Final Results
British SmallerTechCompaniesVCT2PLC
15 March 2004
BRITISH SMALLER TECHNOLOGY COMPANIES VCT 2 PLC
UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED
31 DECEMBER 2003
British Smaller Technology Companies VCT 2 plc ("the Company"), the venture
capital trust specialising in growing smaller technology companies, today
announces its unaudited preliminary results for the year to 31 December 2003.
Financial highlights
Unaudited Audited
2003 2002
Income £256,000 £296,000
Net revenue (loss) return before and after tax £(32,000) £5,000
Total loss per share (7.09)p (2.41)p
Net assets £6.62m £7.17m
NAV per share 84.6p 91.6p
In his overview of the year, the Chairman, Sir Andrew Hugh Smith, said that the
technology sector had begun to show signs of recovery. With a greater confidence
in financial markets and a growing interest in new share issues, he expects to
see increasing exit opportunities for some of the Company's investments.
Investments
Reporting on the investment portfolio, Sir Andrew said that the improving market
environment was already in evidence with the acquisition of Amacis Group by
NASDAQ quoted Primus Knowledge Solutions. A total of £275,000 had been invested
in Amacis in April 2003. The acquisition by Primus took place in December 2003
and the consideration, in the form of Primus shares, was valued at £598,000 at
the year end.
Sir Andrew added, "Although this does not yet represent a cash realisation, it
does give an encouraging indication of the portfolio's potential in terms of
growth and exit opportunities."
The net movement on the portfolio valuation in the year was a reduction of
£388,000. Sir Andrew commented on the revised British Venture Capital
Association (BVCA) valuation guidelines that became effective on 1 August 2003
and which the Company has adopted. He said that, although it is difficult to
make precise comparisons, the change from the former guidelines to the revised
basis had not materially affected the reported net asset value.
Financial Results and Dividend
The total return for the year was a net loss of 7.1 pence per share, reducing
net asset value per share to 84.6 pence per share.
At 31 December 2003, liquid resources stood at just under £4.1m. David Hall,
Managing Director of Yorkshire Fund Managers, the Investment Adviser to the
Company, said, "We are continually reviewing the anticipated funding which may
be required by existing portfolio companies to take them through to realisation.
We believe that the Company has adequate funds to support those businesses that
merit further support and also to make selective new investments as part of
strong syndicates in companies close to commercial viability."
Turning to the VCT legislative requirements, Sir Andrew said that this was the
first year end for which the Company needed to formally comply with the
requirement to hold at least 70% of its investments in qualifying holdings. In
order to meet this requirement, but not compromise the quality of investments or
available reserves for follow-on funding, the Company had placed sufficient
monies on non-interest bearing deposit.
Sir Andrew commented, "This will result in a small reduction in the Company's
income over the forthcoming year but the Board is of the opinion that this
action is in the best interests of Shareholders in protecting their existing tax
benefits and creating the opportunity for future capital gains."
Shareholder Relations
Sir Andrew reported that the Court had now approved the share buy-back
arrangements agreed by Shareholders at the last Annual General Meeting. He said
that the Company was now in a position to buy back a limited number of shares
where the directors consider this to be in the best interests of other
Shareholders.
John Ashcroft
It was with deep sadness that Sir Andrew formally reported the death of John
Ashcroft who had been a non-executive director of this Company since its initial
launch. Paying tribute to Mr Ashcroft, he said, "John had been fighting against
illness for some time, yet his energy and perceptive contributions to boardroom
debates continued, as always, to be a source of inspiration to me and his fellow
directors. He will be greatly missed by all who knew him."
Outlook
Commenting on the Company's prospects, Sir Andrew said, "The Stock Market
recovery during 2003 has provided a much welcome impetus for smaller, growing
companies in their exit plans and the mood into 2004 has remained optimistic. We
continue to work with strong syndicates in making new investments and to ensure
that we have adequate reserves to support portfolio companies on the road to
market acceptance of their products. The early signs of corporate activity give
encouragement for realisation opportunities in the future."
For further information, please contact:
David Hall Yorkshire Fund Managers Limited Tel: 0161 832 7603
Alan Davies Yorkshire Fund Managers Limited Tel: 0113 294 5000
Keith Williams Brewin Dolphin Securities Limited Tel: 0113 241 0130
Chairman's Statement
During 2003 the technology sector began to show signs of recovery as a general
economic recovery took hold and as the uncertainties surrounding the Iraq war
faded. During the year our benchmark index, the FTSE TechMARK All-Share rose
42%. With greater confidence in financial markets and growing interest in new
share issues, we expect to see increasing exit opportunities for some of our
investments; indeed one, Amacis Group, has been acquired by a US based company
quoted on NASDAQ.
Investment Valuations
I gave notice in my interim report that, with effect from 1 August 2003, the
British Venture Capital Association (BVCA) has revised its guidelines for the
valuation of venture capital investments. Your Board has adopted these revised
guidelines and the investment portfolio at 31 December 2003 has been valued
accordingly. For early stage companies that are typical of this portfolio, the
main change is a move away from a cost base and provisioning in standard banding
of 25% increments to applying more specifically defined methodologies, which aim
to produce reliable fair valuations. Although it is not possible to measure
precisely, the directors' view is that this change has not had a material effect
on the reported net asset value.
This revision to the valuation methodology represents a change in the basis of
measurement and not a change in accounting policy. Therefore, the prior year
comparative figures have not been restated.
Operations
A total of £1.6m was invested in eight businesses over the year. Five of these
businesses were new additions to the portfolio with the remaining three being
follow-on investments.
I commented on the investments made in the first half of the year in my interim
report circulated to Shareholders in September. In the second half of the year,
your Company invested £811,000. There were two new investments in this period,
Purely Proteins and Self Timed Solutions.
Purely Proteins is an innovative, informatics-led, protein purification company.
The investment of £200,000 was part of a first round venture capital fund
raising to exploit the increasing potential of human proteins in pharmaceutical
research. With this funding, Purely Proteins will now be able to expand its
existing range of informatics and protein-based products, as well as begin to
apply its technologies to the discovery of new therapies.
Self Timed Solutions, a spin out company from Manchester University, has
developed asynchronous chip technology that has a number of advantages in both
chip design and energy consumption. Your Company invested £121,000 as part of a
much larger £2m syndicate of investors.
The signs of increasing corporate activity were underlined at the end of the
year when Amacis Group was bought by Primus Knowledge Solutions Inc., a US based
company quoted on NASDAQ. Primus develops award-winning software solutions for
mid-market and Global 2000 organisations. Primus' knowledge sharing software is
used in call centres, help desks, and Web self-service environments to increase
customer satisfaction, improve employee efficiency and lower operating costs.
Its current customers include 3Com, Airbus, Boeing, Fujitsu, IBM, Motorola and
T-Mobile. Your Company invested £275,000 in Amacis in April 2003. The
consideration received by your Company was in the form of Primus shares, valued
at £598,000 at 31 December 2003.
Although this does not yet represent a cash realisation it does give an
encouraging indication of the portfolio's potential in terms of growth and exit
opportunities.
Financial Results
The result for the period was a total return loss of 7.09 pence per share with a
revenue loss of 0.41 pence per share and a capital loss of 6.68 pence per share.
The net asset value at 31 December 2003 was 84.6 pence per share representing a
decrease of 7.6% over the year as a whole.
Liquid Resources and Rate of Investment
At the year end, liquid resources available to the Company stood at just under
£4.1m. Therefore, your Company still has a significant level of funds to invest
in growing businesses. The board and its Investment Adviser, Yorkshire Fund
Managers, is constantly reviewing the portfolio to assess the likely level of
follow-on funding that will be required by the existing investments. This will
dictate the level of cash resources that can be made available for new
investment opportunities.
31 December 2003 was the first year end for which your Company had to formally
comply with the VCT legislation that requires, amongst other things, at least
70% of investments to be in qualifying holdings (as defined by the legislation).
In order to meet this requirement, but not compromise the quality of investments
or available reserves for follow-on funding demands, sufficient funds were
placed on non-interest bearing deposit prior to the reporting date and will
continue to be held as such until suitable qualifying investments are made.
This will result in a small reduction in the Company's income over the
forthcoming year but the Board is of the opinion that this action is in the best
interests of Shareholders in protecting their existing tax benefits and creating
the opportunity for future capital gains.
Warrants
A notice will be sent to Shareholders and Warrantholders in April 2004 alerting
them to the dates on which Warrants can
be exercised in the current year.
Shareholder Relations
As I reported in September 2003, the proposals to enable your Company to buy
back its own shares were approved by Shareholders at the Annual General Meeting
held on 15 May 2003. I am pleased to confirm that Court approval has been
granted and the Company is now in a position to buy back a limited number of
shares where the directors determine it is in the best interests of other
Shareholders to do so, taking account of the price per share and the cash
reserves of the Company at the time.
In the year under review, Yorkshire Fund Managers held a total of four investor
workshops that were well attended and received by many Shareholders across the
three venture capital trusts under its management. The forum provides a good
opportunity for Shareholders to get a better understanding of the companies in
the portfolio, the strategic and operating issues of these VCTs and changes to
the legislative environment in which this type of company operates. Your board
and Yorkshire Fund Managers are keen to continue this programme and the next
workshop will be held on 21 April 2004 in London.
John Ashcroft
It is with deep sadness that I have to report to you the death of John Ashcroft
who had been an independent non-executive director of this Company, and of
British Smaller Technology Companies VCT, since the initial issue. John had been
fighting against illness for some time, yet his energy and perceptive
contributions to boardroom debates continued, as always, to be a source of
inspiration to me and his fellow directors. Our heartfelt condolences go out to
his wife, Alison, and family. He will be greatly missed by all who knew him.
Outlook
The Stock Market recovery during 2003 has provided a much welcome impetus for
smaller, growing companies in their exit plans. Although the performance in the
middle six months of the year, for smaller quoted companies in particular, did
slacken off toward the end of 2003, the mood into 2004 has remained optimistic.
There is a general consensus that UK interest rates will continue to rise in
2004, but as long as this is kept to forecast levels it should not unduly dampen
the current increase being seen in corporate finance activity. The main risk to
business confidence is likely to come from the US where the market is perceived
as overvalued and the presidential elections may cause nervousness in the
markets. If this does happen, I would expect there to be some feedback into the
UK economy.
We continue to look to work with strong syndicates in making new investments and
to ensure that we have adequate reserves to support portfolio companies on the
road to market acceptance of their products. The early signs of corporate
activity, both generally and within our own portfolio, give encouragement for
realisation opportunities in the medium term.
Sir Andrew Hugh Smith
Chairman
Unaudited Statement of Total Return (incorporating the Revenue Account)
for the year ended 31 December 2003
Unaudited Year ended Audited Year ended
31 December 2003 31 December 2002
Notes Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Net losses on investments - (466) (466) - (127) (127)
Income 256 - 256 296 - 296
Investment advisory fee (131) (56) (187) (141) (61) (202)
Other expenses (157) - (157) (150) - (150)
------ ------ ------ ------ ------ ------
Net (loss)return on ordinary
activities before taxation (32) (522) (554) 5 (188) (183)
Tax on ordinary activities 2 - - - - - -
------ ------ ------ ------ ------ ------
Net (loss)return on ordinary
activities after taxation (32) (522) (554) 5 (188) (183)
Dividends 3 - - - - - -
------ ------ ------ ------ ------ ------
Transfer(from) to reserves (32) (522) (554) 5 (188) (183)
====== ====== ====== ====== ====== ======
Return per Ordinary share
Basic and diluted 4 (0.41)p (6.68)p (7.09)p 0.07p (2.48)p (2.41)p
Notes
The revenue column of this statement is the profit and loss account of the
Company.
All activity has arisen from continuing operations.
There is no difference between the net revenue (loss) return on ordinary
activities before taxation and the transfer (from) to reserves in either year
and their historic cost equivalents.
Unaudited Balance Sheet
at 31 December 2003
Unaudited Audited
Notes 2003 2002
£000 £000
Fixed Assets Investments 2,535 1,317
-------- --------
Current Assets
Debtors 26 116
Investments 1,026 5,737
Cash 3,057 34
-------- --------
4,109 5,887
Creditors: amounts payable within one year (28) (31)
-------- --------
Net Current Assets 4,081 5,856
-------- --------
Total Net Assets 6,616 7,173
======== ========
Capital and Reserves
Called-up share capital 782 783
Share premium account - 6,595
Capital reserve
Realised (118) (35)
Unrealised (647) (208)
-------- --------
(765) (243)
Warrant reserve 4 5
Special reserve 6,592 -
Other reserve 1 -
Capital redemption reserve 1 -
Revenue reserve 1 33
-------- --------
Equity shareholders' funds 6,616 7,173
======== ========
Net asset value per Ordinary share 5 84.6p 91.6p
======== ========
Unaudited Cash Flow Statement
for the year ended 31 December 2003
Unaudited Audited
Year ended Year ended
31 December 2003 31 December 2002
£000 £000
Net cash outflow from operating activities (1) (68)
-------- --------
Investing activities
Purchase of investments (1,606) (1,194)
-------- --------
Net cash outflow before management of liquid
resources and financing (1,607) (1,262)
-------- --------
Management of liquid resources
Purchase of fixed interest government stocks (1,980) (650)
Proceeds from the sale of fixed interest
Government stocks 6,613 594
-------- --------
Net cash inflow (outflow) from management of
liquid resources 4,633 (56)
-------- --------
Financing
Issue of Ordinary shares 3 956
Issue expenses - (41)
Purchase of own shares and associated warrants (6) -
-------- --------
Net cash (outflow) inflow from financing (3) 915
-------- --------
Increase (decrease) in cash in the year 3,023 (403)
======== ========
Notes to Financial Statements
for the year ended 31 December 2003
1. Basis of reporting
This preliminary announcement, which has been prepared on a basis consistent
with the previous year, does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. This announcement has been
agreed with the company's auditors for release.
The information for the year ended 31 December 2002 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 statutory accounts for the year ended 31 December 2003, upon which
the auditors have still to report, will be delivered to the Registrar following
the Company's annual general meeting.
2. Tax on Ordinary activities
Year ended 31 December 2003 Year ended 31 December 2002
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Corporation tax
payable at 19.00% - - - - - -
(2002: 19.25%) ------ ------ ------ ------ ------ ------
3. Dividends
No dividends have been paid or proposed in the year (2002: Nil).
4. Return per Ordinary share
The basic revenue return per Ordinary share is based on net loss from ordinary
activities after tax of £32,000 (2002: net revenue return £5,000) and 7,812,000
(2002: 7,566,000) shares, being the weighted average number of shares in issue
during the year.
The basic capital return per Ordinary share is based on net capital loss from
ordinary activities after tax of £522,000 (2002: £188,000) and 7,812,000 (2002:
7,566,000) shares being the weighted average number of shares in issue during
the year.
The Company has no securities that would have a dilutive effect in either period
and hence the basic and diluted return per share are the same.
5. Net Asset Value per Ordinary share
The basic and diluted net asset value per Ordinary share is calculated on
attributable assets of £6,616,000 (2002: £7,173,000) and 7,823,000 (2002:
7,833,000) shares in issue at the year end.
The Company has no securities that would have a dilutive effect in either period
and hence the basic and diluted net asset value per share are the same.
6. Annual General Meeting
Copies of the full financial statements for the period ended 31 December 2003
will be available to the public at the registered office of the Company at Saint
Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZ thereafter. The Company's
AGM is due to be held at 1p.m. on 6 May 2004 at 23 Berkeley Square, London, W1J
6HE.
This information is provided by RNS
The company news service from the London Stock Exchange
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