Interim Results
Bluehone AIM VCT2 PLC
17 July 2007
To: London Stock Exchange For immediate release:
17 July 2007
Bluehone AiM VCT2 plc
Interim results for the six month period
ended 31 May 2007
Ordinary Shares
• Net asset value per share increase of 12.5 per cent to 97.84 pence for the
period
• Net asset value total return of 14.8 per cent for the period
• An interim capital dividend of 1.75 pence per share payable on 24 August
2007
C Shares
• Net asset value per share increase of 1.9 per cent to 106.40 pence for the
period
• Net asset value total return of 3.9 per cent for the period
• An interim capital dividend of 1.0 pence per share payable on 24 August
2007
The Chairman Gordon Brough said:
'Performance
Bluehone AiM VCT2 had an encouraging first six months of the year, with the net
asset value of the Ordinary shares increasing to 97.84 pence per share, a total
return of 14.8 per cent. There was a particularly strong contribution from some
of the portfolio's largest holdings. This was achieved against a more favourable
background for the AiM market as a whole. In contrast with last year, when AiM
was inundated by new issues and capital fund raisings to the point where
investors lost sight of existing companies on the market, during the six month
period ended 31 May 2007 the FTSE AIM Allshare Index has increased by 19.0 per
cent, making it one of the best performing indices on the stock market. The FTSE
AIM Index has benefited from stronger performance from many of the larger
companies on the market, as well as a recovery in the performance in the
market's resource sector. There were also noticeably fewer companies joining the
market in the first five months of 2007 and for those that did, the average size
was considerably larger than those that joined last year.
It has been highlighted in the past that, due to the restrictive nature of the
investment criteria for VCTs, which precludes investment across a wide range of
AiM companies and sectors, the FTSE AIM Allshare Index is not an ideal benchmark
to judge an AiM VCT against. Nonetheless, it is helpful for the valuation of our
portfolio of companies that the AiM market itself is prospering once again,
after a difficult year in 2006. Although there is no meaningful benchmark for
AiM VCTs, given restrictive investment criteria and differing launch dates, for
shareholders who wish to see the performance of the Company in the context of
its AiM VCT peers, a useful website to view is www.trustnet.com. The Trustnet
database shows that Bluehone AiM VCT2 has been one of the best performing AiM
specialist VCTs over one and five years.
The portfolio
Once again favourable market conditions in the early part of the year enabled
the Manager to continue actively managing the portfolio, with a view to
releasing cash from some of the existing investments. In total £5.4 million was
raised from the partial disposal of a number of equity holdings, as well as,
proceeds of £582,000 from the takeover of Blooms of Bressingham by a consortium
led by Sir Tom Hunter. The most significant sale was the disposal of the
majority of the fund's holding in Tanfield at a profit of nine and a half times
the original cost. Tanfield experienced a strong run in its shares during the
period and increasing investor interest in the company enabled shares worth £4.4
million to be sold into rising prices. A profit was also taken from the sale of
twenty per cent of the holding in Worthington Nicholls for £218,000. After these
sales both Tanfield and Worthington Nicholls still remain significant holdings
within the portfolio.
The proceeds from the disposal of investments have been used to provide funds
for the payment of the 2006 final dividend and to finance the buy back and
cancellation of shares from those shareholders who wished to exit their holding
during the period. In addition, a total of £2.4 million was re-invested into the
portfolio. Five new investments were added to the portfolio comprising: K3
Business Technology; Vindon Healthcare; Tangent Communications; Expansys and
Servoca with a combined investment of £1.6 million. Eight existing portfolio
companies comprising: Claims People; Maelor; U4EA; Vicorp; Fulcrum Pharma;
Clearspeed; Fishworks and Corpora, raised further funds, either for working
capital or acquisition purposes, and these were backed with a further investment
totalling £761,000.
During the first half of the year, the portfolio benefited from good performance
from a large number of holdings. These companies had shown encouraging progress
with their business plans and once again, it was the positive share price
movements of the portfolio's largest holdings which contributed most to the
increase in the Net Asset Value. There were unfortunately also two notable
detractors from this performance.
Starting with the poor performers, it was disappointing to learn that the
clinical trials undertaken by biotechnology company Evolutec in 2006 were
unsuccessful and resulted in a collapse in the value of this holding. Evolutec
had been developing an exciting new area of biotechnology from proteins derived
from the saliva of arthropods and early laboratory trials looked promising.
However, when trials were carried out in humans it was discovered that the drug
had no discernable impact. The company is now considering its options with
regards to the remaining cash in its balance sheet.
The Manager decided to write the holding in Torex Retail down to zero in two
stages, following the suspension of these shares from AiM. After a busy
programme of acquisitions, funded to a large extent by debt, Torex announced in
January that its results would be significantly below expectations and that its
borrowings were higher than expected. The company has since announced that its
operating subsidiaries have been sold to a venture capitalist and the holding
company put into administration. It looks unlikely that shareholders will gain
any value for their shares once the banks have recouped their loans.
Turning to the positive influences on the performance of the portfolio, of which
I am pleased to say there were many, once again Bluehone AiM VCT2 benefited from
its large holding in Egdon Resources which increased by 34 per cent. I am sure
that shareholders will by now be familiar with Egdon's progress towards
developing a much needed gas storage facility beneath Portland Harbour in the
south of Great Britain. After two year's of detailed work by technical and
environmental teams, it was encouraging to see that Egdon submitted planning
applications and the Environmental Impact Assessment for its project in March
2007. We now look forward with great anticipation to the outcome of these
applications later in the year.
The largest positive influence on the performance of the Trust during the first
half of the year was however, the continuing rise in the shares of Tanfield
which, taking the recent sales of shares into account, added £2.7 million to the
value of the fund. Tanfield reported strong trading in its powered access
division as well as a number of important contract wins for its zero-emission
electric vehicle division, helping to stimulate investor interest. Having
originally backed the company in 2003 through a fund raising at 9.5 pence per
share, the Manager decided to lock in profits from this holding when it reached
15 per cent of the value of the fund. We have, however, retained exposure to the
shares and it remains one of the top twenty holdings.
Bond International Software, the specialist provider of software for the
international recruitment and human resources sector, announced good results for
2006. The company benefited from the introduction of a new version of its
software which fuelled organic growth and helped it to win its largest contract
to date worth $12 million over five years with Manpower. This year, Bond has
supplemented organic growth with two acquisitions which widen its product
offering and customer base.
The shares of Worthington Nicholls continued their strong run into 2007, rising
by a further 56 percent on the back of a number of sizeable contract wins. Since
joining AiM in June 2006 the company's shares have increased by 228 per cent and
it was not surprising that the company took advantage of the recent strength in
its shares to raise a further £20 million of development capital, to help fund
its organic growth and acquisitions. The Manager also used the increase in share
price to take profits by selling half of the holding.
Jelf Group continued its quest to be a consolidating force in the insurance
brokerage market with a number of well placed, earnings enhancing acquisitions,
to supplement its strong organic growth. The consolidation of small brokerages
has enabled the company to take advantage of economies of scale and cross
selling opportunities. This has attracted the attention of larger insurance
companies in the market, with both Allianz Cornhill Holdings and Aviva taking 5
per cent stakes in its shares. As one of the largest holdings, the fund also
benefited from the 28 per cent rise in Jelf's share price over the period.
Earnings and Dividends
Earnings for the period amounted to a loss of 0.18 pence per ordinary share and
as in the past, the Board is not in the position to recommend an interim income
dividend. However, buoyant market conditions at the start of the year enabled
the realisation of some investments at a profit and as a result the Board is in
a position to recommend payment of an interim capital distribution of 1.75 pence
per ordinary share. This will be paid on 24 August 2007 to shareholders on the
register on 27 July 2007. The total cost of this distribution will be
approximately £676,000 and will have the effect of reducing the company's assets
by 1.8 per cent. It remains the Board's opinion that the best way of returning
capital to shareholders is through the distribution of realised capital profits
to all shareholders. Since inception the Company has distributed a total of
15.75 pence per ordinary share back to shareholders and going forward we hope to
be in a position to continue our recent strategy of making capital dividend
payments.
C Share
The Manager continued with a busy investment programme for the C Share portfolio
investing £1.6 million across a further twelve new holdings. The portfolio now
comprises 27 individual holdings and has passed the required seventy per cent
qualifying asset test laid down in the VCT rules. The net asset value per share
increased to 106.4 pence, giving a total return of 3.9 per cent over the first
half, reflecting the recent nature of many of the investments in the portfolio.
Earnings in the period were £17,000 and the Board does not propose making an
interim income dividend. However, the further reduction of the portfolio's
holding in Worthington Nicholls at a profit has enabled the Board to declare an
interim capital distribution of 1.0 pence per C share, payable on 24 August 2007
to shareholders on the register on 27 July 2007.
Share buy back facility
At the end of May the Company's ordinary share price was 83.5 pence, up 13.6 per
cent from the level at the year end. This represents a discount to the Net Asset
Value per share of 14.7 per cent.
The volume of ordinary shares offered by the market for cancellation during the
first six months was 1.7 million and these were acquired at a cost of £1.4
million, representing 4.2 per cent of the issued ordinary share capital at the
beginning of the year. In order to continue to try and help provide a market for
the shares, the Board renewed its authority to buy back, as well as issue, a
proportion of the Company's shares at this year's AGM, held in April 2007.
Outlook
Stock markets have once again entered a more volatile period, following a strong
start to the year. As we come to the traditionally quieter summer months, the
riskier asset classes, which includes smaller company shares, are once again
finding themselves out of favour. Despite anticipation that 2007 will produce
another year of above average economic growth, investors appear to be concerned
about the build up of inflationary pressures and the possibility of a protracted
cycle of fiscal tightening in response. On the domestic front the economy
remains healthy and whilst inflation is higher than the Bank of England would
like, there are signs that the housing and commercial property markets are
softening in response to recent interest rate increases. It has to be hoped that
we are nearing the end of the current interest rate cycle and that equity
markets and in particular smaller company shares will be in a better position to
move ahead in the autumn. Against this background we anticipate progress being
made by portfolio companies and are optimistic of positive news from some of our
largest holdings. I look forward to updating shareholders again at the year end.
'
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 2007
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 - 2,630 2,630 - 74 74 - 2,704 2,704
Unrealised gains - 2,695 2,695 - 54 54 - 2,749 2,749
Income (note 4) 147 - 147 38 - 38 185 - 185
Investment management fee (111) (333) (444) (9) (28) (37) (120) (361) (481)
Other expenses (108) - (108) (10) - (10) (118) - (118)
(Loss)/profit on ordinary activities
before taxation (72) 4,992 4,920 19 100 119 (53) 5,092 5,039
Tax on ordinary activities - - - (2) 2 - (2) 2 -
(Loss)/profit on ordinary activities
after
taxation (72) 4,992 4,920 17 102 119 (55) 5,094 5,039
Return per share: (0.18p) 12.53p 12.35p 0.58p 3.46p 4.04p (0.12p) 11.45p 11.33p
Unaudited reconciliation of movement in shareholders' funds for the six month
period ended 31 May 2007
Ordinary C
Shares Shares Total
£'000 £'000 £'000
Opening shareholders' funds 35,057 3,079 38,136
Profit for the period 4,920 119 5,039
Increase in share capital 29 - 29
Purchase of shares (1,395) - (1,395)
Dividends paid (806) (59) (865)
Closing shareholders' funds 37,805 3,139 40,944
Unaudited income statement for the six month period ended 31 May 2006
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 - 65 65 - - - - 65 65
Unrealised (losses)/ gains - (360) (360) - 21 21 - (339) (339)
Income (note 4) 159 - 159 15 - 15 174 - 174
Investment management fee (101) (302) (403) (3) (9) (12) (104) (311) (415)
Other expenses (109) - (109) (2) - (2) (111) - (111)
(Loss)/profit on ordinary activities
before taxation (51) (597) (648) 10 12 22 (41) (585) (626)
Tax on ordinary activities - - - - - - - - -
(Loss)/profit on ordinary activities
after
taxation (51) (597) (648) 10 12 22 (41) (585) (626)
Return per share: (0.12p) (1.41p) (1.53p) 0.53p 0.72p 1.25p (0.10p) (1.35p) (1.45p)
Unaudited reconciliation of movement in shareholders' funds for the six month
period ended 31 May 2006
Ordinary C Total
Shares Shares
£'000 £'000 £'000
Opening shareholders' funds 35,700 - 35,700
(Loss)/profit for the period (648) 22 (626)
Increase in share capital 46 2,803 2,849
Purchase of shares (1,278) - (1,278)
Dividends paid (645) - (645)
Closing shareholders' funds 33,175 2,825 36,000
Audited income statement for the year ended 30 November 2006
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 - 1,116 1,116 - 55 55 - 1,171 1,171
Unrealised gains - 2,197 2,197 - 225 225 - 2,422 2,422
Income (note 4) 239 - 239 64 - 64 303 - 303
Investment management fee (204) (611) (815) (13) (39) (52) (217) (650) (867)
Other expenses (254) - (254) (16) - (16) (270) - (270)
(Loss)/profit on ordinary activities
before taxation (219) 2,702 2,483 35 241 276 (184) 2,943 2,759
Tax on ordinary activities 2 - 2 - - - 2 - 2
(Loss)/profit on ordinary activities
after
taxation (217) 2,702 2,485 35 241 276 (182) 2,943 2,761
Return per share: (0.52p) 6.49p 5.97p 1.39p 9.58p 10.97p (0.42p) 6.75p 6.33p
Audited reconciliation of movement in shareholders' funds for the year ended 30
November 2006
Ordinary C Total
Shares Shares
£'000 £'000 £'000
Opening shareholders' funds 35,700 - 35,700
Profit for the period 2,485 276 2,761
Increase in share capital 56 2,803 2,859
Purchase of shares (1,920) - (1,920)
Dividends paid (1,264) - (1,264)
Closing shareholders' funds 35,057 3,079 38,136
Balance Sheet
As at 31 May 2007 As at 31 May 2006 As at 30 November 2006
Unaudited Unaudited Audited
Ordinary C Ordinary C Ordinary C
shares Shares Total shares Shares Total shares Shares Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Fixed asset investments
Listed investments 109 - 109 - - - - - -
Quoted on AiM 33,268 2,198 35,466 28,795 318 29,113 30,838 1,310 32,148
Quoted on PLUS Market 489 - 489 990 - 990 651 - 651
UK government securities 746 671 1,417 - - - 230 1,646 1,876
Unquoted investments 3,344 105 3,449 3,012 70 3,082 3,374 104 3,478
37,956 2,974 40,930 32,797 388 33,185 35,093 3,060 38,153
Current assets
Debtors 280 82 362 48 10 58 46 53 99
Cash at bank and on deposit 626 376 1,002 500 2,660 3,160 197 45 242
906 458 1,364 548 2,670 3,218 243 98 341
Creditors (1,057) (293) (1,350) (170) (233) (403) (279) (79) (358)
Net current (liabilities)/
assets (151) 165 14 378 2,437 2,815 (36) 19 (17)
Total assets less current
liabilities 37,805 3,139 40,944 33,175 2,825 36,000 35,057 3,079 38,136
Equity shareholders' funds 37,805 3,139 40,944 33,175 2,825 36,000 35,057 3,079 38,136
Net asset value per share 97.84p 106.40p 80.37p 95.76p 86.97p 104.37p
Number of shares in issue at
balance sheet date 38,638,848 2,950,085 41,280,023 2,950,085 40,310,023 2,950,085
Statement of Cash Flows
Six months to
31 May 2006 Year to
30 Nov 2006
Six months to 31 May 2007
Unaudited Unaudited Audited
£'000 £'000 £'000 £'000 £'000
Net cash outflow from operating activities (416) (3) (419) (523) (1,002)
Tax recovered - - - - 2
Capital expenditure and financial investment 3,017 393 3,410 1,248 51
Equity dividends paid (806) (59) (865) (645) (1,264)
Net cash inflow/(outflow) before financing 1,795 331 2,126 80 (2,213)
Financing (1,366) - (1,366) 1,623 998
Increase/ (decrease) in cash 429 331 760 1,703 (1,215)
Reconciliation of net cash flow to movement in net cash
Increase/(decrease) in cash 429 331 760 1,703 (1,215)
Opening net cash 197 45 242 1,457 1,457
Net cash at 31 May/30 November 626 376 1,002 3,160 242
Reconciliation of net revenue before taxation to net cash
flow from operating activities
Profit/(loss) on ordinary activities before taxation 4,920 119 5,039 (626) 2,761
Profit on realisation of investments (2,630) (74) (2,704) (65) (1,171)
Unrealised (gains)/losses on investments (2,695) (54) (2,749) 339 (2,422)
Decrease/(increase) in debtors 4 8 12 (29) (31)
Decrease in creditors (15) (2) (17) (142) (139)
Net cash outflow from operating activities (416) (3) (419) (523) (1,002)
Notes
1. The unaudited interim results for the six month period ended 31 May
2007 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 2006.
2. There were 38,638,848 ordinary shares in issue at 31 May 2007 (31 May
2006 - 41,280,023; 30 November 2006 - 40,310,023). During the six months ended
31 May 2007 the Company issued 28,825 ordinary shares under the Dividend
Reinvestment Scheme. The Company bought back for cancellation 1,700,000
ordinary shares at a cost of £1,395,000. There were 2,950,085 C shares in issue
at 31 May 2007 (31 May 2006: 2,950,085, 30 November 2006: 2,950,085)
3. Earnings for the six months to 31 May 2007 should not be
taken as a guide to the results for the full year and are based on a weighted
average of 39,836,150 (31 May 2006: 42,279,173, 30 November 2006: 41,635,148)
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 2006 Year to
30 Nov 2005
Six months to 31 May 2007
Ord C shares
shares
Total Total Total
£'000 £'000 £'000 £'000 £'000
Equity investments 118 1 119 128 184
Fixed interest investment 17 32 49 4 58
Deposit Interest 12 5 17 42 61
147 38 185 174 303
6. These are not statutory accounts in terms of Section 240 of the
Companies Act 1985 and are unaudited. Statutory accounts for the period to 30
November 2006, which were unqualified, have been lodged with the Registrar of
Companies.
7. An interim capital dividend of 1.75 pence per ordinary share will be
paid on 24 August 2007 to ordinary shareholders on the register on 27 July 2007.
8. An interim capital dividend of 1.0 pence per C share will be paid on 24
August 2007 to C shareholders on the register on 27 July 2007.
9. Copies of the Interim Report will be mailed to shareholders shortly and
will be available from the Registered Office of the Company at Exchange House,
Primrose Street, London, EC2A 2NY.
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