RNS Number:3552J
British Smaller Tech Cos VCT PLC
28 March 2003
BRITISH SMALLER TECHNOLOGY COMPANIES VCT PLC
UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED
31 DECEMBER 2002
Total amount invested reaches #10.7m
Follow-on funding close to #1m made at more favourable prices
Potential for significant capital appreciation
British Smaller Technology Companies VCT plc ("the Company"), the venture
capital trust specialising in growing smaller technology companies, today
announces its unaudited preliminary results for the 12 months to 31 December
2002.
Financial highlights
Unaudited Audited
2002 2001
Income #126,000 #229,000
Net revenue return before and after tax #(394,000) #(244,000)
Total return per share (27.70)p (20.14)p
Net assets #7.23m #11.02m
NAV per share 52.6p 80.2p
Commenting on the results, the Chairman, Sir Andrew Hugh Smith, said against the
background where falls in the TechMark All Share index and NASDAQ during the
period were considerably more than 30%, the Company had recorded a 34% decline
in net asset value from 80.2p per share to 52.6p per share.
He said although "this was disappointing" for directors, managers and
shareholders, he remained confident that many of the companies in the portfolio
continue to offer the potential for "very substantial growth in better economic
conditions."
Investments
The Company is concentrating available funds on those investments that are seen
to have the greatest potential. This policy resulted in investments of #932,000
in the year in ten portfolio companies. In those cases where the institutions
were unwilling to invest further, this inevitably led to the companies ceasing
to trade. There was one failure during the year, Optical Micro Devices Limited,
and since the year end LANergy Limited has ceased to trade.
Although downward valuation adjustments have been made in some businesses to
reflect market sentiment for the sector and continuing restricted exit
opportunities, others have made good progress and their products are achieving
significant levels of market progress. The Chairman commented that these
companies "cannot easily be valued upward at present as there is no real
independent basis on which to do so."
The Company remains comfortably ahead of the qualifying investment targets set
out in the venture capital trust legislation.
Phil Cammerman, Managing Director of Yorkshire Fund Managers Limited, the
Company's Investment Adviser, said that as he predicted in last year's report,
2002 was another difficult year.
He commented that obtaining market acceptance of new products proved difficult
for early stage businesses and fund raising had proved to be extremely
challenging. This meant that companies had to keep tight control on costs and
maximise sales and marketing whilst reducing and bringing forward break even
points.
He said that there was the risk in an early stage portfolio like this, that
companies either failed to gain a foothold in their market or ran out of funds
before they achieved that point. Nevertheless, he added "It is encouraging
that since last year the combined percentage of companies having achieved either
early or mass-market adoption has increased from 28% in 2001 to 63% in 2002.
This positive progress along the value chain is all the more pleasing given the
prevailing market conditions."
Whilst 2002 has been difficult, the risks associated with the remaining
companies should diminish as the profile of the portfolio matures. He said
that Yorkshire Fund Managers would continue to work to improve performance and
generate exits although these were expected to be difficult in the current
uncertain environment.
"Our priorities for this year, therefore, will be to ensure that companies are
robustly funded, focused on the transition to break-even and alert to potential
exit opportunities," he said.
Financial Results and Dividend
The total return for the year was a loss of 27.7p per share, reducing net asset
value per share to 52.6p.
No dividend can be paid.
Shareholder Relations
The Chairman remarked on two initiatives to improve the liquidity of the
Company's shares. Firstly, net asset values are being announced quarterly to
improve information and to stimulate greater interest in the Company. Secondly,
the Board is recommending the adoption of proposals at the Annual General
Meeting, scheduled for May 2003, to enable the Company to buy back shares and to
facilitate future distributions.
In addition, and to improve communication with Shareholders, Yorkshire Fund
Managers hosted the first of a series of presentations to Shareholders on 6
March 2003 in London. Further presentations are planned for London, Leeds,
Birmingham and Edinburgh.
Outlook
Commenting on the Company's prospects, Sir Andrew said that the economic
climate, both in the UK and internationally, remained depressed and fragile and
the timing of any improvement was uncertain. He added that he "remains
confident that there is considerable upside in a number of investee companies"
and that "there remains the opportunity for substantial capital growth."
For further information, please contact:
Alan Davies/Michael White
Yorkshire Fund Managers Limited Tel: 0113 294 5000
Neil Baldwin/Keith Williams
Brewin Dolphin Securities Limited Tel: 0113 241 0130
CHAIRMAN'S STATEMENT
The economic climate has remained difficult throughout the period under review
and this has been fully reflected in financial markets where falls, since the
peak, have been considerably more than 30% and in the case of markets dominated
by technology businesses, such as the TechMark All Share index and NASDAQ, even
more. Against this background, we have been obliged to record a 34% decline in
the net asset value of your Company. This is disappointing for all of us,
directors, managers and shareholders alike. Nevertheless, we remain confident
that many of the companies in our portfolio continue to offer the potential for
very substantial growth in better economic conditions.
Investments
I have mentioned in previous statements that surplus liquid resources are now
being reserved for follow-on investments within the current portfolio to support
companies that require additional funding to progress their product toward
market acceptance. Not all companies seeking further investment can, or will, be
supported. We are concentrating available funds on those investments that are
seen to have the highest potential. In those cases where we, and other
institutions, are unwilling to invest this will inevitably lead to some
corporate failure. In the first half of the year, one company, Optical Micro
Devices Limited, ceased to trade and since the year end, LANergy Limited has
been placed into Administrative Receivership. In the year as a whole, a further
five companies were fully provided for, although they remain operational.
Downward valuation adjustments have also been taken where additional funding
rounds have been completed at lower valuations to the previous one reflecting
the market sentiment for the sector and the continuing restricted exit
opportunities. Against this, those companies in the portfolio that are making
good progress and whose products are beginning to achieve significant levels of
market acceptance cannot easily be valued upward at present as there is no real
independent basis on which to do so. Currently, there are three investments
valued above cost on the basis of third party arms-length valuations. Your Board
remains encouraged by the potential of a number of other companies within the
portfolio.
A total of #932,000 was invested as follow-on funding in ten companies during
the year. There were no realisations.
I am pleased to report that your Company remains comfortably ahead of the
qualifying investment targets set out in the venture capital trust legislation.
Financial Results
The nature of the investment policy set out in the original Prospectus and the
fact that the portfolio is now substantially invested in these unquoted
companies means that revenue income is expected to remain at a low level for the
immediate future with the emphasis on achieving capital growth in the underlying
portfolio.
The revenue loss for the year was #394,000, equating to a loss per ordinary
share of 2.87p. The loss on capital account was #3.4m bringing the total loss
per share to 27.7p for the year as a whole. No dividend can be paid.
The net asset value at 31 December 2002 was 52.6p per Ordinary share. The value
of Gilt investments, after realisations, increased by a net #26,000 in the year
but was heavily offset by the fall in the value of the unquoted portfolio as
mentioned above.
Shareholder Relations
Your Board and its Investment Adviser have continued to explore ways in which
liquidity in your Company's shares can be improved. In line with a number of
other VCT companies, we have begun to announce net asset values to the market
quarterly in an attempt to both improve information and to stimulate interest in
the sector. We also continue to talk to our brokers and market makers to explore
other opportunities in creating better liquidity.
Further to improving liquidity for shareholders, your Board is recommending
proposals to enable the buying in by the Company of its own shares and to
facilitate future distributions. This will involve the cancellation of the
Company's existing share premium account and the creation, in its place, of a
special distributable reserve to be used for this purpose. Special resolutions
to implement this will be proposed at the forthcoming Annual General Meeting.
As a means of extending our communication with our Shareholders your Board's
Investment adviser, Yorkshire Fund Managers Limited, is hosting a series of
presentations to Shareholders of all three VCTs under its management. The first
of these was held on 6 March in London and was very well attended. David
Cartwright of PricewaterhouseCoopers LLP, the VCT status adviser to the Company,
updated attendees on current and proposed VCT legislation and there were
presentations from two unquoted companies that have received VCT backing through
Yorkshire Fund Managers. Further presentations in London, Leeds, Birmingham and
Edinburgh are planned.
Warrants
A notice was sent to Shareholders and Warrantholders on 20 February 2003
alerting them to the dates on which the Warrants can be exercised in this
current year. This is the second year in which Warrants have been exercisable.
Unexercised Warrants can be exercised on these same dates next year, after which
time they will lapse.
Outlook
The economic climate, both in the UK and internationally, remains depressed and
fragile. The timing of the end to the bear market will inevitably depend upon
the length of the current uncertainty and the depth of damage done to confidence
in the meantime.
Despite the fall in valuation of your Company's portfolio your Board and its
Investment Adviser remain confident that there is considerable upside in a
number of investee companies that is yet to be seen. Although further corporate
failure cannot be discounted in the general market conditions there remains the
opportunity for substantial capital growth.
Sir Andrew Hugh Smith
Chairman
Unaudited Statement of Total Return
(incorporating the Revenue Account)
for the year ended 31 December 2002
Unaudited Year ended Audited Year ended
31 December 2002 31 December 2001
Notes Revenue Capital Total Revenue Capital Total
#000 #000 #000 #000 #000 #000
Net losses on investments - (3,281) (3,281) - (2,391) (2,391)
Income 126 - 126 229 - 229
Investment advisory fee (304) (131) (435) (304) (131) (435)
Other expenses (216) - (216) (169) - (169)
------- ------- ------- -------- -------- --------
Net return on ordinary
activities before taxation (394) (3,412) (3,806) ( 244) (2,522) (2,766)
Tax on ordinary activities 2 - - - - - -
-------- --------- ------- -------- -------- --------
Net return on ordinary
activities after taxation
(394) (3,412) (3,806) (244) (2,522) (2,766)
Dividends in respect of equity 3 - - - - - -
shares
-------- -------- ------- -------- -------- --------
Transfer from reserves (394) (3,412) (3,806) (244) (2,522) (2,766)
===== ===== ==== ===== ===== =====
Return per Ordinary share
Basic and diluted 4 (2.87)p (24.83)p (27.70)p (1.78)p (18.36)p (20.14)p
Notes
The revenue column of this statement is the profit and loss account of the
Company.
All activity has arisen from continuing operations.
There is no difference between the net revenue return on ordinary activities
before taxation and the transfer from revenue reserves in either year and their
historic cost equivalents.
Unaudited Balance Sheet
at 31 December 2002
Unaudited Audited
Note 2002 2001
#000 #000
Fixed Assets
Investment portfolio 5,867 8,242
Current Assets
Investments 1,287 2,571
Debtors 42 23
Cash 71 215
-------- --------
1,400 2,809
Creditors: amounts payable within
one year (39) (34)
-------- --------
Net Current Assets 1,361 2,775
-------- --------
Total Net Assets 7,228 11,017
===== =====
Capital and Reserves
Called-up share capital 1,375 1,373
Share premium account 11,351 11,336
Capital redemption reserve 2 2
Capital reserve
Realised (563) (499)
Unrealised (4,779) (1,431)
-------- --------
(5,342) (1,930)
Warrant reserve 336 338
Other reserve 2 -
Revenue reserve (496) (102)
------- --------
Equity shareholders' funds 7,228 11,017
===== =====
Net asset value per Ordinary share 5 52.6p 80.2p
===== =====
Unaudited Cash Flow Statement
for the year ended 31 December 2002
Unaudited Audited
Year ended Year ended
31 December 2002 31 December 2001
#000 #000
Net cash outflow from operating activities (539) (296)
-------- --------
Taxation
Tax repayments received - 34
-------- --------
Investing activities
Purchase of investments (932) (4,101)
-------- --------
Net cash outflow before management of liquid
resources and financing (1,471) (4,363)
-------- --------
Management of liquid resources
Proceeds from the sale of fixed interest government stocks 1,310 3,241
-------- --------
Financing
Issue of Ordinary shares on exercise of warrants 17 -
Purchase of own shares - (20)
-------- --------
Net cash inflow (outflow) from financing 17 (20)
-------- --------
Decrease in cash in the year (144) (1,142)
===== =====
Notes to Financial Statements
for the year ended 31 December 2002
1. Basis of Reporting
This preliminary announcement, which has been prepared on a basis consistent
with the previous year, does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. This announcement has been
agreed with the Company's auditors for release.
The information for the year ended 31 December 2001 is an extract from the
statutory accounts to that date which have been delivered to the Registrar of
Companies. Those accounts included an audit report which was unqualified and
which did not contain a statement under Section 237(2) or (3) of the Companies
Act 1985. The statutory accounts for the year ended 31 December 2002, upon which
the auditors have still to report, will be delivered to the Registrar following
the Company's annual general meeting.
2. Taxation Charge (Credit)
Year ended 31 December 2002 Year ended 31 December 2001
Revenue Capital Total Revenue Capital Total
#000 #000 #000 #000 #000 #000
Corporation tax payable at 19.25% - - - - - -
(2001: 20%) ------ ------ ------ ------ ------ ------
3. Dividends
There is no proposed dividend in the year (2001: #nil).
4. Revenue Return per Ordinary Share
The basic revenue return per Ordinary share is based on net revenue loss from
ordinary activities after tax of #394,000 (2001: #244,000) and 13,742,000 (2001:
13,734,000) shares being the weighted average number of shares in issue during
the year.
The Company has no securities that would have a dilutive effect in either year
and hence basic and diluted return per share are the same.
5. Net Asset Value per Ordinary Share
The net asset value per Ordinary share is calculated on attributable assets of
#7,228,000 (2001: #11,017,000) and 13,745,842 (2001: 13,728,842) shares in issue
at the year end.
6. Annual General Meeting
Copies of the full financial statements for the period ended 31 December 2002
will be available to the public at the registered office of the Company at Saint
Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZ thereafter. The Company's
AGM is due to be held at 4p.m. on 15 May 2003 at the above address.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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