Final Results
AIM VCT2 PLC
08 February 2006
To: Company Announcements
From: AiM VCT2 plc
Date: 8 February 2006
Investment Objective
To provide shareholders with a tax efficient means of gaining long term capital
growth and an attractive dividend stream primarily through investment in a
diversified portfolio of AiM companies and unquoted companies which anticipate a
stock market listing within 18 months.
• Net asset value per share (before capital dividends) of 86.96 pence
• Net asset value per share (after capital dividends) of 83.96 pence
• Capital dividends of 3.0 pence per share for the year
• 'C' Share Prospectus issued
The Chairman, Gordon Brough, said:
'Introduction | Despite the market's lacklustre headline performance 2005 turned
out to be the busiest year for new issues and fund raising since the AiM
market's launch ten years ago and provided the Manager with some further
interesting investment opportunities which were added to the portfolio. However,
as the portfolio is now largely fully invested this investment activity was at a
lower level than in past years. The Manager also took advantage of periods of
improved liquidity in the market, as well as, benefiting from progress being
announced by certain investee companies, to realise a number of investments
either in whole, or in part. These realisations enabled the Company to propose
capital dividends amounting to 3 pence per share.
Performance | Over the year the Company's Net Asset Value per share (NAV) fell
by 1.0 per cent to 86.96 pence, before taking account of annual capital
distributions, having peaked at 99.16 pence per share during March 2005, when
the AiM market also reached its high for the year. This flat performance in the
NAV again masks some quite large movements in the share prices of the portfolio
companies in both directions.
The largest contribution to performance came from Egdon Resources which is
probably the only VCT qualifying AiM company in the resource sector. A series of
positive news announcements during the year resulted in Egdon's share price
rising by 139 per cent, whilst at the same time adding £1.7 million to the value
of the Company's assets. AiM VCT2 has been an investor in Egdon since 1999, and
has supported the company through its early development phase and it is good now
to see our patience being rewarded. Further positive news flow is anticipated in
2006. However, resource companies are not without risk and the Manager has taken
profits from this holding as the share price has risen. At the year end, the
holding in Egdon had become the Company's largest investment, accounting for 7.1
per cent of total assets. The portfolio also benefited from increases in
valuations at Tanfield and Avingtrans, which reported progress with their
business plans and Vectura which signed a significant development and
commercialisation agreement with Novartis.
The main detractors from the performance of the portfolio included two
investments which were written off during the year. It was particularly
disappointing to see Advanced Technology Group move into administration after a
long struggle to commercialise its airship technology and running out of funds.
Another aviation company, Avionics was also unsuccessful in raising further
capital following delays in a number of major contracts. The portfolio was also
adversely affected by: management problems at Scott Tod, the fall in valuation
of Real Good Food after its acquisition of Napier Brown, as well as falls in the
share prices of Hartest, which required re-financing and Amino, which reported
slower than anticipated growth.
Earnings and Dividends | Losses on ordinary revenue activities after taxation
amounted to £221,000 and similarly to last year the Board is not in a position
to recommend an income dividend. However, market conditions and progress made by
individual business plans permitted the realisation of a number of holdings at a
profit and, as a result, the Board is in a position to recommend the payment of
a capital distribution of 3 pence per share (2004 - 2 pence). Shareholders will
have already received an interim payment of 1.5 pence per share in September
2005. The proposed final capital distribution of 1.5 pence per share will be
paid to shareholders on 3 April 2006, subject to shareholder approval. The total
cost of these distributions will be £1.3 million and will have the effect of
reducing the Company's assets by 3.5 per cent. Following this distribution,
since launch the Company will have paid 10.5 pence per share. The Board believes
that distributions are the best way of returning capital to shareholders and
will continue to encourage the Manager to make realisations as market conditions
and individual business plans permit.
Investment Programme | Market conditions and positive news from a number of
investments enabled the Manager to follow a strategy of gradually refreshing the
portfolio. During 2005, conditions in the market have been more favourable than
in past years for making disposals and over the year £6.6 million was realised
from the portfolio with the sale of 16 holdings in their entirety and part sale
of a number of others. A good proportion of these realisations were achieved at
a profit to their original cost, thus enabling the Board to recommend the
capital distribution back to shareholders. The Manager also decided to sell a
number of holdings which had proved disappointing investments in the past and
where, it was felt, they would have little meaningful positive impact on the
performance of the portfolio going forward. These were inevitably sold at a loss
and careful consideration had to be made to ensure that the Company's VCT status
was preserved. At the year end, the Company continued to meet all its VCT
obligations including the important qualifying investment test where the Company
has in excess of 95 per cent invested in qualifying companies.
The proceeds from realisations, together with funds raised following the issue
of new shares in AiM VCT2 enabled the Manager to continue to take advantage of
the buoyant new issue market by re-investing £3.2 million into 12 new holdings
as well as follow-on investments totalling £1.1 million into 14 existing
portfolio companies.
Shareholder Issues | During the year the Board exercised its powers to buy back
for cancellation 2.5 million shares in the Company, representing 5.8 per cent of
the issued share capital at a cost of £1.93 million. This was offset by new
shares issued to the value of £2 million in an Offer for Subscription during the
year. The buy-backs were made at an average discount of 15 per cent, thereby
enhancing the NAV for remaining shareholders. Although it remains the Board's
opinion that the best way of returning capital is through the distribution of
realised capital profits to all shareholders, it recognises the need to offer
flexibility to those shareholders that wish to sell part, or all, of their
holding. To this end, the Board will seek to renew its authority to buy back, as
well as issue, a proportion of the Company's share capital at the AGM to be held
on 29 March 2006.
Valuation Basis | New UK accounting standards have been issued to assist in
converging UK accounting practices with International Accounting Standards. The
Company will be required to adopt a numbers of these new Financial Reporting
Standards when it prepares its financial statements for the year to 30 November
2006. Financial Reporting Standard 26 recommends that equities be valued at
fair value. Fair value is deemed to be the bid price rather than the middle
market price, which has been used historically. The valuations for this report
are based on the middle market price. However, from 31 December 2005 all the
Company's published NAVs have been based on the bid price. This has had the
effect of reducing the value of the portfolio by approximately 3.2 per cent.
Board Changes | Mr Barrow announced on 25 April 2005 his intention to resign
from all his non-executive positions, including his position as a non executive
Director of AiM VCT2. The Board and the Manager would like to thank Robert for
all his help and guidance over the past five years and we wish him well in the
future. In order to keep the Board at full strength it was decided to replace
Robert with a new non executive Director. The appointment of Gordon Humphries
followed a review of potential candidates and the need to maintain a well
balanced Board. Gordon is a Chartered Accountant and has over 20 years of
experience in fund management services and I am sure he will make a valuable
contribution to the Company in the years to come.
Outlook | The UK experienced a modest slowdown in economic activity in 2005 in
response to earlier fiscal tightening. This had the desired effect of subduing
the consumer and taking the wind out of a raging housing market, thereby
controlling inflationary pressures within the economy. As we start 2006, the
economic backdrop to the markets appears finely balanced with some commentators
predicting a continued slowdown and therefore weaker performance from equities
and others with a more optimistic outlook on the year ahead. The Board feels
there are reasons to be optimistic. Firstly, the economy appears to have, thus
far , successfully absorbed the inflationary effects of increased fuel and
commodity prices which worried the markets last year. Secondly, the housing
market has avoided the drastic falls widely predicted and activity appears to be
picking up once more. Combined with continued spending by the public sector,
these two are providing support to consumer spending and the employment markets.
After a better than expected Christmas trading period, there is evidence that
consumer spending is once again increasing, albeit modestly. At a time when
interest rates looked to have peaked and may ease, this provides support for a
positive performance from domestic smaller companies, especially when current
valuations do not appear over stretched. However, the market remains vulnerable
to shocks there may be periods of volatility during the year.
With this as a background, 2006 should be an interesting year for AiM VCT2 as
the Managers seek to actively manage the portfolio.'
Enquiries:
Robert Mitchell / Bill Brown
Bluehone Investors LLP
Investment Managers Tel: 0207 496 8929
Rhonda Nicoll
F&C Asset Management plc
Secretaries Tel: 0131 465 1074
Audited Profit and Loss Account of the Company
Year to 30 November 2005
Revenue Capital Total
£'000 £'000 £'000
Profit on realisation of investments - 101 101
Income 291 - 291
Investment management fee (227) (681) (908)
Other expenses (285) - (285)
Loss on ordinary activities before taxation (221) (580) (801)
Tax on ordinary activities - - -
Loss on ordinary activities after taxation (221) (580) (801)
Dividends payable - (1,297) (1,297)
Transfer from reserves (221) (1,877) (2,098)
Return per ordinary share: (0.51p) (1.32p) (1.83p)
Statement of Total Recognised Gains and Losses
2005 2005 2005
Revenue Capital Total
£'000 £'000 £'000
Loss on ordinary activities after taxation (221) (580) (801)
Unrealised gain on revaluation of investments - 32 32
---------- ---------- -----------
Total recognised loss during the year (221) (548) (769)
---------- ---------- -----------
Total recognised loss per ordinary share (0.51)p (1.25)p (1.76)p
---------- ---------- ----------
Audited Profit and Loss Account of the Company
Year to 30 November 2004
Revenue Capital Total
£'000 £'000 £'000
Profit on realisation of investments - 758 758
Income 321 - 321
Investment management fee (226) (679) (905)
Other expenses (260) - (260)
(Loss)/profit on ordinary activities before taxation (165) 79 (86)
Tax on ordinary activities (13) - (13)
(Loss)/profit on ordinary activities after taxation (178) 79 (99)
Dividends payable (1) (868) (869)
Transfer from reserves (179) (789) (968)
Return per ordinary share: (0.42p) 0.19p (0.23p)
Statement of Total Recognised Gains and Losses
2004 2004 2004
Revenue Capital Total
£'000 £'000 £'000
(Loss)/profit on ordinary activities after taxation (178) 79 (99)
Unrealised gain on revaluation of investments - 252 252
---------- ---------- -----------
Total recognised (loss)/gain during the year (178) 331 153
---------- ---------- -----------
Total recognised (loss)/gain per ordinary share (0.42p) 0.78p 0.36p
---------- ---------- ----------
Audited Balance Sheet
As at As at
30 November 30 November
2005 2004
£'000 £'000
Fixed Assets
Quoted on the Alternative Investment Market 30,913 31,829
Quoted on OFEX 1,564 2,457
Listed investments - 97
Unquoted investments 3,280 3,540
35,757 37,923
Net current assets 342 187
Net assets 36,099 38,110
Financed by:
Shareholders' funds 36,099 38,110
Net asset value per ordinary share: 83.96p 87.83p
Ordinary shares in issue 42,994,382 43,390,309
Summarised Audited Statement of Cash Flows
Year to Year to
30 November 30 November
2005 2004
£'000 £'000
Net cash outflow from operating activities (912) (839)
Tax paid - (14)
Capital expenditure and financial investment 1,739 (1,111)
Equity dividends paid (1,520) (250)
----------- -----------
Net cash outflow before financing (693) (2,214)
Financing 255 1,886
----------- -----------
Decrease in cash (438) (328)
----------- -----------
Reconciliation of net cash flow to movement in net cash
Decrease in cash (438) (328)
Net cash at 1 December 1,895 2,223
----------- -----------
Net cash at 30 November 1,457 1,895
----------- -----------
Reconciliation of net revenue before taxation to net cash (outflow)/
inflow from operating activities
Loss on ordinary activities before taxation (801) (86)
Profit on realisation of investments (101) (758)
Increase in debtors (3) (3)
(Decrease)/increase in creditors (7) 8
----------- -----------
Net cash outflow from operating activities (912) (839)
----------- -----------
Notes
1. The audited results which cover the year to 30 November 2005
have been prepared under the historical cost convention, modified to include the
revaluation of fixed asset investments. These financial statements are
presented in accordance with the Investment Trust Companies SORP (including the
provision of additional information) except when departures are necessary to
comply with schedule 4 of the Companies Act 1985 as a result of the fact that
the Company has relinquished its investment company status under the Act.
2. There were 42,994,382 ordinary shares in issue at 30
November 2005 (2004: 43,390,309). During the year the Company issued 2,104,073
ordinary shares raising net proceeds of £1,985,000 and bought back for
cancellation 2,500,000 ordinary shares at a cost of £1,930,000 (2004: 2,259,000
ordinary shares at a cost of £1,809,000).
3. Revenue and capital returns for the year to 30 November 2005
are based on a weighted average of 43,706,543 (2004: 42,603,642) ordinary shares
in issue during the year.
4. Income for the year to 30 November is derived from:
2005 2004
£'000 £'000
Dividend Income 153 112
Fixed interest investment 64 146
Deposit interest 74 63
291 321
5. The final proposed capital dividend of 1.5 pence per
ordinary share will be paid on 3 April 2006, subject to shareholder approval, to
eligible shareholders on the register on 17 February 2006.
6. These are not full accounts in terms of Section 240 of the
Companies Act 1985. Full audited accounts for the year to 30 November 2004 have
been lodged with the Registrar of Companies. The annual report for the year to
30 November 2005 will be sent to shareholders shortly and will then be available
for inspection at Exchange House, Primrose Street, London, the registered office
of the Company. Both the audited accounts for the year to 30 November 2005 and
2004 contain unqualified audit reports.
7. The Annual General Meeting will be held on 29 March 2006 at 11.30am.
This information is provided by RNS
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