Br.small Co.2 Regulatory News (BSC)

18 Aug 2005 12:00

British SmallerTechCompaniesVCT2PLC18 August 2005 18 August 2005 BRITISH SMALLER TECHNOLOGY COMPANIES VCT 2 PLC Unaudited interim results for the 6 months to 30 June 2005 British Smaller Technology Companies VCT 2 plc ("the Company"), the venturecapital trust specialising in growing smaller technology companies across arange of industrial sectors, today announces its unaudited interim results forthe six months to 30 June 2005. Chairman's Statement The general performance of the investment portfolio in the first half of theyear has been satisfactory. However, the reduction in value of two investmentsin particular has resulted in a 10% like-for-like fall in net asset value overthat period. Although disappointing, this is not unexpected for a relativelyyoung portfolio that is still developing and where the encouraging performancesof some of the newer investments has yet to feed through into the valuations. Operations As previously stated, the Board's investment strategy is to reserve sufficientfunding to support the current portfolio where it is merited and selectivelytarget later stage innovative companies for new investment opportunities. During the period under review, a total of £466,000 was invested in three businesses, one of which is new to the portfolio. Vibration Technology Limited continues to show signs of progress having recently completed a trial of its Infinite Telemetry System with NASA in Arizona, USA. Your Company invested a further £150,000 in the first closing of a £5 million funding round. Earlier this year, your Company invested a further £16,000 in Oxonica Limited as its share of a £2.5 million rights issue. Oxonica is involved in the development of innovative commercial solutions for international markets using its expertise in the design and application of nanomaterials. I am pleased to report that following the period end, on 14 July 2005, Oxonica was successfully admitted to AIM, raising £7.1 million at a placing price of 95.8 pence per share. The share price has increased significantly since that date. The new investment was £300,000 in Digital Healthcare Limited just before theend of the period. This company is well known to your Board and its InvestmentAdviser through an existing investment by British Smaller Technology CompaniesVCT plc, which also added to its earlier investment. Digital Healthcare hasdeveloped software for the management of digital images in the diabeticscreening, ophthalmology and optometric sectors of the healthcare market. Theinvestment was part of a £3 million funding round supported by a number of newinvestors. During the period, your Board took the opportunity to realise approximately 10%of your Company's holding in Cozart plc. The disposals were realised at anaverage value of 42.8 pence per share compared to the acquisition cost of 30pence per share. Following the period end, your Company's investment in Tamesis Limited wasrealised through the acquisition of that company by Patsystems plc, an AIMquoted company whose business is the global supply of electronic tradingtechnology. Consideration is by way of a small initial cash payment, withfurther consideration in the form of Patsystems' shares based on profitperformance over the next two years. Mr Last, a director of this Company andyour Board's representative non-executive director on the board of Tamesis, isalso a director of Patsystems plc. Mr Last played no part in any Boarddiscussions about the transaction and had no involvement in the due diligenceprocess. Within the unquoted portfolio, the main valuation movements were in BroadreachNetworks Limited and ExpressOn Biosystems Limited. The fall in the value ofBroadreach reflects the price of a recent transaction in this company's shares.The full impairment against ExpressOn Biosystems is necessary following thefailure of the company to complete its funding round when one of the syndicatemembers withdrew at the final moment, thus causing the company to be placed into receivership. Financial Results The introduction of new Financial Reporting Standards (FRS), and particularlyFRS 26 which concerns the measurement of financial assets, has had an effect onthese interim results. The main difference is that all valuation movements,including unrealised gains above cost that were previously taken to therevaluation reserve, are now taken through the profit and loss account. Therevaluation reserve no longer exists. These changes have no effect on theCompany's distributable reserves and its ability to pay dividends in the future. FRS 21, which concerns the accounting treatment of events after the balancesheet date, means that dividends proposed are recognised in the period in whichthe obligation arises. Therefore, the prior year period has now been restatedwith the 2004 dividend now accounted for in the current year. The restated 2004net asset value is 97.1 pence per share. There is no net effect on the currentyear net asset value. The result for the period was a loss of £652,000 equivalent to 8.41 pence pershare. Net asset value fell to 83.8 pence per share from the equivalent 92.1pence per share at 31 December 2004. Cash and liquid investments, in the form of UK Government gilts, totalled £2.7million at the period end. Your Board considers this is satisfactory to supportthe current portfolio, make selective new investments and meet the foreseeableoperating costs of the Company. General The dividend reinvestment scheme was introduced earlier this year and thedirectors were authorised at the Extraordinary General Meeting on 27 May 2005to implement the scheme. This scheme enables shareholders to reinvest theirdividend entitlement to take advantage of the tax relief available to investorsin VCTs, currently at a rate of 40%. I can report that, of the dividenddistribution approved in respect of the year to 31 December 2004, a total of77,311 shares were subscribed for at a price of 76.8 pence per share. A total of 8,000 Ordinary shares of 10p each were allotted on 23 May 2005 at asubscription price of £1 per share following the exercise of warrants. This wasthe last date by which warrants could be exercised and any outstanding warrantrights have now lapsed. A total of 200,000 shares were purchased by the Company in the market forcancellation during the six month period at an average cost of 78.8 pence pershare. Outlook The businesses within the current portfolio continue to perform, on the whole,satisfactorily. The first half result has been disproportionately affected bythe failure of ExpressOn Biosystems and the write down on Broadreach Networks.However, the successful flotation of Oxonica shows that there is still marketappetite for growing innovative businesses and the development of a number ofcompanies in the portfolio continues to support the Board's optimism for valuegrowth in the medium term. Sir Andrew Hugh Smith18 August 2005 Profit and Loss Account Unaudited Restated Restated 6 months Unaudited Year ended 6 months ended 30 June ended 31 December 2005 2004 2004 £000 £000 £000 Notes Income 37 35 77 ------ ------ ------Administrative expenses:Investment advisory fee (88) (138) (197)Other expenses (95) (85) (178) ------ ------ ------ (183) (223) (375) ------ ------ ------Gain on realisation of investments 7 159 1,398Impairment of investments (513) 60 (20) ------ ------ ------(Loss) profit on ordinary activitiesbefore taxation (652) 31 1,080Tax on (loss) profit on ordinary 2 activities - - - ------ ------ ------(Loss) profit for the financial period (652) 31 1,080Dividends 1 (392) - - ------ ------ ------(Deficit) retained profit for the period (1,044) 31 1,080 ===== ===== =====Basic and diluted (loss) earningsper Ordinary share 3 (8.41)p 0.40p 13.79p ===== ===== ===== Statement of Total Recognised Gains and Losses Unaudited Restated Audited 6 months Unaudited Year ended 6 months ended 30 June ended 31 December 2005 30 June 2004 2004 £000 £000 £000 (Loss) profit for the financial period (652) 31 1,080Unrealised gain (loss) on valuation ofinvestments - 429 (100)Realisation of Warrant reserve onlapse of unexercised warrants 2 - - ------ ------ ------Total recognised (losses) gainsfor the period (650) 460 980 ===== ===== ===== Note of Historical Cost Profits and Losses Unaudited Restated Restated 6 months Unaudited Year ended 6 months ended 30 June ended 31 December 2005 30 June 2004 £000 £000 £000 (Loss) profit on ordinary activitiesbefore taxation (652) 31 1,080Realisation of investment gains ofprevious periods 12 7 31 ------ ------ ------Historical cost (loss) profit on ordinaryactivities before taxation (640) 38 1,111 ===== ===== =====Historical cost (loss) profit on ordinaryactivities after taxation and dividends (1,032) 38 1,111 ===== ===== ===== Notes All activity has arisen from continuing operations. Balance Sheet Unaudited Restated Restated 30 June Unaudited 31 December 2005 30 June 2004 2004 £000 £000 £000 Notes Fixed assetsInvestment portfolio 3,664 3,639 3,775 ------ ------ ------Current assetsDebtors 215 134 112Investments 1,541 1,037 1,280Cash 1,158 2,386 2,544 ------ ------ ------ 2,914 3,557 3,936Creditors: amounts payablewithin one year (108) (109) (105) ------ ------ ------Net current assets 2,806 3,448 3,831 ------ ------ ------Total net assets 6,470 7,087 7,606 ===== ===== =====Capital and reservesCalled-up share capital 772 782 783Share premium account 60 10 9Capital redemption reserve 21 1 1Revaluation reserve - 776 223Warrant reserve - 2 3Special reserve 5,213 6,595 5,364Other reserve 2 1 2Profit and loss account 402 (1,080) 1,221 ------ ------ ------Equity shareholders' funds 6,470 7,087 7,606 ===== ===== =====Net asset value per Ordinaryshare 4 83.8p 90.5p 97.1p Summarised Cash Flow Statement Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £000 £000 £000 Net cash outflow from operating activities (188) (215) (307) Financial investment (466) (452) 20 Equity dividend paid to shareholders (332) - - ------ ------ ------Net cash outflow before management ofliquid resources and financing (986) (667) (287) Management of liquid resources (250) (12) (236) ------ ------ ------Net cash outflow before financing (1,236) (679) (523) Financing (150) 8 10 ------ ------ ------Decrease in cash in the period (1,386) (671) (513) ===== ===== ===== Notes to the Financial Statements 1. The Company has adopted a number of new Financial Reporting Standards in these interim results. The Company has taken advantage of the exemption available to it under paragraph 108D of FRS 26 'Financial Instruments:Measurement' not to restate the prior year comparative figures on adoption of FRS 26. FRS 26 requires the Company to recognise and measure its investments at fair value. The Company has measured its investments at fair value applying the International Private Equity and Venture Capital Valuation Guidelines with effect from 1 January 2005 to the extent that those requirements do not conflict with FRS 26, the main difference being in respect of the non-application of marketability discounts. Where a conflict exists, the requirements of FRS 26 are followed. The new valuation guidelines superseded the British Venture Capital Association Valuation Guidelines which have historically been applied by the Company. FRS 21 'Events after the Balance Sheet Date' has been adopted in these interim results. The main change is that dividends are only recorded where an obligation exists at the period end date. Consequently dividends which the Company proposes after the balance sheet date are no longer accrued but are required to be disclosed in the notes to the financial statements. The prior year comparative figures have been restated to reflect adoption of FRS 21. The prior year adjustment solely relates to the adoption of FRS 21. The adoption of both FRS 22 'Earnings per share' and FRS 23 'The Effects ofChanges in Foreign Exchange Rates' has resulted in no changes in the accounting policies of the Company. Consequently, the prior year comparative figures have not been revised. The requirements of the disclosure standard FRS 25 'Financial Instruments:Disclosure and Presentation' whilst being applicable for the year ending 31December 2005, do not impact the interim results. The requirements of FRS 25 will be reflected in the Company's annual report and accounts expected to bepublished in March 2006. The interim financial statements, which have been approved by the directors, are unaudited and do not constitute full financial statements as defined in section 240 of the Companies Act 1985. The comparative figures for the year ended 31 December 2004 do not constitute full financial statements and, with the exception of the effects of the prior year adjustment arising on adoption of FRS 21 referred to above, have been extracted from the Company's financial statements for the year ended 31 December 2004. Those accounts were reported upon without qualification by the auditors and have been delivered to the Registrar of Companies. On 12 November 2004, the Company revoked its investment company status and,consequently, now prepares its financial statements in compliance with Schedule4 of the Companies Act 1985. The unaudited interim results to 30 June 2004,which were originally prepared in accordance with the provisions of theStatement of Recommended Practice, Financial Statements of Investment TrustCompanies, have been restated for comparative purposes. 2. Taxation charge Unaudited Restated Audited 6 months Unaudited Year ended 6 months Ended 30 June ended 31 December 2005 30 June 2004 2004 £000 £000 £000 (Loss) profit on ordinary activitiesmultiplied by standard small company rate ofcorporation tax in the UK of 19% (2004: 19%) (124) 6 205Effect of:Non taxable losses (profits) on investments (i) 96 (42) (262)Excess management expenses (ii) 28 36 57 ------ ------ ------Current tax charge for period - - - ===== ===== ===== (i)Venture Capital Trusts are not subject to corporation tax on these items(ii)The Company has no deferred tax liability Deferred tax assets in respect of losses have not been recognised as managementdo not currently believe that it is more likely than not sufficient taxableprofits will be available against which the assets can be recovered. Due to the Company's status as a venture capital trust, and the continuedintention to meet the conditions required to comply with Section 842AA of theIncome and Corporation Taxes Act 1988, the Company has not provided deferred tax on any capital gains and losses on the revaluation or disposal of investments. 3. The basic (loss) earnings per share is based on the net loss from ordinaryactivities after tax attributable to shareholders of £652,000 (30 June 2004: net profit £31,000 and 31 December 2004: net profit £1,080,000) and on 7,757,000 shares (30 June 2004: 7,826,000 and 31 December 2004: 7,830,000), being the weighted average number of shares in issue during the period. The Company has no securities that would have a dilutive effect and hence basic and diluted return per share are the same. 4. The net asset value per Ordinary share is calculated on attributable assetsof £6,470,000 and 7,718,777 shares in issue at the period end (30 June 2004:assets of £7,087,000 and 7,833,466 shares, 31 December 2004: assets of£7,606,000 (as restated) and 7,833,466 shares). 5. Copies of the interim report can be obtained from the Company's registeredoffice: Saint Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZ. For further information, please contact: Alan Davies, YFM Private Equity Limited Tel: 0113 294 5000David Hall, YFM Private Equity Limited Tel: 0161 832 7603Jonathan Becher, Teather & Greenwood Limited Tel: 0207 426 3269Michael Bellamy, Teather & Greenwood Limited Tel: 0207 426 9547 This information is provided by RNS The company news service from the London Stock Exchange