Interim Results

RNS Number : 1474A

Bluehone AIM VCT2 PLC

29 July 2008

 



To: London Stock Exchange	For immediate release:
	29 July 2008

Bluehone AiM VCT2 plc

Interim results for the six month period 

ended 31 May 2008

The Chairman Gordon Brough said:

Introduction

Following the recent successful merger between Bluehone AiM VCT2 and Bluehone AiM VCT, I would like to welcome the new shareholders in the Company and to say that we look forward to both sets of shareholders benefiting from the creation of an enlarged VCT of a more economically efficient size. The enlarged Company will have a more diversified portfolio and greater flexibility to continue with the Board's policy of making distributions to shareholders in the future. This report covers the interim period up to the 31 May 2008 which was prior to the merger being announced.

Performance

Investor concerns about the likely economic impact of the problems within the world wide credit markets, which became prevalent during the second half 2007, appear to have been fulfilled with the major Western economies slowing markedly in the first half of this year. At the same time a significant rise in the price of oil has brought with it serious inflationary pressures adding to the deteriorating economic situation. Against this background, we have seen a continuation of the very difficult stock market conditions which characterised the second half of 2007, with smaller company equity valuations remaining highly volatile within a generally downward trend during the first half of 2008. However, the performance of the AiM market has again been supported by its large exposure to the resource sector (some 30 per cent of the total value of the market), which continued to prosper from the strength in commodity prices, and resulted in the FTSE AIM Index falling by just 2.6 per cent over the period. This compares with the FTSE SmallCap Index which was down by 12.4 per cent and belies the fact that the majority of non-resource AiM listed companies experienced a fall in their share price valuations over the period. 

The hostile conditions prevailing in the wider equity markets have led to a sharp de-rating of the smaller company asset class as investors sought the perceived relative safety of larger capitalised stocks. Against this background it was difficult for many of the companies within the portfolio to make much headway in the first half and the majority of the holdings suffered falls in their valuations. Despite this, the Net Asset Value per Ordinary share of Bluehone AiM VCT2 only posted a small decrease of 1.7 per cent to 71.5 pence per share, a positive total return over the period of 0.9 per cent. This performance was once again helped to a large extent by a near doubling in the value of the portfolio's largest holding. In January 2008 Egdon Resources announced the de-merger of its gas storage business into Portland Gas plc, with shareholders receiving shares in both new Egdon Resources and Portland Gas companies. I am sure shareholders will remember that your Manager has been waiting for news about the planning application for the proposed deep underground gas storage facility and I am very pleased to say that permission was granted by Dorset County Council in May. We now await consent for the building of the necessary pipeline which is expected in the near future, as well as news about funding from potential joint venture partners which is expected by the end of the summer. Your Manager believes these milestones will give further opportunity for upside in the company's shares. This has been an important investment for Bluehone AiM VCT2 and one from which profit has already been taken. Even so, as a result of the strong share price appreciation Portland Gas is now a more significant part of the portfolio than a year ago and a holding in which the Manager and the Board continue keep under close review. 

Portfolio Activity

There has been a marked slow down in the number of companies joining the AiM market and this is expected to continue whilst the background for investment in riskier asset classes, which includes smaller companies, remains challenging. At the same time, the ability of the Manager to actively manage the portfolio is being hampered by increased volatility and a lack of liquidity in the smaller company markets. Despite this, the portfolio benefited from the takeover of BBI Holdings and Tellings Golden Miller during the period and this gives some encouragement that trade purchasers are active at current depressed market valuations. BBI Holdings, which at the time was the Trust's second largest holding, was bid for by its largest shareholder Inverness Medical and realised £1.2 million, a profit of 3.8 times the original cost. Tellings Golden Miller was acquired by Arriva and realised £214,286 for the Company, which when combined with a special dividend worth £286,000 which was received in 2005, gave a profit of 1.5 times the original cost. Further disposals of significance included the partial sale of the holdings in Jelf Group and Portland Gas. Total proceeds from disposals amounted to £2.3 million. No new holdings were introduced to the portfolio but four small further investments were made in IS Pharma, Secure Electrans, Clarity Commerce Solutions and Servoca, all as a result of fund raisings by these companies. Investments made into portfolio companies amounted to £400,000 over the period. 

Earnings and Dividends

Earnings for the period amounted to a loss of 0.22 pence per ordinary share and as in the past, the Board is not in a position to recommend an interim income dividend. However, following the profitable realisation of investments in the first half, the Board is able to recommend a capital distribution of 1 pence per share. This will be paid on 29 August 2008 to Ordinary shareholders on the register on 8 August 2008. The total cost of this distribution will be approximately £550,000. The Board intends to continue distributing capital profits to shareholders as and when they arise from the sale of individual investments within the portfolio. However, I am sure shareholders will understand that the current state of the stock market is not being particularly helpful in this regard in the short term. Following payment of the interim distribution in August the Company will have paid back 18.5 pence per share to shareholders since the launch of the Company. 

C Shares

The Net Asset Value per share of the C share portfolio fell by 9 per cent over the period to 86.95 pence, with the majority of holdings reducing in value to a greater or lesser extent. On the positive side, the portfolio benefited from the near doubling in the value of its exposure to Portland Gas as well as good performance from BBI Holdings prior to its takeover by Inverness Medical. There was also a recovery in the share price of Vindon Healthcare, as well as good trading results from Craneware and Mount Engineering which helped the NAV. On the negative side, shares in Discover Leisure, which is a leading caravan retailer, fell back on concerns about its exposure to the consumer. Expansys, the on-line retailer of consumer electronics equipment, experienced problems with its business model and required a further injection of working capital. Finally, Servoca suffered a bout of profit taking in its shares, despite making progress with its business plan.

The portfolio had reached the position of being close to fully invested by the end of 2007, and as a result there was little investment activity in the first half of the year. Just one new investment, Essentially Group, was added to the portfolio and BBI Holdings was disposed of following its takeover. As the Net Asset Value per share has fallen back below the launch NAV, no capital distribution is able to be paid at the interim stage. The portfolio now comprises 30 individual VCT qualifying equity holdings which represent 81 per cent of the assets, as well as, a single fixed income government security which accounts for 17 per cent of the assets. The balance is held in cash. 

Board Changes

As a result of the merger, two changes to the composition of the Board have been made with Robert Catto retiring from the Board and Gordon Harvey, the Chairman of Bluehone AiM VCT, joining. I would like to take this opportunity to thank Robert for his dedicated service and valued contribution to the Company since its launch in 2000 and to wish him well for the future. I would also like to welcome Gordon to the Board. 

Outlook

These are difficult times for investment in smaller quoted companies, with very few being completely immune from the weaknesses we are currently facing in the economy. Whilst the share prices of many AiM companies appear to be discounting considerable bad news already, further falls cannot be ruled out. Bluehone AiM VCT2 has been fortunate to have a significant exposure to Portland Gas which has so far bucked the trend.  Outside the single largest holding and following the merger with Bluehone AiM VCT we now have an enlarged and more diversified portfolio. This portfolio has within it a number of interesting companies which your Board and Manager believe offer opportunities for long term capital growth. When successfully realised these will help us to continue with our policy of capital distribution to shareholders.  

For further information, please contact:

Robert Mitchell

Sally Mills

Bluehone Investors LLP

0207 496 8929

Unaudited income statement for the six month period ended 31 May 2008

	Ordinary shares			C shares			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Profit on realisation of investments	-	1,090	1,090	-	102	102	-	1,192	1,192
Unrealised losses	-	(564)	(564)	-	(332)	(332)	-	(896)	(896)
Income (note 4)	106	-	106	15	-	15	121	-	121
Investment management fee	(81)	(242)	(323)	(8)	(24)	(32)	(89)	(266)	(355)
Other expenses	(110)	(5)	(115)	(12)	-	(12)	(122)	(5)	(127)
(Loss)/profit on ordinary activities
before taxation	(85)	279	194	(5)	(254)	(259)	(90)	25	(65)
Tax on ordinary activities	-	-	-	-	-	-	-	-	-
(Loss)/profit on ordinary activities after
taxation	(85)	279	194	(5)	(254)	(259)	(90)	25	(65)
Return per share:	(0.22p)	0.73p	0.51p	(0.17p)	(8.61p)	(8.78p)

Unaudited reconciliation of movement in shareholders' funds for the six month period ended 31 May 2008

	Ordinary Shares	C Shares	Total
	£'000	£'000	£'000
Opening shareholders' funds	27,863	2,824	30,687
Profit/(loss) for the period	194	(259)	(65)
Increase in share capital	26	-	26
Purchase of shares	(77)	-	(77)
Dividends paid	(688)	-	(688)
Closing shareholders' funds	27,318	2,565	29,883

  Unaudited income statement for the six month period ended 31 May 2007

	Ordinary shares			C shares			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Profit on realisation of investments	-	2,630	2,630	-	74	74	-	2,704	2,704
Unrealised gains	-	2,695	2,695	-	54	54	-	2,749	2,749
Income (note 4)	147	-	147	38	-	38	185	-	185
Investment management fee	(111)	(333)	(444)	(9)	(28)	(37)	(120)	(361)	(481)
Other expenses	(108)	-	(108)	(10)	-	(10)	(118)	-	(118)
(Loss)/profit on ordinary activities
before taxation	(72)	4,992	4,920	19	100	119	(53)	5,092	5,039
Tax on ordinary activities	-	-	-	(2)	2	-	(2)	2	-
(Loss)/profit on ordinary activities after
taxation	(72)	4,992	4,920	17	102	119	(55)	5,094	5,039
Return per share:	(0.18p)	12.53p	12.35p	0.58p	3.46p	4.04p

Unaudited reconciliation of movement in shareholders' funds for the six month period ended 31 May 2007

	Ordinary Shares	C Shares	Total
	£'000	£'000	£'000
Opening shareholders' funds	35,057	3,079	38,136
Profit for the period	4,920	119	5,039
Increase in share capital	29	-	29
Purchase of shares	(1,395)	-	(1,395)
Dividends paid	(806)	(59)	(865)
Closing shareholders' funds	37,805	3,139	40,944

Audited income statement for the year ended 30 November 2007

	Ordinary shares			C shares			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Profit on realisation of investments	-	2,218	2,218	-	14	14	-	2,232	2,232
Unrealised losses	-	(5,481)	(5,481)	-	(136)	(136)	-	(5,617)	(5,617)
Income (note 4)	224	-	224	54	-	54	278	-	278
Investment management fee	(199)	(596)	(795)	(18)	(54)	(72)	(217)	(650)	(867)
Other expenses	(258)	-	(258)	(25)	-	(25)	(283)	-	(283)
(Loss)/profit on ordinary activities
before taxation	(233)	(3,859)	(4,092)	11	(176)	(165)	(222)	(4,035)	(4,257)
Tax on ordinary activities	-	-	-	-	-	-	-	-	-
(Loss)/profit on ordinary activities after
taxation	(233)	(3,859)	(4,092)	11	(176)	(165)	(222)	(4,035)	(4,257)
Return per share:	(0.60p)	(9.86p)	(10.46p)	0.37p	(5.96p)	(5.59p)

Audited reconciliation of movement in shareholders' funds for the year ended 30 November 2007

	Ordinary Shares	C Shares	Total
	£'000	£'000	£'000
Opening shareholders' funds	35,057	3,079	38,136
Loss for the period	(4,092)	(165)	(4,257)
Increase in share capital	52	-	52
Purchase of shares	(1,690)	-	(1,690)
Dividends paid	(1,464)	(90)	(1,554)
Closing shareholders' funds	27,863	2,824	30,687

Balance Sheet

	As at 31 May 2008			As at 31 May 2007			As at 30 November 2007
	Unaudited			Unaudited			Audited
	Ordinary shares	C Shares	Total	Ordinary shares	C Shares	Total	Ordinary shares	C Shares	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Fixed asset investments
Listed investments	1,133	-	1,133	109	-	109	1,297	-	1,297
Quoted on AiM	21,627	1,985	23,612	33,268	2,198	35,466	22,610	2,364	24,974
Quoted on PLUS Market	443	-	443	489	-	489	387	-	387
UK government securities	501	436	937	746	671	1,417	-	334	334
Unquoted investments	3,014	105	3,119	3,344	105	3,449	3,307	106	3,413
	26,718	2,526	29,244	37,956	2,974	40,930	27,601	2,804	30,405
Current assets
Debtors	108	9	117	280	82	362	63	6	69
Cash at bank and on deposit	612	61	673	626	376	1,002	330	35	365
	720	70	790	906	458	1,364	393	41	434
Creditors	(120)	(31)	(151)	(1,057)	(293)	(1,350)	(131)	(21)	(152)
Net current assets / (liabilities)	600	39	639	(151)	165	14	262	20	282
Total assets less current liabilities	27,318	2,565	29,883	37,805	3,139	40,944	27,863	2,824	30,687
Equity shareholders' funds	27,318	2,565	29,883	37,805	3,139	40,944	27,863	2,824	30,687
Net asset value per share	71.54p	86.95p		97.84p	106.40p		72.76p	95.73p
Number of shares in issue at balance sheet date	38,184,466	2,950,085		38,638,848	2,950,085		38,296,588	2,950,085

Statement of Cash Flows

	Six months to 31 May 2008			Six months to 31 May 2007	Year to 30 Nov 2007
	Unaudited			Unaudited	Audited
	Ord shares £'000	C shares £'000	Total £'000	Total £'000	Total £'000
Net cash outflow from operating activities	(317)	(22)	(339)	(419)	(870)
Capital expenditure and financial investment	1,338	48	1,386	3,410	4,184
Equity dividends paid	(688)	-	(688)	(865)	(1,553)
Net cash inflow before financing	333	26	359	2,126	1,761
Financing	(51)	-	(51)	(1,366)	(1,638)
Increase in cash	282	26	308	760	123
Reconciliation of net cash flow to movement in net cash
Increase in cash	282	26	308	760	123
Opening net cash	330	35	365	242	242
Net cash at 31 May/30 November	612	61	673	1,002	365

Reconciliation of net revenue before taxation to net cash flow from operating activities

Profit/(loss) on ordinary activities before taxation	194	(259)	(65)	5,039	(4,257)
Profit on realisation of investments	(1,090)	(102)	(1,192)	(2,704)	(2,232)
Unrealised losses/(gains) on investments	564	332	896	(2,749)	5,617
Decrease/(increase) in debtors	26	(3)	23	12	16
(Decrease)/increase in creditors	(11)	10	(1)	(17)	(14)
Net cash outflow from operating activities	(317)	(22)	(339)	(419)	(870)

  Notes

1.         The unaudited interim results for the six month period ended 31 May 2008 have been prepared in accordance
            with applicable accounting standards, adopting the accounting policies set out in the statutory accounts for
            the year ended 30 November 2007.

 

2.         There were 38,184,466 ordinary shares in issue at 31 May 2008 (31 May 2007 – 38,638,848; 30 November 2007 – 38,296,588). During the six months ended 31 May 2007 the Company issued 37,878 ordinary shares under the Dividend Reinvestment Scheme. The Company bought back for cancellation 150,000 ordinary shares at a cost of £77,000. There were 2,950,085 C shares in issue at 31 May 2008 (31 May 2007: 2,950,085, 30 November 2007: 2,950,085)

 

3.                   Earnings for the six months to 31 May 2008 should not be taken as a guide to the results for the full year and are based on a weighted average of 38,224,316 (31 May 2007: 39,836,150, 30 November 2007: 39,115,512) ordinary shares in issue during the period and 2,950,085 C Shares.

4.         Income for the period is derived from:

	Six months to 31 May 2008			Six months to 31 May 2007	Year to 30 Nov 2007
	Ord shares	C shares	Total	Total	Total
	£'000	£'000	£'000	£'000	£'000
Equity investments	74	3	77	119	186
Fixed interest investment	3	8	11	49	67
Deposit Interest	29	4	33	17	25
	106	15	121	185	278

5.       These are not statutory accounts in terms of Section 240 of the Companies Act 1985 and are unaudited. Statutory accounts for the period to 30 November 2007, which were unqualified, have been lodged with the Registrar of Companies.

 

6.       Post balance sheet event 

On 15 July 2008 shareholders approved proposals to acquire Bluehone AiM VCT plc. Consequently on 23 July 2008 the company acquired investments valued at £10.2 million in return for the issue of 17,148,342 shares.

7.       Copies of the Interim Report will be mailed to shareholders and will be available from the Registered Office of the Company at Exchange House, Primrose Street, London, EC2A 2NY.

Principal Risks and Uncertainties

The Company's assets consist mainly of listed securities and its principal risks are therefore market related. Risks faced by the Company include loss of approval as a venture capital trust, investment and strategic, regulatory, reputational, operational, financial, market and liquidity risks. These risks, and the way in which they are mitigated, are described in more detail under the heading Principal Risks, Risk Management and Regulatory Environment within the Report of the Directors in the Company's Annual Report for the year ended 30 November 2007. The Company's principal risks and uncertainties have not changed materially since the date of that report.

Statement of Directors' Responsibilities in Respect of the Interim Results

We confirm that to the best of our knowledge:

• the financial statements have been prepared in accordance with the Statement 'Half-Yearly Financial Reports' issued by the UK Accounting Standards Board and give a true and fair view of the assets, liabilities, financial position and return of the Company; 

• the Chairman's Statement (constituting the Interim Management Report) includes a fair review of the information required by the Disclosure and Transparency Rules ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

• the Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R; and

• the financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board

Gordon H Brough

Director

29 July 2008

 

END

 

 

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