TIDMBSC
RNS Number : 0588E
British Smaller Companies VCT2 Plc
01 April 2011
BRITISH SMALLER COMPANIES VCT2 PLC
Annual Financial Report Announcement for
the Year to 31 December 2010
British Smaller Companies VCT2 plc ("the Company") today
announces its audited results for the year to 31 December 2010.
Chairman's Statement
Although the challenging economic times look likely to continue
through 2011, the second half of 2010 saw a gradual improvement in
market conditions which benefited several of our portfolio
businesses. The significant market uncertainties of recent years
are gradually becoming clearer enabling management teams to plan
and invest for the future which should lead to an increase in new
investment opportunities in the year ahead. It is with this in mind
that the Board sought to increase the Company's investment capacity
through the recent linked offer with British Smaller Companies VCT
plc.
Net asset value per share as at 31 December 2010 was 68.4 pence
per share, a decrease of 4.3 pence per share compared to 2009. Of
this decrease 4.0 pence relates to dividends paid during the year
and the remainder reflects a marginal decrease in value of the fund
of 0.3 pence per share. The total return, calculated by reference
to net asset value plus cumulative dividends at the year end was
94.4 pence per share compared to 94.7 pence per share in 2009.
Cumulative dividends at 31 December 2010 amounted to 26.0 pence per
share.
Investment Portfolio
Compared to last year, 2010 has seen increased investment
activity levels with a total of GBP1.4 million invested (2009:
GBP0.7 million) although this is still low relative to past
years.
In 2010, the Company made three new investments. In September,
GBP500,000 was invested, alongside British Smaller Companies VCT
plc, in Bluebell Telecom Group Limited. Bluebell is a
telecommunications service provider that aggregates a range of
services to UK businesses. The investment was made to help fund an
acquisition and further acquisitions are expected as the sector
consolidates. The Company invested GBP267,000 into Sirigen Limited
in October 2010, with a further GBP133,000 tranche also committed
dependent on the achievement of certain development milestones,
this was part of a GBP3.0 million funding round. Sirigen is a
technology company which has developed a fluorescent labelling
technology to dramatically increase the sensitivity of diagnostic
tests. In December 2010 GBP239,000 was invested into AiM-listed
Brady plc, a provider of IT solutions to the metals and commodities
markets.
In addition, the Company has invested a total of GBP353,000 by
way of follow-on funding, in support of three existing companies in
the portfolio. GBP182,000 was invested in Immunobiology as part of
a GBP1.7 million funding round from the existing investor
syndicate, bringing our total investment to date to GBP1.03
million. This additional funding is in support of progressing
target vaccines through to human trials and ultimately realising
the value of the underlying technology platforms. An investment of
GBP150,000 was made into Silistix as part of a GBP635,000 round
from existing investors to enhance the product offering and to try
to build trade partnerships. A further investment of GBP21,000 was
also made into Ellfin Home Care as part of a GBP250,000 working
capital round.
Although there have been no large divestments from the portfolio
during the year, the Company has received proceeds of GBP695,000.
This includes GBP298,000 of deferred proceeds in respect of DxS,
taking total amounts received to GBP2.1 million, representing a
12.9x return on capital invested. A further GBP259,000 of deferred
consideration is anticipated from DxS, which has been included
within receivables at the year end. GBP189,000 has been received
from RMS as a result of a successful recapitalisation of this port
operator in August 2010. In addition, Primal Pictures redeemed
preference shares of GBP205,000 out of surplus cash flow. Proceeds
received during the year, together with the DxS deferred
consideration generated a profit of GBP390,000 above previous
carrying values. After a loss of GBP20,000 on realisation of the
gilt portfolio the total profits for the year were GBP370,000.
The overall increase in the value of the investment portfolio
including gilts is an increase of GBP118,000 after taking account
of realised gains on investments of GBP370,000 and unrealised
losses on investments held at fair value of GBP252,000.
Across the unquoted portfolio good progress has been made by a
number of businesses who have seen profits grow despite the
challenging economic environment. These include Primal Pictures
(value increased by GBP366,000), RMS (value increased by
GBP265,000), Harvey Jones (value increased by GBP165,000) and
Waterfall Services (value increased by GBP83,000). However these
gains were offset by write downs of GBP517,000 in respect of
Digital Healthcare and GBP460,000 in respect of Silistix. Digital
Healthcare has accepted that the US rollout of its Retasure(TM)
product will be much slower than expected although good progress
has been made in the UK. After failing to achieve commercial
traction the Company's investment in Silistix has been written down
to zero. It is hoped that some value can be realised in the year
ahead. Overall, the portfolio remains well funded and should be
well placed for value growth as individual growth strategies are
implemented and economic conditions improve.
The AIM portfolio overall has remained relatively stable during
the year with steady progress being achieved by most businesses
with the exception of Pressure Technologies plc which has seen its
value fall by GBP110,000 due to the Gulf of Mexico oil crisis.
Although higher than 2009 levels, the number of investment
opportunities considered and executed during the year is well below
historic levels. It is not expected that this situation will
suddenly change but we do expect a gradual increase in investment
activity as the macro economic factors become clearer and business
owners and funders are able to plan and take investment decisions.
History has shown that the best returns have been made from
investments as the economy begins to grow following a recession and
the Company remains well placed to take advantage of good
opportunities as they occur.
Financial Results
The result for the financial year ended 31 December 2010 was a
pretax loss of GBP0.10 million which comprised a loss in respect of
capital of GBP0.11 million and revenue profit of GBP0.01 million,
as compared to a pretax profit of GBP0.31 million in 2009 (which
comprised a capital profit of GBP0.24 million and revenue profit of
GBP0.07 million). Net of the 4.0 pence dividends paid during the
year, this amounts to a reduction of the net asset value of 0.3
pence per share (2009: increase of 1.8 pence per share net of 6.0
pence dividends).
The movement in net asset value per share in the year was:
Pence/share
Pence/share
31 December 2009 72.7
Dividends paid in
the year (4.0)
Net decrease in
value (0.3)
------------
31 December 2010 68.4
------------
Cash and gilt investments at the end of the year amounted to
GBP4.49 million, representing 38% of net asset value. Further
realisations will enhance cash reserves and enable distributions to
Shareholders in the form of tax free dividends.
Your Board remains committed to achieving the objective of a
constant dividend stream and following the 4.0 pence per share of
dividends paid this year, it is pleased to propose a final dividend
of 2.0 pence per share. If approved, the dividend will be paid on
10 June 2011 to shareholders on the register as at 13 May 2011.
Shareholder Relations and Fundraising
The Company is seeking to increase its investment capacity
through a linked offer together with British Smaller Companies VCT
plc. On 8 December 2010, your Board published proposals offering
investors the opportunity to subscribe for up to 12,811,388 new
Ordinary shares in the Company at an offer price of 70.25 pence per
share. These proposals are by way of two offers closing on 5 April
2011 and 4 May 2011 respectively. An initial allotment of
GBP2,567,989 for 3,655,500 new Ordinary shares was made on 22 March
2011. The additional investment capacity will enable the Company to
take advantage of additional attractive investment opportunities
that are expected to arise over the coming years.
At a shareholder meeting on 18 October 2010 shareholders voted
in favour of re-introducing a buy back policy and the rate of
discount to net asset value at which shares are bought back has
been set at no more than 15%. Since then the Company has bought
back 566,100 Ordinary shares at an average price of 57.04 pence per
share representing 3.2% of the issued share capital. These shares
have been placed in treasury.
Your Board remains committed to enhancing Shareholder
communications and continues to run Shareholder workshops where
investors are invited to meet members of the Board, representatives
from YFM Private Equity Limited, the Company's Fund Manager, and
the CEO's of one or more of our investee companies. We were
delighted to welcome over 150 shareholders to the most recent
workshop held on 9 February 2011 at the British Museum.
The Annual General Meeting of the Company will be held at 12.00
noon on 16 May 2011 at:
33 St. James Square, London, SW1Y 4JS.
Regulation
Your Board is please to note that the recent budget of 23 March
2011 included a number of positive developments which the
Government intends to implement from April 2012. Venture Capital
Trusts have had a positive influence and benefit on the flow of
capital to the UK's smaller businesses and it is welcome that this
is being recognised.
Board of Directors
I am pleased to welcome Mr Peter Waller to the Board, who was
appointed to the Board in October 2010. Mr Waller has extensive
executive experience in the technology, software and services
sectors.
Mr Waller's appointment follows the resignation of Mr Philip
Cammerman in September 2010. I should again like to thank Mr
Cammerman, both personally and on behalf of the Company and its
Shareholders, for the significant contribution he has made since
the Company's inception.
This year's changes to the Board's composition have been in
response to the new Listing Rules with regard to the independence
of directors.
Outlook
There are early signs of improving economic conditions but
recent challenges are expected to continue for several months. The
portfolio remains well funded with many businesses taking the
opportunity to improve efficiency or change their strategy to
maximise the new market opportunities they now see. This Company is
well placed to continue to support our existing portfolio companies
and take advantage of investment opportunities that may arise in
the short term.
The Board remains of the opinion that the upcoming period is
likely to present a number of good investment opportunities, both
for the existing portfolio businesses and for new investments. It
was with this in mind that we increased the investment capacity of
the Company during the year and the Board will continue to consider
the opportunity for further fund raising offers in the future.
Richard Last
Chairman
31 March 2011
Fund Manager's Review
Investment
Valuation Realised
Realised at 31 and
Date Current Proceeds December Unrealised
Name of of Initial Cost* to Date 2010 to Date
Company Investment Location Industry Sector GBP000 GBP000 GBP000 GBP000
Current Investments
Digital
Healthcare
Limited Jun-05 Cambridge Medical Instruments 3,072 - 1,142 1,142
Primal
Pictures
Limited Dec-05 London Medical Instruments 897 205 1,056 1,261
Immunobiology
Limited Jun-03 Cambridge Pharmaceuticals 1,032 - 1,002 1,002
Bluebell
Telecom Group
Limited Sep-10 Newcastle Telecommunications 500 - 500 500
Waterfall
Services
Limited Feb-07 Warrington Healthcare 250 - 474 474
Harvey Jones
Limited May-07 London Consumer Retail 389 - 395 395
Deep-Secure
Ltd Dec-09 Reading Software 500 - 393 393
Pressure
Technologies
plc Jun-07 Sheffield Manufacturing 300 - 370 370
Patsystems plc Sep-07 London Software 317 - 293 293
Metals and
Brady plc Dec-10 Cambridge Commodities 239 - 271 271
Sirigen
Limited Oct-10 Hampshire Medical Technology 267 - 267 267
RMS Group
Holdings Industrial
Limited Jul-07 Goole Services 210 165 221 386
Optos plc Dec-05 Dunfermline Medical Instruments 115 93 195 288
Tissuemed
Limited Dec-05 Leeds Consumer Retail 48 - 120 120
Cambridge
Cognition
Limited May-02 Cambridge Software 240 - 82 82
Brulines plc Oct-06 Stockton-on-Tees Electronics 81 - 69 69
Ellfin Home
Care Limited Dec-07 Oldham Healthcare 317 - 52 52
Allergy
Therapeutics
plc Oct-04 Worthing Biotechnology 350 - 37 37
Silistix
Limited Dec-03 Manchester Electronics 1,364 - - -
Solcom Limited Dec-05 Ryde Software - - - -
Oxis Energy
Limited Dec-05 Abingdon Electronics 5 - - -
Intelligent
Recordings
Limited Sep-08 Nottingham Electronics - - - -
10,493 463 6,939 7,402
----------------------------- --------------------------------------- -------- --------- ----------- -----------
Full realisations to date 7,872 13,993 - 13,993
------------------------------------------------- -------------------- -------- --------- ----------- -----------
Total 18,365 14,456 6,939 21,395
------------------------------------------------- -------------------- -------- --------- ----------- -----------
Investment
Valuation
Realised at 31 Realised
Date Original Proceeds December Realised Profit
of Initial Industry Cost* to Date 2010 to date (loss)
Name of Company Investment Location Sector GBP000 GBP000 GBP000 GBP000 GBP000
Realised Investments
DxS Limited Apr-04 Manchester Healthcare 163 2,266 - 2,266 2,103
Sarian Systems
Limited Dec-05 Ilkley Telecoms 928 2,605 - 2,605 1,677
Amino Technologies
plc Sep-01 Cambridge Electronics 415 1,875 - 1,875 1,460
Cozart plc Jul-04 Abingdon Healthcare 1,566 2,983 - 2,983 1,417
Vibration Technology
Limited Mar-02 Glasgow Industrial 1,061 2,328 - 2,328 1,267
The ART Technology Washington,
Group Inc Apr-03 USA Software 275 638 - 638 363
Tamesis Limited Jul-01 London Software 150 317 - 317 167
Voxar Dec-05 Edinburgh Software - 134 - 134 134
Tekton Group Limited Dec-05 Manchester Software 100 223 - 223 123
Arakis Limited Mar-04 Essex Healthcare 14 108 - 108 94
Hallco 1390 Ltd Dec-06 Manchester Software 1 77 - 77 76
Oxonica plc May-02 Oxford Chemical 241 258 - 258 17
SoseiCo Ltd Aug-05 Toyko, Japan Healthcare 158 94 - 94 (64)
Sirus
Pharmaceuticals
Ltd Sep-01 Cambridge Healthcare 270 14 - 14 (256)
Infinite Data
Storage Limited** Mar-02 Dunfermline Software 425 - - - (425)
Purely Proteins
Limited Nov-03 Cambridge Software 438 - - - (438)
ExpressOn Biosystems
Limited** Oct-02 Midlothian Healthcare 450 - - - (450)
Broadreach Networks
Limited** Feb-03 London Telecoms 550 17 - 17 (533)
Comvurgent Limited** Dec-05 Nottingham Software 611 - - - (611)
Hallco 1389 Ltd Dec-06 Manchester Software 49 49 - 49 -
Focus Solutions Leamington
Group plc Dec-05 Spa Software 7 7 - 7 -
Total 7,872 13,993 - 13,993 6,121
------------------------------------------------- ------------- --------- --------- ----------- --------- ---------
* Original or acquired cost where the investment was acquired at
the fair value ascribed to it at the time of the acquisition of
British Smaller Technology Companies VCT plc.
** In Receivership
Fund Manager's Review
Introduction
This year has again seen the continuation of realisations at
values in excess of the carrying value although we have not seen
any significant exits as in recent years. The Company has continued
to benefit from the sale of DxS to Qiagen in 2009 with GBP298,000
of deferred proceeds received in this period and a further
GBP259,000 expected in the future. Significant proceeds were also
received following the recapitalisation of RMS (GBP189,000
proceeds) on the back of an improving profit performance and Primal
Pictures (GBP205,000 proceeds) where surplus cash was used to
redeem some of the institutional preference shares.
There have been significant positive developments within a
number of the businesses in the portfolio in spite of a
continuation of the challenging market conditions. Primal Pictures
has now completed the development of its principal educational
product, a major step in repositioning the business as a provider
of education services rather than a reference source. Immunobiology
has begun engagement with the major pharmaceuticals as it
progresses its innovative vaccine technology towards human trials.
Cambridge Cognition has finally proven the commercial application
of its diagnostic software. Although Digital Healthcare has
struggled to roll out its Retasure(TM) product to the US market
there are now encouraging signs that changes to the UK market could
strengthen the company's strategic presence in the UK. Several
other portfolio businesses have seen improving profits against a
backdrop of gradually improving economic conditions, including RMS,
Harvey Jones and Waterfall Services. Cash and gilt investments at
31 December 2010 were GBP4.49 million representing 38.0% of net
assets. This compares to GBP5.69 million (47% of net assets) at 31
December 2009. The Company remains in a strong cash position
enabling further investment in selective opportunities and
dividends in 2011.
Portfolio Overview
Portfolio Performance
Overall, the quoted and unquoted portfolio increased by GBP0.78
million to a total of GBP6.94 million from GBP6.16 million. Netting
off the new investment of GBP1,358,000 and realisation of
GBP350,000 of opening December 2009 value, the net portfolio value
movement over the year was a fall of GBP224,000. This breaks down
into a fall in the value of the unquoted portfolio of GBP233,000
and a gain in the value of the quoted portfolio of GBP9,000. The
realised value related to the partial redemption of preference
shares from Primal Pictures and recapitalisation of RMS, the latter
generating an uplift over the December valuation of GBP44,000.
Overall the portfolio remains well funded and positioned for value
growth as economic conditions improve and current strategies are
implemented to capitalise on the changing market conditions.
Quoted
and unquoted Deferred
portfolio proceeds Total
GBP000 GBP000 GBP000
Opening value 6,155 214 6,369
Additions 1,358 1,358
Valuation changes
Unquoted (233) (233)
Quoted 9 9
Proceeds (394) (301) (695)
Profit on disposal 44 346 390
-------------- ---------- --------
31 December 2010 6,939 259 7,198
-------------- ---------- --------
A further GBP301,000 of cash proceeds was generated mainly from
deferred consideration payments relating to the sale of DxS to
Qiagen which completed in the previous reporting period. These
payments together with a further GBP259,000 of value assumed from
DxS in the future represented a profit of GBP346,000 over the
December 2009 valuation (shown within trade and other
receivables).
Including the deferred proceeds the effective net movement in
the opening December 2009 value of the Company's portfolio was an
increase of GBP166,000. This can be broken down as follows:-
GBP000 %
Unquoted (233) (3.8)
Quoted 9 0.2
Realised Profit 44 0.7
Deferred proceeds 346 5.6
------- ------
Total Value Movement 166 2.7
------- ------
Whilst this year has undoubtedly produced a number of
challenges, the unquoted portfolio as a whole has generally proved
resilient with 9 out of 10 investments showing an uplift in value.
Nonetheless, it is disappointing that strong positive progress
across many businesses was offset by significant value falls in two
investments, Digital Healthcare and Silistix. Excluding the effect
of these two investments the remaining unquoted portfolio value
grew by GBP700,000 over the period. The Digital Healthcare
valuation was reduced (down GBP517,000) in recognition of
underperformance of it's US strategy but significant steps have
been made in the UK. Silistix (down GBP460,000) unfortunately
failed to attract a trade buyer for its software used in the design
of next generation electronic processors and the value has now been
written down to zero although there remains a possibility that some
value can still be recovered.
The quoted portfolio saw a small value growth overall in
improving market conditions.
In accordance with the new requirements of IFRS 7 a sensitivity
analysis has been undertaken on the assumptions used to value
investments in unquoted companies. The sensitivity performed
indicated that a 10% decrease in the discounts applied to earnings
multiples would have increased the net assets attributable to the
Company's Shareholders and the total profit for the year by
GBP262,000, with an equal change in the opposite direction causing
a decrease by the same amount. Similarly a 10% decrease in the
discounts applied to last round valuations would have increased the
net assets attributable to the Company's Shareholders and the total
profit for the year by GBP262,000, with an equal change in the
opposite direction causing a decrease of GBP272,000.
Investment Activity
During the year new investments were made in three businesses.
In September 2010, GBP500,000 was invested, alongside British
Smaller Companies VCT plc, into Bluebell Telecom Group Limited to
help fund the acquisition of Call Stream Limited. Bluebell is a
telecommunications service provider to UK businesses seeking to
grow its aggregated service offering through a series of targeted
acquisitions. In October 2010 the Company invested GBP267,000 into
Sirigen Limited, as part of a GBP3.0 million funding round, with a
further GBP133,000 tranche also committed based on development
milestones. Sirigen has developed a fluorescent labelling
technology to dramatically increase the sensitivity of diagnostic
tests and is now seeking to generate significant revenues via
product royalties. In December 2010 the Company invested GBP239,000
into AIM-listed Brady plc, a provider of risk management solutions
to commodities traders, as part of an GBP11 million funding package
to acquire a Norwegian-based competitor.
The Company also made three further investments into the
unquoted portfolio totalling GBP353,000. GBP182,000 was invested in
Immunobiology as part of a GBP1.7 million funding round from the
existing investor syndicate to complete the pre-clinical
development work and discussions with license partners. An
investment of GBP150,000 million was made into Silistix as part of
a GBP635,000 round from existing investors to try to build trade
partnerships ahead of a sale process. A further investment of
GBP21,000 was also made into Ellfin Home Care as part of a
GBP250,000 working capital round following management changes.
The Company's investment policy is to build a diversified
portfolio of investments in emerging businesses combined with later
stage businesses that have the potential to deliver both income and
capital growth. Investment levels, though higher than in 2009, have
remained below historic levels but are expected to gradually grow
over the coming months. We will continue to invest into the
portfolio to fund value growth and support commercialisation of
technology.
Realisations
There were no significant realisations over the period with
market conditions being appropriate to maximise value in most
sectors. GBP205,000 was realised from Primal Pictures through the
partial buyback of preference shares using surplus cash, a result
of recent profits. GBP189,000 was received following the
recapitalisation of RMS, again a result of improving
profitability.
Deferred consideration amounting to GBP298,000 was received
during the year with the residual deferred payments due still being
valued at GBP259,000 as a non-current asset on the Balance Sheet at
the year end. In addition, the Company received final proceeds of
GBP3,000 following the full disposal of Tekton in 2008.
Conclusion and Outlook
The year under review has seen a continuation of previous
challenging market conditions although there were encouraging signs
of a gradual improvement towards the end of the year. We have
continued to support the investee companies through these
challenges and with limited exceptions have seen a general
improvement in performance and valuations across the portfolio.
With a gradually increasing investment rate and limited disposals
cash reserves remain strong and will be boosted with the funds
raised from the linked fund raising with British Smaller Companies
VCT plc (further details of which are set out in the Chairman's
statement) which leaves the Company well placed to continue
dividends and take advantage of good investment opportunities.
We are optimistic that 2011 will see a continuation of the
gradually improving market conditions for the portfolio as well as
seeing an increase in businesses seeking investment which should
create good new investment opportunities for the Company.
David Hall
YFM Private Equity Limited
31 March 2011
Principal risks, risk management and regulatory environment.
The Board believes that the principal risks faced by the Company
are:
Investment and strategic - quality of enquiries, investments,
investee company management teams and monitoring, the risk of not
identifying investee under performance might lead to under
performance and poor returns to Shareholders.
Loss of approval as a Venture Capital Trust - the Company must
comply with Section 274 of the Income Tax Act 2007 which allows it
to be exempted from capital gains tax on investment gains. Any
breach of these rules may lead to the Company losing its approval
as a VCT, qualifying Shareholders who have not held their shares
for the designated holding period having to repay the income tax
relief they obtained and future dividends paid by the Company
becoming subject to tax. The Company would also lose its exemption
from corporation tax on capital gains. As such one of the key
performance indicators monitored by the Company is the compliance
with legislative tests.
Regulatory - the Company is required to comply with the
Companies Act 2006, the rules of the UK Listing Authority,
International Financial Reporting Standards and the Statement of
Recommended Practice. Breach of any of these regulatory rules might
lead to suspension of the Company's Stock Exchange listing,
financial penalties or a qualified audit report.
Reputational - inadequate or failed controls might result in
breaches of regulations or loss of Shareholder trust.
Operational - failure of the Fund Manager's and administrator's
accounting systems or disruption to its business might lead to an
inability to provide accurate reporting and monitoring.
Financial - inadequate controls might lead to misappropriation
of assets. Inappropriate accounting policies might lead to
misreporting or breaches of regulations.
Market Risk - lack of liquidity in both the venture capital and
public markets. Investment in AIM-traded and unquoted companies, by
their nature, involve a higher degree of risk than investment in
companies trading on the main market. In particular, smaller
companies often have limited product lines, markets or financial
resources and may be dependent for their management on a smaller
number of key individuals. In addition, the market for stock in
smaller companies is often less liquid than that for stock in
larger companies, bringing with it potential difficulties in
acquiring, valuing and disposing of such stock.
Liquidity Risk - the Company's investments may be difficult to
realise. The fact that a share is traded on AIM does not guarantee
its liquidity. The spread between the buying and selling price of
such shares may be wide and thus the price used for valuation may
not be achievable.
The Board seeks to mitigate the internal risks by setting
policy, regular review of performance and monitoring progress and
compliance. The key performance indicators measure the Company's
performance and its compliance with legislative tests. In the
mitigation and management of these risks, the Board applies
rigorously the principles detailed in Financial Reporting Council -
Revised Internal Control: Guidance for Directors on the Combined
Code.
Responsibility statements of the directors in respect of the
annual financial report
The Annual Report and Accounts contains the following statements
regarding responsibility for the management report and financial
statements included in the Annual Report and Accounts from which
the information in this Announcement has been extracted (references
in the following statements are to sections of the Annual Report
and Accounts).
The directors confirm, to the best of their knowledge:
-- that the financial statements, prepared in accordance with
IFRSs as adopted by the European Union, give a true and fair view
of the assets, liabilities, financial position and profit of the
Company; and
-- the business review included within the Chairman's Statement,
Fund Manager's Review and Directors' Report includes a fair review
of the development and performance of the business and the position
of the Company, together with the principal risks and uncertainties
that they face.
Statement of Comprehensive Income
For the year ended 31 December 2010
2010 2009
Revenue Capital Total Revenue Capital Total
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gain on realisation of
investments - 370 370 - 1,793 1,793
Losses on investments
held at fair value - (252) (252) - (1,326) (1,326)
Income 2 321 - 321 372 - 372
Administrative
expenses:
-------- -------- -------- -------- -------- --------
Fund Management fee (77) (231) (308) (79) (238) (317)
Other expenses (234) - (234) (212) - (212)
-------- -------- -------- -------- -------- --------
(311) (231) (542) (291) (238) (529)
Profit (loss) before
taxation 10 (113) (103) 81 229 310
Taxation 3 - - - (11) 11 -
------------------------ -------- -------- -------- -------- -------- -------- --------
Profit (loss) for the
year 10 (113) (103) 70 240 310
------------------------ -------- -------- -------- -------- -------- -------- --------
Total comprehensive profit
(loss) for the year 10 (113) (103) 70 240 310
---------------------------------- -------- -------- -------- -------- -------- --------
Basic and diluted earnings
(loss) per Ordinary share 5 0.06p (0.65)p (0.59)p 0.42p 1.44p 1.86p
----------------------------- --- -------- -------- -------- -------- -------- --------
The total column of this statement represents the Company's
Statement of Comprehensive Income, prepared in accordance with
International Financial Reporting Standards ('IFRS'). The
supplementary revenue and capital columns are prepared under the
Statement of Recommended Practice 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts' ('SORP')
2009 published by the Association of Investment Companies.
Balance Sheet
At 31 December 2010
2010 2009
Notes GBP000 GBP000
Assets
Non-current assets
Investments 6,939 6,155
Fixed income government securities 3,980 3,382
--------------------------------------------- -------- --------
Financial assets at fair value through
profit or loss 10,919 9,537
Trade and other receivables 259 214
--------------------------------------------- -------- --------
11,178 9,751
Current assets
Trade and other receivables 193 192
Cash and cash equivalents 509 2,304
702 2,496
Liabilities
Current liabilities
Trade and other payables (51) (141)
Net current assets 651 2,355
Net assets 11,829 12,106
--------------------------------------------- -------- --------
Shareholders' equity
Share capital 1,785 1,664
Share premium account 810 69
Capital redemption reserve 88 88
Other reserve 2 2
Merger reserve 5,525 5,525
Capital reserve 3,587 4,442
Investment holding (losses)
gains (4,763) (4,802)
Special reserve 4,463 4,786
Revenue reserve 332 332
Total Shareholders' equity 11,829 12,106
--------------------------------------------- -------- --------
Net asset value per Ordinary 6 68.4p 72.7p
share
------------------------------------ ------- -------- --------
Statement of Changes In Equity
For the year ended 31 December 2010
Investment
Share holding
Share premium *Other Merger Capital (losses) Special Revenue Total
capital account reserves reserve reserve gains reserve reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 31
December
2008 1,664 69 90 5,525 3,497 (3,169) 4,786 332 12,794
--------------- ----------- -------- --------- -------- -------- ----------- -------- -------- --------
Revenue return
for the year - - - - - - - 70 70
Capital
expenses - - - - (227) - - - (227)
Investment
holding loss
on
investments
held at fair
value - - - - - (1,326) - - (1,326)
Realisation of
investments
in the year - - - - 1,793 - - - 1,793
Total
comprehensive
income for
the year - - - - 1,566 (1,326) - 70 310
--------------- ----------- -------- --------- -------- -------- ----------- -------- -------- --------
Dividends - - - - (928) - - (70) (998)
--------------- ----------- -------- --------- -------- -------- ----------- -------- -------- --------
Total
transactions
with owners - - - - (928) - - (70) (998)
Realisation of
prior year
investment
holding
gains - - - - 307 (307) - - -
Balance at 31
December
2009 1,664 69 90 5,525 4,442 (4,802) 4,786 332 12,106
--------------- ----------- -------- --------- -------- -------- ----------- -------- -------- --------
Revenue return
for the year - - - - - - - 10 10
Capital
expenses - - - - (231) - - - (231)
Investment
holding loss
on
investments
held at fair
value - - - - - (252) - - (252)
Realisation of
investments
in the year - - - - 370 - - - 370
--------------- ----------- -------- --------- -------- -------- ----------- -------- -------- --------
Total
comprehensive
income for
the year - - - - 139 (252) - 10 (103)
--------------- ----------- -------- --------- -------- -------- ----------- -------- -------- --------
Issue of share
capital 121 792 - - - - - - 913
Issue costs - (51) - - - - - - (51)
Purchase of
own shares - - - - - - (323) - (323)
Dividends - - - - (703) - - (10) (713)
--------------- ----------- -------- --------- -------- -------- ----------- -------- -------- --------
Total
transactions
with owners 121 741 - - (703) - (323) (10) (174)
Realisation of
prior year
investment
holding -
gains - - - - (291) 291 - - -
Balance at 31
December
2010 1,785 810 90 5,525 3,587 (4,763) 4,463 332 11,829
--------------- ----------- -------- --------- -------- -------- ----------- -------- -------- --------
*The other reserves include the capital redemption reserve and
other reserve, which are non-distributable. The other reserve was
created on the exercise of warrants and the capital redemption
reserve was created on the purchase and cancellation of own
shares.
The merger reserve was created to account for the difference
between the nominal and fair value of shares issued as
consideration for the acquisition of the assets and liabilities of
British Smaller Technology Companies VCT plc. The reserve was
created after meeting the criteria under section 131 of the
Companies Act 1985 and provisions of the Companies Act 2006 for
merger relief. The merger reserve is a non-distributable
reserve.
The special reserve was created following the approval of the
Court and the resolution of the Shareholders to cancel the
Company's share premium account and is available for other
corporate purposes of the Company. The capital reserve includes
gains and losses compared to cost on the realisation of
investments, capital expenses, together with the related taxation
effect and capital dividends paid to Shareholders. This is a
distributable reserve. The investment holding (losses) gains
reserve includes increases and decreases in the valuation of
investment held at fair value. This is a non-distributable
reserve.
The special reserve, capital reserve and revenue reserve are all
distributable reserves. These reserves total GBP8,382,000 (2009:
GBP9,560,000) representing a decrease of GBP1,178,000 (2009:
GBP945,000 increase) during the year. This change arises from the
loss in the year of GBP103,000 (2009: GBP310,000 profit), movements
in the investment holding gain (loss) reserve of GBP39,000 (2009:
GBP1,633,000), dividends of GBP713,000 (2009: GBP998,000) and
purchase of shares of GBP323,000 (2009: nil). The directors also
take into account the level of the investment holding gain (loss)
reserve when determining the level of dividend payments.
Statement of Cash Flows
For the year ended 31 December 2010
2010 2009
GBP000 GBP000
Net cash (outflow) inflow from operating
activities (312) 125
------------------------------------------------------ -------- --------
Cash flows (used in) from investing
activities
Purchase of financial assets at fair value through
profit or loss (3,135) (1,175)
Proceeds from sale of financial assets at fair
value through profit or loss 1,525 4,243
Deferred consideration 301 -
------------------------------------------------------ -------- --------
Net cash (used in) from investing
activities (1,309) 3,068
------------------------------------------------------ -------- --------
Cash flows used in financing activities
Issue of share capital 913 -
Issue costs (51) -
Purchase of own shares (323) -
Dividends paid (713) (998)
Net cash used in financing activities (174) (998)
------------------------------------------------------ -------- --------
Net (decrease) increase in cash and cash equivalents (1,795) 2,195
Cash and cash equivalents at beginning
of the year 2,304 109
Cash and cash equivalents at the
end of the year 509 2,304
------------------------------------------------------ -------- --------
Reconciliation of (Loss) Profit before Taxation to Net Cash
(Outflow) Inflow from
Operating Activities
2010 2009
GBP000 GBP000
(Loss) profit before taxation (103) 310
(Decrease) increase in trade and
other payables (90) 86
(Increase) decrease in trade and
other receivables (1) 196
Gains on realisation of investments
in the year (370) (1,793)
Losses on investments held at
fair value 252 1,326
------------------------------------------------------- ----------- --------
Net cash (outflow) inflow from operating
activities (312) 125
----------------------------------------------- ------ ----------- --------
Notes
1. Basis of Accounting
This announcement of the annual results of the Company for the
year ended 31 December 2010 has been prepared using accounting
policies consistent with those adopted in the full audited
financial statements which have been prepared on a going concern
basis and in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS.
The financial statements have been prepared under the historical
cost convention as modified by the measurement of investments and
quoted Government Securities at fair value through profit or
loss.
In addition where guidance set out in the Statement of
Recommended Practice 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' issued by the Association of
Investment Companies in January 2009 (SORP) is consistent with the
requirements of IFRS, the financial statements have been prepared
in compliance with the recommendations of the SORP.
Segmental reporting has been determined by the directors based
upon the reports reviewed by the Board. The directors are of the
opinion that the Company has engaged in a single operating segment
- investing in equity and debt securities within the United Kingdom
- and therefore no reportable segmental analysis is provided.
2. Income
2010 2009
GBP000 GBP000
Income from investments
- Dividends from unquoted companies 6 10
- Dividends from AIM quoted companies 22 20
-------------------------------------------- -------- --------
28 30
- Interest on loans to unquoted companies 117 115
- Fixed interest Government securities 162 209
Income from investments held at fair value
through profit or loss 307 354
Interest on bank deposits 14 9
Interest on VAT recovered in 2008 - 9
-------------------------------------------- -------- --------
321 372
-------------------------------------------- -------- --------
3. Taxation
2010 2009
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Corporation tax
at 21% (2009:
21%) - - - 11 (11) -
----------------- -------- -------- ------- -------- -------- -------
Profit (loss)
before
taxation 10 (113) (103) 81 229 310
----------------- -------- -------- ------- -------- -------- -------
Profit (loss)
before taxation
multiplied by
standard small
company rate of
corporation tax
in UK of 21%
(2009: 21%) 2 (24) (22) 17 48 65
Effect of:
UK dividends
received (6) - (6) (6) - (6)
Non taxable
profits on
investments - (24) (24) - (98) (98)
Excess
management
expenses 4 48 52 - 39 39
Tax charge
(credit) - - - 11 (11) -
----------------- -------- -------- ------- -------- -------- -------
The Company has no provided or unprovided deferred tax liability
in either year.
Deferred tax assets of GBP406,000 calculated at 21% (2009:
GBP354,000) in respect of unrelieved management expenses have not
been recognised as management do not currently believe that it is
probable that sufficient taxable profits will be available against
which assets can be recovered.
Due to the Company's status as a venture capital trust and the
continued intention to meet with the conditions required to comply
with Section 274 of the Income Tax Act 2007, the Company has not
provided for deferred tax on any capital gains or losses arising on
the revaluation or realisation of investments.
4. Dividends
Amounts recognised as distributions to equity holders in the
period:
2010 2009
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Final dividend
for the year
ended 31
December 2009
of 2.0p (2008
year end:
2.0p) per
share - 356 356 - 333 333
Interim
dividend for
the year ended
31 December
2010 of 2.0p
(2009: 2.0p)
per share 10 347 357 70 262 332
Special
dividend for
the year ended
31 December
2009 of 2.0p
per share - - - - 333 333
10 703 713 70 928 998
---------------- -------- -------- -------- -------- -------- --------
A final dividend of 2.0p per Ordinary share in respect of the
year to 31 December 2010 is proposed. This dividend has not been
recognised in the year ended 31 December 2010 as the obligation did
not exist at the balance sheet date.
5. Basic and Diluted Earnings (Loss) per Ordinary Share
The basic and diluted return per Ordinary share is based on the
loss after tax attributable to Shareholders of GBP103,000 (2009:
GBP310,000 profit) and 17,449,179 (2009: 16,641,257) shares being
the weighted average number of shares in issue during the year.
The basic and diluted revenue return per Ordinary share is based
on the profit for the year attributable to Shareholders of
GBP10,000 (2009: GBP70,000) and 17,449,179 (2009: 16,641,257)
shares being the weighted average number of shares in issue during
the year.
The basic and diluted capital return per Ordinary share is based
on the capital loss for the year attributable to Shareholders of
GBP113,000 (2009: GBP240,000 profit) and 17,449,179 (2009:
16,641,257) shares being the weighted average number of shares in
issue during the year.
During the year the Company issued 1,203,539 Ordinary shares.
The Company has also repurchased 566,100 of its own shares which
are held in treasury. The treasury shares have been excluded in
calculating the weighted average number of Ordinary shares during
the year from 3 November 2010 (31 December 2009: nil).
The only potentially dilutive shares are those shares which,
subject to certain criteria being achieved in the future, may be
issued by the Company to meet its obligations under the investment
management agreement. No such shares have been issued or are
currently expected to be issued. There are, therefore, considered
to be no potentially dilutive shares in issue at 31 December 2010
or 31 December 2009. Consequently, basic and diluted earnings per
share, basic and diluted revenue return per share and basic and
diluted capital return per share are the same for the year ended 31
December 2010 and 31 December 2009.
6. Net Asset Value per Ordinary Share
The basic and diluted net asset value per Ordinary share is
calculated on attributable assets of GBP11,829,000 (2009:
GBP12,106,000) and 17,278,696 (2009: 16,641,257) shares in issue at
the year end.
The treasury shares have been excluded in calculating the number
of Ordinary shares in issue at 31 December 2010.
The only potentially dilutive shares are those shares which,
subject to certain criteria being achieved in the future, may be
issued by the Company to meet its obligations under the investment
management agreement. No such shares have been issued or are
currently expected to be issued. There are therefore considered to
be no potentially dilutive shares in issue at 31 December 2010 or
31 December 2009. Consequently, basic and diluted net asset value
per Ordinary share is the same for the year ended 31 December 2010
and 31 December 2009.
7. Total Return per Ordinary Share
The total return per Ordinary share is calculated on cumulative
dividends paid of 26.0 pence per Ordinary share (2009: 22.0 pence
per Ordinary share) plus the net asset value as calculated per note
6.
8. Related Party Transactions
The Company has not entered into any related party transactions
that have had a material impact on its financial position or
performance in the year to 31 December 2010. Full details of
related party transactions are shown in note 17 to the Annual
Report and Accounts which can be obtained as described in note
11.
9. Events after the Balance Sheet Date
Your Board has published proposals offering investors the
opportunity to subscribe for up to 12,811,388 new Ordinary shares
in the Company at an offer price of 70.25 pence per share. These
proposals were by way of two offers closing on 5 April 2011 and 29
April 2011 respectively. The closing date for the offer in relation
to the tax year 2011/2012 was subsequently extended to 4 May 2011.
Pursuant to the offers an initial allotment of GBP2,567,989 for
3,655,500 Ordinary shares was made on 22 March 2011.
10. Financial Information
The financial information set out here for the year ended 31
December 2010 does not constitute full statutory financial
statements as defined in section 435 of the Companies Act 2006 but
has been extracted from the Company's financial statements for that
period. Statutory accounts for the year ended 31 December 2010 will
be delivered to the Registrar of Companies following the Company's
Annual General Meeting on 16 May 2011. Those accounts were reported
upon without qualification by the independent auditor and did not
contain a statement under Section 498 (2) or (3) of the Companies
Act 2006.
11. Annual Report and Accounts
Copies of the Annual Report and Accounts for the year ended 31
December 2010 have been submitted to the National Storage Mechanism
and will shortly be available to the public for viewing online at
www.hemscott.com/msn/do. They can also shortly be viewed on the
Fund Manager's website at www.yfmep.com. Hard copies of the Annual
Report and Accounts for the Year ended 31 December 2010 will be
distributed by post to Shareholders and will be available
thereafter to members of the public from the Company's registered
office.
12. Directors
The directors of the Company are: Mr R Last, Mr RM Pettigrew and
Mr P Waller.
13. Annual General Meeting
The Annual General Meeting of the Company will be held at 33 St
James Square, London, SW1Y 4JS, on 16 May 2011 at 12.00 noon.
For further information, please contact:
David Hall YFM Equity Partners Limited Tel: 0113 294 5039
Jeff Keating Singer Capital Markets Tel: 0203 205 7500
This information is provided by RNS
The company news service from the London Stock Exchange
END
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