Br.small Co.2 Regulatory News (BSC)

18 Mar 2005 10:33

British SmallerTechCompaniesVCT2PLC18 March 2005 18 March 2005 BRITISH SMALLER TECHNOLOGY COMPANIES VCT 2 PLC Unaudited preliminary results for the year ended 31 December 2004 • Successful flotation and realisation of Amino Technologies plc • 14.8% increase in net asset value (before distributions); 8.9% increase after dividend distribution • Dividend declared of 5p per share • Increased liquid resources to £3.8m 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 preliminary resultsfor the year ended 31 December 2004. Financial highlights: Unaudited Restated Year ended Year ended 31 December 31 December 2004 2003Income £77,000 £256,000Profit (loss) before and after tax £1,080,000 £(909,000)Earnings (loss) per share 13.79p (11.64)pDividend per share 5.00p -Total recognised gains (losses) £980,000 £(554,000)Net assets £7,214,000 £6,616,000Net asset value per share 92.1p 84.6p Announcing the results, the Chairman, Sir Andrew Hugh Smith, reported thatstronger market sentiment in the technology sector provided a healthyenvironment for the businesses within the Company's portfolio. He said that, ascapital growth begins to be realised, the Board are looking to balance thefinancing needs of the developing businesses within the portfolio with theCompany's ongoing operating requirements, whilst implementing an appropriatedividend policy for the benefit of shareholders. Investments A total of £1.88 million was invested in ten businesses over the course of theyear, three of which were new to the portfolio and seven were in support ofexisting portfolio businesses. Of the three new investments, two were made in businesses on their admission toAIM in furtherance of the Board's stated policy of pursuing some later stageinvestment opportunities to complement the earlier stage investments made todate. Both these quoted investments have consistently traded above theiradmission price. Commenting on the follow-on investments, David Hall, Managing Director of YFMPrivate Equity Limited, the Company's Investment Adviser, said that the fundingenvironment for younger technology-based businesses improved in the year.Despite the wider availability of finance for these opportunities, and withinvestors remaining cautious about the economic outlook, entry valuationsremained at attractive levels. Sir Andrew reported that, towards the end of the year, the Board decided it wasin the best interests of shareholders to realise its holding in AminoTechnologies plc. The Company had first invested in Amino in September 2001 andthe business floated on AIM in June 2004. The total realised gain on the Aminoinvestment was a healthy £1.46 million. Financial Results and Dividend The Company reported a profit for the year of £1,080,000, with earnings pershare of 13.79p, due to the realised gain on Amino Technologies plc. Net assetvalue, before dividend distribution, increased 14.8% over the year as a whole.Sir Andrew said that this reflected the improved market conditions and businessconfidence in the technology sector. The Company has taken the necessary steps to enable realised capital gains to bedistributed as tax free dividends to eligible shareholders. A dividend of5 pence per share is being recommended for payment on 3 June 2005 toshareholders on the Register at 1 April 2005. The net asset value at 31 December2004 is 92.1 pence per share. Dividend Reinvestment Scheme and Extraordinary General Meeting The Board is recommending a dividend reinvestment scheme that will enableshareholders to increase their total holding in the Company in a cost efficientway and, subject to individual circumstances, qualify for the VCT tax reliefsthat are applicable to subscriptions for new shares in venture capital trusts. An Extraordinary General Meeting to authorise the directors to establish such ascheme will be convened to follow immediately after the Annual General Meeting.If authorised, this scheme will enable shareholders to reinvest the dividendjust declared to take advantage of the 40% tax relief available on VCTsubscriptions. Shareholders The Company appointed Teather and Greenwood to act as its broker in furtheranceof its active policy to continue to refine its overall shareholder strategy. As a firm, Teather and Greenwood is widely experienced in theinvestment company market and has a particular focus on the VCT sector.Shareholders have already started to see some benefit through the reduction inthe discount of the Company's quoted share price to its net asset value. Overthe last six months this has reduced from a 55% discount to around 12% at thecurrent time. A notice will shortly be sent to Warrantholders alerting them to the dates onwhich Warrants can be exercised. This is the last time that Warrants can beexercised. Unexercised Warrants will then lapse. Outlook Looking ahead, Sir Andrew said, "Following continued improvement in businessconfidence over the past couple of years, the trend has continued into the earlypart of 2005." Although he commented that the medium term outlook was more fragile than hewould like, he went on to say, "I expect 2005 to continue to presentopportunities for businesses within our portfolio. With over £3.8 million ofliquid funds at the end of the year, the Company has sufficient resources tosupport the current portfolio through to maturity and to make selective newinvestments as opportunities arise." For further information, please contact: David Hall, YFM Private Equity Limited Tel: 0113 294 5050Michael Bellamy, Teather and Greenwood Limited Tel: 0207 426 9547Jonathan Becher, Teather and Greenwood Limited Tel: 0207 426 3269 Chairman's Statement I am pleased to report that the second half of 2004 has shown a continuation ofthe progress seen in the first part of the year. Increased confidence in thetechnology sector has shown through with an increasing number of trade buyersand a strong stock market appetite for innovative companies, and has provided ahealthy environment for the growing businesses within your Company's portfolio. The improved market conditions and business confidence have been reflected inthe performance of your Company over the past year. Net asset value, beforedividend distribution, has risen 14.8% over the year as a whole. As the portfolio starts to mature and capital growth on some of the earlierinvestments begins to be realised, we continue to look for suitable investmentopportunities. In doing so, we need to retain sufficient liquidity to supportthe anticipated growth of our existing investments and to meet our ongoingoperating requirements, whilst implementing an appropriate dividend policy forthe benefit of shareholders. Operations A total of £1.88 million was invested in ten businesses over the year. Three ofthese investments were in new companies to the portfolio. I commented on theinvestment in DxS Limited in my interim statement. This business continues toperform satisfactorily. The other two new investments were in Cozart plc andAllergy Therapeutics plc on their admission to AIM. Cozart was well known to your Board, having been an existing investment of theother two VCTs in the British Smaller Companies stable. The company is adeveloper of hand-held drug testing devices. Since flotation the company's shareprice has consistently traded above the initial admission price of 30 pence pershare. Allergy Therapeutics is a speciality pharmaceutical company focused upon thetreatment and prevention of allergies. The investment was made in October 2004when the company raised a net £15 million through a placing on AIM at 73 penceper share. The company's share price has continued to rise since our year end. In addition, the disposal of Sirus Pharmaceuticals Limited, which also receiveda small, further investment before the sale, has led to your Company acquiring astake in Arakis Limited, the purchaser of Sirus. Toward the end of the year, the Board decided to realise the gain on yourCompany's holding in Amino Technologies plc. The total realised gain since thefirst investment in September 2001 was £1.46 million. Financial Results I reported in my interim statement that the Board had decided to revokeinvestment company status in order to enable realised capital profits to bedistributed in the form of tax free dividends. This formality was completed on12 November 2004. Following the revocation of investment company status, we are now required topresent a profit and loss account in Companies Act format. The financial result for the year under review was a profit of £1.08 millioncompared to a loss for the prior year, as restated, of £0.91 million. The Company is now in a position to distribute realised gains. Your Board isrecommending a dividend payment of 5 pence per share which, if approved, will bepaid on 3 June 2005 to shareholders on the Register at 1 April 2005. Warrants A notice will shortly be sent to shareholders and warrantholders alerting themto the dates on which Warrants can be exercised in the current year. This is thelast year in which Warrants can be exercised, after which time they will lapse. Dividend Reinvestment Scheme and Extraordinary General Meeting Following feedback from shareholders, your Board is recommending a dividendreinvestment scheme that will enable shareholders to elect to receive additionalshares by reinvesting their cash dividends. Dividend reinvestment enablesshareholders to increase their total holding in the Company without incurringdealing costs, issue costs or stamp duty. Subject to individual circumstances,these shares should qualify for the VCT tax reliefs that are applicable tosubscriptions for new shares in venture capital trusts. An Extraordinary General Meeting to authorise the directors to establish such ascheme will be convened to follow immediately after the Annual General Meeting.If authorised, this scheme will enable shareholders to reinvest the dividendjust declared to take advantage of the 40% tax relief available on VCTsubscriptions. Shareholders Your Board is continually looking at ways to improve shareholder liquidity. Infurtherance of this strategy, I am pleased to tell you that the Board appointedTeather & Greenwood to act as broker to the Company. The firm is widelyexperienced in the investment company market and has a particular focus on theVCT sector, acting for a number of venture capital trusts. Teather &Greenwood are assisting the Board and our Investment Adviser, YFM Private EquityLimited, in refining its overall shareholder strategy. Initialbenefits have already been seen by shareholders through a reduction in thediscount of the Company's quoted share price to its net asset value. Over thelast six months this has reduced from a 55% discount to around 12% at thecurrent time. Outlook Following a gradual improvement in business confidence over the past couple ofyears, the trend has continued into the early part of 2005. Overall marketconditions remain favourable, although the economic outlook for the medium termis more fragile than we would like. Nevertheless, we expect asset prices toremain attractive and your Company is well placed, with adequate liquidresources, to take advantage of this environment. The current portfolio is beginning to mature and show some encouraging signs ofgrowth potential. Following your Board's strategy of targeting later stageinnovative companies to get a better portfolio balance, I am pleased that thenew investments made during the year are performing well. I expect 2005 to continue to present opportunities for businesses within ourportfolio. With over £3.8 million of liquid funds at the end of the year, yourCompany has sufficient resources to support the current portfolio through tomaturity and to make selective new investments as opportunities arise. Sir Andrew Hugh SmithChairman Unaudited Profit and Loss Accountfor the year ended 31 December 2004 Unaudited Restated 2004 2003 Notes £000 £000 Income 77 256Administrative expenses: Investment management fee (197) (187) Other expenses (178) (157) ------ ------ (375) (344)Profit (loss) on realisation of investments 1,398 (71)Impairment of investments (20) (750) ------ ------Profit (loss) on ordinary activities before taxation 1,080 (909) Taxation 2 - - ------ ------Profit (loss) on ordinary activitiesafter taxation 1,080 (909) Dividends (392) - ------ ------Retained profit (deficit) for the year 688 (909) ------ ------Basic and diluted earnings (loss) per Ordinary share 5 13.79p (11.64)p ------ ------NotesAll activity has arisen from continuing operations. Unaudited Statement of Total Recognised Gains and Losses Unaudited Restated 2004 2003 £000 £000 Profit (loss) for the financial year 1,080 (909)Unrealised (losses) profits on valuation of investments (100) 355 ------ ------Total recognised gains (losses) for the year 980 (554) ====== ====== Unaudited Note of Historical Cost Profits and Losses Unaudited Restated 2004 2003 £000 £000 Profit (loss) on ordinary activities before taxation 1,080 (909)Realisation of investment profits of previous years 31 67 ------ ------Historical cost profit (loss) on ordinary activities before taxation 1,111 (842) ------ ------Historical cost profit (loss) on ordinary activities after taxation and dividends 719 (842) ====== ====== Unaudited Balance Sheetat 31 December 2004 Notes Unaudited Restated 2004 2003 £000 £000Fixed AssetsInvestments 3,775 2,535 ------ ------Current AssetsDebtors 112 26Investments 1,280 1,026Cash 2,544 3,057 ------ ------ 3,936 4,109Creditors: amounts payable within one year (497) (28) ------ ------Net Current Assets 3,439 4,081 ------ ------Total Net Assets 7,214 6,616 ====== ====== Capital and Reserves Called-up share capital 783 782Share premium account 9 -Capital redemption reserve 1 1Revaluation reserve 223 354Warrant reserve 3 4Special reserve 5,364 6,592Other reserve 2 1Profit and Loss account 829 (1,118) ------ ------ Equity Shareholders' funds 7,214 6,616 ====== ====== Net asset value per Ordinary share 5 92.1p 84.6p ====== ====== Unaudited Cash Flow Statementfor the year ended 31 December 2004 2004 2003 £000 £000 Net cash outflow from operating activities (307) (1) ------ ------Investing activitiesPurchase of fixed asset investments (1,881) (1,606)Proceeds from sale of fixed asset investments 1,901 - ------ ------Net cash inflow (outflow) from investing activities 20 (1,606) ------ ------Net cash outflow before management of liquidresources and financing (287) (1,607) ------ ------Management of liquid resourcesPurchase of fixed interest Government stocks (1,257) (1,980)Proceeds from the sale of fixed interest Government stocks 1,021 6,613 ------ ------Net cash (outflow) inflow from management ofliquid resources (236) 4,633 ------ ------FinancingIssue of Ordinary shares on exercise of warrants 10 3Purchase of own shares and associated warrants - (6) ------ ------Net cash inflow (outflow) from financing 10 (3) ------ ------(Decrease) increase in cash in the year (513) 3,023 ====== ====== Notes to Financial Statementsfor the year ended 31 December 2004 1. Basis of reporting This preliminary announcement, which has been prepared on a basis consistentwith the previous year, does not constitute statutory accounts within themeaning of Section 240 of the Companies Act 1985. In order to enable the Company to make capital distributions, the Company hasrevoked its investment company status. A consequence of the revocation is thatthe Company is now required to prepare accounts in accordance with therequirements of Schedule 4 of the Companies Act 1985 and not in accordance withthe Statement of Recommended Practice 'Financial Statements of Investment TrustCompanies' as was previously the case. The information for the year ended 31 December 2003 is an extract from thestatutory accounts to that date which have been delivered to the Registrar ofCompanies, restated following the revocation of investment company status asdescribed in the Chairman's Statement. Those accounts included an audit reportwhich was unqualified and which did not contain a statement under Section 237(2)or (3) of the Companies Act 1985. The statutory accounts for the year ended 31December 2004, upon which the auditors have still to report, will be deliveredto the Registrar following the Company's annual general meeting. 2. Tax on Ordinary activities Unaudited Restated 2004 2003 £000 £000Corporation tax payable at 19% (2003: 19%) - - ------ ------ 3. Dividends Unaudited Restated 2004 2003 £000 £000 Final proposed - 5.0p per share (2003:Nil) 392 - ------ ------ 392 - ====== ======4. Earnings (Loss) per Ordinary Share The earnings (loss) per Ordinary share is based on the profit from ordinaryactivities after tax of £1,080,000 (2003: £909,000 loss) and 7,830,000 (2003:7,812,000) shares being the weighted average number of shares in issue duringthe year. Apart from the unexercised Warrants currently in issue, the only potentiallydilutive shares are those shares which, subject to certain criteria beingachieved in the future, may be issued by the Company to meet its obligationsunder the investment management agreement. No such shares have been issued orare currently expected to be issued. There are therefore considered to be nopotentially dilutive shares in issue at 31 December 2004. Consequently, basicand diluted earnings per share are the same for the year ended 31 December 2004. Under FRS 14 'Earnings per share' any potentially dilutive shares are deemedanti-dilutive in the event that a loss has been incurred. Consequently, thebasic and diluted loss per share for the year ended 31 December 2003 are thesame. 5. Net Asset Value per Ordinary Share The net asset value per Ordinary share is calculated on attributable assets of£7,214,000 (2003: £6,616,000 and 7,833,466 (2003: 7,823,393) shares in issue atthe year end. 6. Annual General Meeting The Company's AGM is due to be held at 1.20 p.m. on 27 May 2005 at 23 BerkeleySquare, London, W1J 6HE.Copies of the full financial statements for the periodended 31 December 2004 will be available to the public at the registered officeof the Company at Saint Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZthereafter. This information is provided by RNS The company news service from the London Stock Exchange