Final Results

Advent 2 VCT PLC 21 April 2004 Advent 2 VCT plc 21 April 2004 RESULTS FOR THE YEAR ENDED 29 February 2004 The Board of Advent 2 VCT plc announces the results of the Company for the year ended 29 February 2004. Highlights - The Company invested £0.85m in follow on funding rounds in three portfolio companies, namely Reqio, Enseal Systems and Casella. - A number of portfolio companies now have stronger sales pipelines and order books, reflecting increased customer demand during the second half of the year. - During the year, upward revaluations totalling £0.9m were made as a result of improved trading performance and prospects. - Adverse market conditions, chiefly in the first half of the year, resulted in the write-off of the investment in four companies. Full provision had been made against the cost of two investments in the previous year. Provisions in the year amounted to £1.2m against two investments. - A number of preliminary approaches have been received from possible purchasers or merger partners for certain companies in the portfolio which may or may not lead to offers being made in due course. Year Year ended Ended 29 February 2004 28 February 2003 Earnings per ordinary share (16.9)p (15.1)p Net asset value per ordinary share 44.3p 51.0p Net asset value per ordinary share (including all gross dividends paid) 66.1p 72.8p - A final dividend is not being recommended. - The Company continues to exceed the 70% requirement for investment in Qualifying Holdings set by the Inland Revenue. Chairman's Statement I indicated in my interim statement that our portfolio companies were still experiencing challenging market conditions but that the first signs of a recovery were becoming evident. The impact of these trading conditions had an adverse impact on a small number of portfolio companies resulting in the net asset value of the company reducing from 51.0p per share at 28 February 2003 to 45.4p per share at 31 August 2003. Market conditions continued to improve somewhat in the second half of the year to 29 February 2004 and there are now clear signs that the recovery is building further. The net asset value stabilised and at 29 February 2004 was 44.3p per share. After a long period of focusing on cost control and preserving cash resources, the Manager's 'hands-on' management approach is now focusing on ensuring that portfolio companies increase the effectiveness of their sales efforts. As circumstances continue to improve, there is now increasing evidence that the portfolio has the potential to deliver improving value. Investment activity During the year, £0.85m was invested in three existing portfolio companies to meet their funding requirements but no new investments were made. In August 2003, on the back of a rising share price, £0.1m cash was realised from the sale of the residual investment in ADVA. In February 2004, reflecting a positive re-rating of the shares, the investment in XKO Group was sold for over £0.5m cash, a small discount to original cost. The investments in Rodaris and Nexan, against which full provisions were made last year, were written off as were the investments in Weston Antennas Ltd, which was unable to raise further funds following delays in potential orders, and Radiant Networks plc, which also failed to raise further funds in late 2003 following its failure to secure a major customer. Provisions against cost have been increased on two further companies. On the other hand, improved prospects have enabled provisions to be reduced on the investments in Vectorcommand and Advanced Visual Technology. As referred to above, prospects are beginning to improve across many portfolio companies. Footfall and Healthgain have produced strong trading performance. EnSeal Systems and Prismtech have secured significant orders for deployment of their technology. In addition, Elam-T Ltd and DNA Research Innovations have achieved key milestones for their technologies and are progressing to commercialisation. The Company continues to exceed the 70% minimum requirement set by the Inland Revenue for qualifying holdings, thereby maintaining continued Venture Capital Trust status. Balance Sheet The net asset value per share as at 29 February 2004 was 44.3p compared with 51.0p as at 28 February 2003 (and 45.4p per share as at the half year, 31 August 2003). The investments in the portfolio have been valued in accordance with guidelines issued by the British Venture Capital Association. Dividend The Company realised no gains and had a low level of income during the year. The Board is therefore not recommending a dividend. The gross cumulative dividends paid since the inception of the Company is 21.8p. Purchase of own shares Occasional market purchases by the Company of its own shares provide an additional measure of liquidity in the market for the Company's shares and enhance the net asset value per share for the remaining shareholders. It continues to be a policy of the Company to consider the repurchase of shares when they become available. The need to maintain cash resources for follow on investments has not enabled the Company to repurchase any shares during the year. Borrowing In last year's report, I highlighted the lack of cash available within the Company. Consequently, the Company agreed a £1.5m borrowing facility with its bankers, of which £0.6m was drawn as at 29 February 2004. Advent Limited continues to provide a guarantee for these borrowings. Outlook A year ago, I reported that there was little imminent likelihood of a sustained recovery in markets and hence the portfolio's fortunes. There is now clear evidence that the market environment has stabilised and is improving for a number of portfolio companies. Following a long period of 'battening down the hatches' and focusing on cost reduction and cash preservation, many companies are now beginning to see gradually increasing customer demand. Although still early days in the recovery, portfolio companies are now increasing their sales and marketing efforts and ensuring they have sufficient human and financial resources to manage growing order books and sales. However, raising finance on acceptable terms is still difficult. Although uncertainty remains about the strength and sustainability of the recovery and in the economy at large, the Manager is confident that a number of companies in the portfolio have the potential to generate value provided that circumstances continue to improve. A number of preliminary approaches have been received from possible purchasers or merger partners relating to certain companies in the portfolio and these approaches may or may not lead to offers being made in due course. The Board remains concerned at the further decline in the net asset value of the Company but is encouraged by the levelling off over the second half of the year and is satisfied that the Manager is adopting the correct approach to generate improved capital gains. Advent Limited has provided a substantial guarantee in respect of the Company's borrowings, demonstrating Advent's belief in the Company's future prospects. Finally, the Board expresses their thanks to David Thompson, who has left the company, for his services as a director and wish him well for the future. Roger Brooke Chairman Profit and Loss Account for the year ended 29 February 2004 2004 2003 £'000 £'000 Investment income and deposit interest 137 413 Investment management fees (309) (423) Other expenses (247) (218) ------- ------- Operating loss (419) (228) Loss on realisation of investments (5,636) (5,184) ------- ------- Loss on ordinary activities before taxation (6,055) (5,412) Tax on ordinary activities - - ------- ------- Loss on ordinary activities after taxation (6,055) (5,412) Dividends - - ------- ------- Balance transferred from reserves (6,055) (5,412) ------- ------- Earnings per share (16.9)p (15.1)p ------- ------- Statement of Total Recognised Gains and Losses 2004 2003 £'000 £'000 Loss for the year (6,055) (5,412) Unrealised profit/(loss) on revaluation of investments 3,643 (6,521) ------- ------- Total recognised loss relating to the year (2,412) (11,933) ------- ------- Balance Sheet as at 29 February 2004 2004 2003 £'000 £'000 Fixed assets Investments 16,438 17,999 Current assets Debtors 438 516 Money market and other deposits - 2 Cash 350 190 ------- ------- 788 708 Creditors: amounts falling due within one year (1,337) (406) ------- ------- Net current (liabilities)/assets (549) 302 ------- ------- Total assets less current liabilities 15,889 18,301 ------- ------- Capital and reserves Called-up share capital 1,793 1,793 Share premium account 23,581 23,581 Capital redemption reserve 9 9 Revaluation reserve (6,065) (9,708) Profit and loss account (3,429) 2,626 ------- ------- Equity shareholders' funds 15,889 18,301 ------- ------- Net asset value per ordinary share 44.3p 51.0p ------- ------- Cash Flow Statement for the year ended 29 February 2004 2004 2003 £'000 £'000 Cash flow from operating activities and returns on investments: Investment income received 53 372 Deposit and similar interest received 1 46 Investment management fees paid - (423) Secretarial fees paid - (66) Other cash payments (78) (91) ------- ------- Net cash outflow from operating activities and returns on investment (24) (162) ------- ------- Taxation - 5 ------- ------- Financial investment: Purchase of unquoted investments and investments quoted on AIM (1,079) (2,552) Net proceeds on sale of unquoted investments 25 612 Net proceeds on sale of quoted investments 622 - Redemption and sale of listed fixed income investments - 1,061 ------- ------- Net cash outflow from financial investment (432) (879) ------- ------- Equity dividends paid: Dividends paid on ordinary shares - - ------- ------- Net cash outflow from payment of equity dividends - - ------- ------- Net cash outflow before financing and liquid resource management (456) (1,036) ------- ------- Management of liquid resources: Movement in money market and other deposits 2 236 ------- ------- Financing: Issue of ordinary shares - 926 Expenses on share issue - (43) Repurchase and cancellation of shares - (87) ------- ------- Net inflow from financing 614 796 ------- ------- Increase/(decrease) in cash 160 (4) ------- ------- Reconciliation of movement in shareholders' funds 2004 2003 £'000 £'000 Opening shareholders' funds 18,301 29,438 Issue of ordinary shares - 883 Total recognised gains and losses for year (2,412) (11,933) Repurchase and cancellation of shares - (87) ------- ------- Closing shareholders' funds 15,889 18,301 ------- ------- The audit report on the full financial statements has yet to be signed. The preliminary announcement is prepared on the same basis as set out in the previous year's annual accounts. The preliminary announcement does not constitute statutory accounts as defined by section 240 of the Companies Act 1985. The statutory accounts for the year ended 28 February 2003 have been delivered to the Registrar and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the Companies Act 1985. This preliminary announcement was approved by the Board on 20 April 2004. Contacts for information: Advent Fund Managers - 020 7932 2100 Sir David Cooksey Les Gabb Capital MS & L - 020 7878 3189 Annabel O'Connor Teather & Greenwood - 020 7426 9000 Jonathan Becher This information is provided by RNS The company news service from the London Stock Exchange

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