TIDMBSC
RNS Number : 6747L
British Smaller Companies VCT2 Plc
03 August 2011
British Smaller Companies VCT 2 plc
Unaudited Interim Results and Interim Management Statement
For the 6 months ended 30 June 2011
British Smaller Companies VCT 2 plc ("the Company") today
announces its unaudited interim results for the six months to 30
June 2011.
Chairman's Statement
In the six months to 30 June 2011 significant progress has been
made by many portfolio businesses and this is now beginning to show
through in improving valuations. Although the challenging economic
times have continued many businesses have previously taken tough
actions to become more efficient and several are now proactively
seeking to exploit changes in their market conditions to gain
market share and create value. The Company continues to support the
portfolio and in April 2011 raised an additional GBP4.0 million
funds pursuant to the linked offer with British Smaller Companies
VCT plc, and remains well placed to take advantage of the growing
investment activity levels.
The Total Return to Shareholders as at 30 June 2011 amounted to
96.0 pence per Ordinary Share, representing a year to date increase
of 1.6 pence from the 94.4 pence per Ordinary Share at 31 December
2010 and an increase of 1.9 pence over the 12 month period since 30
June 2010. This Total Return includes cumulative dividends paid
which now stand at 28.0 pence per Ordinary Share.
The Net Asset Value at 30 June 2011 is 68.0 pence per Ordinary
Share (68.4 pence per Ordinary Share 31 December 2010, which
reflects an increase in the portfolio values of 1.6 pence per
Ordinary Share and payment of a 2.0 pence per Ordinary Share final
dividend paid in June 2011.
Interim Management Report
Against the backdrop of ongoing economic challenges, the Company
remains focussed on building a strong and diversified portfolio and
seeking to gradually improve levels of portfolio income.
Significant positive steps have been made in this regard, with the
past 6 months seeing 7.4% value growth from an increasingly
diversified and well funded portfolio. Over the period to 30 June
2011 there have been no significant realisations from the
portfolio. Some realisation opportunities may occur in the short
term but these are likely to become more frequent and attractive as
economic conditions improve, with several businesses offering the
potential for significant value enhancement.
Over the six month period to 30 June 2011 a total of GBP1.2
million has been invested into 7 businesses. A further investment
of GBP133,000 was made into Sirigen Group Limited, the second and
final tranche of a GBP3.0 million funding round agreed last year,
of which the Company invested GBP400,000. This investment has
enabled Sirigen to further the technical development of its
innovative fluorescent labelling products which can significantly
improve the sensitivity of a wide range of diagnostic tests.
The remaining 6 investments were made into AiM quoted businesses
which were selected to provide a mix of capital growth and income
via dividends. May Gurney Integrated Services plc (GBP212,000)
manages infrastructure support services, Iomart Group plc
(GBP198,000) provides web-based hosting services, Tikit Group plc
(GBP198,000) is a provider of consulting and IT services to legal
firms, Group NBT plc (GBP197,000) administers domain names and
various internet services, 2ergo Group plc (GBP197,000) is a
provider of marketing solutions via mobile devices and EKF
Diagnostics plc (GBP77,000) manages of a wider range of medical
diagnostic services.
Excluding these new investments and the GBP42,000 value growth
in gilts, the opening portfolio value has grown by GBP534,000
(7.7%) over the six month period to 30 June 2011. In addition a
further GBP23,000 has been recognised in respect of the DxS Ltd
deferred consideration and is included within the debtors balance
at 30 June 2011. Network security provider, Deep-Secure Ltd, has
now delivered a profitable first year since the Company's
investment in the buyout in December 2009 and we anticipate further
profit growth in 2011 with a strong order pipeline. Cambridge
Cognition Limited has established a profitable business model for
its diagnostic products for use in clinical trial and is now
seeking to roll out products for wider clinical applications. To
complement its core reference products, Primal Pictures Limited has
concluded the development of its new anatomy and physiology online
training product, which has received significant market interest
with a number of customer trials underway.
There has been no change to the principal risks and
uncertainties facing the Company since the publication of the
financial statements for the year ended 31 December 2010. In
summary, the principal risks are:
-- Investment and strategic;
-- Loss of approval as a Venture Capital Trust;
-- Regulatory;
-- Reputational;
-- Operational;
-- Financial;
-- Market risk; and
-- Liquidity risk.
Full details of the principal risks can be found in the
financial statements for the year ended 31 December 2010 on page
21, a copy of which can be found at www.yfmep.com
Financial Results
The result for the six months ended 30 June 2011 produced a
revenue profit before tax of GBP2,000 and a capital profit before
tax of GBP473,000 (2010: profit of GBP10,000 and loss of GBP119,000
respectively). It is pleasing to see a strong improvement in the
aggregate value of investments over the 6 months to 30 June 2011 of
GBP576,000 (2010: loss of GBP41,000). The income from the portfolio
of GBP178,000 also represents an increase of GBP15,000 on the same
period in 2010 and the fund manager will continue to make
investments to gradually improve the income generation from the
portfolio.
The movement in Net Asset Value is as follows:
Pence/share
31 December 2010 68.4
Dividends paid in period (2.0)
Net Increase in value 1.6
-------------------------- ------------
30 June 2011 68.0
-------------------------- ------------
Cash and investment in gilts at 30 June 2011 totalled GBP6.85
million (June 2010: GBP5.84 million), representing 43% (June 2010:
47%) of Net Asset Value before taking account of any interim
dividend. The Board considers that in the short term this is
sufficient to support the current portfolio and to continue its
investment strategy in selective new opportunities.
Shareholder Relations
The six months to 30 June 2011 has seen the Company's investment
capacity increase through the issue of 6,268,100 shares pursuant to
the recent linked offer with British Smaller Companies VCT plc,
raising GBP4.4 million of gross proceeds. In addition the Company
issued 3,762 shares pursuant to the Dividend re-investment scheme
on 10th June 2011. The Board believes that the coming 12-24 months
will see increasing investment opportunities and will consider the
opportunity to raise further funding in the months ahead to enable
the Company to take advantage of this and continue to build a
strong, balanced portfolio.
The Board has today issued a circular calling a general meeting
of the company to propose a resolution to again re-instate a share
buyback policy. In October 2010 a buyback policy was introduced,
expiring at the date of the AGM. As has been previously reported
whilst a significant majority of Shareholders voted in favour of
continuing the policy it would not have been sufficient to carry
the vote and the resolution was withdrawn. Your Board believes that
the re-instatement of the policy is essential for the Company for
the following reasons: -
i) It provides Shareholders with liquidity in order that they
can realise their investment
ii) The absence of a policy prevents significant further
fundraising with all the benefits that can bring
iii) It supports a share price that the Board believes reflects
the quality of the underlying net assets
As a consequence the Board strongly recommends the
re-instatement of the buyback policy.
The Board remains committed to the objective of achieving a
consistent dividend stream. Following the 2010 year end dividend of
2.0 pence per Ordinary Share paid on 10 June 2011, this commitment
has been continued in these interim results with your Board
determining that an interim dividend of 2.0 pence per Ordinary
Share will be paid on 8 September 2011 to Shareholders on the
register as at 12 August 2011.
Regulatory and other matters
The Government has recently launched a consultation document in
respect of venture capital trusts and EIS schemes. The underlying
principles of the consultation and proposed changes all seem to
support the activities of the Company which has always sought to
invest in the UK's smaller companies which can generate economic
growth and provide investment return. This remains the core of the
investment strategy and the Company's fund manager will be
responding to this consultation.
Outlook
Whilst a number of challenges remain, there are signs of
improving economic conditions and it is encouraging to see many
portfolio businesses reporting improving results. Overall the
portfolio remains well funded with most businesses having taken 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 the existing portfolio
companies.
The Board remains of the opinion that the forthcoming period
will see many good investment opportunities for the portfolio
businesses and for new investments. It was with this in mind that
we increased the investment capacity of the Company and we will
consider the opportunity to further increase funds in the coming
months.
Richard Last
3 August 2011
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