Interim Results

British Smaller Companies VCT PLC 10 December 2002 For Immediate Release 10 December 2002 BRITISH SMALLER COMPANIES VCT PLC Interim results for the 6 months to 30 September 2002 • £935,000 invested in 4 companies • Encouraging performance from unquoted companies British Smaller Companies VCT plc ('the Company') today announces its unaudited interim results for the six months to 30 September 2002. FINANCIAL HIGHLIGHTS Unaudited Unaudited Audited 6 months to 6 months to 12 months to 30 Sept 2002 30 Sept 31 March 2002 2001 Gross revenue £214,000 £416,000 £667,000 Net revenue return after tax: £82,000 £252,000 £323,000 Revenue return per share: 0.52p 1.60p 2.05p Total return per share: (3.05)p (4.20)p (13.02)p Total dividend: 0.25p 1.10p 2.00p Net assets: £10.10m £12.22m £10.68m Net asset value per share: 65.0p 77.7p 68.0p Number of venture capital investments: 34 30 32 Value of venture capital investments: £8.40m £9.71m £8.61m Announcing the results, the Chairman, Sir Andrew Hugh Smith, said the performance of the unquoted portfolio has been encouraging. The 4.4% reduction in net asset value compares very favourably with the comparative FTSE indices within the period. Some established companies had posted improved earnings growth and in two cases - CCCoutdoors Limited and Sheet Piling Limited - the investments have been revalued above cost. However, the valuations of early stage innovative businesses within the portfolio has been depressed by continued adverse market sentiment towards technology stocks in general. This is reflected in falling valuations when companies return to market for further development funding and in an increasing shortage of funds for risk finance for emerging technology companies. The AIM portfolio valuation has suffered in line with general quoted market sentiment. The valuation of these stocks has recovered slightly since the period end. REALISATIONS During the period, a total of £294,000 was received from unquoted investments, which included the early redemption of loan stock by Leeds-based JDA Limited and a premium of 15,000 on the scheduled preference share redemption by Sheffield-based CCCoutdoors Limited. INVESTMENTS Four investments were made during the period totalling £935,000. Three of these investments were new, with £325,000 being invested in Cambridge Cognition Limited, which specialises in technology that monitors disorders linked to the central nervous system; £249,000 in Cardpoint plc, an independent operator of automated cash machines in the UK; and £300,000 in Special Mail Services Limited, a specialist small parcel secure delivery company. Follow-on investments totalling £61,000 were made in Imerge Limited, the recognised leader in Internet-connected hard disk-based audio products and media appliances. DIVIDEND An interim dividend of 0.25p per share has been declared and will be paid on 3 January 2003 to shareholders on the register on 20 December 2002. OUTLOOK Commenting on the Company's prospects for the current year, the Chairman said: 'We continue to look at exit opportunities for the current portfolio where enhanced shareholder value can be realised. However, in the current market these opportunities are very restricted with corporate finance activity remaining depressed. Nevertheless, we are encouraged by the progress of a number of companies within the portfolio and the underlying capital growth that is evident. In many cases it is still too early to revalue these companies above cost due to the fragile nature of the economy in which they operate and the wider market sentiments in general. 'It may be some time before market conditions enable underlying value to be fully realised and, in the meantime, we are working with investee companies to maintain the pressure on financial and operating controls so that they are ready for the upturn when it materialises.' For further information, please contact: Phil Cammerman, Yorkshire Fund Managers Ltd Tel: 0113 294 5050 David Hardy, Binns & Co Tel: 020 7786 9600 Simon Mountford, Simon Mountford Communications Tel: 01347 844844 CHAIRMAN'S STATEMENT The first six months of the new financial year have continued the trend of the second half of the last year with falling equity markets, declining bond yields and a flow of poor corporate news where projected earnings have been revised sharply downwards. The fall in equity markets has not been restricted to the UK with the US and Eurozone also falling by some 30% and 40% respectively in the year to date. The green shoots of improving confidence that appeared in the first quarter of this calendar year following the events of 11 September 2001 have not taken root. Until the flow of news on the international economic and political scene has improved it is difficult to see equity markets stabilising and returning to sustainable higher levels. I expect this to take some time yet. Investment Portfolio Despite the continuing underlying problems in the UK economy as a whole, and the wider world in general, the performance of your Company's unquoted portfolio has been encouraging. It is not unexpected that the net asset value has fallen in the period under review but the fall of just 4.4% compares very favourably to the fall in comparable FTSE indices in the same period. As I concluded in my last report, your Board is encouraged by the trading experiences of a number of companies within the portfolio. Some established companies have posted improved earnings growth and in two cases, where this is now considered to be sustainable, we have decided to revalue the investments above cost on a modest earnings multiple basis. In others, it is still felt prudent to leave at cost until further evidence of sustained profitability is to hand. The valuation of early stage innovative businesses within the portfolio has been depressed by the continuing adverse market sentiment toward technology stocks in general. This is reflected in falling valuations when companies return to market for further development funding and in an increasing shortage of funds for risk finance for emerging technology companies. With such businesses finding it difficult to raise the additional finance to secure their medium-to-long-term future there is an increasingly higher level of risk of corporate failure. Where funding is available it is inevitably based on a significantly reduced pricing model. Your Board has to take both factors into account when assessing the valuations of such early stage investments within your Company's portfolio. The valuation of the AIM portfolio has suffered in line with the general quoted market sentiment and investees have been valued at the mid market price at 30 September 2002. The valuation of these stocks has recovered slightly since the reporting period end but, in line with the general market, is not expected to recover to its previous levels for some time yet. Three new and one follow on investment amounting to a total of £935,000 were completed in the period. These were predominantly funded by realisations from the existing portfolio through the redemption of loan stock and preference shares together with some AIM investment disposals. The net cash outflow from investing activities was £271,000 with liquid fund reserves at the end of September totalling £1.7m. Financial Results The six months to 30 September 2002 produced a revenue profit of £82,000 (2001: £252,000) equivalent to 0.52p per share (2001: 1.60p). After taking account of movements on investment valuations and other capital items the total return was a loss of 3.05p per share (2001: 4.20p). As predicted, the introduction of early stage innovative businesses has affected the running yield from the investment portfolio. However, your Board is satisfied that the potential for larger capital gains in the medium-to-long-term is still evident. Your Board has recommended an interim dividend of 0.25p per share. The dividend will be paid on 3 Januray 2003 to shareholders on the register on 20 December 2002. This represents a reduction on the previous year's interim of 1.1p per share but recognises the relative level of revenue profits in the current year. The Board's intention is to distribute substantially all its revenue profits for the full financial year in accordance with the venture capital trust legislation. Shareholder Relations During the period your Board has continued to look at ways in which VCT share liquidity can be improved. The Annual General Meeting held on 22 July approved the special resolutions that will enable the Company to buy back its own shares from shareholders who have a need to sell and where this is to the benefit of remaining shareholders. In addition, your Company's Investment Adviser and representatives of the Board have attended industry seminars looking at this liquidity issue which is common to all VCTs. During the first six months a total of 165,000 shares were bought back at prices ranging between 38p and 45p per share. In line with the majority of the venture capital trust industry, your Board has decided to start announcing net asset values on a quarterly basis to the market. This is with a view to improving visibility of performance on an ongoing basis and stimulating market interest in VCT shares as a class. Outlook Your Board and its Investment Adviser continues to look at exit opportunities for the current portfolio where enhanced shareholder value can be realised. However, in the current market these opportunities are very restricted with corporate finance activity remaining depressed. Nevertheless, your Board is encouraged by the progress of a number of companies within the portfolio and the underlying capital growth that is evident. In many cases it is still too early to revalue these companies above cost due to the fragile nature of the economy in which they operate and the wider market sentiments in general. It may be some time before market conditions enable underlying value to be fully realised and, in the meantime, your Investment Adviser is working with investee companies to maintain the pressure on cost control so that they are ready for the upturn when it materialises. Sir Andrew Hugh Smith 9 December 2002 Summarised unaudited statement of total return Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2002 2001 2002 Notes £000 £000 £000 Revenue Gross revenue 214 416 667 Administrative expenses (132) (137) (321) Taxation 2 - (27) (23) ------ ------ ------ 82 252 323 ------ ------ ------ Capital Net realised gains (losses) 161 (122) 269 Net unrealised losses (630) (704) (2,433) Management fee allocated to capital (87) (115) (231) Tax effect of capital items - 27 23 ------ ------ ------ (556) (914) (2,372) ------ ------ ------ Total return (474) (662) (2,049) ==== ==== ==== Appropriated: Revenue Dividend payable on Ordinary shares 39 173 315 Transfer to revenue reserve 43 79 8 ------ ------ ------ 82 252 323 ==== ==== ==== Capital Decrease on reserves (556) (914) (2,372) ==== ==== ==== Basic and diluted return per Ordinary share Revenue 0.52p 1.60p 2.05p Capital 3 (3.57)p (5.80)p (15.07)p ------ ------ ------ (3.05)p (4.20)p (13.02)p ==== ==== ==== Notes The revenue section of this statement is the profit and loss account of the company. All activity has arisen from continuing operations. Unaudited balance sheet Unaudited Unaudited Audited 30 September 30 September 31 March 2002 2001 2002 Notes £000 £000 £000 Fixed assets Investment portfolio 8,400 9,710 8,612 ------- ------- ------- Current assets Short-term investments 1,490 1,681 1,921 Debtors 61 445 68 Cash and short-term deposits 238 606 275 ------- ------- ------- 1,789 2,732 2,264 Creditors: amounts payable within one year (91) (219) (195) ------- ------- ------- Net current assets 1,698 2,513 2,069 ------- ------- ------- Total net assets 10,098 12,223 10,681 ===== ===== ===== Capital and reserves Called up share capital 1,554 1,573 1,571 Capital redemption reserve 33 14 16 Capital reserve (5,215) (3,201) (4,659) Special reserve 13,658 13,741 13,728 Revenue reserve 68 96 25 ------- ------- ------- Equity shareholders' funds 10,098 12,223 10,681 ===== ===== ===== Net asset value per Ordinary share 4 65.0p 77.7p 68.0p Unaudited cash flow statement Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2002 2001 2002 £000 £000 £000 Net cash inflow from operating activities - 114 206 Taxation - 151 186 Financial investment (271) (1,129) (1,139) Equity dividends paid to shareholders (142) (174) (346) ------- ------- ------- Net cash outflow before management of liquid resources and financing (413) (1,038) (1,093) Management of liquid resources 445 1,007 745 Financing (69) (28) (42) ------- ------- ------- Decrease in cash (37) (59) (390) ------- ------- ------- Notes to the financial statements 1. Basis of Reporting The interim financial statements have been prepared on a basis consistent with the statutory financial statements for the year ended 31 March 2002. 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 2002 do not constitute full financial statements and have been extracted from the Company's financial statements for the year ended 31 March 2002 which have been reported upon without qualification by the auditors and have been delivered to the Registrar of Companies. 2. Taxation charge Unaudited Unaudited Audited 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2002 2001 2002 £000 £000 £000 UK taxation based on net revenue for the period: Corporation tax at 20% - 27 23 Allocated to capital reserve - (27) (23) ------ ------ ------ Net charge - - - ==== ==== ==== 3. Revenue return per Ordinary share The revenue return per share is based on net revenue from ordinary activities after tax attributable to shareholders of £82,000 (30 September 2001: £252,000, 31 March 2002: £323,000) and on 15,579,068 shares (30 September 2001: £15,752,371, 31 March 2002: 15,740,441), being the weighted average number of shares in issue during the period. There is no difference between the revenue return per share and the fully diluted revenue return per share in either period. 4. Net asset value per Ordinary share The net asset value per Ordinary share is calculated on attributable assets of £10,098,000 and 15,542,838 shares in issue at the period end (30 September 2001: assets of £12,223,000 and 15,732,838 shares, 31 March 2002: assets of £10,681,000 and 15,707,838 shares). 5. Interim Report and Accounts Copies of the interim report are being posted to shareholders and can be obtained from the Company's registered office: Saint Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZ thereafter. Unaudited interim accounts will be lodged with the Registrar of Companies. This information is provided by RNS The company news service from the London Stock Exchange

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