Last checked at 
26 Aug 2009 09:24
British Smaller Technology Companies VCT 2 plc
unaudited Interim Results and Interim Management Statement
For the 6 months ended 30 June 2009
British Smaller Technology Companies VCT 2 plc ("the Company") today announces its unaudited interim results for the six months to 30 June 2009.
Chairman's Statement
The six months to 30 June 2009 have first and foremost seen considerable support and effort from the Fund Manager for the existing portfolio. Whilst these are challenging economic times, for well-funded and well-managed businesses they are also a time of considerable opportunity to expand market share either organically or through acquisition. In the last six months the Company has provided financial support to a number of its investments and stands ready with further funds should the need arise.
The overall result for the period has seen the total return increase by 0.8 pence per share to 93.7 pence per share. The net asset value is 75.7 pence per share, which compares to 76.9 pence per share at 31 December 2008. This reflects the recognition of the final interim dividend of 2.0 pence per share and the underlying increase in the residual assets of 0.8 pence per share.
Interim Management Report
The six months to 30 June 2009 have been characterised by a period of review and re-assessment both of the short term trading outlooks for our investments and the medium term opportunities. The companies that we have invested in have not, in general, had significant levels of debt in their businesses and consequently have not been significantly impacted by discussions over covenant tests or having to address re-financing issues.
In the period a further investment of £209,000 was made to support the continuing development of Silistix Limited.
Significant progress has been made by DxS Limited as its products continue to be adopted by the markets. Particularly encouraging progress is being made by both Primal Pictures Limited and Waterfall Services Limited. Those businesses seeking overseas expansion but yet to break into profitability in the overseas market have found the current exchange rate environment more challenging, but are moving to minimise the exchange rate risk.
The Company continues to review new investment opportunities. During the first three months of the financial year we continued to see a misalignment of vendor and purchaser expectations as well as a degree of caution in businesses that has seen them concentrate more on the short term rather than medium term growth. More recently we have seen a reduction in pricing expectations although caution still exists. However, the Board remains of the opinion that there will be a growing number of good investment opportunities over the next 12 to 24 months.
Financial Results
The result for the six months ended 30 June 2009 produced a revenue profit before tax of £38,000 and a capital profit before tax of £101,000 (2008: £21,000 and £880,000 respectively).
Containment of costs and a small increase in the level of income generation, principally as a result of loan interest from investments, has seen the revenue profit before tax increase. The capital profit before tax arises from the increase in investment valuations in the period. This capital profit is below that achieved in the same period in the previous year which benefited from the sale of Sarian Systems Limited.
Cash and investment in gilts at 30 June 2009 totalled £4.55 million (June 2008: £6.24 million), representing 36% (June 2008: 45%) of net asset value before taking account of any interim dividend. The Board considers that this is sufficient to support the current portfolio and to continue its investment strategy in selective new opportunities in the short term, although the Board will be seeking to increase the Company's investment capacity through a fundraising later in the year.
Shareholder Relations
In addition to the required statutory announcements, the Board continues to run shareholder workshops where shareholders are invited to meet members of the Board, representatives from YFM Private Equity Limited, the Fund Manager and the CEOs of one or more of the portfolio investments. In the last six months a workshop was held at the Imperial War Museum with in excess of 100 shareholders and their advisors attending. The Board remains committed to this programme.
The Board also remains committed to the objective of achieving a consistent dividend stream. This has been continued in these interim results with your Board determining that an interim dividend of 2.0 pence per share will be paid on 2 October 2009 to shareholders on the register as at 4 September 2009.
Outlook
These continue to be challenging economic times but our investments remain soundly financed. Whilst some have taken the opportunity to address their costs bases as a defensive measure others have continued to develop and prosper. This Company is well placed to continue to support these investments and take advantage of investment opportunities that may arise in the short term.
The Board remains firmly of the opinion that the upcoming period is likely to present a number of investment opportunities, both for the existing portfolio businesses and for new investments. It is with this in mind that we will be seeking to increase the investment capacity later in the year.
Richard Last
26 August 2009
Statement of Comprehensive Income
For the 6 months ended 30 June 2009
| Unaudited 6 months ending 30 June 2009 | Unaudited 6 months ending 30 June 2008 | ||||||
| Notes | Revenue £000 | Capital £000 | Total £000 | Revenue (restated) £000 | Capital (restated) £000 | Total £000 | |
| (Loss) gain on realisation of investments | - | (13) | (13) | - | 1,366 | 1,366 | |
| Gains (losses) on investments held at fair value | - | 234 | 234 | - | (341) | (341) | |
| Income | 2 | 192 | - | 192 | 180 | - | 180 |
| Administrative expenses: | |||||||
| Fund Management fee | (40) | (120) | (160) | (48) | (145) | (193) | |
| Other expenses | (114) | - | (114) | (111) | - | (111) | |
| (154) | (120) | (274) | (159) | (145) | (304) | ||
| Profit before taxation | 38 | 101 | 139 | 21 | 880 | 901 | |
| Taxation | 3 | (4) | 4 | - | (3) | 3 | - |
| Profit for the period attributable to equity shareholders | 34 | 105 | 139 | 18 | 883 | 901 | |
| Total comprehensive income for the period attributable to equity shareholders | 34 | 105 | 139 | 18 | 883 | 901 | |
| Basic and diluted earnings per ordinary share | 5 | 0.20p | 0.63p | 0.84p | 0.11p | 5.31p | 5.41p |
The total column of this statement represents the Company's income statement, prepared in accordance with International Financial Reporting Standards ('IFRS'). 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.
Balance Sheet
As at 30 June 2009
| Notes | Unaudited 6 months ended 30 June 2009 £000 | Unaudited 6 months ended 30 June 2008 (restated) £000 | Audited year ended 31 December 2008 £000 | |||
| Assets | ||||||
| Non-current assets | ||||||
| Investments | 7,980 | 7,378 | 4,864 | |||
| Fixed income government securities | 3,905 | 5,867 | 7,488 | |||
| Financial assets at fair value through profit or loss | 11,885 | 13,245 | 12,352 | |||
| Current assets | ||||||
| Trade and other receivables | 126 | 253 | 388 | |||
| Cash and cash equivalents | 646 | 368 | 109 | |||
| 772 | 621 | 497 | ||||
| Liabilities | ||||||
| Current liabilities | ||||||
| Trade and other payables | (57) | (64) | (55) | |||
| Net current assets | 715 | 557 | 442 | |||
| Net assets | 12,600 | 13,802 | 12,794 | |||
| Shareholders' equity | ||||||
| Share capital | 1,664 | 1,664 | 1,664 | |||
| Share premium | 69 | 69 | 69 | |||
| Capital redemption reserve | 88 | 88 | 88 | |||
| Merger reserve | 5,525 | 5,525 | 5,525 | |||
| Other reserve | 2 | 2 | 2 | |||
| Realised capital reserve | 3,045 | 4,173 | 3,497 | |||
| Unrealised capital reserve | (2,945) | (2,746) | (3,169) | |||
| Special reserve | 4,786 | 4,786 | 4,786 | |||
| Revenue reserve | 366 | 241 | 332 | |||
| Total Shareholders' equity | 12,600 | 13,802 | 12,794 | |||
| Net asset value per Ordinary share | 6 | 75.7p | 82.9p | 76.9p | ||
The Balance Sheet for the six months ended 30 June 2008 has been restated following the adoption of 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 to show additional reserves, and the reclassification of Government Securities as described in note 1.
Unaudited Statement of Changes in Equity
For the 6 months ended 30 June 2009
| Share capital | Share premium account | Merger reserve | *Other reserves | Realised capital reserve | Unrealised Capital reserve | Special reserve | Revenue reserve | Total equity | |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| At 31 December 2007 | 1,664 | 69 | 5,525 | 90 | 2,224 | (1,539) | 4,786 | 332 | 13,151 |
| Revenue return for the period | - | - | - | - | - | - | - | 18 | 18 |
| Realisation of negative goodwill | - | - | - | - | 448 | (448) | - | - | - |
| Capital expenses | - | - | - | - | (142) | - | - | - | (142) |
| Unrealised loss on investments held at fair value | - | - | - | - | - | (341) | - | - | (341) |
| Realisation of prior year unrealised gains | - | - | - | - | 418 | (418) | - | - | - |
| Realisation of investments in the period | - | - | - | - | 1,366 | - | - | - | 1,366 |
| Dividends | - | - | - | - | (141) | - | - | (109) | (250) |
| At 30 June 2008 | 1,664 | 69 | 5,525 | 90 | 4,173 | (2,746) | 4,786 | 241 | 13,802 |
| Revenue return for the period | - | - | - | - | - | - | - | 91 | 91 |
| Capital expenses | - | - | - | - | (10) | - | - | - | (10) |
| Realisation of negative goodwill | - | - | - | - | - | - | - | - | - |
| Unrealised loss on investments held at fair value | - | - | - | - | - | (427) | - | - | (427) |
| Realisation of prior year unrealised losses | - | - | - | - | (4) | 4 | - | - | - |
| Realisation of investments in the period | - | - | - | - | 3 | - | - | - | 3 |
| Dividends | - | - | - | - | (665) | - | - | - | (665) |
| At 31 December 2008 | 1,664 | 69 | 5,525 | 90 | 3,497 | (3,169) | 4,786 | 332 | 12,794 |
| Revenue return for the period | - | - | - | - | - | - | - | 34 | 34 |
| Capital expenses | - | - | - | - | (116) | - | - | - | (116) |
| Realisation of negative goodwill | - | - | - | - | - | - | - | - | - |
| Unrealised gain on investments held at fair value | - | - | - | - | - | 234 | - | - | 234 |
| Realisation of prior year unrealised gains | - | - | - | - | 10 | (10) | - | - | - |
| Realisation of investments in the period | - | - | - | - | (13) | - | - | - | (13) |
| Dividends | - | - | - | - | (333) | - | - | - | (333) |
| At 30 June 2009 | 1,664 | 69 | 5,525 | 90 | 3,045 | (2,945) | 4,786 | 366 | 12,600 |
The Unaudited Statement of Changes in Equity for the six months ended 30 June 2008 has been restated following the adoption of 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 to show additional reserves.
* Other reserves include the capital redemption reserve and other reserve, which are non-distributable.
Statement of Cash Flows
For the 6 months ended 30 June 2009
| Unaudited 6 months ended 30 June 2009 £000 | Unaudited 6 months ended 30 June 2008 (restated) £000 | Audited year ended 31 December 2008 £000 | |||
| Net cash inflow (outflow) from operating activities | 181 | (239) | (305) | ||
| Cash flows from investing activities | |||||
| Purchase of financial assets at fair value through profit or loss | (209) | (3,166) | (4,115) | ||
| Proceeds from sale of financial assets at fair value through profit or loss | 898 | 3,796 | 5,217 | ||
| Net cash from investing activities | 689 | 630 | 1,102 | ||
| Cash flows used in financing activities | |||||
| Dividends paid | (333) | (250) | (915) | ||
| Net cash used in financing activities | (333) | (250) | (915) | ||
| Net increase (decrease) in cash and cash equivalents | 537 | 141 | (118) | ||
| Cash and cash equivalents at the beginning of the period | 109 | 227 | 227 | ||
| Cash and cash equivalents at the end of the period | 646 | 368 | 109 | ||
Notes to the Financial Statements
1. These half year statements have been approved by the directors whose names appear at note 7, 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 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 2008 do not constitute full financial statements and have been extracted from the Company's financial statements for the year ended 31 December 2008. Those accounts were reported upon without qualification by the auditors and have been delivered to the Registrar of Companies.
The half year statements comply with IAS 34 'Interim financial reporting' and the Disclosure and Transparency Rules of the Financial Services Authority. 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 2008, except as noted below.
The financial statements for the year ended 31 December 2008 were prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted by the European Union and those parts of the Companies Act 1985 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.
The following new standards and amendments to standards are mandatory for the first time for the financial year commencing 1 January 2009. Where relevant to the Company the half year statements have been prepared under the revised disclosure requirements.
IAS 1 (revised) "Presentation of Financial Statements". The Company has elected to present a single performance statement: the Statement of Comprehensive Income.
IFRS 8 "Operating Segments". The adoption of this standard has had no impact on the segmental information reported by the Company.
Other standards and interpretations which have been issued but are not currently relevant for the Company are IAS 23 (Revised) and IFRICs 13, 15 and 16.
Investments in quoted Government Securities were reclassified from cash equivalents to financial assets at fair value through profit or loss in the accounts for the year ended 31 December 2008. As a consequence the balance sheet for the six months ended 30 June 2008 has been restated.
There has been no change to the principal risks and uncertainties facing the Company since the publication of the financial statements for the year ended 31 December 2008. In summary, the principal risks are:
Full details of the principal risks can be found in the financial statements for the year ended 31 December 2008 on page 15, a copy of which can be found at www.yfmgroup.co.uk.
2. Income
| Unaudited 6 months ended 30 June 2009 £000 | Unaudited 6 months ended 30 June 2008 £000 | |
| Income from investments | ||
| - Dividends from unquoted companies | 7 | 3 |
| - Dividends from AIM quoted companies | 12 | - |
| 19 | 3 | |
| - Interest on loans to unquoted companies | 59 | 53 |
| - Fixed interest Government securities | 112 | 117 |
| Income from investments held at fair value through profit or loss | 190 | 173 |
| Interest on bank deposits | 2 | 7 |
| 192 | 180 |
3. Taxation
| Unaudited 6 months ended 30 June 2009 | Unaudited 6 months ended 30 June 2008 | ||||||
| Revenue £000 | Capital £000 | Total £000 | Revenue (restated) £000 | Capital (restated) £000 | Total £000 | ||
| Corporation tax payable at 21% (2008: 21%) | 4 | (4) | - | 3 | (3) | - | |
| Profit on ordinary activities before taxation | 38 | 101 | 139 | 21 | 880 | 901 | |
| Profit on ordinary activities multiplied by standard small company rate of corporation tax in UK of 21% (2008: 21%) | 8 | 21 | 29 | 4 | 185 | 189 | |
| Effect of: | |||||||
| UK dividends received | (4) | - | (4) | (1) | - | (1) | |
| Non taxable profits on investments | - | (46) | (46) | - | (215) | (215) | |
| Excess management expenses | - | 21 | 21 | - | 27 | 27 | |
| Tax on profit on ordinary activities | 4 | (4) | - | 3 | (3) | - | |
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 management 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
| | Unaudited 6 months ended 30 June 2009 | Unaudited 6 months ended 30 June 2008 | Audited Year ended 31 December 2008 | |||||
| Amounts recognised as distributions to equity holders in the period: | Capital £000 | Total £000 | Revenue (restated) £000 | Capital (restated) £000 | Total £000 | Revenue £000 | Capital £000 | Total £000 |
| Final paid - 1.5p per share paid 16 May 2008 | - | - | 109 | 141 | 250 | 109 | 141 | 250 |
| Interim paid – 2.0p per share paid 26 September 2008 | - | - | - | - | - | - | 332 | 332 |
| Special Interim dividend paid – 2.0p per share paid 26 September 2008 | - | - | - | - | - | | 333 | 333 |
| Final paid - 2.0p per share paid 19 May 2009 | 333 | 333 | - | - | - | - | - | - |
| | | | | | | | | |
| | 333 | 333 | 109 | 141 | 250 | 109 | 806 | 915 |
| | | | | | | | | |
An interim dividend of 2.0 pence per Ordinary Share, amounting to £333,000, 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 from ordinary activities after tax of £139,000 (30 June 2008: £901,000) and 16,641,000 (30 June 2008: 16,641,000) shares being the weighted average number of shares in issue during the year.
The basic and diluted revenue return per Ordinary share is based on the profit from ordinary activities after tax of £34,000 (30 June 2008: £18,000) and 16,641,000 (30 June 2008: 16,641,000) shares being the weighted average number of shares in issue during the year.
The basic and diluted capital return per Ordinary share is based on the profit from ordinary activities after tax of £105,000 (30 June 2008: £883,000) and 16,641,000 (30 June 2008: 16,641,000) shares being the weighted average number of shares in issue during the year.
The Company has no securities that would have a dilutive effect and hence basic and diluted earnings per Ordinary share are the same.
6. Net asset value per Ordinary share
The basic and diluted net asset value per Ordinary share is calculated on attributable assets of £12,600,000 (30 June 2008 and 31 December 2008: £13,802,000 and £12,794,000 respectively) and 16,641,000 (30 June 2008 and 31 December 2008: 16,641,000 shares) shares in issue at the period end.
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.
7. The directors of the Company are: Mr R Last, Mr PS Cammerman and Mr RM Pettigrew.
8. 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 the Fund Manager's website: www.yfmgroup.co.uk.
For further information please contact:
| David Hall | YFM Private Equity | Tel: 0161 832 7603 |
| Jeff Keating | Singer Capital Markets | Tel: 0203 205 7500 |