TIDMBSC
RNS Number : 2761P
British Smaller Companies VCT2 Plc
15 August 2014
British Smaller Companies VCT2 plc
Unaudited interim Results and Interim Management Report
For the 6 months ended 30 June 2014
British Smaller Companies VCT2 plc ("the Company") today
announces its unaudited interim results for the six months to 30
June 2014.
Chairman's Statement
Investment rates continue to climb as the improved economic
climate increases confidence amongst business owners. Your Company
has made seven new unquoted investments in the last year, including
four in the six months to 30 June 2014.
I am pleased to report a strong six months of investment
activity, with GBP5.5 million invested in the period and a total of
GBP10.0 million in the 12 months to 30 June 2014. Your Company
continues to focus on investing in established businesses with
strong potential for growth located in the UK regions. Of the seven
investments completed, three were in the midlands; two were in the
South East and one each in Wales and Scotland.
As at 30 June 2014 your board had approved a further GBP2.0
million of investment and since the period end has approved another
GBP2.1 million. These investments, totalling GBP4.1 million, are
expected to complete in the near future.
I am delighted to report the success of our recent share offers
which closed on 29 May 2014 and raised new funds of GBP10.2
million, which is approximately the same amount the Company
invested in the last twelve months. Demand for investment continues
to increase and the pipeline of new investments is extremely
encouraging.
Financial Results and Dividends
In the six months to 30 June 2014 the Company's total return
increased by 0.1 pence per ordinary share from 104.6 pence per
ordinary share at 31 December 2013.
Significant progress has been made by many of the portfolio
companies however, due to timing delays in the closure of new
sales, provisions totalling GBP0.74 million were made against two
of our investments. These were offset by gains elsewhere across the
portfolio and both investments continue to be held above cost.
During the period a final dividend of 2.5 pence per ordinary
share was paid, bringing cumulative dividends paid to date to 41.5
pence per ordinary share. For the period to 30 June 2014 the Board
has proposed an interim dividend of 2.0 pence per ordinary share,
making a total of 4.5 pence per ordinary share over the last year.
It is intended that of the total interim dividend 0.27 pence per
ordinary share will be paid from revenue reserves and 1.73 pence
per ordinary share from capital reserves. The interim dividend will
be paid on 7 October 2014 to shareholders on the register at 5
September 2014.
Shareholder Relations
Following the success of the 19th Shareholder workshop in
February 2014, the Company is pleased to announce that its next
workshop will be held at Freemasons Hall, London on 4 February
2015. Details will be circulated nearer the time.
Regulatory Changes
The EU Alternative Investment Fund Managers Directive (AIFMD)
became part of UK law in July 2013, with a 12 month transitional
period to July 2014. The Directive regulates the management of
alternative investment funds, including venture capital funds such
as VCTs. The Board is pleased to announce that the Financial
Conduct Authority approved the Company's application to become a
Small Registered UK Alternative Investment Fund Manager on 21 July
2014. YFM Private Equity Limited continues to provide investment
advisory and administrative services to the Company.
As expected, the 2014 Finance Bill, which received Royal Assent
on 17 July 2014, included measures to prevent "enhanced" share
buy-backs, where a VCT offers to buy back shares from investors on
condition that the proceeds are applied in subscribing for a fresh
issue of shares. Income tax relief for subscriptions of shares in a
VCT is also restricted where an investor disposes of shares in the
same VCT within six months of the subscription. Furthermore, where
new VCT shares are allotted on or after 6 April 2014, VCTs will be
prevented for a specified period from paying dividends to
shareholders out of share capital or distributable reserves created
by cancelling the share premium account arising on the allotment of
such shares. The Company's balance sheet already has ample
distributable reserves amounting to GBP13.43 million and we do not
expect the new rules to have any impact on future dividend
streams.
Outlook
Good progress continues to be made across the portfolio to
position businesses to grow and realise shareholder value. At the
same time our Company continues to see strong demand for investment
in the UK regions, with GBP10 million deployed in the last twelve
months which has significantly increased the diversity of the
portfolio.
The Company continues to see an increase in new investment
opportunities. In order for the Company to continue to take
advantage of these new opportunities the Board will be seeking to
raise further funds, details of which will follow in due
course.
Strategic Report
Investment Review
The Company currently has an increasingly diversified portfolio
which at 30 June 2014 had a value of GBP20.66 million consisting of
GBP18.26 million (88.4 per cent) unquoted investments and GBP2.40
million (11.6 per cent) quoted investments. The high level of
current investment rates has significantly increased the portfolio
diversity with the largest single investment representing just 5.2
per cent of the net asset value.
Over the six months to 30 June 2014 the portfolio saw a small
underlying value gain of GBP0.01 million and good progress has been
made across the portfolio to position businesses to grow and
realise shareholder value. This has been displayed in a mixture of
strong profit growth from some businesses as well as some strategic
and organisational restructuring of others to maximise profits in
the year ahead. The most significant movements in valuations in the
period were:
- Waterfall Services Limited (increase of GBP0.30 million) saw
strong profit growth from new contracts last year and expects to
also benefit from the imminent introduction of free primary school
meals.
- Pressure Technologies plc (increase of GBP0.26 million)
reported significantly improved profits from its core pressure
container production and successful diversification into the biogas
sector.
- Sirigen Limited (increased by GBP0.26 million) delivered many
key milestones to achieve additional deferred consideration
following its trade sale in 2012.
- DisplayPlan Holdings Limited (increase of GBP0.15 million) saw
continued strong cash generation.
- Seven Technologies Holdings Limited (reduction of GBP0.47
million) suffered public sector budgetary constraints in its core
US and UK markets last year which are now showing signs of
easing.
- Deep-Secure Ltd (decrease of GBP0.27 million) experienced some
public sector contract slippage and a delay in the launch of a
product through a significant new strategic partnership.
New Investments
In the six months to 30 June 2014 the Company has completed four
new investments totalling GBP5.19 million.
Name of Business Date Amount invested
Company of Investment (GBPm)
--------------------------- ----------------- ---------------- ----------------
Healthcare January
Mangar Health Limited Equipment 2014 1.64
--------------------------- ----------------- ---------------- ----------------
The management buyout of Mangar International,
a world leader in inflatable lifting & handling
and bathing equipment for the elderly, disabled
and emergency services markets. Headquartered
in Presteigne, Wales Mangar distributes its products
to care providers, local authorities, ambulance
services and care homes, and has a growing international
presence.
----------------------------------------------------------------------------------
Intelligent Office Support
UK Ltd Services May 2014 1.96
--------------------------- ----------------- ---------------- ----------------
The management buyout of Intelligent Office,
a leading provider of business process outsourcing
solutions to the UK legal sector. Its Managed
Services division works within firms' own premises
to help them transform and manage key administrative
functions of print and mail, reception, document
production and secretarial services. Its Transcription
Services division provides document production
services from a secure shared services centre.
----------------------------------------------------------------------------------
Macro Art Holdings Digital
Limited Printer June 2014 0.84
--------------------------- ----------------- ---------------- ----------------
The management buyout and growth capital funding
for Macro Art Limited, a specialist wide-format
digital printer which has printed building wraps
for Selfridges and Harrods London stores and
holds the Guinness World Record for the largest
printed movie poster. In recent years the business
has invested in specialist UV and dye sublimation
print technology and expanded into the profitable
exhibitions and high-end retail sectors.
----------------------------------------------------------------------------------
Intamac Systems Limited IT & Software June 2014 0.75
--------------------------- ----------------- ---------------- ----------------
The provision of growth capital funding to Intamac
Limited which develops technology to connect
physical products via the internet so they can
be monitored and controlled using smart mobile
phones and computers. The cloud-based software
platform is used by several blue chip companies
including, Scottish Power, Securitas, TDC and
Belgacom. The strategy is to partner with established
hardware suppliers and embed software into their
next generation products to become a key enabler
of the Internet of Things. Applications range
from alarms, cameras, heating controls, safety
equipment, healthcare monitoring and white goods.
----------------------------------------------------------------------------------
The Company has made follow-on investments into AiM listed EKF
Diagnostics plc and AB Dynamics plc totalling GBP0.32 million.
As at 30 June 2014 the Company had approved GBP2.0 million of
investment by way of follow-on and new investment. Since that date
it has approved another two new investments of GBP2.1 million in
aggregate.
Realisation of Investments
During the six months to 30 June 2014 the Company received
proceeds from disposals of investments of GBP1.11 million. This
resulted in a gain on disposal of investments of GBP0.35 million
and an uplift of GBP0.60 million compared to the original cost of
the investments.. Of this GBP0.49 million of proceeds were realised
from the sale of shares in the quoted portfolio, namely Iomart plc,
Optos plc, Pressure Technologies plc and Vianet Group plc,
representing a GBP0.27 million uplift on original cost. The
remainder was due to the repayment of loans generating proceeds of
GBP0.36 million with premiums on redemption totalling GBP0.07
million.
GBP1.37 million was received in June 2014 from the sale of the
Company's remaining gilt portfolio at the original investment
cost.
Investment Portfolio
Sector Name of Date Current Realised Investment Valuation
Company of initial cost proceeds Valuation plus
Investment to At 30 proceeds
Date June to Date
GBP000 2014 GBP000
GBP000 GBP000
---------------- ----------------------- ------------- -------- ---------- ----------- ----------
Bus. DisplayPlan Holdings Jan
Services Limited 12 525 228 2,062 2,290
Bus. Intelligent Office May
Services UK Limited 14 1,956 - 1,956 1,956
Gill Marine Holdings Sep
Retail Limited 13 1,870 - 1,870 1,870
Mangar Health Jan
Healthcare Limited 14 1,640 - 1,640 1,640
Software Seven Technologies Apr
& IT Holdings Limited 12 1,238 762 1,238 2,000
Oct
Manufacturing GTK (UK) Limited 13 1,084 66 1,084 1,150
Jun
Healthcare Immunbiology Limited 03 1,932 - 987 987
Leengate Holdings Dec
Manufacturing Limited 13 934 - 934 934
Bus. Macro Art Holdings Jun
Services Limited 14 840 - 840 840
Bus. Waterfall Services Feb
Services Limited 07 26 458 792 1,250
---------------- ----------------------- ------------- -------- ---------- ----------- ----------
Top 10 Unquoted Investments 12,045 1,514 13,403 14,917
Remaining unquoted portfolio
Callstream Group Sep
Telecoms Limited 10 415 131 771 902
Intamac Systems June
Internet Limited 14 750 - 750 750
Dec
Software Deep-Secure Ltd 09 500 - 644 644
Retail Bagel Nash Group Jul
& Manufacture Limited 11 771 53 613 666
Insider Technologies Aug
Software (Holdings) Limited 12 780 - 587 587
Harvey Jones Holdings May
Retail Limited 07 389 - 451 451
RMS Group Holdings July
Industrial Limited 07 70 349 398 747
Mar
Software Selima Limited 12 300 - 300 300
Nov
Software PowerOasis Limited 11 567 - 284 284
Other investments
< GBP0.1 million 2,104 60 60
-------------------------------------- --------------- -------- ---------- ----------- ----------
Total Unquoted portfolio 18,691 2,047 18,261 20,308
Quoted portfolio
Pressure Technologies Jun
Manufacturing plc 07 121 493 583 1,076
EKF Diagnostics Jul
Medical Holdings plc 11 437 - 407 407
May
Manufacturing AB Dynamics plc 13 253 - 376 376
Hargreaves Services Aug
Manufacturing plc 12 325 - 314 314
May
Internet Iomart Group plc 11 119 209 247 456
Dec
Software Brady plc 10 134 163 171 334
Bus. Oct
Services Vianet Group plc 06 181 45 132 177
Cambridge Cognition May
Healthcare Holdings plc 02 240 - 102 102
Allergy Therapeutics Oct
Healthcare plc 04 350 - 70 70
---------------- ----------------------- ------------- -------- ---------- ----------- ----------
Total quoted portfolio 2,160 910 2,402 3,312
Total portfolio 20,851 2,957 20,663 23,620
Full disposals to date 13,502 20,679 - 20,679
Total 34,353 23,636 20,663 44,299
Principal Risks and Uncertainties
In accordance with DTR 4.2.7, the Board confirms that the
principal risks and uncertainties facing the Company have not
materially changed from those identified in the Annual Report and
Accounts for the year ended 31 December 2013. The Board
acknowledges that there is regulatory risk and continues to manage
the company's affairs in such a manner as to comply with section
274 income Tax Act 2007.
In summary, the principal risks are:
-- Economic;
-- Investment and strategic;
-- Loss of approval as a Venture Capital Trust;
-- Regulatory;
-- Reputational;
-- Operational;
-- Financial;
-- Market/liquidity risk.
Full details of the principal risks can be found in the
financial statements for the year ended 31 December 2013 on pages
29 and 30, a copy of which is available at www.yfmep.com
Responsibility Statement of the Directors
The directors of British Smaller Companies VCT2 plc confirm
that, to the best of their knowledge, the condensed set of
financial statements in this interim report have been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the EU, and give a fair view of
the assets, liabilities, financial position and profit or loss of
British Smaller Companies VCT2 plc, and that the interim management
report includes a fair review of the information required by DTR
4.2.7R and DTR 4.2.8R.
The directors of British Smaller Companies VCT2 plc are listed
in Note 9 of the interim financial statements.
Richard Last
Chairman
15 August 2014
Unaudited Statement of Comprehensive Income
For the six months ended 30 June 2014
Unaudited Unaudited
6 months ending 6 months ending
30 June 2014 30 June 2013
Notes Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gain on disposal of
investments - 347 347 - 9 9
(Losses) gains on investments
held at fair value - (336) (336) - 1,097 1,097
Income 2 543 - 543 365 - 365
Administrative expenses:
---------- ---------- --------- ---------- ---------- ---------
Investment adviser's
fee (75) (225) (300) (68) (204) (272)
Other expenses (196) - (196) (168) - (168)
---------- ---------- --------- ---------- ---------- ---------
(271) (225) (496) (236) (204) (440)
Profit before taxation 272 (214) 58 129 902 1,031
Taxation 3 (1) 1 - - - -
Profit for the period 271 (213) 58 129 902 1,031
------------------------------- -------- ---------- ---------- --------- ---------- ---------- ---------
Total comprehensive
income (expense) for
the period attributable
to equity hareholders 271 (213) 58 129 902 1,031
------------------------------- -------- ---------- ---------- --------- ---------- ---------- ---------
Basic and diluted earnings
(loss) per ordinary
share 5 0.51p (0.40p) 0.11p 0.30p 2.06p 2.36p
------------------------------- -------- ---------- ---------- --------- ---------- ---------- ---------
The Total column of this statement represents the Company's
Statement of Comprehensive Income, prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union. 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.
Unaudited Balance Sheet
As at 30 June 2013
Unaudited Unaudited Audited
30 June 30 June 31 Dec
2014 2013 2013
Notes GBP000 GBP000 GBP000
Assets
Non-current assets
Investments 20,663 12,377 16,255
Fixed income government
securities - 901 890
----------------------------- ------ ---------- ---------- --------
Financial assets at
fair value through profit
or loss 6 20,663 13,278 17,145
Trade and other receivables 297 108 132
----------------------------- ------ ---------- ---------- --------
20,960 13,386 17,277
Current assets
Trade and other receivables 572 114 123
Cash on fixed term deposit 4,500 3,500 4,500
Cash and cash equivalents 13,415 13,393 8,680
18,487 17,007 13,303
Liabilities
Current liabilities
Trade and other payables (117) (135) (122)
Net current assets 18,370 16,872 13,181
Net assets 39,330 30,258 30,458
----------------------------- ------ ---------- ---------- --------
Shareholders' equity
Share capital 6,411 4,800 4,822
Share premium account 13,736 4,835 4,926
Capital redemption reserve 88 88 88
Merger reserve 5,525 5,525 5,525
Other reserve 2 2 2
Capital reserve 13,377 17,028 14,568
Investment holding (losses)
gains - net (158) (2,149) 448
Revenue reserve 349 129 79
Total shareholders'
equity 39,330 30,258 30,458
----------------------------- ------ ---------- ---------- --------
Net asset value per
ordinary share 7 63.2p 65.3p 65.6p
----------------------------- ------ ---------- ---------- --------
Signed on behalf of the Board
Richard Last
Chairman
15 August 2014
Unaudited Statement of Changes in Equity
For the six months ended 30 June 2014
Investment
holding
Share Share Other Merger Capital gains Revenue Total
capital premium reserves* reserve reserve (losses) reserve equity
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 31 December
2012 4,271 14,806 90 5,525 7,225 (4,919) 154 27,152
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Revenue return
for the period - - - - - - 129 129
Capital expenses - - - - (204) - - (204)
Investment
holding gain
on investments
held at fair
value - - - - - 1,097 - 1,097
Realisation
of investments
in the period - - - - 9 - - 9
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Total comprehensive
income for
the period - - - - (195) 1,097 129 1,031
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Issue of share
capital 504 2,964 - - - - - 3,468
Issue of Shares
- DRIS 25 130 - - - - - 155
Issue costs - (160) - - - - - (160)
Purchase of
own shares - - - - (224) - - (224)
Dividends - - - - (1,001) - (154) (1,155)
Cancellation
of Share Premium - (12,905) - - 12,896 - - (9)
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Total transactions
with shareholders 529 (9,971) - - 11,671 - (154) 2,075
Realisation
of prior year
investment
holding losses - - - - (1,673) 1,673 - -
At 30 June
2013 4,800 4,835 90 5,525 17,028 (2,149) 129 30,258
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Revenue return
for the period - - - - - - 79 79
Capital expenses - - - - (217) - - (217)
Investment
holding gain
on investments
held at fair
value - - - - - 651 - 651
Gain on disposal
of investments
in the period - - - - 587 - - 587
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Total comprehensive
income for
the period - - - - 370 651 79 1,100
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Issue of Shares
- DRIS 22 109 - - - - - 131
Issue costs - (18) - - - - - (18)
Purchase of
own shares - - - - (85) - - (85)
Dividends - - - - (799) - (129) (928)
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Total transactions
with shareholders 22 91 - - (884) - (129) (900)
Realisation
of prior year
investment
holding gains - - - - (2,123) 2,123 - -
Realisation
of negative
goodwill - - - - 177 (177) - -
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
At 31 December
2013 4,822 4,926 90 5,525 14,568 448 79 30,458
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Investment
holding
Share Share Other Merger Capital gains Revenue Total
capital premium reserves* reserve reserve (losses) reserve equity
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 31 December
2013 4,822 4,926 90 5,525 14,568 448 79 30,458
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Revenue profit
for the period - - - - - - 271 271
Capital expenses - - - - (224) - - (224)
Investment
holding loss
on investments
held at fair
value - - - - - (336) - (336)
Gain on disposal
of investments
in the period - - - - 347 - - 347
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Total comprehensive
income for
the period - - - - 123 (336) 271 58
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
Issue of ordinary
Share capital 1,551 9,200 - - - - - 10,751
Issue of Shares
- DRIS 38 191 - - - - - 229
Issue costs
of Ordinary
shares - (581) - - - - - (581)
Purchase of
own shares - - - - (36) - - (36)
Dividends - - - - (1,548) - (1) (1,549)
Total transactions
with shareholders 1,589 8,810 - - (1,584) - (1) 8,814
Realisation
of prior year
investment
holding losses - - - - 257 (257) - -
Realisation
of negative
goodwill - - - - 13 (13)
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
At 30 June
2014 6,411 13,736 90 5,525 13,377 (158) 349 39,330
-------------------- ---------- ---------- ------------ ---------- ---------- ----------- ---------- ---------
* Other reserves include the capital redemption reserve and
other reserve which are non-distributable.
The capital reserve includes GBP115,000 (2013: GBPnil) of
deferred proceeds receivable in 2016. The revenue reserve includes
GBP182,000 (2013: GBPnil) of interest receivable in 2018 and 2019.
These amounts should be excluded in the calculation of the
Company's distributable reserves at 30 June 2014.
Unaudited Statement of Cash Flows
For the six months ended 30 June 2014
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBP000 GBP000 GBP000
Net cash (outflow) inflow
from operating activities (262) 90 (79)
-------------------------------------- ---------- ---------- -------------
Cash flows from investing
activities
Purchase of financial assets
at fair value through profit
or loss (5,978) (954) (5,499)
Proceeds from sale of financial
assets at fair value through profit
or loss 2,114 1,062 2,926
Cash placed on fixed term
deposit - - (4,500)
Cash received back from fixed
term deposit - 3,548 7,048
Deferred consideration - 90 125
Net cash (outflow) inflow
from investing activities (3,864) 3,746 100
-------------------------------------- ---------- ---------- -------------
Cash flows from financing
activities
Issue of ordinary shares 10,509 3,412 3,412
Cost of ordinary shares (328) (106) (122)
Purchase of own shares - (224) (309)
Dividends paid (1,320) (1,000) (1,797)
Share premium cancellation
costs - (9) (9)
Net cash inflow from financing
activities 8,861 2,073 1,175
-------------------------------------- ---------- ---------- -------------
Net increase in cash and
cash equivalents 4,735 5,909 1,196
Cash and cash equivalents
at the beginning of the
period 8,680 7,484 7,484
Cash and cash equivalents
at the end of the period 13,415 13,393 8,680
-------------------------------------- ---------- ---------- -------------
Notes to the Unaudited Financial Statements
1. General information, basis of preparation and principal accounting policies
These half year statements have been approved by the directors
whose names appear at note 9, each of whom has confirmed that to
the best of his knowledge:
-- The Interim Management Report includes a fair review of the
information required by rules 4.2.7 and 4.2.8 of the Disclosure
Rules and the Transparency Rules.
-- The half year statements have been prepared in accordance
with IAS 34 'Interim financial reporting' and the Disclosure and
Transparency Rules of the Financial Services Authority.
The half year statements are unaudited and have not been
reviewed by the auditors pursuant to the Auditing Practices Board
(APB) guidance on Review of Interim Financial Information. They do
not constitute full financial statements as defined in section 435
of the Companies Act 2006. The comparative figures for the year
ended 31 December 2013 do not constitute full financial statements
and have been extracted from the Company's financial statements for
the year ended 31 December 2013. Those accounts were reported upon
without qualification by the auditors and have been delivered to
the Registrar of Companies.
The accounting policies and methods of computation followed in
the half year statements are the same as those adopted in the
preparation of the audited financial statements for the year ended
31 December 2013.
The financial statements for the year ended 31 December 2013
were prepared in accordance with the 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. 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.
Other standards and interpretations have been issued which will
be effective for future reporting periods but have not been adopted
early in these financial statements. These include amendments to
IFRS 9, IFRS 10, IFRS 11 and IFRS 12, and amendments to IAS24, IAS
27, IAS28, IAS32 and IAS 36. A full impact assessment has not yet
been completed in order to assess whether these new standards will
have a material impact on the financial statements.
Going Concern: The directors have carefully considered the issue
of going concern and are satisfied that the Company has sufficient
resources to meet its obligations as they fall due for a period of
at least twelve months from the date these half year statements
were approved. As at 30 June 2014 the Company held cash balances
and fixed term deposits with a combined value of GBP17,915,000.
Cash flow projections show the Company has sufficient funds to meet
both its contracted expenditure and its discretionary cash outflows
in the form of share buy-backs and the dividend policy. The
directors therefore believe that it is appropriate to continue to
apply the going concern basis of accounting in preparing these half
year statements.
2. Income
Unaudited Unaudited
6 months 6 months
ended 30 ended
June 30 June
2014 2013
GBP000 GBP000
Income from investments
- Dividends from unquoted
companies 24 28
- Dividends from AIM quoted
companies 19 22
---------------------------------- ---------- ----------
43 50
- Interest on loans to unquoted
companies 421 187
- Fixed interest Government
securities 7 10
---------------------------------- ---------- ----------
Income from investments held
at fair value through profit
or loss 471 247
Interest on bank deposits 72 118
543 365
---------------------------------- ---------- ----------
3. Taxation
Unaudited 6 Unaudited 6 months
months ended ended 30 June
30 June 2014 2013
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Profit before taxation 272 (214) 58 129 902 1,031
-------------------------- -------- -------- ------- -------- -------- -------
Profit before taxation
multiplied by standard
small company rate
of corporation tax
in UK of 20% (2013:
20%) 54 (43) 11 26 180 206
Effect of:
UK dividends received (8) - (8) (10) - (10)
Non taxable profits
on investments - (2) (2) - (221) (221)
Excess management
expenses (45) 44 (1) (16) 41 25
-------------------------- -------- -------- ------- -------- -------- -------
Tax charge (credit)
(credit) 1 (1) - - - -
-------------------------- -------- -------- ------- -------- -------- -------
The Company has no provided, or unprovided, deferred tax
liability in either year.
Deferred tax assets in respect of losses have not been
recognised as the directors do not currently believe that it is
probable that sufficient taxable profits will be available against
which the assets can be recovered.
Due to the Company's status as a venture capital trust, and the
continued intention to meet the conditions required to comply with
Chapter 3 Part 6 of the Income Tax Act 2007, the Company has not
provided 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:
Unaudited Unaudited Audited
6 months 6 months Year ended
ended ended 31 December
30 June 2014 30 June 2013 2013
Rev Cap Total Rev Cap Total Rev Cap Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Final dividend
for the year
ended 31 December
2013 of 2.5p
(2012 year end
2.5p) per ordinary
share 1 1,548 1,549 154 1,001 1,155 154 1,001 1,155
Interim dividend
for the year
ended 31 December
2013 of 2.0p
per ordinary
share - - - - - - 129 799 928
1 1,548 1,549 154 1,001 1,155 283 1,800 2,083
--------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
An interim dividend of 2.0 pence per ordinary share, amounting
to GBP1,245,000 is proposed. The dividend has not been recognised
in these half year financial statements as the obligation did not
exist at the balance sheet date.
5. Basic and Diluted Earnings per Ordinary Share
The basic and diluted earnings per ordinary share is based on
the profit after tax attributable to equity shareholders of
GBP58,000 (30 June 2013: profit of GBP1,031,000) and 53,185,770 (30
June 2013: 43,683,333) ordinary shares being the weighted average
number of Ordinary shares in issue during the period.
The basic and diluted revenue return per ordinary share is based
on the revenue profit attributable to equity shareholders of
GBP271,000 (30 June 2013: GBP129,000) and 53,185,770 (30 June 2013:
43,683,333) ordinary shares being the weighted average number of
ordinary shares in issue during the period.
The basic and diluted capital loss per ordinary share is based
on the capital loss attributable to equity shareholders of
GBP213,000 (30 June 2013: capital return based on a profit of
GBP902,000) and 53,185,770 (30 June 2013: 43,683,833) ordinary
shares being the weighted average number of Ordinary shares in
issue during the period.
During the period the Company allotted 377,855 new ordinary
shares in respect of its dividend re-investment scheme and
15,511,615 new ordinary shares under the joint offer for
subscription with British Smaller Companies VCT plc".
The Company has repurchased 63,196 of its own shares in the
period and these shares are held in the capital reserve. The total
of 1,840,918 treasury shares has been excluded in calculating the
weighted average number of ordinary shares during the period. The
Company has no securities that would have a dilutive effect and
hence basic and diluted earnings per ordinary Share are the
same.
6. Financial Assets at Fair Value through Profit or Loss
IFRS 7 and IFRS 13, in respect of financial instruments that are
measured in the balance sheet at fair value, requires disclosure of
fair value measurements by level within the following fair value
measurement hierarchy:
-- Level 1: quoted prices in active markets for identical assets
or liabilities. The fair value of financial instruments traded in
active markets is based on quoted market prices at the balance
sheet date. A market is defined as a market in which transactions
for the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis. The
quoted market price used for financial assets held by the Company
is the current bid price. These instruments are included in Level 1
and comprise AIM quoted investments or government securities and
other fixed income securities classified as held at fair value
through profit or loss.
-- Level 2: the fair value of financial instruments that are not
traded in an active market is determined by using valuation
techniques. These valuation techniques maximise the use of
observable market data where it is available and rely as little as
possible on entity specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument
is included in Level 2. The Company held no such instruments in the
current or prior year.
-- Level 3: the fair value of financial instruments that are not
traded in an active market (for example, investments in unquoted
companies) is determined by using valuation techniques such as
earnings multiples. If one or more of the significant inputs is not
based on observable market data, the instrument is included in
Level 3.
Each investment is reviewed at least quarterly to ensure that it
has not ceased to meet the criteria of the level in which it was
included at the beginning of each accounting period. There has been
no transfers between these classifications in the period (2013:
one). The change in fair value for the current and previous year is
recognised through profit or loss.
All items held at fair value through profit or loss were
designated as such upon initial recognition and are subject to
reoccurring valuations on at least a quarterly basis.
Valuation of Investments
Initial Measurement: Financial assets are initially measured at
fair value. The best estimate of the initial fair value of a
financial asset that is either quoted or not quoted in an active
market is the transaction price (i.e. cost).
Subsequent Measurement: The International Private Equity and
Venture Capital (IPEVC) Valuation Guidelines ("the Guidelines")
identify six of the most widely used valuation methodologies for
unquoted investments. The Guidelines advocate that the best
valuation methodologies are those that draw on external, objective
market based data in order to derive a fair value.
Full details of the methods used by the Company were set out on
page 27 of the financial statements for the year ended 31 December
2013, a copy of which can be found at www.yfmep.com. Where
investments are in quoted stocks, fair value is set at the market
price.
The primary methods used for valuing non-quoted investments, and
the key assumptions relating to them are:
Price of Recent investment, reviewed for changes in fair value:
the cost of the investment, adjusted for background factors
specific to the investment, is taken as a reasonable assessment of
the fair value for a period of up to one year. During this period
performance is monitored for evidence of changes to this initial
fair value. Valuations may be re-based following substantial
investment by a third party when this offers evidence that there
has been a change to fair value.
Earnings multiple: The appropriate sector FTSE(R) multiples are
used as a market-based indication of the enterprise value of an
investment company. A discount is applied to the multiple based on
perceived market interest in that company or sector and on any
benefit that may be observed by holding a significant shareholding
or superior rights.
Movements in investments at fair value through profit or loss
during the six months to 30 June 2014 are summarised as
follows:
IFRS 13 measurement Level Level Level
classification 3 1 1
------------------------- ------------- ------------- -------------- ------------ -------------
Unquoted Quoted Total Fixed Total
Investments Equity Quoted Income Investments
Investments and Unquoted Securities
------------------------- ------------- ------------- -------------- ------------ -------------
GBP000 GBP000 GBP000 GBP000 GBP000
Opening cost 13,792 2,061 15,853 888 16,741
Opening valuation
(loss) gain (4) 406 402 2 404
------------------------- ------------- ------------- -------------- ------------ -------------
Opening fair value
at 1 January 2014 13,788 2,467 16,255 890 17,145
------------------------- ------------- ------------- -------------- ------------ -------------
Additions at cost 5,185 318 5,503 475 5,978
Capitalised interest 8 - 8 - 8
Disposal proceeds (359) (492) (851) (1,365) (2,216)
Net profit on disposal* 34 50 84 - 84
Change in fair
value (395) 59 (336) - (336)
------------------------- ------------- ------------- -------------- ------------ -------------
Closing fair value
at 30 June 2014 18,261 2,402 20,663 - 20,663
------------------------- ------------- ------------- -------------- ------------ -------------
Closing cost 18,691 2,160 20,851 - 20,851
Closing valuation
(loss) gain ** (430) 242 (188) - (188)
Closing fair value
at 30 June 2014 18,261 2,402 20,663 - 20,663
------------------------- ------------- ------------- -------------- ------------ -------------
*The net profit on disposal in the table above is GBP84,000
whereas that shown in Statement of Comprehensive Income is
GBP347,000. The difference comprises deferred proceeds of
GBP263,000 in respect of assets which have been disposed and are
not included within the investment portfolio at the period end.
**Following the merger between the Company and British Smaller
Technology Companies VCT plc, a total of GBP975,000 of negative
goodwill was recognised in the investment holding gains and losses
reserve in respect of investments acquired. The relevant amount per
investment is released at the point of disposal to the capital
reserve, At 30 June 2014, a total of GBP30,000 was held on
investments yet to be realised in the investment holding gains and
losses reserve.
Level 3 valuations include assumptions based on non-observable
data, such as discounts applied either to reflect changes in fair
value of financial assets held at the price of recent investment,
or to adjust earnings multiples.
IFRS13 requires disclosure, by class of financial instruments,
if the effect of changing one or more inputs to reasonably possible
alternative assumptions would result in a significant change to
fair value measurement. The portfolio has been reviewed and both
downside and upside alternative assumptions have been identified
and applied to the valuation of each of the unquoted investments.
Applying the downside alternative the value of the unquoted
investments would be GBP1,480,000 (X8.1 per cent) lower. Using the
upside alternative the value would be increased by GBP2,200,000
(12.0per cent).
Of the Company's equity investments, 11.6 per cent are quoted on
AIM (31 December 2013: 15.2 per cent). A five per cent increase in
stock prices as at 30 September 2013 would have increased the net
assets attributable to the Company's shareholders and the total
profit for the year by GBP120,000 (31 December 2013: GBP123,000).
An equal change in the opposite direction would have decreased the
net assets attributable to the Company's shareholders and the total
profit for the period by an equal amount.
Of the Company's equity investments 88.4 per cent are in
unquoted companies held at fair value (December 2013: 84.8 per
cent). The valuation methodology for these investments includes the
application of externally produced FTSE(R) multiples. Therefore the
value of the unquoted element of the portfolio is also indirectly
affected by price movements on the listed market. Those using and
earnings multiple methodology include judgements regarding the
level of discount applied to that multiple. A 10 per cent decrease
in the discount applied would have increased the net assets
attributable to the Company's shareholders and the total profit by
GBP550,000 (4.6 per cent of net assets). A change in the opposite
direction would have decreased net assets attributable to the
Company's shareholders and the total profit for the period by the
same amount.
The total of fair value adjustments below cost made against
investments at 30 June 2014 amounted to GBP275,000 (31 December
2013: GBP524,000).
There have been no individual fair value adjustments downwards
during the period that exceeded five per cent of the total assets
of the Company (31 December 2013: none).
Fixed income securities comprise UK Government stocks and are
classified as financial assets through profit or loss. Their use is
as temporary holdings until capital investment opportunities
arise.
The following disposals took place during the period (all
companies are unquoted unless otherwise stated).
Net Cost Opening Gain Profit
proceeds carrying over (loss)
from value opening on original
Sale as at carrying cost
1 January value
2014
GBP000 GBP000 GBP000 GBP000 GBP000
Loan repayments
Displayplan
Holdings Limited 228 175 191 37 53
GTK (UK) Limited 56 56 56 - -
Bagel Nash Group
Limited 40 40 40 - -
Callstream Group
Limited 35 23 38 (3) 12
----------------------- ---------- ------- ----------- ---------- -------------
359 294 325 34 65
Equity disposals
Pressure Technologies
plc* 200 47 148 52 153
Iomart Group
plc* 97 30 90 7 67
Vianet Group
plc* 45 61 42 3 (16)
Optos plc* 150 80 162 (12) 70
----------------------- ---------- ------- ----------- ---------- -------------
492 218 442 50 274
Total disposals 851 512 767 84 339
Deferred Proceeds
Sirigen Group
Limited (included
in receivables) 263 - - 263 263
----------------------- ---------- ------- ----------- ---------- -------------
Total proceeds
from quoted
and unquoted
investments 1,114 512 767 347 602
Fixed Income
Securities 1,365 1,365 1,365 - -
----------------------- ---------- ------- ----------- ---------- -------------
Total 2,479 1,877 2,132 347 602
----------------------- ---------- ------- ----------- ---------- -------------
*Designates AIM quoted investments
7. Basic and Diluted Net Asset Value per Ordinary Share
The basic and diluted net asset value per ordinary share is
calculated on attributable assets of GBP39,330,000 (30 June 2013
and 31 December 2013: GBP30,258,000 and GBP30,458,000 respectively)
and 62,269,837 (30 June 2013 and 31 December 2013: 46,371,537 and
46,443,563 respectively) ordinary shares in issue at 30 June
2014.
The 1,840,918 (30 June 2013: 1,632,722 and 31 December 2013:
1,777,722) treasury shares have been excluded in calculating the
number of ordinary shares in issue at 30 June 2014. The Company has
no securities that would have a dilutive effect and hence basic and
diluted net asset value per ordinary share are the same.
8. Total Return
Total return per share is calculated on cumulative dividends
paid of 41.5 pence per ordinary share (30 June 2013: 37.0 pence per
ordinary share and 31 December 2013: 39.0 pence per ordinary share)
plus the net asset value as calculated in note 7.
9. Directors
The directors of the Company are: Mr R Last, Mr R M Pettigrew,
and Mr P C Waller.
10. Other Information
Copies of the interim report can be obtained from the Company's
registered office: Saint Martins House, 210-212 Chapeltown Road,
Leeds, LS7 4HZ or from www.bscfunds.com.
11. Interim Dividend for the six months ended 30 June 2014
Further to the announcement of its interim results for the 6
months to 30 June 2013, the Company confirms that an interim
dividend of 2.0 pence per ordinary share ("Interim Dividend") will
be paid on 7 October 2014 to those shareholders on the Company's
register at the close of business on 5 September 2014. The
ex-dividend date for the Interim Dividend will be 3 September
2014.
12. Dividend Re-investment Scheme ("DRIS")
The Company operates a dividend reinvestment scheme ("DRIS").
The latest date for receipt of DRIS elections so as to participate
in the DRIS in respect of the Interim Dividend is the close of
business on 22 September 2014.
For further information, please contact:
David Hall YFM Equity Partners Limited Tel: 0113 294 5039
Gillian Martin Nplus 1 Singer Advisory LLP Tel: 0207 496
3000
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DMGMRGKFGDZM
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