Baronsmead Vt Regulatory News (BVT)

11 Nov 2005 16:24

Baronsmead VCT 2 PLC11 November 2005 Baronsmead VCT 2 plc To: RNSFrom: Baronsmead VCT 2 plcDate: 11 November 2005 Interim Results - Six Months Ended 30 September 2005 Highlights • Ten new investments were made during the period and five were sold taking the total equity portfolio to 71 companies. Ordinary Shares • NAV per share increased by 5.7 per cent to 120.76p (before any dividend payments) from 114.22p. • After interim dividends totalling 7.5p per share (equivalent to 11.1p to a higher rate tax payer) the NAV will be 113.26p. • The first interim dividend of 5p per share was paid on 6 June 2005 and the second interim dividend of 2.5p per share is payable on 16 December 2005. • Since launch in 1998 the total return to ordinary shareholders is 81per cent (based on quoted investments valued at mid-market price). C Shares • NAV per share increased by 3.0 per cent to 97.88p from 95.04p. • After an interim dividend declared of 1.0p per share, the NAV was 96.88p. • The interim dividend of 1.0p per share is payable on 16 December 2005. The Net Asset Values stated above are based on revised UK GAAP in that quotedinvestments are valued at bid price. However, dividends payable by the Companyhave been recognised in the accounting period to which they relate and not whenthey are paid, a departure from the revised UK GAAP. The Chairman, Clive Parritt said "The active sale of mainly unquoted investments has enabled the good record ofdividends to be sustained. Baronsmead VCT 2 is now the largest VCT in the market place with assets of over£69m. It continues to focus on investment in established and profitable unquotedand AiM-traded companies RESULTS | The six months to 30 September 2005 has been a further satisfactoryperiod for the Company, in terms of investment, realisations, dividends andgrowth. The use of revised UK GAAP makes it difficult to show clearly theachievements for the year and the treatment of dividends under this standardmakes a comparison of NAV growth difficult to display. Thus at 31 March 2005the NAV per ordinary share under the new rules was 116.92p, but 2.7p was paid asa final dividend to ordinary shareholders in June 2005 and has been deducted toprovide an adjusted NAV of 114.22p per ordinary share. This compares with120.76p per ordinary share, as at 30 September 2005, before providing fordividend distributions. Therefore, on a comparable basis the NAV per ordinaryshare increased by 5.7 per cent before providing for a 5p first interim dividendpaid in June 2005 and a 2.5p second interim dividend (comprising 1.4p from netrevenue and 1.1p from net realised profits) payable to ordinary shareholders on16 December 2005. The resulting NAV per ordinary share at the interim stage was113.26p per share. The increase in the FTSE All-Share index (total return) was13.6% over the comparable period. Again, the opening NAV per C share has been restated to take account of thequoted investments being valued at bid price. This has resulted in the NAVreported at 31 March 2005 being reduced by 0.19p to 95.04p. For the six monthsto 30 September 2005, the NAV of the C share pool increased by 3.0 per cent to97.88p, before the payment of a 1.0p interim dividend. This dividend will alsobe paid to C shareholders on 16 December 2005. The increase in value of the AiMportfolio accounted for most of this gain. Since April 1998, the total investment return (based on quoted investmentsvalued at mid-market price) is 81 per cent, which is comparable to 20 per centgrowth in the FTSE All-Share index (total return) over the same period. Taxfree dividends paid and declared now total 41.4p for founder shareholders, whichis an average of 5.5p per annum. If the initial 20 per cent income tax reliefis taken into account, founder shareholders will have received a net annualyield of 6.9 per cent equivalent to an annual yield of 10.2 per cent for higherrate tax payers. THE PORTFOLIO | In the six month period under review, ten new investments weremade and five sold increasing the portfolio to 71 companies and maintaining thelevel of qualifying investments at approximately 75 per cent at the period end.The relative health of portfolio companies is measured quarterly in terms ofprofitability or other measures of progress appropriate to the investment inquestion. Currently 79 per cent of the investees were reporting higher orsteady progress. The increase in NAV per ordinary share was largely attributable to the unquotedportfolio. Fat Face generated significant profits whilst AssA and Searchspacewere both realised at more than twice cost. During the six months therealisation of Kondor was achieved at cost but Biofocus and Imerge were sold ata loss. Sustained trading progress at Americana not only increased its valuebut subsequently a significant part of this value has been redeemed forshareholders after the period end. This part realisation and residual valuerepresents some six times cost paid for this investment in August 2003. MEETING SHAREHOLDER NEEDS | During the period under review, 484,589 ordinaryshares were issued under the Dividend Reinvestment Scheme at 108p per share.Since the Company's year end and prior to the Company's AGM held on June 2005,475,000 ordinary shares were purchased and cancelled by the Company at adiscount of approximately 10 per cent to NAV per share. Since the Company's AGM, at which shareholder's voted in favour of shares beingheld in Treasury, the Company has purchased 425,000 ordinary shares to be heldin this way. The Board's policy on Treasury Shares is to ensure that if theseshares are issued, they will be priced at the NAV or above on the day ofre-issue. This will avoid dilution to existing shareholders. The Company isonly permitted to hold 10 per cent of its issued share capital in Treasury andTreasury Shares can be cancelled by the Company at any time. Treasury Sharesare not entitled to any dividends paid by the Company and carry no votingrights. CORPORATE GOVERNANCE | The introduction of International Financial ReportingStandards (IFRS) on 1 January 2005 had important implications for financialinstitutions which have private equity operations since IFRS requires investeecompanies to consolidate their financial reporting in line with the ultimateshareholder. This would have proved to be an unacceptable imposition to allparties and professional advice was sought for alternative solutions. The advice received provided the Managers with an opportunity to acquire controlof the business and on 1 July 2005, a new Limited Liability Partnership wascreated to assume the existing business and operations of ISIS Equity Partners(ISIS), managing circa £500m of private equity assets, including the managementcontract with Baronsmead VCT 2. The relationship between F&C and ISIS remainsstrong as the status of the latter moves from being a subsidiary to that ofpartnership. The Board was fully consulted regarding this change of control andare supportive of the new arrangement. CO-INVESTMENT SCHEME OF MANAGER | The Co-investment Scheme for executive membersof the Managers to invest in unquoted transactions was announced to shareholdersin November 2004. The rationale was to retain the existing skills and capacityof the Managers team and also to attract new talent in a market which isstrongly competitive in order to maintain and improve our successful investmentperformance. Early indications are that this has been successful. In the lastyear five new staff members have joined ISIS with an average of some ten yearsrelevant investment experience each. Co-investments made to date by 27individuals total £27,000 made in three unquoted transactions comprising BoldonJames, Credit Solutions and Independent Living Services. The benefits to VCT shareholders of the co-investment scheme (under which 5percent of the ordinary shares in the unquoted investee companies are subscribedby executive professionals working for ISIS) are that the interests of the teamand the VCT shareholders are aligned more closely. It is important to note thatmembers of the co-investment scheme are required to invest in all unquotedinvestments, they cannot cherry pick, they must follow on if the fund decides todo so and if they leave before the investment is realised, they will miss out onmuch of the potential value. As reported 12 months ago, the Board took independent financial and legal adviceon a wide range of matters relating to the Scheme. The Board examined theproposal over several months and in this respect it should be noted that allBoard members are also significant shareholders in their own right. Thisincluded calculating what the impact of the Scheme would have been had it beenin force since inception of the Company to the date the Co-investment Scheme waseffected. The resulting dilution would have been 0.2% per annum. The Boardconcluded and remain satisfied that the potential dilution expected from thisScheme is small and should be more than offset by an improvement in investmentperformance. Undertaking this innovative Scheme, the Managers have continued to sustain andimprove their investment capabilities in terms of both breadth and depth ofskills. As a result, ISIS has been able to remunerate staff in line with nonVCT private equity managers with whom it normally competes for transactions.The Board receives an annual report on the Scheme and will formally consider itscontinuance in four years. OUTLOOK | The interim results to 30 September 2005 meet the twin objectives ofachieving long term capital growth and generating consistent and growingtax-free dividends. The high level of unquoted realisations, both during theperiod and subsequently, gives the Board confidence that the dividend record canbe sustained in the medium term. The economic climate may become less favourable but the portfolio for the firsttime has now moved to over 70 companies and therefore provides a high level ofdiversification to counter such conditions. David Thorp, ISIS EP LLP: 0207 5061100 Rhonda Nicoll, F&C Asset Management plc 0131 465 1000 Unaudited Profit and Loss Account Six months to 30 September 2005 Ordinary Shares Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 1,258 1,258Realised gains on investments - 920 920Income 1,011 - 1,011Investment management fee (137) (412) (549)Other expenses (109) - (109) ---------- ----------- ----------- Profit on ordinary activities before taxation 765 1,766 2,531 Tax on ordinary activities (175) 250 75 ---------- ----------- ----------- Profit on ordinary activities after taxation 590 2,016 2,606 ---------- ---------- ----------- Return per ordinary share 6.32p ----------- Dividends paid/payable per share: First interim dividend paid on 6 June 2005 - 5.0p 5.0pSecond interim dividend payable on 16 December 2005 1.4p 1.1p 2.5p ---------- ---------- ----------- 1.4p 6.1p 7.5p ---------- ---------- ----------- Unaudited Profit and Loss Account Six months to 30 September 2005 C Shares* Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 408 408Realised losses on investments - (2) (2)Income 625 - 625Investment management fee (63) (190) (253)Other expenses (74) - (74) ---------- ----------- ----------- Profit on ordinary activities before taxation 488 216 704 Tax on ordinary activities (138) 63 (75) ---------- ----------- ----------- Profit on ordinary activities after taxation 350 279 629 ---------- ---------- ----------- Return per ordinary share 2.85p ----------- Dividends payable per share: Interim dividend payable on 16 December 2005 1.0p - 1.0p ---------- ---------- ----------- 1.0p - 1.0p ---------- ---------- ----------- * C Shares launched on 1 October 2004. Unaudited Profit and Loss Account Six months to 30 September 2005 Total Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 1,666 1,666Realised gains on investments - 918 918Income 1,636 - 1,636Investment management fee (200) (602) (802)Other expenses (183) - (183) ---------- ----------- ----------- Profit on ordinary activities before taxation 1,253 1,982 3,235 Tax on ordinary activities (313) 313 - ---------- ----------- ----------- Profit on ordinary activities after taxation 940 2,295 3,235 ---------- ---------- ----------- Return per ordinary share 5.11p ----------- Unaudited Profit and Loss Account Six months to 30 September 2004 Ordinary Shares As restated As restated Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 195 195Realised gains on investments - 41 41Income 679 - 679Investment management fee (114) (344) (458)Other expenses (147) - (147) ---------- ----------- ----------- Profit/(loss) on ordinary activities before taxation 418 (108) 310 Tax on ordinary activities (55) 55 - ---------- ----------- ----------- Profit/(loss) on ordinary activities after taxation 363 (53) 310 ---------- ---------- ----------- Return per ordinary share 0.74p ----------- Dividends payable: Interim dividend payable on 16 December 2004 0.8p 1.5p 2.3p ---------- ---------- ----------- 0.8p 1.5p 2.3p ---------- ---------- ----------- Unaudited Profit and Loss Account For the year to 31 March 2005 Ordinary Shares As restated Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 7,789 7,789Realised gains on investments - 1,181 1,181Income 1,511 - 1,511Investment management fee (255) (2,418) (2,673)Other expenses (272) - (272) ---------- ----------- ----------- Profit on ordinary activities before taxation 984 6,552 7,536 Tax on ordinary activities (177) 206 29 ---------- ----------- ----------- Profit on ordinary activities after taxation 807 6,758 7,565 ---------- ---------- ----------- Return per ordinary share 18.01p ----------- Dividends paid/payable Interim dividend paid on 16 December 2004 0.8p 1.5p 2.3pFinal dividend payable on 28 June 2005 1.1p 1.6p 2.7p ---------- ----------- ----------- 1.9p 3.1p 4.0p ---------- ----------- ----------- Unaudited Profit and Loss Account For the year to 31 March 2005 C Shares As restated Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 86 86Income 383 - 383Investment management fee (43) (129) (172)Other expenses (57) - (57) ---------- ----------- ----------- Profit/(loss) on ordinary activities before taxation 283 (43) 240 Tax on ordinary activities (54) 25 (29) ---------- ----------- ----------- Profit/(loss) on ordinary activities after taxation 229 (18) 211 ---------- ---------- ----------- Return per ordinary share 1.38p ----------- Dividend Payable: Final dividend payable on 28 June 2005 1.0p - 1.0p ---------- ----------- ----------- 1.0p - 1.0p ---------- ----------- ----------- Unaudited Profit and Loss Account For the year to 31 March 2005 Total As restated Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 7,875 7,875Realised gains on investments - 1,181 1,181Income 1,894 - 1,894Investment management fee (298) (2,547) (2,845)Other expenses (329) - (329) ---------- ----------- ----------- Profit on ordinary activities before taxation 1,267 6,509 7,776 Tax on ordinary activities (231) 231 - ---------- ----------- ----------- Profit on ordinary activities after taxation 1,036 6,740 7,776 ---------- ---------- ----------- Return per ordinary share 13.58p ----------- Unaudited Balance Sheet As at 30 September 2005 Ordinary C Shares Shares Total £'000 £'000 £'000Fixed AssetsQuoted on the Alternative Investment Market 14,985 2,536 17,521Unquoted investments 17,417 1,700 19,117Quoted on OFEX 98 - 98Listed investments 471 - 471Listed Fixed interest securities 12,759 15,358 28,117 _______ _______ _______ 45,730 19,594 65,324 Net current assets 1,776 2,013 3,789 ______ ______ ______ Total assets less current liabilities 47,506 21,607 69,113 ______ ______ ______ Financed by: Equity shareholders' funds 47,506 21,607 69,113 ______ ______ ______ Net asset value per share: 115.76p 97.88p - Ordinary shares in issue 41,038,015 22,074,995 - Treasury net asset value per share 115.76pNumber of ordinary shares in issue 41,038,015Number of ordinary shares held in Treasury 425,000Number of listed ordinary shares 41,463,015 Unaudited Balance Sheet As at 30 September 2004 (as restated) Total £'000Fixed AssetsQuoted on the Alternative Investment Market 13,758Unquoted investments 21,055Quoted on OFEX 105Listed investments -Listed Fixed interest securities 6,025 _______ 40,943 Net current assets 1,895 ______ Total assets less current liabilities 42,838 ______ Financed by: Equity shareholders' funds 42,838 ______ Net asset value per share: 101.67p Shares in issue 42,133,617 Unaudited Balance Sheet As at 31 March 2005 (as restated) Ordinary C Shares Shares Total £'000 £'000 £'000Fixed AssetsQuoted on the Alternative Investment Market 15,919 786 16,705Unquoted investments 23,698 - 23,698Quoted on OFEX 127 - 127Listed investments 481 - 481Listed Fixed interest securities 6,001 17,984 23,985 _______ _______ _______ 46,226 18,770 64,996 Net current assets 2,243 2,359 4,602 ______ ______ ______ Total assets less current liabilities 48,469 21,129 69,598 ______ ______ ______ Financed by: Equity shareholders' funds 48,469 21,129 69,598 ______ ______ ______ Net asset value per share: 116.92p 96.04p - Shares in issue 41,453,426 22,000,000 - Summarised Unaudited Statement of Cash Flows Six months to 30 September 2005 (as restated) Ordinary C Shares Shares Total £'000 £'000 £'000 Net cash (outflow)/inflow from operating activities (1,369) 285 (1,084)Capital expenditure and financial investment 2,479 (418) 2,061Equity dividends paid (3,192) (220) (3,412) ----------- ----------- -----------Net cash outflow before financing (2,082) (353) (2,435)Financing (389) (281) (670) ----------- ----------- -----------Decrease in cash (2,471) (634) (3,105) ----------- ----------- -----------Reconciliation of net cash flow to movement in net cash Decrease in cash (2,471) (634) (3,105)Opening net cash 4,100 2,589 6,689 ----------- ----------- -----------Net cash at end of period 1,629 1,955 3,584 ----------- ----------- ----------- Reconciliation of operating profit before taxation to net cash flow fromoperating activities Profit on ordinary activities before taxation 2,531 704 3,235Unrealised gains on investments (1,258) (408) (1,666)Realised (gains)/losses on investments (920) 2 (918)Changes in working capital and other non cash items (1,722) (13) (1,735) ----------- ----------- -----------Net cash (outflow)/inflow from operating activities (1,369) 285 (1,084) ----------- ----------- ----------- Summarised Unaudited Statement of Cash Flows Six months to 30 September 2004 Ordinary Shares Total £'000 Net cash outflow from operating activities (101)Capital expenditure and financial investment (4,483) -----------Net cash outflow before financing (4,584)Financing 1,513 -----------Decrease in cash (3,071) -----------Reconciliation of net cash flow to movement in net cash Decrease in cash (3,071)Opening net cash 4,856 -----------Net cash at end of period 1,785 ----------- Reconciliation of operating profit before taxation to net cash flow fromoperating activities Profit on ordinary activities before taxation 310Unrealised gains on investments (195)Realised gains on investments (41)Changes in working capital and other non cash items (175) -----------Net cash outflow from operating activities (101) ----------- Summarised Unaudited Statement of Cash Flows Year to 31 March 2005 Ordinary C Shares Shares Total £'000 £'000 £'000 Net cash inflow from operating activities 235 3 238Capital expenditure and financial investment (1,034) (18,684) (19,718)Equity dividends paid (967) - (967) ----------- ----------- -----------Net cash outflow before financing (1,766) (18,681) (20,447)Financing 1,010 21,270 22,280 ----------- ----------- -----------(Decrease)/increase in cash (756) 2,589 1,833 ----------- ----------- -----------Reconciliation of net cash flow to movement in net cash (Decrease)/increase in cash (756) 2,589 1,833Opening net cash 4,856 - 4,856 ----------- ----------- -----------Net cash at end of period 4,100 2,589 6,689 ----------- ----------- ----------- Reconciliation of operating profit before taxation to net cash flow fromoperating activities Profit on ordinary activities before taxation 7,536 240 7,776Unrealised gains on investments (7,789) (86) (7,875)Realised gains on investments (1,181) - (1,181)Changes in working capital and other non cash items 1,669 (151) 1,518 ----------- ----------- -----------Net cash inflow from operating activities 235 3 238 ----------- ----------- ----------- Unaudited Statement of Changes in EquityFor the six months ended 30 September 2005Ordinary Shares Share Share Capital Revaluation Profit and Capital Premium Redemption Reserve loss Reserve Account £'000 £'000 £'000 £'000 £'000 At 1 April 2005 4,145 2,551 232 11,981 29,560 Profit for the period - - - - 2,606Net increase in value of investments - - - 1,258 (1,258)Transfer of prior years revaluation to (6,485) 6,485profit and loss account - - -Transfer of permanent diminution in (580) 580value to profit and loss accountDeferred consideration 12Purchase of shares for cancellation (48) - 48 - (472)Purchase of shares for Treasury (42) 42 (437)Equity Dividends - - - - (3,192)Net Issue of shares 48 472 - - - ----------- ----------- ----------- ----------- ----------- At 30 September 2005 4,103 3,023 322 6,174 33,884 ----------- ----------- ----------- ----------- ----------- C Shares Share Share Capital Revaluation Profit and Capital Premium Redemption Reserve loss Reserve Account £'000 £'000 £'000 £'000 £'000 At 1 April 2005 11,000 9,918 - 86 125 Profit for the period - - - - 629Net increase in value of investment - - - 408 (408)Transfer of prior years revaluation to 21 (21)profit and loss account - - -Equity Dividends - - - - (220)Net Issue of shares 37 32 - - - ----------- ----------- ----------- ----------- ----------- At 30 September 2005 11,037 9,950 - 515 105 ----------- ----------- ----------- ----------- ----------- Notes 1. The unaudited results which cover the six months to 30 September 2005 have been drawn up in accordance with applicable accounting standards and adopting the accounting policies set out in the statutory accounts for the year ended 31 March 2005 apart from the following: • Under FRS25/26 applicable for accounting periods commencing 1 January 2005, the unrealised increase in investments have been recognised through the profit and loss account. In line with the revised GAAP, quoted investments have been valued at bid, rather than mid-market price. • Under FRS 21, applicable for accounting periods commencing 1 January 2005, dividends payable by the Company are now recognised in the period in which they are paid. Reconciliation of net asset value per share: As at 30 September 2005 Ordinary C As at 31 March 2005 As at 30 Shares Shares Ordinary September 2004 C Ordinary Shares Shares Shares NAV (previous UK GAAP) 114.61p 97.28p 115.63p 95.23p 100.63pLess: move to bid prices (1.35)p (0.40)p (1.41)p (0.19)p (1.26)pAdd: dividend declared 2.50p 1.00p 2.70p 1.00p 2.30pNAV (revised UK GAAP) 115.76p 97.88p 116.92p 96.04p 101.67p The NAV reported in the financial highlights recognises the dividend in theaccounting period to which they relate and not when they are paid, therefore thedividend has not been added back. This is a departure from revised UK GAAP. 2. Return per Ordinary Share is based on a weighted average of41,266,797 Ordinary Shares in issue (31 March 2005 - 41,995,911; 30 September2004 - 42,077,838) . Return per C Share is based on a weighted average of22,035,653 C Shares in issue (31 March 2005 - 15,323,042). 3. During the six months ended 30 September 2005, the Companyissued 484,589 Ordinary Shares and bought back for cancellation 475,000 OrdinaryShares at a cost of £472,000. A further 425,000 Ordinary Shares were boughtback by the Company to be held in Treasury at a cost of £437,000. There were41,038,015 Ordinary Shares in issue at 30 September 2005 (31 March 2005 -41,453,426, 30 September 2004 - 42,133,617). During the six months ended 30 September 2005, the Company issued74,995 C Shares. There were 22,074,995 C shares in issue at 30 September 2005(31 March 2005 - 22,000,000). 4. Earnings for the first six months should not be taken as a guide tothe results of the full year. 5. A second interim dividend comprising 1.4p (revenue) and 1.1p(capital) will be paid on 16 December 2005 to ordinary shareholders on theregister on 25 November 2005. An interim 1.0p revenue dividend will also bepaid on 16 December 2005 to C shareholders on the register on 25 November 2005. 6. These are not full accounts in terms of Section 240 of the CompaniesAct 1985. Full audited accounts for the year to 31 March 2005 which wereunqualified have been lodged with the Registrar of Companies. No statutoryaccounts in respect of any period after 31 March 2005 have been reported on bythe Company's auditors or delivered to the Registrars of Companies. 7. Copies of the Interim Report will be mailed to shareholders and willbe available from the Registered Office of the Company at Exchange House,Primrose Street, London, EC2A 2NY. This information is provided by RNS The company news service from the London Stock Exchange