Interim Results
British Smaller Companies VCT PLC
05 October 2006
05 October 2006
BRITISH SMALLER COMPANIES VCT PLC
Unaudited interim results for the 6 months to 30 September 2006
British Smaller Companies VCT plc ('the Company') today announces its unaudited
interim results for the six months to 30 September 2006.
Chairman's Statement
For the fourth successive set of interim results I am pleased to be able to
report continued and significant growth in the net asset value per share of your
Company. For the six months to 30 September 2006, the total return of the
Ordinary shares, which takes into account both the current net asset value and
the cumulative total of dividend distributions, has increased by 3.1% to 132
pence per share and over the last twelve months the increase in total return has
been 9.2 pence per share. The total return of the C shares is 102 pence per
share
The continued growth has resulted from the significant realisation of one
investment, coupled with sustained profitability from many of the portfolio
companies, both unquoted and quoted. Your Company has continued to strengthen
its cash reserves whilst at the same time actively supporting the share buy back
policy and maintaining dividend payments on the Ordinary shares. Your Board and
its Investment Adviser, YFM Private Equity, are focused on selectively
increasing the investment rate to build on the returns achieved to date.
The interim dividend payment has been maintained at 1.5 pence per Ordinary
share. In line with last year, no interim dividend is proposed in respect of the
C shares. The dividend will be paid on 6 November 2006 to shareholders on the
register at 13 October 2006.
Investment Portfolio
The first six months of this financial year saw a further major realisation
adding to the two successful ones included in my previous report. In September,
your Company realised its investment in Secure Mail Services Limited. The
original investment of £0.4 million generated a total return of £1.3 million of
which £1.2 million was received on completion. There is the possibility of
further deferred consideration being received dependant upon future performance.
The underlying value of the Ordinary shares' portfolio increased by £0.43
million in the period, reflecting the continued progress of the investments. Of
particular note has been the successful continuation of the store opening
programme of GOoutdoors, with the recent addition of the Stockport store taking
the number of stores to 6. Further expansion is planned over the next twelve
months. The progress of Tekton Group Limited has also been pleasing; its
performance has exceeded plan since we invested in December last year.
The strong market conditions that have assisted our programme of realisations
have, however, kept asset prices relatively high and your Board has resisted the
temptation to invest at unrealistic entry valuations. Your Board remains focused
on adding to your Company's investment portfolio and currently has a number of
investment opportunities under review. Nonetheless, the Board will remain
selective in determining which of these opportunities it will pursue.
Financial Results and Dividend
The net asset value of the Ordinary shares at 30 September 2006 was 98.5 pence
per share, and 101.5 pence per share for the C shares. Taking account of the
dividends paid to date on the Ordinary shares, the total return for eligible
founder shareholders at the balance sheet date was 132 pence per share and for
the C shareholders was 102 pence per share.
The Ordinary shares recorded a pre-tax profit of £0.59 million after taking
account of unrealised valuation gains of £0.50 million. The C share pool
recorded a small pre-tax loss after taking account of unrealised valuation
losses of £2,000.
The interim dividend has not been recognised in the accounts under IFRS as the
contractual obligation did not exist at the balance sheet date.
In respect of the C shareholders, it has been your Board's intention that once
the initial target of 70% of funds raised has been invested, the C shares will
be converted into Ordinary shares in line with the Prospectus dated 7 January
2005. In the meantime, the Ordinary shares and C shares are maintained, and
accounted for, in separate pools with dividend distributions determined by the
performance of each pool independent of the other. As at 30 September 2006 the C
share pool was 31.4% invested. We are looking to make further investments in the
C share portfolio and will consider whether it would be to the advantage of both
Ordinary and C shareholders to convert at an earlier stage.
The changes in respect of venture capital trusts announced by the Chancellor
earlier this year were enacted in July 2006. Further detailed guidance in
respect of the impact of these changes is still awaited. In particular, the
changes impact dividend re-investment schemes and, as a result, it remains
impractical to continue your Company's Scheme. Consequently, unless, and until,
rules are published to deal with the problem, the Scheme remains suspended
pending further clarification. The interim dividend of 1.5 pence per Ordinary
share will therefore be paid in cash.
Shareholder Relations and Fundraising
Following the full subscription of the previous Offer, which I reported in my
previous statement, your Board has decided to recommend a further Issue of
Ordinary shares. Your Board will be seeking to raise up to £15 million. A
further fundraising will allow your Company to benefit further from increasing
the scale of your Company which will allow costs to be spread across a wider
asset base and to take advantage of the expected increasing proprietary
investment flow arising from the national office network of YFM Private Equity.
Details of the Offer will be sent to shareholders in the near future.
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 has purchased for cancellation a total
of 609,560 shares during the period, at an average price of 88.75 pence per
share. These purchases are made with funds taken from the Special Reserve and do
not adversely impact on the Company's ability to distribute tax free dividends
to shareholders.
Your Board has appointed PKF (UK) LLP to replace PricewaterhouseCoopers LLP as
auditors to the Company. A resolution to confirm this appointment will be put to
the next Annual General Meeting.
Outlook
The current economic climate has supported a strong market for corporate
activity which has enabled your Company to add to its recent record of
successful realisations, continuing to support and maintain the dividend policy
on the mature Ordinary share portfolio. The underlying performance of the
remainder of the portfolio continues to show pleasing progress. Your Company is
well positioned to take advantage of selective investment opportunities as they
arise and through the proposed fundraising will add to its investment capacity
over the next few years. This will strengthen the Company's ability to
capitalise on the anticipated flow of opportunities arising from any tightening
of the economic conditions.
Sir Andrew Hugh Smith
5 October 2006
Income Statement
For the 6 months ended 30 September 2006
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 September 2006 30 September 2005 31 March 2006
Ord C Ord C Ord C
Shares Shares Total Shares Shares Total Shares Shares Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Notes
Income 193 22 215 157 18 175 413 38 451
Administrative expenses:
Investment advisory fee (172) (14) (186) (150) (6) (156) (314) (18) (332)
Other expenses (122) (9) (131) (107) (4) (111) (202) (13) (215)
------ ------ ------ ------ ----- ------ ------ ------ ------
(294) (23) (317) (257) (10) (267) (516) (31) (547)
Gains on realisation of
investments(net) 194 - 194 209 - 209 806 1 807
Unrealised gains (losses)
on investments held at fair
value (net) 495 (2) 493 1,283 5 1,288 1,477 95 1,572
------ ------ ------ ------ ----- ------ ------ ------ ------
Profit (loss)on ordinary
activities before
taxation 588 (3) 585 1,392 13 1,405 2,180 103 2,283
Taxation 2 - - - - - - - - -
------ ------ ------ ------ ----- ------ ------ ------ ------
Profit (loss)for the period
from continuing operations 588 (3) 585 1,392 13 1,405 2,180 103 2,283
------ ------ ------ ------ ----- ------ ------ ------ ------
Basic and diluted
earnings(loss) per share 3 3.73p (0.29)p 3.43p 9.28p 1.08p 8.67p 14.55p 8.38p 13.89p
------ ------ ------ ------ ----- ------ ------ ------ ------
Balance Sheet
As at 30 September 2006
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 September 2006 30 September 2005 31 March 2006
Ord C Ord C Ord C
Notes Shares Shares Total Shares Shares Total Shares Shares Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Assets
Non-current assets
Financial assets at
fair value through
profit or loss 9,831 431 10,262 10,661 - 10,661 10,382 427 10,809
------ ----- ------- ------- ----- ------- ------- ------ -------
Current assets
Trade and other
receivables 468 38 506 121 4 125 448 10 458
Cash and cash
equivalents 5,159 832 5,991 3,284 1,211 4,495 4,531 864 5,395
------ ------ ------ ------ ------ ------ ------ ------ ------
5,627 870 6,497 3,405 1,215 4,620 4,979 874 5,853
Liabilities
Current liabilities
Trade and
other payables (79) (24) (103) (85) (18) (103) (101) (14) (115)
------ ------ ------ ------ ----- ------ ------ ------ ------
Net current assets 5,548 846 6,394 3,320 1,197 4,517 4,878 860 5,738
------ ------ ------ ------ ------ ------ ------ ------ ------
Net assets 15,379 1,277 16,656 13,981 1,197 15,178 15,260 1,287 16,547
-------- ------ ------- ------- ------ ------- ------- ------ -------
Shareholders' equity
Share capital 1,562 629 2,191 1,490 629 2,119 1,566 629 2,195
Share premium
account 723 555 1,278 18 555 573 781 555 1,336
Capital redemption
reserve 178 - 178 100 - 100 117 - 117
Special reserve 3,330 - 3,330 3,471 - 3,471 3,330 - 3,330
Retained earnings 9,586 93 9,679 8,902 13 8,915 9,466 103 9,569
------ ------ ------ ------ ----- ------ ------ ------ ------
Total Shareholders'
equity 15,379 1,277 16,656 13,981 1,197 15,178 15,260 1,287 16,547
------- ------ ------- ------- ------ ------- ------- ------ -------
Net asset value
per share 4 98.5p 101.5p 98.7p 93.9p 95.1p 94.0p 97.5p 102.2p 97.9p
------ ------ ------ ------ ----- ------ ------ ------ ------
Unaudited Statement of Changes in Shareholders' Equity
For the 6 months ended 30 September 2006
Share Capital
Share premium redemption Special Retained Total
Capital account reserve reserve earnings equity
£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 period - - - - 585 585
Dividends - - - - (475) (475)
Purchase of own shares (61) (535) 61 - - (535)
Issue of Ordinary shares 57 477 - - - 534
------ ------ ----- ------ ------ -------
Balance at 30 September 2006 2,191 1,278 178 3,330 9,679 16,656
------- ------ ----- ------ ------ -------
Summarised Cash Flow Statement
For the 6 months ended 30 September 2006
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 September 2006 30 September 2005 31 March 2006
Ord C Ord C Ord C
Shares Shares Total Shares Shares Total Shares Shares Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Net cash outflow from
operating activities (76) (17) (93) (95) 13 (82) (54) 2 (52)
------ ----- ----- ------ ----- ----- ----- ----- -----
Net cash from (used in)
investing activities 1,230 - 1,230 1,856 - 1,856 2,619 (330) 2,289
------ ------ ----- ------ ----- ------ ------ ----- ------
Net cash from
(used in) financing (509) (9) (518) (463) 946 483 1 947 948
------ ------ ----- ------ ----- ------ ------ ----- ------
Net increase (decrease) in
cash and cash equivalents 645 (26) 619 1,298 959 2,257 2,566 619 3,185
Cash and cash equivalents at
the beginning of the period 4,531 864 5,395 1,970 246 2,216 1,970 246 2,216
Effect of market value
changes in cash
equivalents (17) (6) (23) 16 6 22 (5) (1) (6)
------ ------ ------ ------ ------ ----- ------ ----- -----
Cash and cash equivalents at
the end of the period 5,159 832 5,991 3,284 1,211 4,495 4,531 864 5,395
------ ------ ------ ------ ------ ------ ------ ----- ------
Notes to the Financial Statements
For the 6 months ended 30 September 2006
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 for
the year ended 31 March 2006 do not constitute full financial statements and
have been extracted from the Company's financial statements for the year ended
31 March 2006. 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 March 2006 were prepared in
accordance with the International Financial Reporting Standards (IFRS), which
comprise standards and interpretations approved by the International Accounting
Standards Board (IASB) and the International Accounting Standards Committee
(IASC) as adopted by the European Union and those parts of the Companies Act
1985 applicable to companies reporting under IFRS.
The comparatives for the six months ended 30 September 2005 were previously
presented in accordance with UK accounting standards. The Board decided to adopt
IFRS for the financial statements for the year ended 31 March 2006. The
effective date of transition to IFRS was therefore 1 April 2004. Consequently,
the comparatives for the six months ended 30 September 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 March 2006 which have been filed
with the Registrar of Companies and sent to shareholders in July 2006.
2. Taxation charge:
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 September 2006 30 September 2005 31 March 2006
Ord C Ord C Ord C
Shares Shares Total Shares Shares Total Shares Shares Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Profit (loss) on ordinary
activities multiplied by
standard small company
rate of corporation
tax in the UK of 19%
(2005:19%) 112 (1) 111 264 2 266 414 20 434
Effect of:
UK dividends received (16) - (16) (14) - (14) (48) - (48)
Non taxable losses
(profits) on investments (131) 1 (130) (283) (1) (284) (434) (18) (452)
Excess management expenses 35 - 35 33 (1) 32 68 (2) 66
------ ------ ------ ------ ------ ----- ------ ----- -----
Current tax charge for
the period - - - - - - - - -
------ ------ ------ ------ ------ ----- ------ ----- -----
The Company has no provided, or unprovided, deferred tax liability in either
year.
Deferred tax assets in respect of losses have not been recognised as management
currently believe that there will not be sufficient taxable profits against
which the assets can be recovered.
Due to the Company's status as a venture capital trust, and the continued
intention to meet the conditions required to comply with Section 842AA of the
Income and Corporation Taxes Act 1988, the Company has not provided deferred tax
on any capital gains or losses arising on the revaluation or realisation of
investments.
3. The earnings per share is based on the net profit from ordinary
activities after tax attributable to shareholders of £585,000 (30 September
2005: net profit £1,405,000 and 31 March 2006: net profit £2,283,000) and on
17,051,000 shares (30 September 2005: 16,198,000 and 31 March 2006: 16,432,000),
being the weighted average number of shares in issue during the period.
The earnings per Ordinary share is based on the net profit from ordinary
activities after tax attributable to shareholders of £588,000 (30 September
2005: net profit £1,392,000 and 31 March 2006: net profit £2,180,000) and on
15,792,000 shares (30 September 2005: 15,000,000 and 31 March 2006: 14,979,000),
being the weighted average number of Ordinary shares in issue during the period.
The (loss) earnings per C share is based on the net loss from ordinary
activities after tax attributable to C shareholders of £3,000 (30 September
2005: net profit £13,000 and 31 March 2006: net profit £103,000)
and on 1,259,000 shares(30 September 2005: 1,198,412 and
31 March 2006:1,228,000), being the weighted average number of C shares in issue
during the period.
The Company has no securities that would have a dilutive effect and hence basic
and diluted return per share are the same.
4. The net asset value per share is calculated on attributable
assets of £16,656,000 and 16,880,040 shares in issue at the period end (30
September 2005: assets of £15,178,000 and 16,154,140 shares, 31 March 2006:
assets of £16,547,000 and 16,912,836 shares).
The net asset value per Ordinary share is calculated on attributable assets of
£15,379,000 and 15,621,364 shares in issue at the period end (30 September 2005:
assets of £13,981,000 and 14,895,463 shares, 31 March 2006: assets of
£15,260,000 and 15,654,160 shares).
The net asset value per C share is calculated on attributable assets of
£1,277,000 and 1,258,676 shares in issue at the period end (30 September 2005:
assets of £1,197,000 and 1,258,676 shares, 31 March 2006: assets of £1,287,000
and 1,258,676 shares).
The Company has no securities that would have a dilutive effect and hence basic
and diluted net asset values per share are the same.
For further information, please contact:
David Hall, YFM Private Equity Limited Tel: 0161 819 3195
Jonathan Becher, Teather & Greenwood Limited Tel: 0207 426 3269
Michael Bellamy, Teather & Greenwood Limited Tel: 0207 426 9547
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