TIDMBSC
RNS Number : 1370W
British Smaller Companies VCT2 Plc
14 August 2015
British Smaller Companies VCT2 plc
Unaudited Interim Results and Interim Management Report
For the 6 months ended 30 June 2015
British Smaller Companies VCT2 plc ("the Company") today
announces its unaudited interim results for the six months to 30
June 2015.
Financial Highlights
-- Increase in total return of 2.1 pence per ordinary share to
108.5 pence per ordinary share (106.4 pence per ordinary share as
at 31 December 2014).
-- Investment portfolio has increased to GBP33.20 million at 30
June 2015, from GBP28.22 million at 31 December 2014 including a
value gain of GBP1.66 million, a 5.9 per cent increase over opening
value.
-- Increase in net asset value per share ("NAV") to 65.0 pence
per ordinary share prior to the payment of dividends during the
period totalling 2.5 pence per ordinary share. This growth was 3.3
per cent of the opening NAV of 62.9 pence per ordinary share.
-- Total cumulative dividends paid since inception of 46.0 pence per ordinary share.
-- 91 per cent invested in qualifying holdings giving
significant headroom relative to the minimum 70 per cent VCT tax
rule test, providing significant resilience to withstand the
current period of uncertainty due to changes in VCT investment
rules.
Chairman's Statement
The stable performance of the UK economy of 2014 has continued
into the current year notwithstanding that since my last Statement
at the end of March we have seen a General Election and a second
budget.
The Company's portfolio has continued to perform well against
this backdrop. The overall value of your Company's investments has
increased by 5.9 per cent since the start of the year despite there
being trading challenges for those exporting to Europe where
businesses have had to increase trading volumes to counteract the
effects of a strong pound. The Company's larger and more
diversified portfolio has also continued to deliver an increasing
level of income. Overall the total return to shareholders has
increased by 2.1 pence per ordinary share.
A further two new investments have been added to the portfolio
in this period, these being Scottish based womenswear brand Ness
(Holdings) Limited and AIM listed Gooch & Housego plc,
amounting to, in aggregate, GBP1.4 million.
Proposed Regulatory Changes
There are a number of proposed changes emanating from the Summer
budget that may restrict the pool of investments available to the
VCT industry as a whole. The detailed legislation relating to these
changes is in the process of being drafted and is expected to be
finalised in the autumn. The board is keeping these changes under
review and will appraise shareholders in due course.
In the meantime there is still an encouraging pipeline of
investment opportunities reflecting the strong demand for equity
funding among smaller UK businesses which we are progressing,
although we might expect some slowing down in gaining HMRC approval
for transactions until the new legislation is finalised.
Financial Results and Dividends
In the six months to 30 June 2015 the Company's total return
increased by 2.1 pence per ordinary share from 106.4 pence per
ordinary share at 31 December 2014 to 108.5 pence per ordinary
share. This equates to an increase of 3.3 per cent on the opening
net assets value at 31 December 2014.
Significant progress has been made by many of the portfolio
companies resulting in a value gain of GBP1.66 million,
representing a 5.9 per cent increase over the opening value and
equivalent to an increase in value for shareholders of 1.9 pence
per ordinary share. The increased income generation from the
existing portfolio contributed a further GBP0.35 million gain net
of costs, equivalent to 0.4 pence per ordinary share.
During the period a final dividend in respect of the year ended
31 December 2014 of 2.5 pence per ordinary share was paid, bringing
the cumulative dividends paid to date to 46.0 pence per ordinary
share.
Your Board remains committed to achieving the objective of a
consistent and, where possible, increasing dividend stream over
time whilst seeking to maintain capital value. For the period to 30
June 2015 the Board has proposed an interim dividend of 2.0 pence
per ordinary share, taking dividends paid over the last year to 4.5
pence per ordinary share, the same as last year, representing 7.2
per cent of net assets per share. It is intended that of the total
interim dividend 0.48 pence per ordinary share will be paid from
revenue reserves and 1.52 pence per ordinary share from capital
reserves, representing unrealised gains. The interim dividend will
be paid on 28 September 2015 to shareholders on the register at 28
August 2015.
Net Asset Value Pence per ordinary GBP000
share
NAV at 31 December 2014 62.9 39,333
Net underlying increase
in portfolio 1.9 1,656
Net income 0.4 350
Buy-backs - (123)
Issue of new shares (0.2) 15,077
---------- --------- -------- -------
2.1 16,960
Dividends paid (2.5) (2,153)
(0.4) 14,807
--------- -------
NAV at 30 June 2015 62.5 54,140
-------
Cumulative dividends paid 46.0
---------
Total Return 108.5
---------
Shareholder Relations
As part of its review of costs, and in line with current
Environmental, Social & Corporate Governance, the Company is
committed to promoting electronic communications with shareholders.
The Board has decided to implement an electronic communications
policy, whereby documents such as the annual report will in future
be disseminated via the website www.bscfunds.com rather than by
post. This will save on printing costs and be more environmentally
friendly. Further details have been included in the letter which
accompanied the recent quarterly shareholder update.
In addition we are refreshing the Company's website. The
emphasis being on providing a comprehensive level of information in
a user-friendly format.
Outlook
Good progress continues to be made across the portfolio to
position businesses to grow and realise shareholder value. The
growth in income generation from the portfolio has added further
resilience to future investment returns.
The recent budget announcements have introduced uncertainty in
the processing of advanced assurances from HMRC in the short term
which is expected to resolve later in the year. Whilst it does seem
that for the VCT industry as a whole there may be some reduction in
the overall pool of investments, your Company has available funds
to invest and a strong pipeline of opportunities which comply with
the new draft VCT regulations. We will continue to take a cautious
approach to protect the tax status of investors and maintain our
strong long-term investment record.
Objectives and Strategy
The Company's objective is to provide investors with an
attractive long-term tax free dividend yield whilst seeking to
maintain and build the capital value of their investment and
maintain the Company's status as a venture capital trust.
The investment strategy of the Company is to create a portfolio
with a mix of companies operating in traditional industries and
those that offer opportunities in the development and application
of innovation. The Company invests in UK businesses across a broad
range of sectors including but not limited to Software, IT &
Telecommunications, Business Services, Manufacturing &
Industrial Services, Retail & Brands and Healthcare in VCT
qualifying and non-qualifying unquoted and AIM traded
securities.
Investment Review
The Company has continued to diversify its portfolio which at 30
June 2015 had a value of GBP33.2 million consisting of GBP30.5
million (91.8 per cent) in unquoted investments and GBP2.7 million
(8.2 per cent) in quoted investments. The strategy to increase the
portfolio diversity is signified insofar as the largest single
investment represents just 5.4 per cent of the net asset value.
Over the six months to 30 June 2015 the portfolio saw an
underlying value gain of GBP1.66 million with good progress being
made across a number of companies. The most significant movements
in valuations in the period were:
-- IO Outsourcing (value gain of GBP0.56 million) following
strong profit growth and new contract wins in the first years
following investment.
-- TeraView Limited (value gain of GBP0.49 million) which closed
a $10 million funding round including a new investment from a US
trade investor.
-- GTK (Holdco) Limited (value gain of GBP0.18 million)
delivered another year of sales and profit growth with a focus on
gradually building average order value, and
-- AB Dynamics plc (value gain of GBP0.17 million) saw further
growth and received planning permission for its factory expansion
plans.
New and Follow-on Investments
In the six months to 30 June 2015 the Company has completed 2
new investments totalling GBP1.40 million as set out in the table
below.
Name of Business Date Amount invested
Company of Investment (GBPm)
--------------------------- ------------------- ---------------- ----------------
Manufacturing
and Industrial
Gooch & Housego plc services January 2015 0.40
--------------------------- ------------------- ---------------- ----------------
Gooch & Housego is a manufacturer of precision optical components
and sub-systems, as well as light measurement instrumentation
and services, based upon key enabling optical technologies.
It designs and manufactures product for the aerospace, defense,
industrial life sciences and scientific research sectors.
------------------------------------------------------------------------------------
Ness (Holdings) Limited Retail & Brands March 2015 1.00
--------------------------- ------------------- ---------------- ----------------
Ness is a womenswear lifestyle retail brand based in Edinburgh
which trades through a chain of 11 profitable retail stores
with an established and loyal customer base. The growth strategy
is to develop the brand and retail proposition through direct
sales via its website and the opening of many new stores throughout
the UK.
------------------------------------------------------------------------------------
The Company also made a follow-on investment of GBP0.26 million
in March 2015 into Brady plc.
As at 30 June 2015 the Company had approved a further GBP1.30
million of investment by way of follow-on and new investment.
Realisation of Investments
During the six months to 30 June 2015 the Company received cash
proceeds of GBP0.51 million relating to the repayment of loan
capital from the Company's portfolio, and GBP0.32 million from the
sale of quoted shareholdings.
Investment Portfolio
Sector Name of Date Current Realised Investment Valuation
Company of initial cost proceeds Valuation plus proceeds
Investment to Date At 30 to Date
June GBP000
GBP000 GBP000 2015
GBP000
------------------ --------------------------- ------------- -------- ---------- ----------- ---------------
Intelligent Office
(via IO Outsourcing
Bus. Services Limited) May 14 1,956 - 2,918 2,918
Healthcare Mangar Health Limited Jan 14 1,640 - 2,082 2,082
DisplayPlan Holdings
Bus. Services Limited Jan 12 292 531 1,822 2,353
Gill Marine Holdings
Retail Limited Sep 13 1,870 - 1,783 1,783
Manufacturing GTK (Holdco) Limited Oct 13 813 337 1,446 1,783
ACC Aviation
(via Newacc (2014)
Bus. Services Limited) Nov 14 1,379 - 1,379 1,379
Business Collaborator
Telecoms Limited Nov 14 1,340 - 1,340 1,340
Harvey Jones Holdings
Retail Limited May 07 1,193 - 1,211 1,211
Springboard Research
Bus. Services Holdings Limited Oct 14 1,186 - 1,186 1,186
Cambrian Park & Leisure
Homes Limited (via
Manufacturing DWFCO 8 Limited) Oct 14 1,167 33 1,167 1,200
------------------ --------------------------- ------------- -------- ---------- ----------- ---------------
Top 10 Unquoted Investments 12,836 901 16,334 17,235
Remaining unquoted portfolio
The Heritage Window
Manufacturing Company Holdco Limited Sep 14 1,268 - 1,142 1,142
Manufacturing Leengate Holdings Limited Dec 13 934 - 1,100 1,100
Retail Ness (Holdings) Limited Mar 15 1,000 - 1,000 1,000
Seven Technologies
Telecoms Holdings Limited Apr 12 1,238 762 994 1,756
Healthcare Immunobiology Limited Jun 03 1,932 - 987 987
Macro Art Holdings
Bus. Services Limited Jun 14 783 56 842 898
Telecoms Intamac Systems Limited Jun 14 750 - 750 750
Telecoms Callstream Group Limited Sep 10 329 265 737 1,002
Wakefield Acoustics
(via Malvar Engineering
Manufacturing Limited) Dec 14 720 - 720 720
Telecoms Power Oasis Limited Nov 11 594 - 594 594
Retail
/ Manufacturing Bagel Nash Group Limited Jul 11 694 133 561 694
Insider Technologies
Telecoms (Holdings) Limited Aug 12 780 - 536 536
Other investments GBP0.5 million
and below 3,792 349 4,169 4,518
----------------------------------------------- ------------- -------- ---------- ----------- ---------------
Total Unquoted portfolio 27,650 2,466 30,466 32,932
-------------------------------------------------------------- -------- ---------- ----------- ---------------
Quoted portfolio
Manufacturing AB Dynamics plc May 13 253 163 529 692
Manufacturing Gooch & Housego plc Jan 15 397 - 525 525
Telecoms Brady plc Dec 10 398 - 507 507
Other investments GBP0.5 million
and below 1,194 707 1,175 1,882
Total quoted portfolio 2,242 870 2,736 3,606
Total portfolio 29,892 3,336 33,202 36,538
Full disposals to date 16,625 22,653 - 22,653
-------------------------------------------------------------- -------- ---------- ----------- ---------------
Total 46,517 25,989 33,202 59,191
-------------------------------------------------------------- -------- ---------- ----------- ---------------
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 2014. 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:
-- Loss of approval as a Venture Capital Trust;
-- Economic;
-- Investment and strategic;
-- Regulatory;
-- Reputational;
-- Operational;
-- Financial;
-- Market/liquidity.
Full details of the principal risks can be found in the
financial statements for the year ended 31 December 2014 on pages
30 and 31, a copy of which is available at www.bscfunds.com.
Directors' Responsibilities Statement
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 and 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.
Richard Last
Chairman
14 August 2015
Unaudited Statement of Comprehensive Income
For the six months ended 30 June 2015
Unaudited Unaudited
6 months ended 30 6 months ended 30
June June 2014
2015
Notes Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gain (loss) on investments
held at fair value - 1,709 1,709 - (336) (336)
(Loss) gain on disposal
of investments - (53) (53) - 347 347
Income 2 965 - 965 543 - 543
---------- ---------- --------- ---------- ---------- ---------
Total Income 965 1,656 2,621 543 11 554
Administrative expenses:
---------- ---------- --------- ---------- ---------- ---------
Investment adviser's fee (98) (295) (393) (75) (225) (300)
Other expenses (222) - (222) (196) - (196)
---------- ---------- --------- ---------- ---------- ---------
(320) (295) (615) (271) (225) (496)
Profit (loss) before taxation 645 1,361 2,006 272 (214) 58
Taxation 3 (76) 76 - (1) 1 -
------------------------------- -------- ---------- ---------- --------- ---------- ---------- ---------
Profit for the period 569 1,437 2,006 271 (213) 58
------------------------------- -------- ---------- ---------- --------- ---------- ---------- ---------
Total comprehensive income
(expense) for the period 569 1,437 2,006 271 (213) 58
------------------------------- -------- ---------- ---------- --------- ---------- ---------- ---------
Basic and diluted earnings
(loss) per ordinary share 5 0.72p 1.81p 2.53p 0.51p (0.40p) 0.11p
------------------------------- -------- ---------- ---------- --------- ---------- ---------- ---------
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 ('IFRSs'). 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') 2014 published by the Association of
Investment Companies.
Unaudited Balance Sheet
As at 30 June 2015
Unaudited Unaudited Audited
30 June 30 June 31 December
Notes 2015 2014 2014
GBP000 GBP000 GBP000
Assets
Non-current assets
Financial assets at fair value
through profit or loss 6 33,202 20,663 28,216
Trade and other receivables 572 297 417
-------------------------------- ------ ---------- ---------- -------------
33,774 20,960 28,633
Current assets
Trade and other receivables 467 572 314
Cash on fixed term deposit 6,000 4,500 -
Cash and cash equivalents 14,078 13,415 10,633
20,545 18,487 10,947
Liabilities
Current liabilities
Trade and other payables (179) (117) (247)
Net current assets 20,366 18,370 10,700
Net assets 54,140 39,330 39,333
-------------------------------- ------ ---------- ---------- -------------
Shareholders' equity
Share capital 8,881 6,411 6,447
Share premium account 13,079 13,736 342
Capital redemption reserve 88 88 88
Other reserve 2 2 2
Merger reserve 5,525 5,525 5,525
Capital reserve 22,324 13,383 24,822
Investment holding gains and
losses 3,340 (158) 1,507
Revenue reserve 901 343 600
Total shareholders' equity 54,140 39,330 39,333
-------------------------------- ------ ---------- ---------- -------------
Net asset value per ordinary
share 7 62.5p 63.2p 62.9p
-------------------------------- ------ ---------- ---------- -------------
Signed on behalf of the Board
Richard Last
Chairman
14 August 2015
Unaudited Statement of Changes in Equity
For the six months ended 30 June 2015
Investment
Share holding
Share premium Other Merger Capital gains Revenue Total
capital account reserves* reserve reserve and losses reserve equity
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
before taxation - - - - - - 272 272
Capital expenses - - - - (225) - - (225)
Investment holding
loss on
investments
held at fair
value - - - - - (336) - (336)
Realisation of
investments - - - - 347 - - 347
Taxation - - - - 1 - (1) -
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
Total
comprehensive
income (expense)
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 - - - - (1,542) - (7) (1,549)
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
Total transactions
with owners 1,589 8,810 - - (1,578) - (7) 8,814
Realisation of
negative goodwill - - - - 13 (13) - -
Realisation of
prior year
investment
holding gains - - - - 257 (257) - -
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
At 30 June 2014 6,411 13,736 90 5,525 13,383 (158) 343 39,330
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
Revenue profit
before taxation - - - - - - 425 425
Capital expenses - - - - (296) - - (296)
Investment holding
gain on
investments
held at fair
value - - - - - 447 - 447
Realisation of
investments - - - - 523 - - 523
Taxation - - - - 6 - (6) -
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
Total
comprehensive
income for the
period - - - - 233 447 419 1,099
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
Issue of shares
- DRIS 36 171 - - - - - 207
Issue costs - (10) - - - - - (10)
Purchase of own
shares - - - - (39) - - (39)
Dividends - - - (1,083) - (162) (1,245)
Cancellation of
share premium
account - net
of costs - (13,555) - - 13,546 - - (9)
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
Total transactions
with owners 36 (13,394) - - 12,424 - (162) (1,096)
Realisation of
prior year
investment
holding losses - - - - (1,218) 1,218 - -
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
At 31 December
2014 6,447 342 90 5,525 24,822 1,507 600 39,333
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
Unaudited Statement of Changes in Equity
For the six months ended 30 June 2015
Investment
Share holding
Share premium Other Merger Capital gains Revenue Total
capital account reserves* reserve reserve and losses reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 31 December
2014 6,447 342 90 5,525 24,822 1,507 600 39,333
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
Revenue profit
before taxation - - - - - 645 645
Capital expenses - - - - (295) - - (295)
Investment holding
loss on
investments
held at fair
value - - - - - 1,709 - 1,709
Realisation of
investments - - - - (53) - - (53)
Taxation - - - - 76 - (76) -
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
Total
comprehensive
(expense) income
for the period - - - - (272) 1,709 569 2,006
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
Issue of ordinary
share capital 2,366 13,056 - - - - - 15,422
Issue of shares
- DRIS 68 329 - - - - - 397
Issue costs of
ordinary shares - (648) - - (94) - - (742)
Purchase of own
shares - - - - (123) - - (123)
Dividends - - - - (1,885) - (268) (2,153)
Total transactions
with owners 2,434 12,737 - - (2,102) - (268) 12,801
Realisation of
prior year
investment
holding losses - - - - (124) 124 - -
At 30 June 2015 8,881 13,079 90 5,525 22,324 3,340 901 54,140
------------------- ---------- ---------- ------------ ---------- ---------- ------------ ---------- ---------
* Other reserves include the capital redemption reserve and
other reserve.
Reserves available for distribution
Under the Companies Act 2006 the capital reserve and the revenue
reserve are distributable reserves. The table below shows amounts
that are available for distribution.
Capital Revenue Total
reserve reserve
GBP000 GBP000 GBP000
Distributable reserves as above 22,324 901 23,225
Less : Interest not yet distributable - (487) (487)
: Deferred proceeds (85) - (85)
: Cancelled share premium not yet distributable (1,343) - (1,343)
--------------------------------------------------------- ---------- ---------- --------
Reserves available for distribution** 20,896 414 21,310
--------------------------------------------------------- ---------- ---------- --------
** The revenue reserve of GBP414,000 is only distributable once
the interim financial statements are filed at Companies House.
The capital reserve (GBP22,324,000) and the revenue reserve
(GBP901,000) are both distributable reserves and total
GBP23,225,000 (30 June 2014: GBP13,726,000 and 31 December 2014:
GBP25,422,000), a decrease of GBP2,197,000 in the period since 31
December 2014 (30 June 2014: GBP921,000 decrease). The directors
also take into account the level of investment holding gains and
losses reserve and the future requirements of the Company when
determining the level of dividend payments.
Of the potentially distributable reserves of GBP23,225,000 shown
above, GBP487,000 (2014: GBP182,000) relates to interest receivable
in 2018 and 2019, GBP85,000 (2014: GBP115,000) of deferred proceeds
receivable in 2016, and GBP1,343,000 of share premium (2014: Nil)
which becomes distributable from 1 January 2018.
On filing the interim financial statements at Companies House,
the reserves available for distribution will be GBP21,310,000.
Unaudited Statement of Cash Flows
For the six months ended 30 June 2015
Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
GBP000 GBP000 GBP000
Net cash inflow (outflow) from operating
activities 209 (262) (293)
---------------------------------------------- ---------- ---------- -------------
Cash flows from investing activities
Purchase of financial assets at fair
value through profit or loss (4,161) (5,978) (14,071)
Proceeds from sale of financial assets
at fair value through profit or loss 582 2,114 3,679
Deferred consideration 14 - 345
Cash placed on fixed term deposit (6,000) - -
Cash received back from fixed term
deposit - - 4,500
Net cash outflow from investing activities (9,565) (3,864) (5,547)
---------------------------------------------- ---------- ---------- -------------
Cash flows from financing activities
Issue of ordinary shares 15,126 10,509 10,510
Cost of ordinary shares (446) (328) (350)
Purchase of own shares (123) - (75)
Dividends paid (2,153) (1,549) (2,719)
Shares issued under DRIS 397 229 436
Share premium cancellation costs - - (9)
Net cash inflow from financing activities 12,801 8,861 7,793
---------------------------------------------- ---------- ---------- -------------
Net increase in cash and cash equivalents 3,445 4,735 1,953
Cash and cash equivalents at the
beginning of the period 10,633 8,680 8,680
Cash and cash equivalents at the
end of the period 14,078 13,415 10,633
---------------------------------------------- ---------- ---------- -------------
Notes to the Unaudited Condensed Financial Statements
1. General information, basis of preparation and principal accounting policies
The 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 2014 do not constitute full financial statements
and have been extracted from the Company's financial statements for
the year ended 31 December 2014. 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 2014.
The financial statements for the year ended 31 December 2014
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, 10, 11, 14 and 15 and amendments to IAS16, 27, 28, 32 and
38. 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 2015 the Company held cash balances
and fixed term deposits with a combined value of GBP20,078,000.
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 ended 6 months ended
30 June 30 June
2015 2014
GBP000 GBP000
Income from investments
- Dividends from unquoted companies 240 24
- Dividends from AIM quoted companies 24 19
-------------------------------------------- ---------------- ----------------
264 43
- Interest on loans to unquoted companies 627 421
- Fixed interest Government securities - 7
-------------------------------------------- ---------------- ----------------
Income from investments held at fair
value through profit or loss 891 471
Interest on bank deposits 74 72
965 543
-------------------------------------------- ---------------- ----------------
3. Taxation
Unaudited 6 months Unaudited 6 months
ended 30 June 2015 ended
30 June 2014
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Profit (loss) before taxation 645 1,361 2,006 272 (214) 58
------------------------------------- -------- -------- ------- -------- -------- -------
Profit (loss) before taxation
multiplied by standard
small company rate of corporation
tax in UK of 20% (2014:
20%) 129 272 401 54 (43) 11
Effect of:
UK dividends received (53) - (53) (8) - (8)
Non taxable profits on
investments - (331) (331) - (2) (2)
Excess management expenses - (17) (17) (45) 44 (1)
------------------------------------- -------- -------- ------- -------- -------- -------
Tax charge (credit) (credit) 76 (76) - 1 (1) -
------------------------------------- -------- -------- ------- -------- -------- -------
The Company has no provided, or unprovided, deferred tax
liability in either period.
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 ended 6 months ended Year ended
30 June 2015 30 June 2014 31 December 2014
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Final dividend
for the year ended
31 December 2014
of 2.5p (2013 year
end 2.5p) per ordinary
share 268 1,885 2,153 7 1,542 1,549 7 1,542 1,549
Interim dividend
for the year ended
31 December 2014
of 2.0p per ordinary
share - - - - - - 162 1,083 1,245
268 1,885 2,153 7 1,542 1,549 169 2,625 2,794
---------------------------------- -------- -------- ------- -------- -------- ------- -------- -------- ----------
An interim dividend of 2.0 pence per ordinary share, amounting
to approximately GBP1,734,000 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
GBP2,006,000 (30 June 2014: profit of GBP58,000) and 79,407,872 (30
June 2014: 53,185,770) ordinary shares being the weighted average
number of ordinary shares in issue during the period.
The basic and diluted revenue earnings per ordinary share is
based on the revenue profit attributable to equity shareholders of
GBP569,000 (30 June 2014: GBP271,000) and 79,407,872 (30 June 2014:
53,185,770) ordinary shares being the weighted average number of
ordinary shares in issue during the period.
The basic and diluted capital earnings (loss) per ordinary share
is based on the capital profit attributable to equity shareholders
of GBP1,437,000 (30 June 2014: loss GBP213,000) and 79,407,872 (30
June 2014: 53,185,770) ordinary shares being the weighted average
number of ordinary shares in issue during the period.
During the period the Company allotted 677,522 new ordinary
shares in respect of its dividend re-investment scheme and
23,665,149 new ordinary shares under the offer for subscription
with British Smaller Companies VCT plc.
The Company has repurchased 217,981 of its own shares in the
period and these shares are held in the capital reserve. The total
of 2,128,003 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.
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
Advisor Agreement. No such shares have been issued or are currently
expected to be issued.
6. Financial Assets at Fair Value through Profit or Loss
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 have
been no transfers between these classifications in the period
(2014: none). 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 55 of the financial statements for the year ended 31 December
2014, a copy of which can be found at www.bscfunds.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 classification Level 3 Level 1
------------------------------------ ------------- -------------- ------------------
Unquoted Quoted Equity Total Investments
Investments Investments
------------------------------------ ------------- -------------- ------------------
GBP000 GBP000 GBP000
Opening cost 24,593 2,146 26,739
Opening valuation gain (loss) 1,495 (18) 1,477
------------------------------------ ------------- -------------- ------------------
Opening fair value at 1 January
2015 26,088 2,128 28,216
Additions at cost 3,500 661 4,161
Capitalised interest 1 - 1
Disposal proceeds (514) (316) (830)
Net profit on disposal* 31 (86) (55)
Change in fair value 1,360 349 1,709
------------------------------------ ------------- -------------- ------------------
Closing fair value at 30 June
2015 30,466 2,736 33,202
------------------------------------ ------------- -------------- ------------------
Closing cost 27,650 2,242 29,892
Closing valuation gain ** 2,816 494 3,310
Closing fair value at 30 June
2015 30,466 2,736 33,202
------------------------------------ ------------- -------------- ------------------
*The net loss on disposal in the table above is GBP55,000
whereas that shown in the Statement of Comprehensive Income is
GBP53,000. The difference comprises the gain of GBP2,000 arising on
deferred proceeds 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 2015, 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 GBP2,177,000 (7.1 per cent) lower. Using the
upside alternative the value would be increased by GBP2,522,000
(8.3 per cent).
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 GBP1,214,000 (2.2 per cent of net assets).
A change in the opposite direction would have decreased the net
assets attributable to the Company's shareholders and the total
profit by GBP1,131,000 (2.1 per cent of net assets).
Of the Company's equity investments, 8.2 per cent are quoted on
AIM (31 December 2014: 8.0 per cent). A five per cent increase in
stock prices as at 30 June 2015 would have increased the net assets
attributable to the Company's shareholders and the total profit for
the year by GBP137,000 (31 December 2014: GBP106,000). 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 91.8 per cent are in
unquoted companies held at fair value (December 2014: 92.0 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 an
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 (1.0 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.
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 2014: none)
The Company has completed investments totalling GBP2.50 million
into five acquisition vehicles.
The following disposals took place during the period (all
companies are unquoted unless otherwise stated).
Net proceeds Cost Opening Gain (loss) Profit
from Sale carrying over opening (loss)
value carrying on original
as at value cost
1 January
2015
------------------------------ ------------- ------- ----------- -------------- -------------
GBP000 GBP000 GBP000 GBP000 GBP000
Loan repayments
DisplayPlan Holdings Limited 303 233 272 31 70
GTK (Holdco) Limited 103 103 103 - -
Bagel Nash Group Limited 40 40 40 - -
Macro Art Holdings Limited 35 35 35 - -
Cambrian Park & Leisure
Homes Limited 33 33 33 - -
------------------------------ ------------- ------- ----------- -------------- -------------
514 444 483 31 70
------------------------------ ------------- ------- ----------- -------------- -------------
Equity disposals
Hargreaves Services plc* 160 325 262 (102) (165)
Cambridge Cognition Holdings
plc* 156 240 140 16 (84)
------------------------------ ------------- ------- ----------- -------------- -------------
316 565 402 (86) (249)
------------------------------ ------------- ------- ----------- -------------- -------------
Total disposals 830 1,009 885 (55) (179)
------------------------------ ------------- ------- ----------- -------------- -------------
Deferred Proceeds
Primal Pictures Limited 12 - 12 - 12
DxS Limited 2 - - 2 2
------------------------------ ------------- ------- ----------- -------------- -------------
Total 844 1,009 897 (53) (165)
------------------------------ ------------- ------- ----------- -------------- -------------
*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 GBP54,140,000 (30 June 2014
and 31 December 2014: GBP39,330,000 and GBP39,333,000 respectively)
and 86,681,566 (30 June 2014 and 31 December 2014: 62,269,837 and
62,556,876 respectively) ordinary shares in issue at 30 June
2015.
The 2,128,003 (30 June 2014: 1,840,918 and 31 December 2014:
1,910,022) treasury shares have been excluded in calculating the
number of ordinary shares in issue at 30 June 2015. 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.
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
Advisor 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 30 June 2015, 31 December
2014 or 30 June 2014.
8. Total Return
Total return per share is calculated on cumulative dividends
paid of 46.0 pence per ordinary share (30 June 2014: 41.5 pence per
ordinary share and 31 December 2014: 43.5 pence per ordinary share)
plus the net asset value as calculated in note 7.
9. Directors
The directors of the Company are: Richard Last, Robert Martin
Pettigrew, and Peter Charles Waller.
10. Other Information
Copies of the interim report can be obtained from the Company's
registered office: 5th Floor, Valiant Building, 14 South Parade,
Leeds, LS1 5QS or from www.bscfunds.com.
11. Interim Dividend for the six months ended 30 June 2015
Further to the announcement of its interim results for the 6
months to 30 June 2015, the Company confirms that an interim
dividend of 2.0 pence per ordinary share ("Interim Dividend") will
be paid on 28 September 2015 to those shareholders on the Company's
register at the close of business on 28 August 2015. The
ex-dividend date for the Interim Dividend will be 27 August
2015.
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 14 September 2015.
For further information, please contact:
David Hall YFM Equity Partners Limited Tel: 0113 244 1000
James Maxwell 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
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