Interim Results
British Smaller Companies VCT PLC
02 November 2005
02 November 2005
BRITISH SMALLER COMPANIES VCT PLC
Unaudited interim results for the six months to 30 September 2005
British Smaller Companies VCT plc ('the Company'), today announces its unaudited
interim results for the six months to 30 September 2005.
Chairman's Statement
I am pleased to report further growth by your Company, continuing the progress
made in the previous three years. The first half of the current financial year
has seen the net asset value of the Ordinary shares increase from £13.09 million
(as restated) to £13.98 million. This growth has, in part, derived from
achieving successful realisations, in particular the disposal of the investment
in Harlands of Hull Limited where your Company more than trebled its investment
in less than two years. The total return to shareholders who invested in the
first round of fundraising, including dividends paid, at 30 September 2005 is
122.8 pence per share, an increase of 19.6% over the last twelve months. It is
proposed to maintain the interim dividend at 1.5 pence per Ordinary share.
In the same period, the net asset value of the C shares has increased from 95 to
95.1 pence per share. Investment of the new funds raised is now under way.
Investment Portfolio
The first half of this financial year has, in the main, seen your Company
continue to concentrate on achieving realisations from the portfolio. As a
consequence, £1.86 million has been generated in the period. Harlands of Hull
Limited was acquired by Clondalkin Group (UK) Limited and your Company's
investment of £0.5 million was realised for £1.59 million. Your Company also
realised 10% of its holding in Cozart plc, generating £0.18 million. Your Board
was pleased to learn that the investment in Harlands of Hull has gained
recognition amongst its peers and has recently been short listed for the
European Venture Capital Deal of the Year award.
Subsequent to the end of the period, your Company has completed a £200,000
investment in Belgravium Technologies plc on its admission to AIM. In accordance
with the stated policy, the amounts invested from the Ordinary and C shares were
£146,000 and £54,000 respectively.
As a result of the realisations, the total amount of cash and liquid resources
in respect of the Ordinary shares at 30 September 2005 was £3.28 million (C
shares: £1.21 million). Regarding the Ordinary shares, £0.22 million is
allocated for the proposed interim dividend. The balance provides sufficient
reserves to meet the operational requirements of your Company and any estimated
funding requirements for the current portfolio and provides enough cash to meet
selected investment opportunities as they arise.
Investment Valuations
This period has seen the introduction of the new Financial Reporting Standards
(FRS) and particularly FRS 26 which concerns the measurement of financial
assets. The main effect is that all valuation movements, including unrealised
gains above cost that were previously taken to the revaluation reserve, are now
taken through the profit and loss account. The revaluation reserve no longer
exists. These changes have no effect on the Company's distributable reserves and
its ability to pay dividends in the future. The comparatives have not been
restated in relation to this change, as permitted by FRS 26.
FRS 21, which concerns the accounting treatment of events after the balance
sheet date, means that dividends proposed are recognised in the period in which
the obligation arises. Therefore, the prior period has now been restated with
the final dividend in respect of the year ended 31 March 2005 now accounted for
in the current year. The restated 2005 net asset value is 86.6 pence per share.
There is no effect on the overall total return.
Financial Results and Dividend
After taking account of the capital appreciation in the investment portfolio,
the profit on the Ordinary shares for the six month period under review was
£1.39 million, equivalent to 9.28 pence per share. In respect of the C shares,
the profit for the period was £13,000, equivalent to 1.08 pence per share.
The directors are proposing an interim dividend of 1.5 pence per Ordinary share.
This maintains the level of dividends paid in the same period of the previous
financial year. The dividend will be payable on 22 December 2005 to holders of
Ordinary shares on the register at 11 November 2005. Your Company continues to
operate a dividend re-investment scheme that allows shareholders to re-invest
the dividends and, subject to your tax status, re-claim 40% of the investment as
a tax relief.
No interim dividend is proposed on the C shares since the investment of the
funds raised is in its very early stages and there has not been an opportunity
to date to earn profits on the investments made.
Shareholder Relations
I am pleased to report that the share price performance has continued to match
that of the net asset value with the discount being maintained at around 10%.
Your Board has also continued its policy of publishing quarterly net asset
values in order that the share price can reflect the most recent performance of
your Company and it has maintained its policy of actively buying back shares
where it is in the best interests of the remaining shareholders to do so. During
the six months to 30 September 2005, your Company acquired 200,000 shares in
pursuit of this policy.
Fundraising
Shareholders will be aware that a C Share issue, at a price of £1 per share, was
made by your Company and closed in June 2005. The total amount of funds raised
was £1.26 million. The proceeds from the C share issue will be invested
alongside the Ordinary shares in proportion to the cash and liquid resources
available for investment. It is your Board's intention to convert the C shares
into Ordinary shares once 70% of the proceeds of the issue have been invested in
qualifying investments.
Outlook
The growth in the portfolio continues, with further potential upside evident.
With the recent realisations and the expectation of some more in the pipeline,
the challenge for the Board and its investment adviser now is to increase the
rate of investment to build the portfolio back up to its historic levels.
With a maturing portfolio producing profitable realisations, and through the
introduction of the dividend reinvestment scheme, your Board has provided
shareholders with capital growth and the ability to reinvest the distribution
proceeds in a tax efficient way, whilst still enabling those shareholders
wishing to receive tax free cash income to do so.
Sir Andrew Hugh Smith
2 November 2005
Profit and Loss Account
Restated Restated
Unaudited Unaudited Year
6 months ended months ended ended
30 September 30 September 31 March
Notes 2005 2004 2005
Ord C
Shares Shares Total
£000 £000 £000 £000 £000
-------------------------- ------------ ---------
Income 157 18 175 157 396
Administrative expenses:
Investment advisory fee (150) (6) (156) (133) (272)
Other expenses (107) (4) (111) (116) (262)
------ ------ ------ ------ ------
(257) (10) (267) (249) (534)
Gain on realisation of investments 209 - 209 82 229
Movement on investment valuations 1,283 5 1,288 35 (136)
------ ------ ------ ------ ------
Profit (loss) on ordinary activities before tax 1,392 13 1,405 25 (45)
Tax on profit (loss)on ordinary activities 2 - - - - -
------ ------ ------ ------ ------
Profit (loss) for the financial period 1,392 13 1,405 25 (45)
Dividends paid 3 (333) - (333) (741) (1,140)
------ ------ ------ ------ ------
Retained profit (deficit) for the period 1,059 13 1,072 (716) (1,185)
===== ===== ===== ===== =====
Basic and diluted earnings (loss) per share 4 9.28p 1.08p 8.67p 0.16p (0.29)p
===== ===== ===== ===== =====
Statement of Total Recognised Gains and Losses
Unaudited Unaudited Year
6 months ended 6 months ended ended
30 September 30 September 31 March
2005 2004 2005
Ord C
Shares Shares Total
£000 £000 £000 £000 £000
------------------------ -------------- --------
Profit (loss) for the financial period 1,392 13 1,405 25 (45)
Unrealised gain on valuation of investments - - - 720 2,392
------ ------ ------ ------ ------
Total recognised gains for the period 1,392 13 1,405 745 2,347
===== ===== ===== ===== =====
Note of Historical Cost Profits and Losses
Restated Restated
Unaudited Unaudited Year
6 months ended 6 months ended ended
30 September 30 September 31 March
2005 2004 2005
Ord C
Shares Shares Total
£000 £000 £000 £000 £000
------------------------ -------------- --------
Profit (loss) on ordinary activities before taxation 1,392 13 1,405 25 (45)
Realisation of investment gains of previous periods 1,042 - 1,042 - 315
------ ------ ------ ------ ------
Historical cost profit on ordinary activities
before taxation 2,434 13 2,447 25 270
===== ===== ===== ===== =====
Historical cost profit (loss) on ordinary activities
after taxation and dividends 2,101 13 2,114 (716) (870)
===== ===== ===== ===== =====
Notes
All activity has arisen from continuing operations. There was no income or
expenditure in the comparative periods in respect of the C shares. Consequently
the results above for the comparative periods relate only to the Ordinary
shares.
Balance Sheet
Restated
Unaudited Unaudited Restated
30 September 30 September 31 March
2005 2004 2005
Ord C Ord C
Shares Shares Total Shares Shares Total
£000 £000 £000 £000 £000 £000 £000
------------------------ ------------ ------------------------
Notes
Fixed assets
Investment portfolio 10,661 - 10,661 9,711 11,045 - 11,045
------ ------ ------ ------ ------ ------ ------
Current assets
Debtors 121 4 125 301 160 - 160
Investments 2,661 1,111 3,772 1,777 1,656 - 1,656
Cash 623 100 723 288 314 246 560
------ ------ ------ ------ ------ ------ ------
3,405 1,215 4,620 2,366 2,130 246 2,376
Creditors: amounts payable within one year (85) (18) (103) (46) (85) (9) (94)
------ ------ ------ ------ ------ ------ ------
Net current assets 3,320 1,197 4,517 2,320 2,045 237 2,282
------ ------ ------ ------ ------ ------ ------
Total net assets 13,981 1,197 15,178 12,031 13,090 237 13,327
===== ===== ===== ===== ===== ===== =====
Capital and reserves
Called-up share capital 1,490 629 2,119 1,532 1,512 125 1,637
Share premium account 18 555 573 - - 112 112
Capital redemption reserve 100 - 100 55 75 - 75
Revaluation reserve - - - 5,511 7,116 - 7,116
Special reserve 3,471 - 3,471 3,805 3,661 - 3,661
Profit and loss account 8,902 13 8,915 1,128 726 - 726
------ ------ ------ ------ ------ ------ ------
Equity Shareholders' funds 13,981 1,197 15,178 12,031 13,090 237 13,327
===== ===== ===== ===== ===== ===== =====
Net asset value per share 5 93.9p 95.1p 94.0p 78.5p 86.6p 95.0p 86.7p
===== ===== ===== ===== ===== ===== =====
Summarised Cash Flow Statement
Audited
Unaudited Unaudited Year
6 months ended 6 months ended ended
30 September 30 September 31 March
2005 2004 2005
Ord C Ord C
Shares Shares Total Shares Shares Total
£000 £000 £000 £000 £000 £000 £000
------------------------ -------------- ------------------------
Net cash (outflow) inflow from
operating activities (95) 13 (82) (311) (212) - (212)
Net cash inflow from investing activities 1,856 - 1,856 374 706 - 706
Equity dividend paid to shareholders (net) (311) - (311) (741) (1,140) - (1,140)
------ ------ ------ ------ ------ ------ ------
Net cash inflow (outflow) before management of
liquid resources and financing 1,450 13 1,463 (678) (646) - (646)
Management of liquid resources (989) (1,105) (2,094) 848 950 - 950
------ ------ ------ ------ ------ ------ ------
Net cash inflow (outflow) before financing 461 (1,092) (631) 170 304 - 304
Financing (152) 946 795 (66) (174) 246 72
------ ------ ------ ------ ------ ------ ------
Increase (decrease) in cash in the period 309 (146) 163 104 130 246 376
===== ===== ===== ===== ===== ===== =====
Notes to the Financial Statements
1. The Company has adopted a number of new Financial Reporting Standards in
these interim results. The Company has taken advantage of the exemption
available to it under paragraph 108D of FRS 26 'Financial Instruments:
Measurement' not to restate the prior year comparative figures on adoption of
FRS 26. FRS 26 requires the Company to recognise and measure its investments at
fair value. The Company has measured its investments at fair value applying the
International Private Equity and Venture Capital Valuation Guidelines with
effect from 1 January 2005 to the extent that those requirements do not conflict
with FRS 26, the main difference being in respect of the non-application of
marketability discounts. Where a conflict exists, the requirements of FRS 26 are
followed. The new valuation guidelines supersede the British Venture Capital
Association Valuation Guidelines which, historically, have been applied by the
Company.
FRS 21 'Events after the Balance Sheet Date' has been adopted in these interim
results. The main change is that dividends are only recorded where an obligation
exists at the period end date. Consequently, dividends which the Company
proposes after the balance sheet date are no longer accrued but are required to
be disclosed in the notes to the financial statements. The prior year
comparative figures have been restated to reflect adoption of FRS 21. The prior
year adjustment solely relates to the adoption of FRS 21.
The adoption of both FRS 22 'Earnings per share' and FRS 23 'The Effects of
Changes in Foreign Exchange Rates' has resulted in no changes in the accounting
policies of the Company. Consequently, the prior year comparative figures have
not been revised.
The requirements of the disclosure standard FRS 25 'Financial Instruments:
Disclosure and Presentation', whilst being applicable for the year ending 31
March 2006, do not impact the interim results. The requirements of FRS 25 will
be reflected in the Company's annual report and accounts expected to be
published in June 2006.
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 2005 do not constitute full financial statements and, with the exception
of the effects of the prior year adjustment arising on adoption of FRS 21
referred to above, have been extracted from the Company's financial statements
for the year ended 31 March 2005. Those accounts were reported upon without
qualification by the auditors and have been delivered to the Registrar of
Companies.
2. Taxation charge
Unaudited Unaudited Year
6 months ended 6 months ended ended
30 September 30 September 31 March
2005 2004 2005
Ord C
Shares Shares Total
£000 £000 £000 £000 £000
------------------------ -------------- --------
Profit (Loss) on ordinary activities multiplied by
standard small company rate of corporarion tax in
the UK of 19% (2004: 19%) 264 2 266 (7) (9)
Effect of:
UK dividends received (i) (14) - (14) (9) (33)
Non taxable losses (profits) on investments (i) (283) (1) (284) (7) (17)
Excess management expenses 33 (1) 32 23 59
------ ------ ------ ------ ------
Current tax charge for the period - - - - -
===== ===== ===== ===== =====
(i)Venture Capital Trusts are not subject to corporation tax on these items
Deferred tax assets in respect of losses have not been recognised as management
do not currently believe that it is more likely than not sufficient taxable
profits will be available 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 for deferred
tax on any capital gains and losses on the revaluation or disposal of investments.
3. Dividends:
Unaudited Unaudited Year
6 months ended 6 months ended ended
30 September 30 September 31 March
2005 2004 2005
Ord C
Shares Shares Total
£000 £000 £000 £000 £000
------------------------ -------------- --------
March 2004 Final dividend
4.8p per share - paid August 2004 - - - 741 741
September 2004 Interim dividend
1.5p per Ordinary share - paid November 2004 - - - - 230
Special interim dividend
1.1p per Ordinary share - paid February 2005 - - - - 169
March 2005 Final dividend
2.2p per Ordinary share - paid August 2005 333 - 333 - -
------ ------ ------ ------ ------
333 - 333 741 1,140
===== ===== ===== ===== =====
Since the period end, the directors have approved an interim dividend in respect
of the Ordinary shares of 1.5 pence per share. This will be paid on 22 December
2005 to shareholders on the register at 11 November 2005. No interim dividend
will be paid in respect of the C shares.
4. The basic earnings (loss) per Ordinary share is based on the net profit
from ordinary activities after tax attributable to shareholders of £1,392,000
(30 September 2004: net profit £25,000 and 31 March 2005: net loss £45,000) and
on 15,000,000 shares (30 September 2004: 15,407,000 and 31 March 2005:
15,343,000), being the weighted average number of Ordinary shares in issue
during the period.
The basic earnings per C share is based on the net profit from ordinary
activities after tax attributable to C shareholders of £13,000 and on 1,198,412
shares, being the weighted average number of C shares in issue during the
period. There was no income or expenditure in the comparative periods in respect
of the C shares.
The Company has no securities that would have a dilutive effect and hence basic
and diluted return per share are the same.
5. The net asset value per Ordinary share is calculated on attributable
assets of £13,981,000 and 14,895,463 shares in issue at the period end (30
September 2004: assets of £12,031,000 (as restated) and 15,317,838 shares, 31
March 2005: assets of £13,090,000 (as restated) and 15,117,838 shares).
The net asset value per C share is calculated on attributable assets of
£1,197,000 and 1,258,677 shares in issue at the period end (31 March 2005:
assets of £237,000 and 249,575 shares).
6. Copies of the interim report can be obtained from the Company's
registered office: Saint Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZ.
For further information, please contact:
Alan Davies, YFM Private Equity Limited Tel: 0113 294 5000
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
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