.

-       Pressure Technologies plc (increase of £0.26 million) reported significantly improved profits from its core pressure container production and successful diversification into the biogas sector.

-       Sirigen Limited (increased by £0.26 million) delivered many key milestones to achieve additional deferred consideration following its trade sale in 2012.

-       DisplayPlan Holdings Limited (increase of £0.15 million) saw continued strong cash generation.

-       Seven Technologies Holdings Limited (reduction of £0.47 million) suffered public sector budgetary constraints in its core US and UK markets last year which are now showing signs of easing.

-       Deep-Secure Ltd (decrease of £0.27 million) experienced some public sector contract slippage and a delay in the launch of a product through a significant new strategic partnership.

New Investments

In the six months to 30 June 2014 the Company has completed four new investments totalling £5.19 million.

Name of

Company

Business

Date

of Investment

Amount invested (£m)

 

Mangar Health Limited

Healthcare Equipment

 

January 2014

 

1.64

The management buyout of Mangar International, a world leader in inflatable lifting & handling and bathing equipment for the elderly, disabled and emergency services markets.  Headquartered in Presteigne, Wales Mangar distributes its products to care providers, local authorities, ambulance services and care homes, and has a growing international presence.

 

Intelligent  Office UK Ltd

 

Support Services

 

May 2014

 

1.96

The management buyout of Intelligent Office, a leading provider of business process outsourcing solutions to the UK legal sector.  Its Managed Services division works within firms' own premises to help them transform and manage key administrative functions of print and mail, reception, document production and secretarial services. Its Transcription Services division provides document production services from a secure shared services centre.

 

Macro Art Holdings Limited

 

Digital Printer

 

June 2014

 

0.84

The management buyout and growth capital funding for Macro Art Limited, a specialist wide-format digital printer which has printed building wraps for Selfridges and Harrods London stores and holds the Guinness World Record for the largest printed movie poster.    In recent years the business has invested in specialist UV and dye sublimation print technology and expanded into the profitable exhibitions and high-end retail sectors.

 

Intamac Systems Limited

 

IT & Software

 

June 2014

 

0.75

The provision of growth capital funding to Intamac Limited which develops technology to connect physical products via the internet so they can be monitored and controlled using smart mobile phones and computers. The cloud-based software platform is used by several blue chip companies including, Scottish Power, Securitas, TDC and Belgacom.  The strategy is to partner with established hardware suppliers and embed software into their next generation products to become a key enabler of the Internet of Things. Applications range from alarms, cameras, heating controls, safety equipment, healthcare monitoring and white goods.

 

The Company has made follow-on investments into AiM listed EKF Diagnostics plc and AB Dynamics plc totalling £0.32 million.

As at 30 June 2014 the Company had approved £2.0 million of investment by way of follow-on and new investment. Since that date it has approved another two new investments of £2.1 million in aggregate.

Realisation of Investments

During the six months to 30 June 2014 the Company received proceeds from disposals of investments of £1.11 million. This resulted in a gain on disposal of investments of £0.35 million and an uplift of £0.60 million compared to the original cost of the investments.. Of this £0.49 million of proceeds were realised from the sale of shares in the quoted portfolio, namely Iomart plc, Optos plc, Pressure Technologies plc and Vianet Group plc, representing a £0.27 million uplift on original cost. The remainder was due to the repayment of loans generating proceeds of £0.36 million with premiums on redemption totalling £0.07 million. 

£1.37 million was received in June 2014 from the sale of the Company's remaining gilt portfolio at the original investment cost.

Investment Portfolio

Sector

Name of

Company

Date

of initial

Investment

Current  cost

 

 

£000

Realised proceeds to Date

 

£000

Investment Valuation

At 30 June

2014

£000

Valuation plus proceeds to Date

£000

Bus. Services

DisplayPlan Holdings Limited

Jan 12

525

228

2,062

2,290

Bus. Services

Intelligent Office UK Limited

May 14

1,956

-

1,956

1,956

Retail

Gill Marine Holdings Limited

Sep 13

1,870

-

1,870

1,870

Healthcare

Mangar Health Limited

Jan 14

1,640

-

1,640

1,640

Software & IT

Seven Technologies Holdings Limited

Apr 12

1,238

762

1,238

2,000

Manufacturing

GTK (UK) Limited

Oct 13

1,084

66

1,084

1,150

Healthcare

Immunbiology Limited

Jun 03

1,932

-

987

987

Manufacturing

Leengate Holdings Limited

Dec 13

934

-

934

934

Bus. Services

Macro Art Holdings Limited

Jun 14

840

-

840

840

Bus. Services

Waterfall Services Limited

Feb 07

26

458

792

1,250

Top 10 Unquoted Investments

12,045

1,514

13,403

14,917

Remaining unquoted portfolio






Telecoms

Callstream Group Limited

Sep 10

415

131

771

902

Internet

Intamac Systems Limited

June 14

750

-

750

750

Software

Deep-Secure Ltd

Dec 09

500

-

644

644

Retail & Manufacture

Bagel Nash Group Limited

Jul 11

771

53

613

666

Software

Insider Technologies  (Holdings) Limited

Aug 12

780

-

587

587

Retail

Harvey Jones Holdings Limited

May 07

389

-

451

451

Industrial

RMS Group Holdings Limited

July 07

70

349

398

747

Software

Selima Limited

Mar 12

300

-

300

300

Software

PowerOasis Limited

Nov 11

567

-

284

284


Other investments < £0.1 million


2,104


60

60

Total Unquoted portfolio

18,691

2,047

18,261

20,308

Quoted portfolio






Manufacturing

Pressure Technologies plc

Jun 07

121

493

583

1,076

Medical

EKF Diagnostics Holdings plc

Jul 11

437

-

407

407

Manufacturing

AB Dynamics plc

May 13

253

-

376

376

Manufacturing

Hargreaves Services plc

Aug 12

325

-

314

314

Internet

Iomart Group plc

May 11

119

209

247

456

Software

Brady plc

Dec 10

134

163

171

334

Bus. Services

Vianet Group plc

Oct 06

181

45

132

177

Healthcare

Cambridge Cognition Holdings plc

May 02

240

-

102

102

Healthcare

Allergy Therapeutics plc

Oct 04

350

-

70

70

Total quoted portfolio

2,160

910

2,402

3,312






Total portfolio

20,851

2,957

20,663

23,620

Full disposals to date

13,502

20,679

-

20,679

Total

34,353

23,636

20,663

44,299

 

 

Principal Risks and Uncertainties

In accordance with DTR 4.2.7, the Board confirms that the principal risks and uncertainties facing the Company have not materially changed from those identified in the Annual Report and Accounts for the year ended 31 December 2013. The Board acknowledges that there is regulatory risk and continues to manage the company's affairs in such a manner as to comply with section 274 income Tax Act 2007.

In summary, the principal risks are:

•               Economic;

•               Investment and strategic;

•               Loss of approval as a Venture Capital Trust;

•               Regulatory;

•               Reputational;

•               Operational;

•               Financial;

•               Market/liquidity risk.

Full details of the principal risks can be found in the financial statements for the year ended 31 December 2013 on pages 29 and 30, a copy of which is available at www.yfmep.com

Responsibility Statement of the Directors

The directors of British Smaller Companies VCT2 plc confirm that, to the best of their knowledge, the condensed set of financial statements in this interim report have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the EU, and give a fair view of the assets, liabilities, financial position and profit or loss of British Smaller Companies VCT2 plc, and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

The directors of British Smaller Companies VCT2 plc are listed in Note 9 of the interim financial statements.

 

 

Richard Last

Chairman

15 August 2014

 

 

 

Unaudited Statement of Comprehensive Income

For the six months ended 30 June 2014

                                                                                                                                                               

 

 



Unaudited

6 months ending 30 June 2014

Unaudited

6 months ending 30 June 2013


 

Notes

 

Revenue

£000

 

Capital

£000

 

Total

£000

 

Revenue

£000

 

Capital

£000

 

Total

£000









Gain on disposal of investments


-

347

347

-

9

9

(Losses) gains on investments held at fair value


-

(336)

(336)

-

1,097

1,097

Income

2

543

-

543

365

-

365

Administrative expenses:








     Investment adviser's fee


(75)

    (225)

(300)

(68)

   (204)

(272)

     Other expenses


(196)

-

(196)

(168)

-

(168)



(271)

(225)

(496)

(236)

(204)

(440)

Profit before taxation


272

(214)

58

129

902

1,031

Taxation

3

(1)

1

-

-

-

-

Profit for the period


271

(213)

58

129

902

1,031

Total comprehensive income (expense) for the period attributable to equity hareholders


271

(213)

58  

129

902

1,031

Basic and diluted earnings (loss) per ordinary share

5

0.51p

(0.40p)

0.11p

0.30p

2.06p

2.36p

 

The Total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards as adopted by the European Union.  The supplementary Revenue and Capital columns are prepared under the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('SORP') 2009 published by the Association of Investment Companies.

 

 



Unaudited Balance Sheet

As at 30 June 2013



Unaudited

30 June 2014

Unaudited

30 June 2013

Audited

31 Dec 2013


Notes

£000

£000

£000

Assets





Non-current assets





Investments 


20,663

12,377

16,255

Fixed income government securities


-

901

890

Financial assets at fair value through profit or loss

6

20,663

13,278

17,145

Trade and other receivables


297

108

132



20,960

13,386

17,277

Current assets





Trade and other receivables


572

114

123

Cash on fixed term deposit


4,500

3,500

4,500

Cash and cash equivalents


13,415

13,393

8,680



18,487

17,007

13,303

Liabilities





Current liabilities





Trade and other payables


(117)

(135)

(122)

Net current assets


18,370

16,872

13,181

Net assets


39,330

30,258

30,458






Shareholders' equity





Share capital


6,411

4,800

4,822

Share premium account


13,736

4,835

4,926

Capital redemption reserve


88

88

88

Merger reserve


5,525

5,525

5,525

Other reserve


2

2

2

Capital reserve


13,377

17,028

14,568

Investment holding (losses) gains - net


(158)

(2,149)

448

Revenue reserve


349

129

79

Total shareholders' equity


39,330

30,258

30,458

 Net asset value per ordinary share

7

63.2p

65.3p

65.6p

 

Signed on behalf of the Board

 

Richard Last

Chairman

15 August 2014



Unaudited Statement of Changes in Equity

For the six months ended 30 June 2014

 

 

 

 

 

 

 

Share premium

 

 

 Other reserves*

 

 

Merger reserve

 

 

Capital reserve

Investment holding gains (losses) reserve

 

 

Revenue reserve

 

 

Total

equity


£000

 

£000

£000

£000

£000

£000

£000

At 31 December 2012

4,271

14,806

90

5,525

7,225

(4,919)

154

27,152

Revenue return for the period

-

-

-

-

-

-

129

129

Capital expenses

-

-

-

-

(204)

-

-

(204)

Investment holding gain on investments held at fair value

 

-

 

-

 

-

 

-

 

-

 

1,097

 

-

 

1,097

Realisation of investments in the period

 

-

 

-

 

-

 

-

 

9

 

-

 

-

 

9

Total comprehensive income for the period

-

-

-

-

(195)

1,097

129

1,031

Issue of share capital

504

2,964

-

-

-

-

-

3,468

Issue of Shares - DRIS

25

130

-

-

-

-

-

155

Issue costs

-

(160)

-

-

-

-

-

(160)

Purchase of own shares

-

-

-

-

(224)

-

-

(224)

Dividends

-

-

-

-

(1,001)

-

(154)

(1,155)

Cancellation of Share Premium

-

(12,905)

-

-

12,896

-

-

(9)

Total transactions with  shareholders

529

(9,971)

-

-

11,671

-

(154)

2,075

Realisation of prior year investment holding losses

-

-

-

-

(1,673)

1,673

-

-

At 30 June 2013

4,800

4,835

90

5,525

17,028

(2,149)

129

30,258

Revenue return for the period

-

-

-

-

-

-

79

79

Capital expenses

-

-

-

-

(217)

-

-

(217)

Investment holding gain on investments held at fair value

 

-

 

-

 

-

 

-

-

651

 

-

651

Gain on disposal of investments in the period

 

-

 

-

 

-

 

-

587

-

 

-

587

Total comprehensive income for the period

-

-

-

-

370

651

79

1,100

Issue of Shares - DRIS

22

109

-

-

-

-

-

131

Issue costs

-

(18)

-

-

-

-

-

(18)

Purchase of own shares

-

-

-

-

(85)

-

-

(85)

Dividends

-

-

-

-

(799)

-

(129)

(928)

Total transactions with  shareholders

22

91

 

-

 

-

(884)

-

(129)

(900)

Realisation of prior year investment holding gains

 

-

 

-

-

 

-

(2,123)

2,123

-

-

Realisation of negative goodwill

-

-

-

-

177

(177)

-

-

At 31 December 2013

4,822

4,926

90

5,525

14,568

448

79

30,458

 

 

 

 

 

 

 

 

Share premium

 

 

 Other reserves*

 

 

Merger reserve

 

 

Capital reserve

Investment holding gains (losses) reserve

 

 

Revenue reserve

 

 

Total

equity


£000

 

£000

£000

£000

£000

£000

£000

At 31 December 2013

4,822

4,926

90

5,525

14,568

448

79

30,458

Revenue profit for the period

-

-

-

-

-

-

271

271

Capital expenses

-

-

-

-

(224)

-

-

(224)

Investment holding loss on investments held at fair value

-

-

-

-

-

(336)

-

(336)

Gain on disposal of investments in the period

-

-

-

-

347

-

-

347

Total comprehensive income for the period

-

-

-

-

123

(336)

271

58

Issue of ordinary Share capital

1,551

9,200

-

-

-

-

-

10,751

Issue of Shares - DRIS

38

191

-

-

-

-

-

229

Issue costs of Ordinary shares

-

(581)

-

-

-

-

-

(581)

Purchase of own shares

-

-

-

-

(36)

-

-

(36)

Dividends

-

-

-

-

(1,548)

-

(1)

(1,549)

Total transactions with  shareholders

1,589

8,810

-

-

(1,584)

-

(1)

8,814

Realisation of prior year investment holding losses

-

-

-

-

257

(257)

-

-

Realisation of negative goodwill

-

-

-

-

13

(13)



At 30 June 2014

6,411

13,736

90

5,525

13,377

(158)

349

39,330

 

* Other reserves include the capital redemption reserve and other reserve which are non-distributable.

The capital reserve includes £115,000 (2013: £nil) of deferred proceeds receivable in 2016. The revenue reserve includes £182,000 (2013: £nil) of interest receivable in 2018 and 2019. These amounts should be excluded in the calculation of the Company's distributable reserves at 30 June 2014.

Unaudited Statement of Cash Flows

For the six months ended 30 June 2014

 


 

 


Unaudited

6 months ended 30 June

2014

Unaudited

6 months ended 30 June

2013

Audited year ended 31 December

2013




£000

£000

£000

Net cash (outflow)  inflow from operating activities



(262)

90

(79)







Cash flows from investing activities






Purchase of financial assets at fair value through profit or loss



(5,978)

(954)

(5,499)

Proceeds from sale of financial assets at fair value through profit or loss

2,114

1,062

2,926

Cash placed on fixed term deposit



-

-

(4,500)

Cash received back from fixed term deposit



-

3,548

7,048

Deferred consideration



-

90

125

Net cash (outflow) inflow from investing activities



(3,864)

3,746

100







Cash flows from financing activities






Issue of ordinary shares



10,509

3,412

3,412

Cost of ordinary shares



(328)

(106)

(122)

Purchase of own shares



-

(224)

(309)

Dividends paid



(1,320)

(1,000)

(1,797)

Share premium cancellation costs



-

(9)

(9)

Net cash inflow from financing activities



8,861

2,073

1,175







Net increase in cash and cash equivalents



4,735

5,909

1,196

Cash and cash equivalents at the beginning of the period



8,680

7,484

7,484

Cash and cash equivalents at the end of the period



13,415

13,393

8,680



Notes to the Unaudited Financial Statements

 

1.   General information, basis of preparation and principal accounting policies

These half year statements have been approved by the directors whose names appear at note 9, each of whom has confirmed that to the best of his knowledge:

·     The Interim Management Report includes a fair review of the information required by rules 4.2.7 and 4.2.8 of the Disclosure Rules and the Transparency Rules.

·     The half year statements have been prepared in accordance with IAS 34 'Interim financial reporting' and the Disclosure and Transparency Rules of the Financial Services Authority.

The half year statements are unaudited and have not been reviewed by the auditors pursuant to the Auditing Practices Board (APB) guidance on Review of Interim Financial Information. They do not constitute full financial statements as defined in section 435 of the Companies Act 2006. The comparative figures for the year ended 31 December 2013 do not constitute full financial statements and have been extracted from the Company's financial statements for the year ended 31 December 2013. Those accounts were reported upon without qualification by the auditors and have been delivered to the Registrar of Companies.

The accounting policies and methods of computation followed in the half year statements are the same as those adopted in the preparation of the audited financial statements for the year ended 31 December 2013.

The financial statements for the year ended 31 December 2013 were prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. Where guidance set out in the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued by the Association of Investment Companies in January 2009 ("SORP") is consistent with the requirements of IFRS, the financial statements have been prepared in compliance with the recommendations of the SORP.

Other standards and interpretations have been issued which will be effective for future reporting periods but have not been adopted early in these financial statements. These include amendments to IFRS 9, IFRS 10, IFRS 11 and IFRS 12, and amendments to IAS24, IAS 27, IAS28, IAS32 and IAS 36. A full impact assessment has not yet been completed in order to assess whether these new standards will have a material impact on the financial statements.

Going Concern: The directors have carefully considered the issue of going concern and are satisfied that the Company has sufficient resources to meet its obligations as they fall due for a period of at least twelve months from the date these half year statements were approved. As at 30 June 2014 the Company held cash balances and fixed term deposits with a combined value of £17,915,000. Cash flow projections show the Company has sufficient funds to meet both its contracted expenditure and its discretionary cash outflows in the form of share buy-backs and the dividend policy. The directors therefore believe that it is appropriate to continue to apply the going concern basis of accounting in preparing these half year statements.

 

2.   Income


Unaudited

6 months ended 30 June

2014

Unaudited

6 months ended

30 June

2013


£000

£000

Income from investments



  - Dividends from unquoted companies

24

28

  - Dividends from AIM quoted companies

19

22


43

50

  - Interest on loans to unquoted companies

421

187

  - Fixed interest Government securities

7

10

Income from investments held at fair value through profit or loss

471

247

Interest on bank deposits

72

118


543

365

3.    Taxation

 



Unaudited 6 months ended 30 June 2014

Unaudited 6 months ended 30 June 2013



Revenue

Capital

Total

Revenue

Capital

Total


£000

£000

£000

£000

£000

£000

Profit before taxation

272

(214)

58

129

902

1,031

Profit before taxation multiplied by standard small company rate of corporation tax in UK of 20% (2013: 20%)

 

54

 

(43)

 

11

 

26

 

180

 

206

Effect of:







UK dividends received

(8)

-

(8)

(10)

-

(10)

Non taxable profits on investments

-

(2)

(2)

-

(221)

(221)

Excess management expenses

(45)

44

(1)

(16)

41

25

Tax charge (credit)                                                                                     (credit)

1

(1)

-

-

-

-

The Company has no provided, or unprovided, deferred tax liability in either year.

Deferred tax assets in respect of losses have not been recognised as the directors do not currently believe that it is probable that sufficient taxable profits will be available against which the assets can be recovered.

Due to the Company's status as a venture capital trust, and the continued intention to meet the conditions required to comply with Chapter 3 Part 6 of the Income Tax Act 2007, the Company has not provided deferred tax on any capital gains or losses arising on the revaluation or realisation of investments.

4.   Dividends

Amounts recognised as distributions to equity holders in the period:


Unaudited

6 months ended

30 June 2014

Unaudited

6 months ended

30 June 2013

Audited

Year ended

31 December 2013

 


Rev

Cap

Total

Rev

Cap

Total

Rev

Cap

Total


£000

£000

£000

£000

£000

£000

£000

£000

£000

Final dividend for the year ended 31 December 2013 of 2.5p (2012 year end 2.5p) per ordinary share

1

1,548

1,549

154

1,001

1,155

154

1,001

1,155

Interim dividend for the year ended 31 December 2013 of 2.0p per ordinary share

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

129

 

 

799

 

 

928

                                                                                                         

1

1,548

1,549

154

1,001

1,155

283

1,800

2,083

 

An interim dividend of 2.0 pence per ordinary share, amounting to £1,245,000 is proposed. The dividend has not been recognised in these half year financial statements as the obligation did not exist at the balance sheet date.

5.   Basic and Diluted Earnings per Ordinary Share

The basic and diluted earnings per ordinary share is based on the profit after tax attributable to equity shareholders of £58,000 (30 June 2013: profit of £1,031,000) and 53,185,770 (30 June 2013: 43,683,333) ordinary shares being the weighted average number of Ordinary shares in issue during the period. 

The basic and diluted revenue return per ordinary share is based on the revenue profit attributable to equity shareholders of £271,000 (30 June 2013: £129,000) and 53,185,770 (30 June 2013: 43,683,333) ordinary shares being the weighted average number of ordinary shares in issue during the period.

The basic and diluted capital loss per ordinary share is based on the capital loss attributable to equity shareholders of £213,000 (30 June 2013: capital return based on a profit of £902,000) and 53,185,770 (30 June 2013: 43,683,833) ordinary shares being the weighted average number of Ordinary shares in issue during the period.

During the period the Company allotted 377,855 new ordinary shares in respect of its dividend re-investment scheme and 15,511,615 new ordinary shares under the joint offer for subscription with British Smaller Companies VCT plc".

The Company has repurchased 63,196 of its own shares in the period and these shares are held in the capital reserve. The total of 1,840,918 treasury shares has been excluded in calculating the weighted average number of ordinary shares during the period. The Company has no securities that would have a dilutive effect and hence basic and diluted earnings per ordinary Share are the same.

6.   Financial Assets at Fair Value through Profit or Loss 

IFRS 7 and IFRS 13, in respect of financial instruments that are measured in the balance sheet at fair value, requires disclosure of fair value measurements by level within the following fair value measurement hierarchy:      

·      Level 1: quoted prices in active markets for identical assets or liabilities. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is defined as a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The quoted market price used for financial assets held by the Company is the current bid price. These instruments are included in Level 1 and comprise AIM quoted investments or government securities and other fixed income securities classified as held at fair value through profit or loss.

·      Level 2: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. The Company held no such instruments in the current or prior year.

·      Level 3: the fair value of financial instruments that are not traded in an active market (for example, investments in unquoted companies) is determined by using valuation techniques such as earnings multiples. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

Each investment is reviewed at least quarterly to ensure that it has not ceased to meet the criteria of the level in which it was included at the beginning of each accounting period. There has been no transfers between these classifications in the period (2013: one). The change in fair value for the current and previous year is recognised through profit or loss.

All items held at fair value through profit or loss were designated as such upon initial recognition and are subject to reoccurring valuations on at least a quarterly basis.

Valuation of Investments

Initial Measurement: Financial assets are initially measured at fair value. The best estimate of the initial fair value of a financial asset that is either quoted or not quoted in an active market is the transaction price (i.e. cost).

Subsequent Measurement: The International Private Equity and Venture Capital (IPEVC) Valuation Guidelines ("the Guidelines") identify six of the most widely used valuation methodologies for unquoted investments. The Guidelines advocate that the best valuation methodologies are those that draw on external, objective market based data in order to derive a fair value.

Full details of the methods used by the Company were set out on page 27 of the financial statements for the year ended 31 December 2013, a copy of which can be found at www.yfmep.com. Where investments are in quoted stocks, fair value is set at the market price.

The primary methods used for valuing non-quoted investments, and the key assumptions relating to them are:

Price of Recent investment, reviewed for changes in fair value: the cost of the investment, adjusted for background factors specific to the investment, is taken as a reasonable assessment of the fair value for a period of up to one year. During this period performance is monitored for evidence of changes to this initial fair value. Valuations may be re-based following substantial investment by a third party when this offers evidence that there has been a change to fair value.

Earnings multiple: The appropriate sector FTSER multiples are used as a market-based indication of the enterprise value of an investment company. A discount is applied to the multiple based on perceived market interest in that company or sector and on any benefit that may be observed by holding a significant shareholding or superior rights.

Movements in investments at fair value through profit or loss during the six months to 30 June 2014 are summarised as follows:

IFRS 13 measurement classification

Level 3

Level 1


Level 1



Unquoted Investments

 

Quoted Equity Investments

Total Quoted and Unquoted

Fixed Income Securities

Total Investments

 


£000

£000

£000

£000

£000

Opening cost

13,792

2,061

15,853

888

16,741

Opening valuation (loss) gain

(4)

406

402

2

404

Opening fair value at 1 January 2014

13,788

2,467

16,255

890

17,145







Additions at cost

5,185

318

5,503

475

5,978

Capitalised interest

8

-

8

-

8

Disposal proceeds

(359)

(492)

(851)

(1,365)

(2,216)

Net profit on disposal*

34

50

84

-

84

Change in fair value

(395)

59

(336)

-

(336)

Closing fair value at 30 June 2014

18,261

2,402

20,663

-

20,663







Closing cost

18,691

2,160

20,851

-

20,851

Closing valuation (loss) gain **

(430)

242

(188)

-

(188)

Closing fair value at 30 June 2014

18,261

2,402

20,663

-

20,663

 

*The net profit on disposal in the table above is £84,000 whereas that shown in Statement of Comprehensive Income is £347,000. The difference comprises deferred proceeds of £263,000 in respect of assets which have been disposed and are not included within the investment portfolio at the period end.

**Following the merger between the Company and British Smaller Technology Companies VCT plc, a total of £975,000 of negative goodwill was recognised in the investment holding gains and losses reserve in respect of investments acquired. The relevant amount per investment is released at the point of disposal to the capital reserve, At 30 June 2014, a total of £30,000 was held on investments yet to be realised in the investment holding gains and losses reserve.

Level 3 valuations include assumptions based on non-observable data, such as discounts applied either to reflect changes in fair value of financial assets held at the price of recent investment, or to adjust earnings multiples.

IFRS13 requires disclosure, by class of financial instruments, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a significant change to fair value measurement. The portfolio has been reviewed and both downside and upside alternative assumptions have been identified and applied to the valuation of each of the unquoted investments. Applying the downside alternative the value of the unquoted investments would be £1,480,000 (X8.1 per cent) lower. Using the upside alternative the value would be increased by £2,200,000 (12.0per cent).

Of the Company's equity investments, 11.6 per cent are quoted on AIM (31 December 2013: 15.2 per cent). A five per cent increase in stock prices as at 30 September 2013 would have increased the net assets attributable to the Company's shareholders and the total profit for the year by £120,000 (31 December 2013: £123,000). An equal change in the opposite direction would have decreased the net assets attributable to the Company's shareholders and the total profit for the period by an equal amount.

Of the Company's equity investments 88.4 per cent are in unquoted companies held at fair value (December 2013: 84.8 per cent). The valuation methodology for these investments includes the application of externally produced FTSER multiples. Therefore the value of the unquoted element of the portfolio is also indirectly affected by price movements on the listed market. Those using and earnings multiple methodology include judgements regarding the level of discount applied to that multiple. A 10 per cent decrease in the discount applied would have increased the net assets attributable to the Company's shareholders and the total profit by £550,000 (4.6 per cent of net assets). A change in the opposite direction would have decreased net assets attributable to the Company's shareholders and the total profit for the period by the same amount.

The total of fair value adjustments below cost made against investments at 30 June 2014 amounted to £275,000 (31 December 2013: £524,000).

There have been no individual fair value adjustments downwards during the period that exceeded five per cent of the total assets of the Company (31 December 2013: none).

Fixed income securities comprise UK Government stocks and are classified as financial assets through profit or loss. Their use is as temporary holdings until capital investment opportunities arise.

The following disposals took place during the period (all companies are unquoted unless otherwise stated).


Net proceeds from Sale

Cost

 

 

Opening carrying value as at 1 January 2014

Gain over opening carrying value

 

Profit (loss) on original cost


£000

£000

£000

£000

£000

Loan repayments






Displayplan Holdings Limited

228

175

191

37

53

GTK (UK) Limited

56

56

56

-

-

Bagel Nash Group Limited

40

40

40

-

-

Callstream Group Limited

35

23

38

(3)

12


359

294

325

34

65

Equity disposals






Pressure Technologies plc*

200

47

148

52

153

Iomart Group plc*

97

30

90

7

67

Vianet Group plc*

45

61

42

3

(16)

Optos plc*

150

80

162

(12)

70


492

218

442

50

274







Total disposals

851

512

767

84

339

Deferred Proceeds






Sirigen Group Limited (included in receivables)

263

-

-

263

263

Total proceeds from quoted and unquoted investments

1,114

512

767

347

602

Fixed Income Securities

1,365

1,365

1,365

-

-

Total

2,479

1,877

2,132

347

602

*Designates AIM quoted investments

 

7.   Basic and Diluted Net Asset Value per Ordinary Share

The basic and diluted net asset value per ordinary share is calculated on attributable assets of £39,330,000 (30 June 2013 and 31 December 2013: £30,258,000 and £30,458,000 respectively) and 62,269,837 (30 June 2013 and 31 December 2013: 46,371,537 and 46,443,563 respectively) ordinary shares in issue at 30 June 2014.

The 1,840,918 (30 June 2013: 1,632,722 and 31 December 2013: 1,777,722) treasury shares have been excluded in calculating the number of ordinary shares in issue at 30 June 2014. The Company has no securities that would have a dilutive effect and hence basic and diluted net asset value per ordinary share are the same.

8.   Total Return

Total return per share is calculated on cumulative dividends paid of 41.5 pence per ordinary share (30 June 2013: 37.0 pence per ordinary share and 31 December 2013: 39.0 pence per ordinary share) plus the net asset value as calculated in note 7.

9.   Directors

The directors of the Company are: Mr R Last, Mr R M Pettigrew, and Mr P C Waller.

10. Other Information

Copies of the interim report can be obtained from the Company's registered office: Saint Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZ or from www.bscfunds.com.

11. Interim Dividend for the six months ended 30 June 2014

Further to the announcement of its interim results for the 6 months to 30 June 2013, the Company confirms that an interim dividend of 2.0 pence per ordinary share ("Interim Dividend") will be paid on 7 October 2014 to those shareholders on the Company's register at the close of business on 5 September 2014. The ex-dividend date for the Interim Dividend will be 3 September 2014.

12. Dividend Re-investment Scheme ("DRIS")

The Company operates a dividend reinvestment scheme ("DRIS"). The latest date for receipt of DRIS elections so as to participate in the DRIS in respect of the Interim Dividend is the close of business on 22 September 2014.

 

 

 

For further information, please contact:

 

David Hall                                  YFM Equity Partners Limited                  Tel:  0113 294 5039

Gillian Martin                            Nplus 1 Singer Advisory LLP                    Tel:  0207 496 3000

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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