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3 Jul 2008 08:47
BRITISH SMALLER COMPANIES VCT PLC
UNAUDITED PRELIMINARY RESULTS
FOR THE YEAR ENDED
31 MARCH 2008
British Smaller Companies VCT plc ("the Company") today announces its unaudited preliminary results for the year ended 31 March 2008.
Chairman's Statement
In this my last Chairman's statement, I am pleased to report the fifth successive year of growth in the total return on your investment in the Company. For the year to 31 March 2008, the total return, which takes into account both the net asset value and the level of dividends paid, has increased by 5.8 pence per Ordinary share or 4.3% to 142.1 pence per share. This represents an increase of 67.8% over the five year period.
This year has again seen a number of successful realisations which has both sustained the increase in asset value and enabled the Board to continue its dividend policy of distributing profits on investments, resulting in our recommendation to pay a final dividend of 3.0 pence per Ordinary share, bringing the total for the year to 5.0 pence per share.
Investment Portfolio
These realisations resulted in an increase in value of £2.3 million over the previously reported carrying value and an increase of £3.9 million over the original cost of acquisition. The most significant realisations were of the investments in Cozart plc and Oasis Healthcare plc, which between them delivered £1.3 million of these profits. A further £0.3 million profit was realised on the Company's original investment in Tekton Limited relating to a residual holding in the shares of the purchaser, following the sale of Tekton 15 months earlier.
A total of £4.77 million was invested into nine businesses in the year. £3.4 million (71.8%) was invested in five unquoted companies, £1.1 million (23.6%) was invested in AIM listed businesses and £0.22 million (4.6%) was invested in an AIM company in exchange for the deferred consideration in respect of the realisation of an unquoted investment.
Financial Results and Dividend
The net asset value of the Company at 31 March 2008 was 102.1 pence per share. Taking account of the dividends paid to date the total return for eligible founder shareholders at the balance sheet date was 142.1 pence per share.
The Company recorded an operating profit before investment gains for the year of £0.23 million (2007: loss £0.25 million) and a pre-tax profit of £2.2 million (2007: £1.3 million).
The performance of the Company reflects the benefits of increasing scale, higher yields and lower expense ratios which have all contributed to the increased operating profit. The level and amount of successful realisations has then further contributed to deliver the enhanced pre-tax profit.
As I reported in the interim results the previously issued C shares were converted during the year to Ordinary shares.
An interim dividend of 2.0 pence per share was declared on the Ordinary shares and paid in November 2007. The Board is now proposing a final dividend of 3.0 pence per share on the Ordinary shares. If approved, this dividend will be paid on 8 August 2008 to shareholders on the register at 11 July 2008. The final dividend has not been recognised in the accounts under IFRS as the contractual obligation did not exist at the balance sheet date.
For the benefit of shareholders the Board would like to introduce a dividend re-investment scheme. Details of the new proposals will be issued to shareholders. The resolutions being put to shareholders at the AGM provide the necessary authorities for the directors to introduce a new scheme which, if approved, will apply to any future dividend payments after the final proposed dividend for the year to 31 March 2008.
Performance Incentive
The Board has reviewed the existing Performance Incentive Scheme for the Fund Manager. The Board feels that the existing scheme, as well as being relatively complex, is what is known as a benchmark scheme (tracking total return against the FTSE All Share Index) and is no longer appropriate for this Company. Whilst this scheme has merits, the Board has taken the view that, particularly in times of declining markets (when a flat performance could trigger an incentive payment), the scheme does not best align itself with the Company's policy of combining consistent dividend payments and net asset value performance. Consequently, the Board is proposing to recommend that shareholders replace this scheme with one that focuses on growth and distributions as well as setting a new hurdle, with the expectation that some time will be required to achieve this hurdle.
Details of the proposed new arrangement will be issued to shareholders for approval during the coming year.
The Company has strong cash reserves as a result of the realisation programme and recent fundraisings. This leaves it well positioned to take advantage of new investment opportunities that arise over the next twelve months and to provide follow-on investment funding to existing investee companies.
The combination of reducing debt capacity, a reducing public market appetite and any slowdown in economic growth may elicit further opportunities to acquire strong investments at attractive prices. The Board consistently reviews the current level of liquidity in the Company to ensure that it remains well placed to take advantage of these opportunities as they arise.
Shareholders and Fundraising
On 4 January 2008, the Board published proposals offering investors the opportunity to subscribe for up to 5 million new Ordinary shares in the Company at an offer price of 106.25 pence per share. These proposals were by way of two offers closing on 4 April 2008 and 30 April 2008 respectively. Shareholders were given priority to apply for shares up to 21 March 2008. I am delighted to report that the Offers raised a total of £5.3 million before expenses, with 68% of this total resulting from existing shareholders. In addition, a further 382,619 shares were issued by the directors since the financial year end. The Board remains grateful for this level of support and the Company has begun to take advantage of the opportunities that are available as a result of the additional investment capacity.
The Company continues to operate a share buy back policy to enable shareholders to obtain some liquidity in an otherwise illiquid market where there is a need to dispose of their stock. This policy is kept under review to ensure that any decisions taken are in the best interests of shareholders as a whole. In accordance with this policy, the Company purchased a total of 752,802 shares during the year, at an average price of 89 pence per share. These shares are held in treasury. The existing buy back authority which currently expires on 8 August 2008 is proposed to be extended until the next AGM or fifteen months, whichever is the earlier. A resolution to this effect will be proposed at the Company's AGM on 6 August 2008.
Outlook
There have been recent announcements in respect of venture capital trusts being exempted from VAT on management fees from 1 October 2008. Whilst details of the implementation of this change have yet to be published, the Board welcomes the changes which it believes can only positively affect the Company.
The Company has achieved significant realisations and has increased the rate of new investment that is developing a portfolio containing maturing and growing investments with the emphasis remaining on unquoted investments.
Our investment strategy has been to seek to invest in growing businesses where we have confidence in the ability of management to produce attractive returns even in difficult trading conditions without over-leveraging investee companies with debt. These companies are spread over a broad range of sectors and even though economic conditions are deteriorating we believe that our portfolio is well-placed to deal with the challenges that lie ahead. Where investee companies' strategies include growth by acquisition, the Board believes that as a result of the economic climate these strategies could be either accelerated or achieved at more attractive prices than was previously possible.
Board and Other Changes
As I have previously stated, I retire as Chairman at this AGM and will be replaced by Helen Sinclair, who joined the Board in March of this year.
In addition Steve Noar, who has been a Board Member since May 2005, stepped down on 30 June, following his decision to re-locate outside the UK. I would like to thank Steve for his invaluable contribution during his time as a member of this Board.
Can I take this opportunity to thank you for your continued support over the years and to wish you and Helen well for the future.
Sir Andrew Hugh Smith
Chairman
3 July 2008
Unaudited Income Statement
For the year ended 31 March 2008
| Notes | 2008 £000 | 2007 £000 | |||||
| Income | 1,035 | 368 | |||||
| Administrative expenses: | |||||||
| Fund management fee | (610) | (381) | |||||
| Other expenses | (195) | (234) | |||||
| (805) | (615) | ||||||
| Operating profit (loss) | 230 | (247) | |||||
| Gain on realisation of investments | 2,318 | 503 | |||||
| Unrealised (losses) gains on investments held at fair value | (343) | 1,082 | |||||
| Profit on ordinary activities before taxation | 2,205 | 1,338 | |||||
| Taxation | - | - | |||||
| Profit for the year from continuing operations | 2,205 | 1,338 | |||||
| Basic and diluted earnings per Ordinary share |
| 3 | 8.51p | 7.82p | |||
| Basic and diluted earnings per C share |
| 3 | *n/a | 8.98p | |||
* On 9 May 2007 the Company converted its C shares of 50p each into new Ordinary shares of 10p each. The 1,258,676 C shares converted into 1,415,585 Ordinary shares and rank pari passu with other Ordinary shares.
.
Unaudited Balance Sheet
at 31 March 2008
| Notes | 2008 £000 | 2007 £000 | ||
| Assets | ||||
| Non-current assets | ||||
| Financial assets at fair value through profit or loss | 12,947 | 11,627 | ||
| Current assets | ||||
| Trade and other receivables | 1,114 | 512 | ||
| Cash and cash equivalents | 12,356 | 4,867 | ||
| 13,470 | 5,379 | |||
| Liabilities | ||||
| Current liabilities | ||||
| Trade and other payables | (219) | (218) | ||
| Net current assets | 13,251 | 5,161 | ||
| Net assets | 26,198 | 16,788 | ||
| Shareholders' equity | ||||
| Share capital | 2,642 | 2,148 | ||
| Share premium account | 10,502 | 1,813 | ||
| Capital redemption reserve | 221 | 221 | ||
| Treasury share reserve | (666) | - | ||
| Special reserve | 2,408 | 2,408 | ||
| Retained earnings | 11,091 | 10,198 | ||
| Total shareholders' equity | 26,198 | 16,788 | ||
| Net asset value per Ordinary share | 4 | 102.1p | 101.3p | |
| Net asset value per C share | 4 | *n/a | 110.8p | |
* On 9 May 2007 the Company converted its C shares of 50p each into new Ordinary shares of 10p each. The 1,258,676 C shares converted into 1,415,585 Ordinary shares and rank pari passu with other Ordinary shares.
Unaudited Statement of Changes in Shareholders' Equity
| Total shares | Share capital | Share premium account | Capital redemption reserve | Treasury share reserve | Special reserve | Retained earnings | Total equity |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| Balance at 31 March 2006 | 2,195 | 1,336 | 117 | - | 3,330 | 9,569 | 16,547 |
| Profit for the year | - | - | - | - | - | 1,338 | 1,338 |
| Dividends | - | - | - | - | - | (709) | (709) |
| Purchase and cancellation of own shares | (104) | - | 104 | - | (922) | - | (922) |
| Issue of Ordinary share capital | 57 | 517 | - | - | - | - | 574 |
| Issue costs of Ordinary shares | - | (40) | - | - | - | - | (40) |
| Balance at 31 March 2007 | 2,148 | 1,813 | 221 | - | 2,408 | 10,198 | 16,788 |
| Profit for the year | - | - | - | - | - | 2,205 | 2,205 |
| Dividends | - | - | - | - | - | (1,312) | (1,312) |
| Purchase of own shares | - | - | - | (666) | - | - | (666) |
| Issue of Ordinary share capital | 981 | 8,722 | - | - | - | - | 9,703 |
| Issue costs of Ordinary shares | - | (525) | - | - | - | - | (525) |
| C share conversion | (487) | 492 | - | - | - | - | 5 |
| Balance at 31 March 2008 | 2,642 | 10,502 | 221 | (666) | 2,408 | 11,091 | 26,198 |
The table above includes prior year comparatives.
The special distributable reserve was created following approval of the Court and the resolution of the Shareholders to cancel the Company's share premium account and is available for use for other corporate purposes of the Company.
Included within retained earnings, in respect of unrealised gains on investments held at fair value through profit or loss is £5,471,000 (2007: £6,803,000). These gains are not distributable under the Companies Act 1985 and provisions of the Companies Act 2006.
Unaudited Cash Flow Statement
for the year ended 31 March 2008
| Notes | 2008 £000 | 2007 £000 | |
| Net cash outflow from operating activities | 5 | (26) | (267) |
| Cash flows from (used in) investing activities | |||
| Purchase of financial assets at fair value through profit or loss | (4,770) | (1,380) | |
| Proceeds from sale of financial assets at fair value through profit or loss | 4,878 | 2,198 | |
| Net cash from investing activities | 108 | 818 | |
| Cash flows from (used in) financing activities | |||
| Costs of C share issue | - | (3) | |
| Issue of Ordinary shares | 9,784 | 574 | |
| Cost of Ordinary share issue | (579) | (80) | |
| Purchase of own Ordinary shares | (721) | (796) | |
| Dividends paid | (1,312) | (709) | |
| Net cash from (used in) financing activities | 7,172 | (1,014) | |
| Net increase (decrease) in cash and cash equivalents | 7,254 | (463) | |
| Cash and cash equivalents at beginning of the year | 4,867 | 5,395 | |
| Effect of market value changes in cash equivalents | 235 | (65) | |
| Cash and cash equivalents at the end of the year | 12,356 | 4,867 | |
Notes to Financial Statements
for the year ended 31 March 2008
1. Accounting Policies
This preliminary announcement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The information for the year ended 31 March 2007 is an extract from the statutory accounts to that date which have been delivered to the Registrar of Companies. Those accounts included an audit report which was unqualified and which did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. The accounting policies set out in those accounts have continued to be followed. The statutory accounts for the year ended 31 March 2008, upon which the auditors have still to report, will be delivered to the Registrar following the Company's annual general meeting.
The accounts have been prepared on a going concern basis and in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, and those parts of the Companies Act 1985 applicable to companies reporting under IFRS.
The financial statements are prepared in accordance with IFRS and interpretations in force at the reporting date. The Company has not adopted any standards or interpretations in advance of the required implementation dates. It is not expected that adoption of standards or interpretations which have been issued by the International Accounting Standards Board but have not been adopted will have a material impact on the financial statements.
2. Dividends
Amounts recognised as distributions to equity holders in the year:
| 2008 £000 | 2007 £000 | |
| Interim dividend for the year ended 31 March 2008 - 2.0p per Ordinary share; paid 16 November 2007 (2007: 1.5p per Ordinary share) | 520 | 234 |
| Final dividend for the year ended 31 March 2007 - 3.0p per Ordinary share; paid 8 August 2007 (2007: 3.0p per Ordinary share and 0.5p per C share) | 792 | 475 |
| 1,312 | 709 | |
The interim dividend of 2.0p per share was declared on 17 October 2007 and paid on 16 November 2007 to shareholders on the register on 26 October 2007.
A final dividend of 3.0p per share in respect of the year to 31 March 2008, amounting to £932,000, is proposed. This has not been recognised in the year ended 31 March 2008 as the obligation did not exist at the balance sheet date.
3. Earnings per Share
The earnings per Ordinary share is based on net profit from ordinary activities after tax of £2,205,000 (2007: £1,225,000) and 25,915,000 (2007: 15,664,000) shares, being the weighted average number of Ordinary shares in issue during the year.
During the year the Company issued 9,817,214 Ordinary shares and the 1,258,676 C shares were converted into 1,415,585 Ordinary shares. Consequently earnings per C share for the year to 31 March 2008 are not applicable. Earnings per C share for the year to 31 March 2007 is based on net profit from ordinary activities after tax of £113,000 and 1,259,000 shares, being the weighted average number of C shares in issue during the year.
The Company also repurchased 752,802 of its own shares, these shares are held in treasury. The 752,802 treasury shares have been excluded in calculating the number of Ordinary shares in issue at 31 March 2008 (31 March 2007: nil). The Company has no securities that would have a dilutive effect in either period and hence the basic and diluted earnings per share are the same.
Since the year end the Company has issued 5,379,239 Ordinary shares. Had this transaction occurred before the year end, it would have significantly affected the number of shares used in the earnings per share calculation.
4. Net Asset Value per Share
The net asset value per Ordinary share is calculated on attributable assets of £26,198,000 (2007: £15,394,000) and 25,671,361 (2007: 15,191,364) Ordinary shares in issue at the year end.
During the year the Company issued 9,817,214 Ordinary shares and the 1,258,676 C shares were converted into 1,415,585 Ordinary shares. Consequently net asset value per C share for the year to 31 March 2008 is not applicable. Net asset value per C share for the year to 31 March 2007 is based on attributable assets of £1,394,000 and 1,258,676 C shares in issue at the year end.
The Company also repurchased 752,802 of its own shares, these shares are held in treasury. The 752,802 treasury shares have been excluded in calculating the number of Ordinary shares in issue at 31 March 2008 (31 March 2007: nil). The Company has no securities that would have a dilutive effect in either period and hence the basic and diluted net asset values per share are the same.
Since the year end the Company has issued 5,379,239 Ordinary shares. Had this transaction occurred before the year end, it would have significantly affected the number of shares used in the net asset value per share calculation.
5. Reconciliation of Profit on Ordinary Activities before Taxation to Net Cash Outflow from Operating Activities
| 2008 £000 | 2007 £000 | |
| Profit on ordinary activities before tax | 2,205 | 1,338 |
| Increase in prepayments and accrued income | (230) | (40) |
| (Decrease) Increase in accruals | (26) | 20 |
| Profit on realisation of investments in the year | (2,318) | (503) |
| Revaluation of investments in the year | 343 | (1,082) |
| Net cash outflow from Operating Activities | (26) | (267) |
6. Total Return per Share
The total return per share takes into account the closing net asset value per share and cumulative dividends paid per share at the balance sheet date to eligible founder shareholders.
| Ordinary Shares | | For the year ended 31 March | |||
| | 2008 | 2007 | 2006 | 2005 | 2004 |
| Net asset value per Ordinary share | 102.1p | 101.3p | 97.5p | 86.6p | 78.3p |
| Cumulative dividend paid per Ordinary share | 40.0p | 35.0p | 30.5p | 26.8p | 19.4p |
| | -------- | -------- | -------- | -------- | -------- |
| Total Return per Ordinary share | 142.1p | 136.3p | 128.0p | 113.4p | 97.7p |
| | ===== | ===== | ===== | ===== | ===== |
| C Shares | | For the year ended 31 March | |||
| | 2008* | 2007 | 2006 | 2005 | 2004 |
| Net asset value per C share | - | 110.8p | 102.2p | 95.0p | - |
| Cumulative dividend paid per C share | - | 0.5p | - | - | - |
| | -------- | -------- | -------- | -------- | -------- |
| Total Return per C share | - | 111.3p | 102.2p | 95.0p | - |
| | ===== | ===== | ===== | ===== | ===== |
* On 9 May 2007 the Company converted its C shares of 50p each into new Ordinary shares of 10p each. The 1,258,676 C shares converted into 1,415,585 Ordinary shares and rank pari passu with other Ordinary shares.
7. Annual Report
Copies of the full financial statements for the year ended 31 March 2008 will be available to the public at the registered office of the Company at Saint Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZ.
For further information, please contact:
David Hall YFM Private Equity Limited Tel: 0161 832 7603
Jonathan Becher Teather & Greenwood Limited Tel: 0207 426 3269
Michael Bellamy Teather & Greenwood Limited Tel: 0207 426 9547