Final Results
April 08 2003 - 3:00AM
UK Regulatory
RNS Number:7444J
Advent 2 VCT PLC
08 April 2003
ADVENT 2 VCT PLC
8 April 2003
RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2003
The Board of Advent 2 VCT plc announces the results of the Company for the year
ended 28 February 2003.
Highlights
- 0.9 million was raised in April 2002 through an offer for subscription of
shares to fund follow-on investment activity.
- In January 2003, the investment in Dencare Management Group was sold to
Oasis Healthcare, a company listed on AIM, in exchange for shares and #0.5
million in cash.
- During the period, the Company made follow-on investments totalling #2.6
million in ten existing portfolio companies.
- Market conditions have resulted in three investments being written off,
full provisions being made against the cost of two investments and partial
provisions being introduced or increased against the cost of seven
investments.
Year Year
ended ended
28 February 2003 28 February 2002
- Earnings per ordinary share (15.1)p (1.4)p
- Net asset value per ordinary share 51.0p 84.3p
- Net asset value per ordinary share
(including all gross dividends paid and proposed) 72.8p 106.1p
- A final dividend is not being recommended.
- The Company continues to exceed the 70% requirement for
investment in Qualifying Holdings set by the Inland Revenue.
Chairman's Statement
In my interim statement, I advised shareholders that the Company was enduring a
turbulent period and I am sorry to report that these conditions have persisted
throughout the remainder of the year. The negative attitude of markets toward
the technology sector has resulted in a lack of both funding and liquidity
opportunities, and these, together with a significant downturn in the market
sectors into which many of our companies are selling, have resulted in further
downward pressure on the value of the portfolio. In consequence, the net asset
value per share has declined from 84.3p at 28 February 2002 to 51.0p as at 28
February 2003.
Capital increase
An offer was made to shareholders in March 2002 to subscribe for additional new
ordinary shares in the Company, which raised #920,000 that provided funding for
follow-on investments within the portfolio.
Investment activity
During the year a total of #2.6 million was invested in ten existing portfolio
companies to meet their ongoing funding requirements. There were no new
investments made during the year, and follow-on activity has been constrained by
the lack of available cash within the Company. In January 2003, Dencare
Management Group Ltd was sold to Oasis Healthcare plc (a company whose shares
are traded on AIM) at a small discount to cost for a consideration comprising
both new Oasis ordinary shares and a cash element of #0.5 million. On the other
hand, investments in three companies, Displaymate Touchscreens Ltd, Intersolar
Group Ltd and Optical Micro Devices Ltd were written off in the year and full
provision has been made against the cost of the investments in Nexan Group Ltd
and Rodaris Pharmaceuticals Ltd. In addition, provisions against cost have
either been introduced or increased on a further seven companies. At the end of
the year, the portfolio comprised 24 companies compared with 27 at the end of
the previous year.
The Company continues to exceed the 70% minimum requirement set by the Inland
Revenue for qualifying holdings, thereby maintaining continued Venture Capital
Trust status.
Balance sheet
The net asset value per share as at 28 February 2003 was 51.0p (net of dividends
declared in prior periods) compared with 84.3p as at 28 February 2002. The
investments in the portfolio have been valued in accordance with guidelines
issued by the British Venture Capital Association.
Dividend
The Company has made no gains in the year and limited cash resources have
resulted in low income returns. The Board is therefore not recommending a
dividend. The gross cumulative dividends paid since the inception of the Company
is 21.8p.
Purchase of own shares
In May, the Company repurchased and cancelled 100,000 shares. The Company has
made occasional market purchases of its own shares to provide an additional
measure of liquidity in the market for the Company's shares, as well as
enhancing the net asset value for the remaining shareholders. However,
repurchases can only be made when the cash position of the Company allows and it
is therefore impractical to make any such purchases until there is far greater
liquidity in the Company.
Borrowing
The Board has become increasingly concerned about the lack of cash available
within the Company and the impact that the inability to make follow-on
investments in portfolio companies' funding rounds may have on the equity
position and valuation of portfolio holdings. Consequently, the Company has
agreed a borrowing facility of #1.5 million with its bankers to provide funding
in those situations where an inability to invest may have a severely adverse
impact on the valuation and prospects for the Company's holding in a portfolio
company. Advent Ltd has agreed to provide a guarantee for such borrowings.
Outlook
At the end of a poor year for the portfolio, I should like to be able to offer a
rosier view of the immediate prospects, but there seems little imminent
likelihood of a sustained recovery in markets and the economy at large, and
therefore little hope of a short term recovery in the portfolio's fortunes. In
these circumstances, the Manager's approach is to "batten down the hatches" and
to take all necessary measures to ensure that portfolio companies can trade
through the current hard times and prosper when the markets and economy return
to health. This involves ensuring that portfolio companies' management teams
acknowledge and adapt to the new reality and either aim to reach cash breakeven
at the earliest opportunity or stretch their cash reserves to the maximum
extent. The Manager is confident that the majority of the remaining portfolio
companies have the potential to develop significant value if and when
circumstances improve. Indeed, there are a number of companies, such as Inca,
EnSeal Systems and DNA Research Innovations, which are bucking the general trend
and making solid progress even in the current environment. On the other hand,
the ability of even good companies to raise finance is proving difficult, and
could result in the reduction of company valuations.
The Board shares the inevitable concern of shareholders at the rapid decline in
the net asset value of the Company but is satisfied that the Manager is adopting
the correct approach to maximise the possibility of gains over the longer term.
Neither the Manager nor the Secretary are currently drawing fees from the
Company and this, together with the willingness of Advent Ltd to guarantee the
proposed bank borrowing, is indicative of the Manager's belief in the future
prospects for the portfolio.
Roger Brooke
Chairman
PROFIT AND LOSS ACCOUNT
for the year ended 28 February 2003
2003 2002
#'000 #'000
-------- --------
Investment income and deposit interest 413 497
Investment management fees (423) (815)
Other expenses (218) (211)
-------- --------
Operating loss (228) (529)
(Loss)/profit on realisation of investments (5,184) 50
-------- --------
Loss on ordinary activities before taxation (5,412) (479)
Tax on ordinary activities - -
-------- --------
Loss on ordinary activities after taxation (5,412) (479)
Dividends - -
-------- --------
Balance transferred from reserves (5,412) (479)
======== ========
Earnings per share (15.1)p (1.4)p
======== ========
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
2003 2002
#'000 #'000
-------- --------
Loss for the year (5,412) (479)
Unrealised loss on revaluation of investments (6,521) (3,374)
-------- --------
Total recognised loss relating to the year (11,933) (3,853)
======== ========
BALANCE SHEET
as at 28 February 2003
2003 2002
#'000 #'000
-------- --------
FIXED ASSETS
Investments 17,999 28,830
CURRENT ASSETS
Debtors 516 331
Money market and other deposits 2 238
Cash 190 194
-------- --------
708 763
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (406) (155)
-------- --------
NET CURRENT ASSETS 302 608
-------- --------
TOTAL ASSETS LESS CURRENT LIABILITIES 18,301 29,438
======== =======
CAPITAL AND RESERVES
Called-up share capital 1,793 1,746
Share premium account 23,581 22,750
Capital redemption reserve 9 4
Revaluation reserve (9,708) (3,187)
Profit and loss account 2,626 8,125
-------- --------
Equity shareholders' funds 18,301 29,438
======== ========
Net asset value per ordinary share 51.0p 84.3p
-------- --------
CASH FLOW STATEMENT
for the year ended 28 February 2003
2003 2002
#'000 #'000
CASH FLOW FROM OPERATING ACTIVITIES AND RETURNS ON INVESTMENTS:
Investment income received 372 219
Deposit and similar interest received 46 204
Investment management fees paid (423) (815)
Secretarial fees paid (66) (63)
Other cash payments (91) (94)
-------- --------
NET CASH OUTFLOW FROM OPERATING ACTIVITIES AND RETURNS ON INVESTMENT
(162) (549)
-------- --------
TAXATION 5 440
-------- --------
FINANCIAL INVESTMENT:
Purchase of unquoted investments and investments quoted on AIM
(2,552) (5,605)
Net proceeds on sale of unquoted investments 612 -
Net proceeds on sale of quoted investments - 4
Redemption and sale of listed fixed income investments
1,061 1,609
--------- --------
NET CASH OUTFLOW FROM FINANCIAL INVESTMENT (879) (3,992)
--------- --------
EQUITY DIVIDENDS PAID:
Dividends paid on ordinary shares - -
--------- --------
NET CASH OUTFLOW FROM PAYMENT OF EQUITY DIVIDENDS
- -
-------- --------
NET CASH OUTFLOW BEFORE FINANCING AND LIQUID RESOURCE MANAGEMENT
(1,036) (4,101)
--------- --------
MANAGEMENT OF LIQUID RESOURCES:
Movement in money market and other deposits 236 4,187
-------- --------
FINANCING:
Issue of ordinary shares 926 -
Expenses on share issue (43) -
Repurchase and cancellation of shares (87) (31)
-------- --------
NET CASH INFLOW/(OUTFLOW) FROM FINANCING 796 (31)
-------- --------
(DECREASE)/INCREASE IN CASH (4) 55
======== ========
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
2003 2002
#'000 #'000
-------- --------
Opening shareholders' funds 29,438 33,322
Issue of ordinary shares 883 -
Total recognised gains and losses for year (11,933) (3,853)
Repurchase and cancellation of shares (87) (31)
-------- --------
Closing shareholders' funds 18,301 29,438
-------- --------
The audit report on the full financial statements has yet to be signed. The
preliminary announcement is prepared on the same basis as set out in the
previous year's annual accounts. The preliminary announcement does not represent
the Company's statutory accounts. The statutory accounts for the year ended 28
February 2002 have been delivered to the Registrar and included the report of
the auditors which was unqualified and did not contain a statement under either
section 237(2) or section 237(3) of the Companies Act 1985. This preliminary
announcement was approved by the Board on 7 April 2003.
Contacts for information:
Advent Fund Managers - 020 7932 2100
Sir David Cooksey
Les Gabb
GCI Financial - 020 7398 0822
Annabel O'Connor
Teather & Greenwood - 020 7426 9000
Jonathan Becher
This information is provided by RNS
The company news service from the London Stock Exchange
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