Baronsmead Vt Regulatory News (BVT)

12 Nov 2007 14:33

Baronsmead VCT 2 PLC12 November 2007 To: RNSFrom: Baronsmead VCT 2 plcDate: 12 November 2007 Investment Objective To achieve long-term capital growth and generate tax-free dividends and capitaldistributions for private investors. Audited Preliminary Results - Eighteen month period to 30 September 2007 NAV per ordinary share over the eighteen month period increased by 9.7 per centto 125.69p before deduction of dividends. After payment of dividends totalling13.5p per ordinary share in the 18 months to 30 September 2007, the NAV was112.19p. The annualised rate of increase in the NAV was 6.4%. Ordinary share price total return of 95 per cent over the five years to 30September 2007, equivalent to an annualised tax-free return of 14.3 per cent. NAV total return of 110 per cent to ordinary shareholders since launch in 1998,equivalent to an annualised total return of 8.1% before 20 per cent income taxrelief (on subscription at launch) and 10.1 per cent afterwards. Average annual tax-free dividend is now 6.4p per ordinary share since launch in1998 (equivalent to a pre-tax return of 9.5p per share for a higher ratetaxpayer) The Chairman, Clive Parritt, said: "The economic climate over the 18 month accounting period has becomeincreasingly volatile. Despite that, the Company has achieved a creditable 9.7per cent increase in Net Asset Value (NAV) before deduction of dividends. Thisdemonstrates clearly the advantage of good investment diversity which the Boardand the Manager strive to achieve. The unquoted investment portfolio progressedwell in the period, while the AiM portfolio was marginally down. The share price total return for the five years to 30 September 2007 is 95 percent. This is attributable primarily to strong cumulative performance over theperiod from the investment portfolio. The consistency and level of dividends (currently equivalent to 9.5p per shareper annum for a higher rate tax payer), is beginning to make a real contributionto market demand for the Company's shares and it is helping to underpin theshare price. The dividends paid to Ordinary and C shareholders of 13.5p and9.8p respectively (the latter converted in January 2007) illustrate the incomeattractions of holding shares in Baronsmead VCT 2. RESULTS | In the 18 months to 30 September 2007, the Net Asset Value (NAV) perordinary share increased by 9.7 per cent from 114.62p to 125.69p beforededuction of dividends. Three interim ordinary dividends were paid - inDecember 2006 (5p), March 2007 (5p) and September 2007 (3.5p). The C share capital raised in winter 2004/05 was converted into ordinary shareson 24 January 2007 with 9,657 new ordinary shares being issued for every 10,000C shares held. LONG TERM PERFORMANCE | There are two principal ways in which shareholders canassess the long term performance of the Company; either by reference to the NAVplus dividends paid (known as "NAV total return"); or the movement in shareprice plus dividends paid (known as "share price total return"). This lattermeasure is particularly relevant to investors who buy in the market. Usingeither measure the Company has performed well. The NAV total return to ordinary shareholders since launch in 1998 amounts to110 per cent which represents an annual compound growth rate of 8.1 per cent andis stated net of all running costs including any performance fees earned by theManager. In the period under review, performance fees of £508,000 (includingVAT) were paid to the Manager. These total returns are stated before theinclusion of VCT tax reliefs, which were designed to redress both the VCTconstraints and the higher risk that pertains to smaller unquoted and AiM-tradedcompanies. If the original 20 per cent income tax relief on subscription atlaunch is taken into account the subsequent return is 137.5 per cent and theannual compound growth rate increases to 9.5 per cent. The share price total return in the last five years has been 95 per cent, whichrepresents an annualised tax-free return of 14.3 per cent. By the period end, tax-free dividends totalling 60.9p had been paid to foundershareholders. This is an annualised tax-free average of 6.4p per share perannum. For the higher rate taxpayer, the gross equivalent represents 9.5p pershare per annum. Based on a share price of 101p at the period end, thisrepresents a dividend yield of 6.3 per cent or a gross equivalent yield of 9.4per cent tax-free for UK private investors. The Board will aim to sustainannual dividends at an average of 5.5p per share but clearly continuance willdepend on the level of profitable realisations and it cannot be guaranteed. The results set out above compare favourably with other VCTs and fullercomparisons have recently been prepared by the Association of InvestmentCompanies (AIC) who publish monthly data on their website, www.theaic.co.uk. THE PORTFOLIO | The portfolio increased to 80 investments with 21 newinvestments made, 10 investments being fully realised and 4 investments beingwritten off during the period. New investments, (excluding further rounds offinancing) totalled £11.4 million across 7 new unquoted and 14 AiM-tradedinvestees. The split by value of the portfolio (excluding the interest bearingsecurities) is approximately 61 per cent unquoted and 39% AiM or listedinvestments. The largest investments in each category are 3.9 per cent and 2.2per cent of NAV respectively. Six VCT tests relating to the running of Baronsmead VCT 2 have to be, and weremet for each day of the period to 30 September 2007. The most significant ofthese tests is the need to ensure that at least 70% of the funds raised areinvested in VCT qualifying investments within 3 years. At the period end,approximately 77% of the ordinary capital raised (net of launch costs) prior to30 September 2005 was invested in qualifying investments. The 'direction of travel' or relative health of portfolio companies is measuredquarterly in terms of profitability as well as other non-financial benchmarks.At the period end 81 per cent of the portfolio companies were reporting higheror steady profits. Investment sales totalled £11.5 million realising a net profit of some £6.7million and delivering a multiple on cost of 2.4 times. Since the period end,Boldon James has been sold to a trade buyer at 3.1 times the original cost of£687,000 realising a profit of £1.1 million. MAKING FURTHER INVESTMENT IN BARONSMEAD VCT 2 | The record of share price totalreturns and the availability of ISA style tax reliefs illustrate some of themerits for UK private investors of acquiring existing shares in Baronsmead VCT2. Following revisions to VCT legislation in the Finance Acts 2006 and 2007 thedetailed way in which new share capital can be deployed has become clearer andas a consequence the Board is able to increase the financial planningopportunities available to ordinary shareholders by offering them the ability tosubscribe for new 'top up' shares. The Directors have decided to offer for subscription ordinary shares with atotal value of up to Euros 2.5 million (approximately equivalent to £1.7 millionat 30 September 2007), in accordance with the Prospectus Directive 2005, at thesame time as the final statutory and interim reports are sent to allshareholders. Any offer over Euros 2.5 million requires the publication of afull prospectus, the regulatory cost of which makes large top up offers toocostly to undertake. Shareholders are invited to subscribe for new shares in the knowledge that thenext time shareholders will be asked to confirm that the Company should continueas a Venture Capital Trust will be in 2013, or if the proposed specialresolution to extend the life of the Company is passed at the AGM it will be2014 (i.e. more than 5 years in the future). Income tax relief of up to 30% canbe claimed on the subscription cost and retained as long as shareholders holdthese shares for five years or more. If more subscription monies are receivedthan the upper limit of Euros 2.5 million, subscription levels will be scaledback accordingly. The new Dividend Reinvestment Plan (DRIP) continues to be available. Under thisscheme approximately 12 per cent of ordinary shareholders re-invest theirdividends by acquiring shares in the market. The scheme acquired a total of784,014 shares during the period. The number of third party purchasers of shares in the market has shown anincrease during summer 2007 and it is hoped that this will continue. During theperiod, 1,125,000 ordinary shares were bought back, which was a lower level thanprior periods. INVESTMENT POLICY | The Board reviews the investment policy on a regular basisto ensure that it remains appropriate in the prevailing market conditions.Inevitably, over time, there have been minor changes but the basic strategy thathas been in place since launch in 1998 remains as valid today as it did then. SHAREHOLDER ISSUES | The Company now has approximately 3,400 ordinaryshareholders and the Board's task is to ensure that it meets and understandstheir requirements. The Board looks forward to welcoming as many shareholdersas possible to the AGM on 10 December 2007. During the new financial year ending 30 September 2008, former C shareholderswho subscribed between October 2004 and January 2005 will come to the end oftheir three year holding period after which their initial 40% income tax reclaimcan be permanently retained. The Board is aware from the 2006 shareholdersurvey that a small minority have indicated their preference to sell. However,based on this survey and prior experience, it is anticipated that the existingshareholder policies regarding the DRIP, tax-free dividend yields and the trackrecord of Baronsmead VCT 2 over more than nine years, should encourage anorderly market of buyers and sellers. OUTLOOK | The UK economy is currently experiencing higher uncertainty promptedby the credit difficulties on both sides of the Atlantic. While this is expectedto impact on the institutional funds available for AiM flotations, the Boardhopes it will also lead to greater realism in the pricing of buyingopportunities. Unquoted opportunities are less affected by these difficultiesbut they can dampen unquoted deal flow. To counter this, the Manager hasinvested in direct origination to help sustain the level of new investment whichis so crucial to our success. With regard to the existing portfolio there is a good spread of risk and,currently, the unquoted investees are showing strong momentum in theirbusinesses. This resilience is also evident in the trading of many of the AiMinvestees, but here there is greater susceptibility to lower market pricing forsmaller and more illiquid companies. The Manager remains confident about futureperformance but is taking steps to ensure that the risk profile of investees andnew investment opportunities are reviewed with even greater stringency." Enquiries: David Thorp, ISIS EP LLP 0207 506 5631 Rhonda Nicoll, F&C Asset Management 0131 718 1074 Baronsmead VCT 2 plc Audited Income Statement Eighteen month period to 30 September 2007 Ordinary Shares Total Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 6,288 6,288Realised gains on investments - 1,820 1,820Income 3,474 - 3,474Investment management fee (624) (2,380) (3,004)Other expenses (624) - (624) Profit on ordinary activities before taxation 2,226 5,728 7,954 Taxation on ordinary activities (459) 459 - Profit on ordinary activities after taxation 1,767 6,187 7,954 Return per ordinary share: 2.86p 10.02p 12.88p Audited Reconciliation of Movements in Shareholders' FundsEighteen month period to 30 September 2007 2007 2007 2007 Ordinary C shares Total shares £'000 £'000 £'000 Opening shareholders' funds at 31 March 2006 46,897 22,677 69,574 Conversion of C shares 24,760 (24,760) - Profit for the period 5,513 2,441 7,954 Purchase of shares for Treasury (1,159) - (1,159) Expenses of share issue/conversion of share premium (23) (2) (25) Dividends paid (7,243) (356) (7,599) Closing shareholders' funds at 30 September 2007 68,745 - 68,745 Baronsmead VCT 2 plc Audited Income Statement Year to 31 March 2006 Ordinary Shares Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 3,997 3,997Realised gains on investments - 1,590 1,590Income 1,903 - 1,903Investment management fee (278) (1,517) (1,795)Other expenses (241) - (241) Profit on ordinary activities before taxation 1,384 4,070 5,454 Taxation on ordinary activities (284) 375 91 Profit on ordinary activities after taxation 1,100 4,445 5,545 Return per ordinary share: 2.68p 10.81p 13.49p Audited Reconciliation of Movements in Shareholders' FundsYear to 31 March 2006 2006 Ordinary Shares £'000 Opening shareholders' funds at 31 March 2005 48,469Profit for the year 5,545Deferred consideration 12Decrease in share capital in issue (459)Dividends paid (6,670) Closing shareholders' funds at 31 March 2006 46,897 Baronsmead VCT 2 plc Audited Income Statement Year to 31 March 2006 C Shares Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 1,838 1,838Realised losses on investments - (60) (60)Income 1,091 - 1,091Investment management fee (129) (485) (614)Other expenses (127) - (127) Profit on ordinary activities before taxation 835 1,293 2,128 Tax on ordinary activities (247) 156 (91) Profit on ordinary activities after taxation 588 1,449 2,037 Return per C share: 2.66p 6.56p 9.22p Audited Reconciliation of Movements in Shareholders' FundsYear to 31 March 2006 2006 C Shares £'000 Opening shareholders' funds at 31 March 2005 21,129Profit for the year 2,037Increase in share capital in issue 239Dividends paid (728) Closing shareholders' funds at 31 March 2006 22,677 Baronsmead VCT 2 plc Audited Income Statement Year to 31 March 2006 Total Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 5,835 5,835Realised gains on investments - 1,530 1,530Income 2,994 - 2,994Investment management fee (407) (2,002) (2,409)Other expenses (368) - (368) Profit on ordinary activities before taxation 2,219 5,363 7,582 Taxation on ordinary activities (531) 531 - Profit on ordinary activities after taxation 1,688 5,894 7,582 Audited Reconciliation of Movements in Shareholders' Funds Year to 31 March 2006 2006 £'000 Opening shareholders' funds at 31 March 2005 69,598Profit for the year 7,582Deferred consideration 12Decrease in share capital in issue (220)Dividends paid (7,398) Closing shareholders' funds at 31 March 2006 69,574 Baronsmead VCT 2 plc Audited Balance SheetAs at 30 September 2007 Total £'000Fixed assets held at fair value Investments traded on AiM 18,433 Investments traded on PLUS 65 Listed investments 1,274 Interest bearing securities 16,929 Unquoted investments 30,739 67,440 Net current assets 1,352Total assets less current liabilities 68,792Creditors falling due after one year (47)Net assets 68,745 Financed by: Shareholders' funds 68,745 Net asset value per share- Basic 112.19p- Treasury 111.80p Shares in issue 61,276,638Shares in Treasury 2,220,000 Baronsmead VCT 2 plc Audited Balance SheetAs at 31 March 2006 Ordinary C Shares Shares Total £'000 £'000 £'000Fixed assets held at fair value Investments traded on AiM 16,404 3,909 20,313 Investments traded on PLUS 119 - 119 Listed investments 530 - 530 Interest bearing securities 11,229 13,302 24,531 Unquoted investments 16,230 4,110 20,340 44,512 21,321 65,833 Net current assets 2,385 1,356 3,741Net assets 46,897 22,677 69,574 Financed by: Shareholders' funds 46,897 22,677 69,574 Net asset value per share- Basic 114.62p 101.93p -- Treasury 114.62p - - Shares in issue 40,916,427 22,247,650Shares in Treasury 1,095,000 - Baronsmead VCT 2 plc Summarised Audited Statement of Cash Flows For the eighteen month period ended 30 September 2007 Total £'000 Net cash outflow from operating activities (1,383)Net cash inflow from capital expenditure and financialinvestment 6,501Equity dividends paid (7,603) Net cash outflow before financing (2,485)Net cash outflow from financing (1,310) Decrease in cash (3,795) Reconciliation of net cash flow to movement in netcash Decrease in cash in the period (3,795)Net cash as at 1 April 4,962 Net cash as at 30 September 1,167 Baronsmead VCT 2 plc Summarised Audited Statement of Cash Flows For the year ended 31 March 2006 Ordinary C Shares Shares Total £'000 £'000 £'000 Net cash (outflow)/inflow from operating activities (974) 697 (277)Net cash inflow/(outflow) from capital expenditure andfinancial investment 7,319 (773) 6,546Equity dividends paid (6,670) (728) (7,398) Net cash outflow before financing (325) (804) (1,129)Net cash outflow from financing (485) (113) (598) Decrease in cash (810) (917) (1,727) Reconciliation of net cash flow to movement in netcash Decrease in cash in the year (810) (917) (1,727)Net cash as at 1 April 4,100 2,589 6,689 Net cash as at 31 March 3,290 1,672 4,962 Notes 1. The audited results which cover the eighteen month period to 30 September 2007 have been prepared under UK Generally Accepted Accounting Practice (UK GAAP). In order to better reflect the activities of a VCT and in accordance with the SORP, supplementary information which analyses the income statement between items of a revenue and capital nature has been presented alongside the income statement. Net Revenue is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 of the Income Tax Act 2007. 2. There were 61,276,638 ordinary shares in issue at 30 September 2007 (31 March 2006: 40,916,427). During the period the Company bought back 1,125,000 ordinary shares to be held in Treasury, at a cost of £1,159,000. These shares will not be sold at a discount wider than the discount prevailing at the time the shares were initially bought back by the Company. The Company holds 2,220,000 ordinary shares in Treasury representing 3.6 per cent of the issued share capital as at 9 November 2007. The total number of ordinary shares listed at 30 September 2007 was 63,496,638 (31 March 2006: 42,011,427). On 24 January 2007, the conversion of the C shares into ordinary shares resulted in 21,485,211 ordinary shares being issued. 3. Revenue and capital returns for the ordinary shares for the period to 30 September are based on a weighted average of 61,762,131 (2006: 41,108,544) ordinary shares in issue during the period. 4. Income for the period/year is derived from: 2007 2006 Total Total £'000 £'000 Dividend income 697 452Fixed interest 2,556 2,382Deposit interest 221 160 3,474 2,994 5. These are not full accounts in terms of Section 240 of the Companies Act 1985. Full audited accounts for the year to 31 March 2006 have been lodged with the Registrar of Companies. The annual report for the eighteen month period to 30 September 2007 will be sent to shareholders shortly and will then be available for inspection at 100 Wood Street, London, the registered office of the Company. The audited accounts for the eighteen month period to 30 September 2007 contains an unqualified audit report. 6. The Annual General Meeting will be held on 10 December 2007 at 3.30 pm. This information is provided by RNS The company news service from the London Stock Exchange