Half Yearly Report

RNS Number : 3859W

Bluehone AIM VCT2 PLC

28 July 2009

 



Bluehone AiM VCT2 plc

Interim results for the six month period 

ended 31 May 2009

Investment Objective

To provide shareholders with a tax efficient means of gaining long term capital growth and an attractive dividend stream primarily through investment in a diversified portfolio of AiM companies and unquoted companies. 

Ordinary Shares

• Net asset value total return of 19.6 per cent for the period

• An interim capital dividend of 0.5 pence per share, payable on 28 August 2009

C Shares

• Net asset value total return of -11.6 per cent for the period

The Chairman Gordon Brough said:

Market Background

After the failure of Lehman Brothers Bank in the autumn of 2008 the problems facing the banking sector intensified and companies started the year facing a deep recession, with most sectors of the economy being adversely affected. Stock markets around the world continued their falls whilst governments applied desperate measures to avoid systemic financial collapse. However, fears that we were heading for another Great Depression receded as this coordinated action began to take effect and stock markets reached a nadir in March, before staging a partial recovery during the spring. This recovery accompanied a rebound in commodity prices and re-stocking by businesses that had previously let inventory levels fall in the face of dwindling demand. The AiM market also reached its nadir in early March and has since enjoyed a period of recovery off a very low base. In the six months to 31 May, the FTSE AIM All-Share Index increased by 29.4 per cent. This performance looks impressive when compared to the main market which increased by just 5.6 per cent over the same period; but a note of explanation is in order. Much of the gain in the AiM index has once again come from its resource sector which makes up 28 per cent of the index and which responded strongly to the recovery in world commodity prices. Elsewhere smaller companies have borne the brunt of the problems facing the financial sector, being less able to access bank finance and finding it difficult to raise equity finance. Apart from the strong showing by the resource sectors, performance within the AiM market generally has been patchy with some companies faring better than others.

Performance

The Net Asset Value per Ordinary share of Bluehone AiM VCT2 increased by 19.6 per cent over the period to reach 38.7 pence per share. The portfolio was positively influenced by an improvement in the share prices of some of its larger holdings. Portland Gas recommenced its financing process for its underground gas storage facility and it is hoped that the company will be successful in organising the necessary funding within this calendar year. Vectura continued to make progress with the development of its drug and drug delivery systems as well as announcing a healthy increase in revenues from existing products. Elsewhere, there were positive operational updates from a good number of portfolio companies all of which appear to be making satisfactory progress despite the downturn. However, the poor economic and financial background has been a severe challenge to some companies in the portfolio, particularly those with weaker balance sheets or those requiring the ongoing support of their shareholders. It was therefore disappointing to see the write off of investments in U4EA, Sanastro and Infonics when these companies went into administration due to a lack of funding. 

Portfolio Activity

The level of activity within the portfolio was low by historic standards, reflecting the difficult market backdrop. There were, however, periods when the ability to trade shares in the AiM market improved. Whilst much of this turnover was concentrated in the larger companies on the market, some individual stocks in the portfolio also showed more life than they had done for a while. The Manager took advantage of this temporary increase in liquidity to improve the focus of the portfolio and divested some of the smaller holdings where significant recovery was not anticipated. To this end, holdings in Byotrol, Autoclenz, Tanfield, Evolutec, Sport Media and Conexion Media have been sold. This process of reducing the number of holdings in the portfolio is expected to continue subject to liquidity being available in individual situations. On the investment side there was very little new issue activity within the AiM market to speak of. The Company supported two of its existing holdings, Servoca and Datum International with further investments; it also added to its holding in WIN.  

Earnings and Dividends

Earnings for the period amounted to a loss of 0.2 pence per Ordinary share. However, following the recovery from HM Revenue and Customs of VAT paid in the past on investment management fees and the cancellation of the Company's share premium account, which has created a distributable reserve, the Board is able to recommend a capital distribution of 0.5 pence per share. This will be paid on 28 August 2009 to Ordinary shareholders on the register on 7 August 2009. The total cost of this distribution will be approximately £277,000 and will have the effect of reducing the Company's assets by 1.3 per cent. The Board believes that distributions are the most effective and fairest way of returning capital as they are received by all shareholders. It intends to continue distributing capital profits to shareholders as and when they arise from the sale of individual investments from within the portfolio. Following payment of the interim distribution in August the Company will have paid back 19 pence per share to shareholders. 

C Share performance

The Net Asset Value per share of the C share portfolio fell by 11.6 per cent over the period to 49.9 pence with the portfolio suffering from its exposure to Infonic and U4EA. Both of these companies went into administration after failing to make adequate operational progress, combined with a subsequent lack of financial support from shareholders. The portfolio's largest investment CBG Group also fell by 39 per cent over the period which had a negative impact. This Manchester based company specialises in insurance broking and financial services to small and medium sized businesses and reported that challenging trading conditions were putting its financial performance under pressure. The company remains well financed and a strong regional player that should bounce back when the economy improves.

C Share Conversion

At the AGM in April, C shareholders voted not to tender their shares for realisation and as a result these shares will convert into Ordinary shares in November 2009. The calculation date for conversion will be 23 November 2009, with conversion occurring shortly thereafter and new Ordinary share certificates being sent to shareholders. Conversion will take place automatically without any further action required from shareholders.

Change of Broker and Trading in Bluehone AiM VCT2 shares.

The Company was in the unfortunate position once again to have to change its broker when the parent company to Teathers was placed into administration, resulting in Teathers ceasing to make markets in its shares. The Company was pleased therefore, to be able to appoint Matrix Securities as its new brokers in March 2009. The Company currently has three market makers and in recent months has seen a noticeable improvement in the two-way trading of its shares, albeit that there remains a sizeable discount in the price of the shares in relation to the net asset value per share.

Outlook

We enter the summer period with most markets, including AiM, coming off their recent highs and the recovery seen earlier in the year appearing to have petered out. This suggests that investors are not yet convinced that widely reported 'green shoots' are evidence of economic recovery. At best the economic slowdown appears to be decelerating with real signs of a sustained improvement still someway off. There remain many structural imbalances in the world economy that will take time to correct and the recovery can be expected to be anaemic as well as protracted when it comes. Against this background we can expect the market for smaller company shares to remain volatile and unpredictable. That said, valuations have been so severely hit over the past few years that many smaller company shares are trading on historically low levels and substantial discounts to the larger companies quoted on the main market. Your Board and Manager believe this is also true of many companies held within the portfolio and we look forward to them participating more fully in the recovery when it comes. 

Gordon Brough

Chairman

For further information, please contact:

Robert Mitchell

Sally Mills

Bluehone Investors LLP

0207 496 8929

  Unaudited Income Statement for the six month period ended 31 May 2009

	Ordinary shares			C shares			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Loss on realisation of investments	-	(19)	(19)	-	(2)	(2)	-	(21)	(21)
Changes in fair value of investments	-	3,764	3,764	-	(174)	(174)	-	3,590	3,590
Income (note 4)	103	-	103	13	-	13	116	-	116
Investment management fee	(34)	(102)	(136)	(4)	(12)	(16)	(38)	(114)	(152)
Other expenses	(199)	-	(199)	(13)	-	(13)	(212)	-	(212)
(Loss)/profit on ordinary activities	(130)	3,643	3,513	(4)	(188)	(192)	(134)	3,455	3,321
before taxation
Tax on ordinary activities	-	-	-	-	-	-	-	-	-
(Loss)/profit on ordinary activities after	(130)	3,643	3,513	(4)	(188)	(192)	(134)	3,455	3,321
taxation
Return per share:	(0.23p)	6.58p	6.35p	(0.15p)	(6.35p)	(6.50p)

Unaudited Reconciliation of Movement in Shareholders' Funds for the six month period ended 31 May 2009

	Ordinary Shares	C Shares	Total
	£'000	£'000	£'000
Opening shareholders' funds	17,894	1,665	19,559
Profit/(loss) for the period	3,513	(192)	3,321
Closing shareholders' funds	21,407	1,473	22,880

  Unaudited Income Statement for the six month period ended 31 May 2008

	Ordinary shares			C shares			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Profit on realisation of investments	-	1,090	1,090	-	102	102	-	1,192	1,192
Changes in fair value of investments	-	(564)	(564)	-	(332)	(332)	-	(896)	(896)
Income (note 4)	106	-	106	15	-	15	121	-	121
Investment management fee	(81)	(242)	(323)	(8)	(24)	(32)	(89)	(266)	(355)
Other expenses	(110)	(5)	(115)	(12)	-	(12)	(122)	(5)	(127)
(Loss)/profit on ordinary activities
before taxation	(85)	279	194	(5)	(254)	(259)	(90)	25	(65)
Tax on ordinary activities	-	-	-	-	-	-	-	-	-
(Loss)/profit on ordinary activities after
taxation	(85)	279	194	(5)	(254)	(259)	(90)	25	(65)
Return per share:	(0.22p)	0.73p	0.51p	(0.17p)	(8.61p)	(8.78p)

Unaudited Reconciliation of Movement in Shareholders' Funds for the six month period ended 31 May 2008

	Ordinary Shares	C Shares	Total
	£'000	£'000	£'000
Opening shareholders' funds	27,863	2,824	30,687
Profit/(loss) for the period	194	(259)	(65)
Increase in share capital	26	-	26
Purchase of shares	(77)	-	(77)
Dividends paid	(688)	-	(688)
Closing shareholders' funds	27,318	2,565	29,883

Audited Income Statement for the year ended 30 November 2008

	Ordinary shares			C shares			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Profit on realisation of investments	-	451	451	-	36	36	-	487	487
Changes in fair value of investments	-	(19,871)	(19,871)	-	(1,171)	(1,171)	-	(21,042)	(21,042)
Income (note 4)	256	116	372	33	1	34	289	117	406
Investment management fee	(130)	(392)	(522)	(12)	(38)	(50)	(142)	(430)	(572)
VAT on management fees refund	265	795	1,060	5	14	19	270	809	1,079
Other expenses	(245)	-	(245)	(27)	-	(27)	(272)	-	(272)
Profit / (loss) on ordinary activities	146	(18,901)	(18,755)	(1)	(1,158)	(1,159)	145	(20,059)	(19,914)
before taxation
Tax on ordinary activities	-	-	-	-	-	-	-	-	-
Profit / (loss)  on ordinary activities after	146	(18,901)	(18,755)	(1)	(1,158)	(1,159)	145	(20,059)	(19,914)
taxation
Return per share:	0.33p	(42.69p)	(42.36p)	(0.03p)	(39.22p)	(39.25p)

Audited Reconciliation of Movement in Shareholders' Funds for the year ended 30 November 2008

	Ordinary Shares	C Shares	Total
	£'000	£'000	£'000
Opening shareholders' funds	27,863	2,824	30,687
Loss for the period	(18,755)	(1,159)	(19,914)
Increase in share capital	10,267	-	10,267
Expenses of share issue	(162)	-	(162)
Purchase of shares	(77)	-	(77)
Dividends paid	(1,242)	-	(1,242)
Closing shareholders' funds	17,894	1,665	19,559

Balance Sheet

	As at 31 May 2009			As at 31 May 2008			As at 30 November 2008
	Unaudited			Unaudited			Audited
	Ordinary shares	C Shares	Total	Ordinary shares	C Shares	Total	Ordinary shares	C Shares	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Fixed asset investments
Quoted on AiM	14,350	1,108	15,458	21,627	1,985	23,612	11,002	1,209	12,211
Quoted on PLUS market	405	-	405	443	-	443	340	-	340
Listed investments	2,636	-	2,636	1,133	-	1,133	1,788	-	1,788
UK government securities	1,522	340	1,862	501	436	937	976	387	1,363
Unquoted investments	2,322	-	2,322	3,014	105	3,119	2,905	51	2,956
	21,235	1,448	22,683	26,718	2,526	29,244	17,011	1,647	18,658
Current assets
Debtors	160	14	174	108	9	117	811	16	827
Cash at bank and on deposit	187	24	211	612	61	673	207	14	221
	347	38	385	720	70	790	1,018	30	1,048
Creditors	(175)	(13)	(188)	(120)	(31)	(151)	(135)	(12)	(147)
Net current assets	172	25	197	600	39	639	883	18	901
Total assets less current liabilities	21,407	1,473	22,880	27,318	2,565	29,883	17,894	1,665	19,559
Equity shareholders' funds	21,407	1,473	22,880	27,318	2,565	29,883	17,894	1,665	19,559
Net asset value per share	38.66p	49.93p		71.54p	86.95p		32.32p	56.47p
Number of shares in issue at balance sheet date	55,370,992	2,950,085		38,184,466	2,950,085		55,370,992	2,950,085

  Summarised Statement of Cash Flow

	Six months to 31 May 2009			Six months to 31 May 2008	Year to 30 Nov 2008
	Unaudited			Unaudited	Audited
	Ord shares £'000	C shares £'000	Total £'000	Total £'000	Total £'000
Net cash inflow /(outflow) from operating activities	522	(14)	508	(339)	(178)
Capital expenditure and financial investment	(542)	24	(518)	1,386	1,398
Equity dividends paid	-	-	-	(688)	(1,224)
Net cash (outflow) / inflow before financing	(20)	10	(10)	359	(4)
Financing	-	-	-	(51)	(140)
(Decrease) / increase in cash	(20)	10	(10)	308	(144)
Reconciliation of net cash flow to movement in net cash
(Decrease) / increase in cash	(20)	10	(10)	308	(144)
Opening net cash	207	14	221	365	365
Net cash at 31 May/30 November	187	24	211	673	221

Reconciliation of net revenue before taxation to net cash flow from operating activities

Profit/(loss) on ordinary activities before taxation	3,513	(192)	3,321	(65)	(19,914)
Loss / (profit) on realisation of investments	19	2	21	(1,192)	(487)
Changes in fair value of investments	(3,764)	174	(3,590)	896	21,042
Decrease/(increase) in debtors	714	2	716	23	(778)
Increase / (decrease) in creditors	40	-	40	(1)	(41)
Net cash inflow / (outflow) from operating activities	522	(14)	508	(339)	(178)

              Notes

1.    The unaudited interim results for the six month period ended 31 May 2009 have been prepared in accordance with applicable accounting standards, adopting the accounting policies set out in the statutory accounts for the year ended 30 November 2008.

2.    There were 55,370,992 Ordinary shares in issue at 31 May 2009 (31 May 2008 - 38,184,466; 30 November 2008 - 55,370,992).  There were 2,950,085 C shares in issue at 31 May 2009 (31 May 2008: 2,950,085, 30 November 2008: 2,950,085)

            3.   Earnings for the six months to 31 May 2009 should not be taken as a guide to the results for the full year
            and are based on a weighted average of 55,370,992 (31 May 2008: 38,224,316, 30 November
            2008: 44,274,717) Ordinary shares in issue during the period and 2,950,085 C Shares. 

            4.   Income for the period is derived from:

	Six months to 31 May 2009			Six months to 31 May 2008	Year to 30 Nov 2008
	Ord shares	C shares	Total	Total	Total
	£'000	£'000	£'000	£'000	£'000
Equity investments	67	5	72	77	175
Fixed interest investment	35	8	43	11	33
Deposit Interest	1	-	1	33	41
Miscellaneous Income	-	-	-	-	157
	103	13	116	121	406

             5.  The interim dividend of 0.5p per Ordinary share will be paid on 28 August 2009 to shareholders on the
             register on 7 August 2009. In accordance with accounting standards this dividend has not been accounted for
             in the results for the six months ended 31 May 2009. 

             6.  These accounts have not been audited or reviewed by the Company's auditors.

             7.   These are not statutory accounts in terms of Section 434 of the Companies Act 2006. Statutory accounts
            for the year ended 30 November 2008, which were unqualified, have been lodged with the Registrar of
            Companies.

            8.  Copies of the Interim Report will be mailed to shareholders and will be available from the Registered Office
            of the Company at Exchange House, Primrose Street, London, EC2A 2NY.

  Statement of Principal Risks and Uncertainties

The Company's assets consist mainly of listed securities and its principal risks are therefore market related. Risks faced by the Company include loss of approval as a venture capital trust, investment and strategic, regulatory, reputational, operational, financial, market and liquidity risks. These risks, and the way in which they are mitigated, are described in more detail under the heading Principal Risks, Risk Management and Regulatory Environment within the Report of the Directors in the Company's Annual Report for the year ended 30 November 2008. The Company's principal risks and uncertainties have not changed materially since the date of that report.

Statement of Directors' Responsibilities in Respect of the Interim Results

We confirm that to the best of our knowledge:

• the financial statements have been prepared in accordance with the Statement 'Half-Yearly Financial Reports' issued by the UK Accounting Standards Board and give a true and fair view of the assets, liabilities, financial position and return of the Company; 

• the Chairman's Statement (constituting the Interim Management Report) includes a fair review of the information required by the Disclosure and Transparency Rules ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

• the Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R; and

• the financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board

Gordon H Brough

Director

28 July 2009

 

END

 

 

IR IIFFADDITFIA