Br.small Co.2 Regulatory News (BSC)

4 Aug 2006 16:10

British SmallerTechCompaniesVCT2PLC04 August 2006 04 August 2006 BRITISH SMALLER TECHNOLOGY COMPANIES VCT 2 PLC Unaudited interim results for the 6 months to 30 June 2006 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 2006. Chairman's Statement The first six months to 30 June 2006 has seen a steady performance from yourCompany's investments. Realised gains together with net positive valuationmovements on the balance of the portfolio were sufficient to offset the netoperating costs and contributed to a small increase in net asset value per shareto 74.8 pence during the period under review. This is the first period of trading as the new enlarged Company following theacquisition of British Smaller Technology Companies VCT plc. I am pleased toreport that the operating costs of the combined Company during the period were22% lower than the sum of the expenditure of the two individual companies in thesame period last year. Your Board continues to look for cost savings to improvethe Company's financial performance. Operations The significant event in the period was the flotation of Optos plc in February2006 which I mentioned in the last Annual Report. The company floated at a priceof 250 pence per share and, after an initial fall, the share price rose to 284pence per share by the end of March 2006. Since that time there has been agradual fall to the current position where the share price is around 200 penceper share. Your Board took the opportunity to lock in some profits and disposedof a small number of shares at prices between 240.5 and 265.5 pence per share.Optos reported good progress in its initial interim results to 31 March 2006 andhas recently won the UK's most prestigious engineering innovation accolade - TheRoyal Academy of Engineering 2006 MacRobert Award. In addition to the sale of a small holding of Optos shares, your Board took thedecision to realise its holding in two quoted investments, Focus Solutions Groupplc and Sosei Co. Limited. This produced a small combined loss of £21,000. Bothcompanies were relatively small in value and your Board felt that there waslittle likelihood of improved performance in either case. The net asset value after the first quarter of trading in this new financialyear was 76.2 pence per share. The fall in the second quarter was due to ageneral fall in AIM stock values, reflected in all quoted companies in theportfolio, with the exception of Cozart. Of these quoted companies, Optos andAllergy Therapeutics continue to report good news in the form of operatingmilestones and revenue increases. Oxonica has shown some revenue generation andhas completed a small acquisition, but the company remains relatively small andis still far from profitability. The share price of ART Technology has fallen inline with the NASDAQ index but analysts remain positive about growth prospects. Investor appetite for technology-focused businesses as a whole is still evidentwith early stage interest in some companies within the portfolio continuing,both for trade sales and possible flotations. Although no formal offers orproposals have yet been made, these initial indications are at valuations inexcess of your Company's carrying value. Financial Results The result for the six months ended 30 June 2006 was a profit of £19,000 or 0.11pence per share (30 June 2005: loss of £652,000; (8.41) pence per share). Theprior period comparison is for the original single entity whereas the currentyear includes the enlarged business following the acquisition of British SmallerTechnology Companies VCT plc at the end of last year; hence the relativeincrease in income and administrative expenses. The result of the net gain to profit and loss account, taken with the effect ofthe share buy back following the announcement of the 2005 results in April 2006,is a small increase in net asset value of 0.6 pence per share to 74.8 pence pershare over the six month period to 30 June 2006. Net asset value at the end ofthe period was £12.44 million. No interim dividend is being paid as realisationsin the period were small in absolute terms. Cash and cash equivalents at the period end were £2.73 million, representing 22%of net asset value. Your Board considers that this is sufficient to support thecurrent portfolio and allow some limited investments in selective newopportunities. Further realisations should enhance this cash reserve afterdistributing an appropriate proportion to shareholders as a tax free dividend. Shareholder Relations Following the announcement of the 2005 annual results, your Board authorised thebuy back of 665,867 shares that were available in the market at a price of 63pence per share. Following that transaction, your Board became aware thatfurther substantial holdings were about to be offered for buy back. It was clearto the Board that, if accepted, this would prejudice the interests of the othershareholders and would substantially reduce the liquid funds available tosupport the Company's investment portfolio. The Board therefore announced thatit was withdrawing its share buy back policy for an indefinite period. Following that announcement the share price has fallen to 44 pence per share andthe discount to the announced net asset value has widened to 42%. This isobviously not ideal but reflects the long term nature of VCT shares and theeffects of the VCT legislation that only offers the 30% income tax rebate on thesubscription to a new issue of shares. Thus, the after market remains largelyilliquid which is reflected in the discount of share price to net asset value. The reason for the decision to end the Company's policy of buying back shares inthe market at a fixed discount to net asset value was to concentrate theCompany's cash resources and management efforts on supporting the expansionplans of key businesses in the existing portfolio whilst selectively making newinvestments in business opportunities that have a proven market acceptance andwhich provide potential for significant growth. Your Board considers that thisis still valid and, although it will consider the reinstatement of a similarpolicy at the appropriate time, that is unlikely to be in the foreseeablefuture. Outlook The economic outlook remains reasonably encouraging although currentdevelopments in the Middle East are a cause for serious concern. The investmentportfolio has shown improvement over the course of the first six months. Therewill always be some volatility to the quoted stock valuations but all thesecompanies are making progress against their business plans and we are optimisticabout their prospects relative to the overall stock market sentiments. There continues to be early stage corporate interest in a number of investmentswithin the portfolio, but it is still too early to say if this would lead torealisations. Nevertheless, it gives grounds for your Board's longer termoptimistic view for growth in portfolio value. The overall development of theportfolio at this current time remains satisfactory. Sir Andrew Hugh Smith04 August 2006 Income StatementFor 6 months ended 30 June 2006 Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000 NotesIncome 149 37 82 ------- ------- -------Administrative expenses:Investment advisory fee (190) (88) (172)Other expenses (147) (95) (186) ------- ------- ------- (337) (183) (358) ------- ------- -------Excess of acquirer's interest inthe fair value of the acquiree'sidentifiable assets, liabilites and and contingent liabilities over cost - - 975 Gain on realisation of investments (net) 28 7 251 Unrealised gains (losses) oninvestments held at fair value (net) 179 (513) (1,371) ------- ------- -------Profit (loss) on ordinary activities before taxation 19 (652) (421)Taxation 2 - - - ------- ------- -------Profit (loss) for the periodfrom continuing operations 19 (652) (421) ======= ======= =======Basic and diluted earnings(loss)per Ordinary share 3 0.11p (8.41)p (5.14)p ======= ======= ======= Balance SheetAs at 30 June 2006 Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000 NotesAssets Non-current assets Investments at fair value throughprofit or loss 9,588 3,664 9,503 ------- ------- -------Current assetsTrade and other receivables 193 215 150Cash and cash equivalents 2,733 2,699 3,834 ------- ------- ------- 2,926 2,914 3,984LiabilitiesCurrent liabilitiesTrade and other payables (74) (108) (647) ------- ------- -------Net current assets 2,852 2,806 3,337 ------- ------- -------Net assets 12,440 6,470 12,840 ======= ======= ======= Shareholders' equityShare capital 1,664 772 1,731Share premium 69 60 69Capital redemption reserve 88 21 21Merger reserve 5,525 - 5,525Special reserve - 5,213 -Other reserve 2 2 2Retained earnings 5,092 402 5,492 ------- ------- -------Total Shareholders' equity 12,440 6,470 12,840 ======= ======= =======Net asset value per Ordinary share 4 74.8p 83.8p 74.2p ======= ======= ======= Unaudited Statement of Changes in Shareholders' EquityFor the 6 months ended 30 June 2006 Share Share premium Merger Other Retained Total capital account reserve reserves* earnings equity £000 £000 £000 £000 £000 £000 Balance at 31 Decemmber 2005 1,731 69 5,525 23 5,492 12,840 Profit for the period - - - - 19 19 Purchase of own shares (67) - - 67 (419) (419) ------- ------- ------- ------- ------- -------Balance at 30 June 2006 1,664 69 5,525 90 5,092 12,440 ======= ======= ======= ======= ======= ======= * Other reserves include the capital redemption reserve and other reserve. Summarised Cash Flow StatementFor the 6 months ended 30 June 2006 Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000 Net cash outflow from operatingactivities (286) (188) (290) ------- ------- -------Net cash from (used in) investingactivities 27 (466) 811 ------- ------- -------Net cash (used in) from financing (765) (482) (519) ------- ------- -------Net (decrease) increase in cash andcash equivalents (1,024) (1,136) 2 Cash and cash equivalents at thebeginning of the period 3,834 3,824 3,824 Effect of market value changes incash equivalents (77) 11 8 ------- ------- -------Cash and cash equivalents at theend of the period 2,733 2,699 3,834 ======= ======= ======= Notes to the Financial Statements 1. 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 forthe year ended 31 December 2005 do not constitute full financial statements and have been extracted from the Company's financial statements for the year ended 31 December 2005. Those accounts were reported upon without qualification by the auditors and have been delivered to the Registrar of Companies. The financial statements for the year ended 31 December 2005 were prepared inaccordance with the International Financial Reporting Standards (IFRS), whichcomprise standards and interpretations approved by the International AccountingStandards Board (IASB) and the International Accounting Standards Committee(IASC) as adopted by the European Union and those parts of the Companies Act1985 applicable to companies reporting under IFRS. The comparatives for the six months ended 30 June 2005 were previously presentedin accordance with UK accounting standards. Following the transaction with British Smaller Technology Companies VCT plc in December 2005, the Board decided to adopt IFRS for the financial statements for the year ended 31 December 2005. The effective date of transition to IFRS was therefore 1 January 2004. Consequently, the comparatives for the six months ended 30 June 2005 have been restated in accordance with IFRS. The impact of the adoption of IFRS was explained in the financial statements for the year ended 31 December 2005 which have been filed with the Registrar of Companies and sent to shareholders in June 2006. 2. Taxation charge Unaudited Unaudited Audited 6 months 6 months year ended ended ended 30 June 30 June 31 December 2006 2005 2005 £000 £000 £000 Profit (loss) on ordinary activitiesmultiplied by standard small companyrate of corporation tax in the UKof 19% (2005:19%) 4 (124) (80) Effect of: Non taxable (profits) losses on investments (39) 96 213Excess management expenses 35 28 (133) ------- ------- -------Current tax charge for period - - - ======= ======= ======= The Company has no provided, or unprovided, deferred tax liability in eitheryear. 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 taxon any capital gains or losses arising on the revaluation or realisation ofinvestments. 3. The earnings (loss) per Ordinary share is based on the net profit fromordinary activities after tax of 19,000 (30 June 2005: net loss of £652,000 and31 December 2005: net loss of £421,000) and on 17,120,000 (30 June 2005:7,757,000 and 31 December 2005: 8,185,000) shares, being the weighted averagenumber of shares in issue during the period. The Company has no securities that would have a dilutive effect and hence basicand diluted earnings (loss) per share are the same. 4. The net asset value per Ordinary share is calculated on attributable assetsof £12,440,000 (30 June 2005: £6,470,000 and 31 December 2005: £12,840,000) and16,641,257 (30 June 2005: 7,718,777 and 31 December 2005: 17,307,124) shares inissue at the period end. 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: Phil Cammerman, 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