Final Results
Baronsmead VCT 2 PLC
18 May 2005
Baronsmead VCT 2 plc
To: Company Announcements
From: Baronsmead VCT 2 plc
Date: 18 May 2005
Unaudited Results - Year Ended 31 March 2005
Highlights
• NAV per ordinary share increased by 18.4% to 120.63p before deduction of
dividends
• NAV per C share increased by 1.3% to 96.23p before deduction of dividends
• C share issue fully subscribed by 14 January 2005 - 22 million shares
issued
• The total return since launch in 1998 on the ordinary shares is now 70.7%,
which is equivalent to an annualised return of 7.9% since launch
• Dividends totalling 5.0p per ordinary share paid/proposed maintains the
average annual tax free dividend at over 4.5p per ordinary share since
launch.
• Dividend of 1.0p per C share proposed
Clive Parritt, the Chairman said:
'OVERVIEW
Since launch seven years ago your company has achieved good investment
performance and met the twin objectives of creating capital growth and paying
attractive tax free dividends. The sale of Fat Face in April 2005 is a fine
example of how a portfolio company can generate good value for investors and so
enhance returns for shareholders in Baronsmead VCT 2.
Our offer of 22 million new C shares in winter 2004/2005 was fully subscribed by
14 January 2005. We are delighted to welcome the 1,473 new shareholders.
Baronsmead VCT 2 is now the largest VCT in the marketplace with a net asset
value of over £65m.
RESULTS AND DIVIDENDS
In the year to 31 March 2005, the fully diluted Net Asset Value (NAV) per
ordinary share increased by 18.4% from 101.88p to 120.63p. The increase in the
FTSE All-Share index (total return) was 15.6% over the comparable period to 31
March 2005.
Dividends totalling 5p a share for ordinary shareholders (2.3p interim dividend
paid in December 2004 and the proposed final dividend of 2.7p payable on 28 June
to shareholders on the register on 25 May 2005) reduce the NAV per ordinary
share at the year-end to 115.63p per ordinary share.
I am delighted that performance over the last year has been excellent. This is
a tribute to the managers. As shareholders are aware, the managers'
remuneration arrangements are designed to enable them to share in the success
they create for shareholders. The results for 2004/2005 trigger a performance
fee of 3.39p per ordinary share (excluding VAT) which is based on the managers
receiving 20% of the total return in excess of a hurdle set at base rate plus
2%.
Since the year end (on 29 April 2005) Fat Face has been sold, enabling
Baronsmead VCT 2 to realise its total investment for £5.2m. This has enabled
the Board to declare a first interim dividend of 5p per ordinary share for the
financial year 2005/06, payable on 6 June 2005.
The changes in the net asset value per ordinary share as a result of the
dividends paid/proposed are set out in the table below.
Pence per Ordinary Share Dividends Changes in
NAV(p)
Net Asset Value (before dividends) 120.63
Less - Interim Dividend 2004/05 Paid 2.3
Less - Final Dividend 2004/05 Proposed 2.7 5.00
Net Asset Value at 31 March 2005 115.63
Less - First Interim Dividend 2005/06 declared 5.0 5.00
Resulting Net Asset Value per Ordinary Share 110.63
The C share issue raised net funds of £20.9m. A first dividend of 1.0p is
proposed arising from the income earned on cash and fixed interest securities in
the last few months of the year. Three AiM-traded investments were made by 31
March 2005 and the £20.1m balance of the portfolio is held in gilts, a money
market OEIC and cash. Over 70% of this capital is to be invested in a portfolio
of qualifying holdings by 31 March 2007. At the year end the net asset value
per C share was 95.23p.
To assist shareholders in the understanding of the financial statements we have
included a non-statutory operating report.
LONG TERM PERFORMANCE
Since 1998 the total return for founder ordinary shareholders in Baronsmead VCT
2 is 70.7%, net of all costs. This is calculated by combining the growth in NAV
with reinvested dividends per ordinary share of 33.9p.
This performance places the achievements of your company ahead of most other '
generalist' VCTs, which have a similar strategy investing across a range of
unquoted and AiM companies. The FTSE All-Share index over the comparable period
since launch is up only a meagre 6% and so the performance of your company
remains substantially ahead of this index too. The positive differential
increases further if the benefits from the available VCT tax reliefs are also
taken into account.
THE PORTFOLIO
In the year under review, 15 new investments were made and three investments
sold taking the net portfolio to 66 companies. The relative health of portfolio
companies is measured quarterly in terms of profitability as well as other non
financial bench-marks. At the year end, 53 of the 66 portfolio companies were
reporting higher or steady profits.
This year the principal contributor to the increase in our net asset value came
from the unquoted portfolio. Americana and Staffline each showed increases in
value of more than £1.4m, after taking account of the repayment of loan stock
investments. Both are testament to the successful combination of talented
management teams and active involvement by the managers. AssA too, like
Staffline, experienced a good recovery following changes at board level and
increased in value by more than £1m. The sale of Brownsword, the flotation of
Vectura and Ardana plus some profitable realisations of AiM stocks all added to
good progress in realising value for shareholders. As reported previously, Job
Opportunities went into administration and provisions were made against Spaform
and Hawksmere, illustrating that not all ambitions have been fulfilled.
At 31 March 2004 the valuation of Fat Face was £1.9m. Increasing this to its
ultimate sale value provided an uplift of £3.3m. £450,000 of loan stock had
been repaid previously, so that the final cash returned including interest and
dividends received over the period of ownership, represented 11.9 times the
original cost of the investment. The business grew from 28 to 98 stores over
the five years of the investment and illustrates how talented entrepreneurs, the
introduction of professional managers and active involvement by your manager at
each stage can achieve outstanding results. As the CEO of Fat Face said 'Our
partnership with ISIS Equity Partners has been a fantastic success and together
we have taken the Fat Face brand to new levels'
MEETING SHAREHOLDER NEEDS
Shareholders approved a C share fund raising issue in July 2004 and the
extension of the life of your Company from 2008 to 2011. The prospectus issued
in September was well received by commentators, advisers and their clients so
that we were the first VCT in the financial year 2004/05 to be fully subscribed.
We were also pleased that the average cost to new shareholders was less than
4.5%, which was one of the least expensive fund raisings across the VCT sector.
In May 2004 the board stated that it would aim to sustain annual dividends at
the historic level from launch of 4.5p per ordinary share, while also
maintaining a net asset value of at least 100p per ordinary share. Clearly the
ability to meet these twin objectives will depend significantly on the level and
timing of profitable realisations. With the first interim dividend for
2005-2006 the yield objective has already been exceeded which is an excellent
start. Ultimately, if an active secondary market in VCT shares is to be
achieved, it will be important to show secondary investors that, in addition to
tax free dividends and gains, the dividend flow is likely to be maintained.
OUTLOOK
The last year has seen good performance across the portfolio which has been
translated into higher investment returns. The task now is to sustain this and
the board's role is to monitor progress and encourage the manager to maintain
and further improve that performance. Significant cash returns for ordinary
shareholders have been generated and we shall plan to extend this to C
shareholders in two years time when their shares convert. In the meantime, an
important priority is for potential purchasers of the ordinary shares to
appreciate the yield characteristics of Baronsmead VCT 2 shares so that existing
shareholders can benefit from the resultant increase in the share price.'
David Thorp, ISIS Equity Partners : 0207 506 1100
Robert Coulter, F&C Asset Management plc: 0131 465 1000
UNAUDITED NON-STATUTORY OPERATING REPORT FOR THE YEAR ENDED 31 MARCH 2005
Ordinary C Ordinary
shares shares Total shares
2005 2005 2005 2004
£'000 £'000 £'000 £'000
Profit on sale of investments in year 1,595 - 1,595 1,258
(total)
(Profit)/loss already included in valuation at start of (131) - (131) 662
year
Profit on sale of investments in current year 1,464 - 1,464 1,920
Increase in portfolio valuation in the 8,219 128 8,347 6,306
year
Permanent diminution in value as a result of investments (1,452) - (1,452) -
liquidated
Deduct losses already included in valuation at start of 810 - 810 -
year
Realised write offs of investments in current (642) - (642) -
year
Investment income 1,511 383 1,894 1,256
Investment management fee (including performance fee) (2,673) (172) (2,845) (778)
Other expenses (272) (57) (329) (284)
Total return before tax for shareholders 7,607 282 7,889 8,420
Taxation 29 (29) - 1
Total return after tax for shareholders 7,636 253 7,889 8,421
Dividends paid and proposed (2,086) (220) (2,306) (3,476)
Transferred to reserves 5,550 33 5,583 4,945
Total return per ordinary share/ C share in year 18.18p 1.65p 20.54p
Unaudited Profit and Loss Account of the Company
for the year ended 31 March 2005
Ordinary shares
2005 2005 2005
Revenue Capital Total
£'000 £'000 £'000
Profit on realisation of investments - 822 822
Income 1,511 - 1,511
Investment management fee (255) (2,418) (2,673)
Other expenses (272) - (272)
---------- ----------- -----------
Profit/(loss) on ordinary activities before taxation 984 (1,596) (612)
Tax on ordinary activities (177) 206 29
---------- ----------- -----------
Profit/(loss) on ordinary activities after taxation 807 (1,390) (583)
Dividends paid and proposed (792) (1,294) (2,086)
----------- ----------- -----------
Retained gain/(loss) transferred to/(from) reserves 15 (2,684) (2,669)
---------- ---------- -----------
Return per ordinary share 1.92p (3.31)p (1.39)p
______ ______ _____
Unaudited Statement of Total Recognised Gains and Losses
for the year ended 31 March 2005
Ordinary shares
2005 2005 2005
Revenue Capital Total
£'000 £'000 £'000
Profit/(loss) on ordinary activities after taxation 807 (1,390) (583)
Unrealised gain on revaluation of investments - 8,219 8,219
---------- ----------- -----------
Total recognised gain during the year 807 6,829 7,636
---------- ----------- -----------
Total recognised gain per ordinary share 1.92p 16.26p 18.18p
Unaudited Profit and Loss Account of the Company
for the year ended 31 March 2005
C shares
2005 2005 2005
Revenue Capital Total
£'000 £'000 £'000
Income 383 - 383
Investment management fee (43) (129) (172)
Other expenses (57) - (57)
---------- ----------- -----------
Profit/(loss) on ordinary activities before taxation 283 (129) 154
Tax on ordinary activities (54) 25 (29)
---------- ----------- -----------
Profit/(loss) on ordinary activities after taxation 229 (104) 125
Dividends paid and proposed (220) - (220)
----------- ----------- -----------
Retained gain/(loss) transferred to/(from) reserves 9 (104) (95)
---------- ---------- -----------
Return per C share 1.49p (0.68)p 0.81p
______ ______ _____
Unaudited Statement of Total Recognised Gains and Losses
for the year ended 31 March 2005
C shares
2005 2005 2005
Revenue Capital Total
£'000 £'000 £'000
Profit/(loss) on ordinary activities after taxation 229 (104) 125
Unrealised gain on revaluation of investments - 128 128
---------- ----------- -----------
Total recognised gain during the year 229 24 253
---------- ----------- -----------
Total recognised gain per C share 1.49p 0.16p 1.65p
Unaudited Profit and Loss Account of the Company
for the year ended 31 March 2005
Total
2005 2005 2005
Revenue Capital Total
£'000 £'000 £'000
Profit on realisation of investments - 822 822
Income 1,894 - 1,894
Investment management fee (298) (2,547) (2,845)
Other expenses (329) - (329)
---------- ----------- -----------
Profit/(loss) on ordinary activities before taxation 1,267 (1,725) (458)
Tax on ordinary activities (231) 231 -
---------- ----------- -----------
Profit/(loss) on ordinary activities after taxation 1,036 (1,494) (458)
Dividends paid and proposed (1,012) (1,294) (2,306)
----------- ----------- -----------
Retained gain/(loss) transferred to/(from) reserves 24 (2,788) (2,764)
---------- ---------- -----------
Return per ordinary share/C share 1.81p (2.61)p (0.80)p
______ ______ _____
Unaudited Statement of Total Recognised Gains and Losses
for the year ended 31 March 2005
Total
2005 2005 2005
Revenue Capital Total
£'000 £'000 £'000
Profit/(loss) on ordinary activities after taxation 1,036 (1,494) (458)
Unrealised gain on revaluation of investments - 8,347 8,347
---------- ----------- -----------
Total recognised gain during the year 1,036 6,853 7,889
---------- ----------- -----------
Total recognised gain per ordinary share/C share 1.81p 11.95p 13.76p
Audited Profit and Loss Account of the Company
for the year ended 31 March 2004
Ordinary shares
2004 2004 2004
Revenue Capital Total
£'000 £'000 £'000
Profit on realisation of investments - 1,920 1,920
Income 1,256 - 1,256
Investment management fee (195) (583) (778)
Other expenses (284) - (284)
---------- ----------- -----------
Profit on ordinary activities before taxation 777 1,337 2,114
Tax on ordinary activities (131) 132 1
---------- ----------- -----------
Profit on ordinary activities after taxation 646 1,469 2,115
Dividends paid and proposed (492) (2,984) (3,476)
----------- ----------- -----------
Retained gain/(loss) transferred to/(from) reserves 154 (1,515) (1,361)
---------- ---------- -----------
Return per ordinary share 1.58p 3.58p 5.16p
______ ______ _____
Audited Statement of Total Recognised
Gains and Losses for the year ended 31 March 2004
2004 2004 2004
Revenue Capital Total
£'000 £'000 £'000
Profit on ordinary activities after taxation 646 1,469 2,115
Unrealised profit on revaluation of investments - 6,306 6,306
---------- ----------- -----------
Total recognised gain during the year 646 7,775 8,421
---------- ----------- -----------
Total recognised gain per ordinary share 1.58p 18.96p 20.54p
Unaudited Balance Sheet
Audited
As at As at
31 March 2005 31 March 2004
Ordinary
shares C shares Total
£'000 £'000 £'000 £'000
Fixed Assets
Unquoted investments 23,698 - 23,698 18,986
Quoted on the Alternative Investment 16,497 818 17,315 13,004
Market (AiM)
Fixed interest securities 6,004 17,994 23,998 4,174
Listed investments 481 - 481 476
Quoted on OFEX 127 - 127 94
_______ _______ _____ _______
46,807 18,812 65,619 36,734
Net current assets 1,124 2,139 3,263 4,909
______ ______ _____ ______
Net assets 47,931 20,951 68,882 41,643
______ ______ _____ ______
Financed by:
Shareholders' funds 47,931 20,951 68,882 41,643
______ ______ _____ ______
Net asset value per share:
Basic 115.63p 95.23p 101.88p
Ordinary/C shares in issue 41,453,426 22,000,000 40,874,019
Unaudited Summarised Statement of Cash Flows
Audited Year to
Year to 31 March 2005 31 March 2004
Ordinary
shares C shares Total
£'000 £'000 £'000 £'000
Net cash inflow from operating activities 235 3 238 377
Taxation - - - (163)
Capital expenditure and financial investment (1,034) (18,684) (19,718) (1,750)
Equity dividends paid (967) - (967) (3,476)
----------- ----------- ----------- -----------
Net cash outflow before financing (1,766) (18,681) (20,447) (5,012)
Financing 1,010 21,270 22,280 (21)
----------- ----------- ----------- -----------
(Decrease)/increase in cash (756) 2,589 1,833 (5,033)
----------- ----------- ----------- -----------
Reconciliation of net cash flow to movement in net
cash
(Decrease)/increase in cash (756) 2,589 1,833 (5,033)
Opening net cash 4,856 - 4,856 9,889
----------- ----------- ----------- -----------
Net cash at 31 March 2005 (31 March 2004) 4,100 2,589 6,689 4,856
----------- ----------- ----------- -----------
Reconciliation of net revenue before taxation to net cash inflow/(outflow) from
operating activities
Profit/(loss) on ordinary activities before taxation (612) 154 (458) 2,114
Profit on realisation of investments (822) - (822) (1,920)
(Increase)/decrease in debtors (53) (302) (355) 134
Increase in creditors 1,722 151 1,873 49
----------- ----------- ----------- -----------
Net cash inflow from operating activities 235 3 238 377
----------- ----------- ----------- -----------
Notes
1. The unaudited results which cover the year to 31 March 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 where 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 41,453,426 ordinary shares in issue at 31 March 2005 (31 March
2004: 40,874,019). 1,899,407 ordinary shares were issued during the year.
The Company bought back 1,320,000 ordinary shares for cancellation during
the year. There were 22,000,000 C shares in issue at 31 March 2005 (31
March 2004:Nil).
3. Returns for the period to 31 March 2005 are based on a weighted average of
41,995,911 (31 March 2004: 40,996,280) ordinary shares in issue during the
year, and a weighted average of 15,323,042 C shares (31 March 2004: Nil) in
issue during the year.
4. The final dividends of 2.7 pence per ordinary share and 1 pence per C share
will be paid on 28 June 2005 to shareholders on the register on 25 May
2005, subject to the approval of shareholders at the Annual General Meeting
on 20 June 2005.
5. These are not full accounts in terms of Section 240 of the Companies Act
1985. Full audited accounts for the year to 31 March 2004 contain an
unqualified audit report and have been lodged with the Registrar of
Companies. The auditors' report on the full financial statements for the
year to 31 March 2005 has yet to be signed. The annual report for the year
to 31 March 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.
6. The Annual General Meeting will be held on 20 June 2005.
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