TIDMBSC
RNS Number : 1316Y
British Smaller Companies VCT2 Plc
17 August 2018
British Smaller Companies VCT2 plc
Unaudited Interim Results and Interim Management Report
For the six months ended 30 June 2018
British Smaller Companies VCT2 plc (the "Company") today
announces its unaudited interim results for the six months to 30
June 2018.
Highlights
-- Increase in Total Return of 1.5 pence per ordinary share to
115.8 pence per ordinary share at 30 June 2018 (114.3 pence per
ordinary share as at 31 December 2017).
-- Investment of GBP5.5 million into four new and two follow-on investments during the period.
-- Offer for subscription fully subscribed from existing
shareholders, raising gross funds of GBP4.4 million.
-- Proposed interim dividend of 1.5 pence per ordinary share in
respect of the year ending 31 December 2018.
-- Intention to launch a prospectus offer of new ordinary shares
for subscription in the 2018/19 tax year. Further announcements
will be made in due course.
-- Richard Last to step down from the roles of Chairman and
director at the Annual General Meeting in 2019.
CHAIRMAN'S STATEMENT
Total Return for the six months was 1.5 pence per ordinary
share, which was 2.6 per cent of the net asset value at 31 December
2017 and your Company's portfolio generated a return of 1.6 pence
per ordinary share, which was 4.2 per cent of its opening
value.
New Investment
Following the disruption to the investment pipeline previously
reported, arising from delays in gaining HMRC's advance assurance,
their process has subsequently shown a marked improvement.
Consequently, in the first six months of 2018, your Company
completed new and follow-on investments totalling GBP5.5 million
comprising four new investments and two follow-on investments.
These were:
In March 2018 GBP1.0 million was invested into Ncam Technologies
Limited. Ncam develops award-winning augmented reality technology
which is utilised globally by broadcast, film and episodic
broadcast TV productions. The funds will be used to support the
development of new products, invest in the team, and help the
business extend its reach into new territories, especially the US,
where a new office opening is planned for 2018.
Also in March 2018 your Company invested GBP2.0 million into
Eikon Holdco Limited, a cutting edge, end-to-end, digital
post-production service provider for the film and broadcast
industry based in London. Clients include Paramount Pictures,
Twentieth Century Fox, Sony Pictures Entertainment, Warner Bros,
Universal Pictures, CBS and Netflix. Eikon will use the investment
to build a new state of the art studio in Los Angeles as well as
continuing to invest in the development of technology to enhance
the service delivery to customers.
In April 2018 your Company made a new investment of GBP0.9
million into Hutchinson Networks Limited, a leading provider of
multi-vendor IT and network solutions to clients globally.
Hutchinson will utilise the money to fund additional marketing and
operational resources to accelerate international growth in a
growing market.
During May 2018 GBP1.2 million was invested into Arcus Global
Limited, a provider of cloud-based software solutions to local and
national public sector organisations. The funding will support the
continued growth of the business; building resource in technology
development, sales and customer services. Together, this will
enable Arcus to further expand its range of software solutions to
help the public sector to increase its use of digital technologies
and transform services.
Follow-on investments were made into existing portfolio
companies, including an additional investment of GBP0.4 million
into Matillion Limited which was part of a large secondary funding
round supported by two well-known US investors.
Financial Results and Dividends
The movement in Total Return is set out in the table below:
Pence per
Total Return ordinary share
Total Return at 1 January 2018 114.3
Net underlying increase in portfolio 1.6
Issue/buy-back of shares (0.1)
Increase in Total Return* 1.5
-------------------------------------------- -------- --------
Total Return at 30 June 2018 115.8
-------------------------------------------- -------- --------
* Total Return movement represents an increase of 2.6 per cent
(annualised 5.4 per cent) over the opening net asset value of 58.8
pence per ordinary share.
The portfolio produced a value gain of GBP1.7 million,
representing a 4.2 per cent increase over the opening value and
equivalent to an increase in value for shareholders of 1.6 pence
per ordinary share.
Adjusting for one-off items income for the first half is
comparable to the same period last year. Although interest income
has remained in line with the previous year, as loans to new
investments have replaced those repaid by the portfolio, much of
the new interest income will be paid out on exit.
Investments made since the changes to the VCT rules in November
2015 now comprise GBP13.1 million (30 per cent) of the unquoted
portfolio as at 30 June 2018, with GBP31.2 million (70 per cent) of
investments made prior to the rule changes. In general, the more
recent additions to the portfolio are re-investing their profits
for growth, which means that the investments comprise mainly equity
instruments.
As part of your Board's commitment to maintaining a sustainable
level of dividends a final dividend of 1.5 pence per ordinary share
in respect of the year ended 31 December 2017 was paid in the
period, bringing the cumulative dividends paid to date to 57.0
pence per ordinary share.
Your Board has proposed an interim dividend of 1.5 pence per
ordinary share for the year ending 31 December 2018 which, when
combined with the final dividend in respect of the year ended 31
December 2017, will bring total dividends paid in the current
financial year to 3.0 pence per ordinary share (2017: 3.0 pence per
share). The interim dividend will be paid on 28 September 2018 to
shareholders on the register on 31 August 2018.
The movement in net asset value per ordinary share and the
dividends paid are set out in the table below:
GBP000 Pence per
Net Asset Value ordinary share
NAV at 1 January 2018 59,056 58.8
Net underlying increase in portfolio 1,681 1.6
Net profit after expenses 40 -
Issue/buy-back of shares 4,069 (0.1)
5,790 1.5
NAV before the payment of dividends 64,846 60.3
Dividends paid (1,612) (1.5)
-------------------------------------- ------ -------- -------- --------
NAV at 30 June 2018 63,234 58.8
-------------------------------------- ------ -------- -------- --------
Shareholder Relations
As part of the Board's continuing dialogue with shareholders,
the 23rd shareholder workshop was held in conjunction with British
Smaller Companies VCT plc at the Honourable Artillery Company on 16
May 2018. There was a presentation from the CEO of one of our
newest investments, Ncam Technologies Limited, alongside short
videos about our other new portfolio companies. The Company's
performance, portfolio and outlook were discussed in talks given by
the Investment Adviser, followed by a question and answer
session.
As shareholders may be aware the General Data Protection
Regulations ("GDPR") came into force on 25 May 2018. GDPR provides
a greater level of protection over personal information and the
Company and the Investment Adviser have taken all necessary steps
to comply with its requirements. A revised Privacy Notice has been
published and this can be found on your Company's website at
www.bscfunds.com.
A large number of shareholders (83 percent) now receive
documents such as the annual report via the website,
www.bscfunds.com, rather than by post. This saves on printing
costs, as well as being more environmentally friendly, and your
Board would encourage all shareholders to do this.
Your Company's website www.bscfunds.com, provides a
comprehensive level of information in what I hope is a
user-friendly format and is refreshed on a regular basis.
Regulatory Developments
It is pleasing that the European Commission has confirmed its
decision to approve the recent amendments to the VCT rules. This
includes an increase in the annual investment limit for Knowledge
Intensive Companies to GBP10 million and your Company intends to
take advantage of this change at the earliest opportunity.
The Company's Investment Adviser continues to engage with HMRC
and has responded to HMRC's recent consultation on the proposed
changes to the advance assurance process, especially the proposal
to allow VCTs to rely on their advisers on the need to obtain
advance assurance for a potential investment.
Fundraising
Having reviewed your Company's likely funding requirements, the
Board is considering a full prospectus fundraising during the
current tax year. The quantum and mechanism of the fundraising will
be communicated nearer to the launch.
Board Composition
Having enjoyed being a director of your Company for over
seventeen years and Chairman since 1 January 2008, I have decided,
in these days of increasing corporate governance where one not only
needs to comply but be seen to comply with the new standards, to
stand down as Chairman and director of your Company at the 2019
Annual General Meeting which is usually held in May. I should like
to thank my colleagues on the Board and David Hall and his
excellent team at YFM Equity Partners for all their help and
support over the years: it has been a pleasure to work with such a
professional team.
Outlook
The revised VCT rules have been approved by the European
Commission including the ability to invest up to GBP10 million in
any one year into Knowledge Intensive Companies. This change is
welcomed by this Board and the industry more widely. Whilst the
future trading relationship with the EU is at this time not as
clear as we would like these particular rule changes will benefit
VCTs and their ability to invest in UK small businesses
irrespective of any wider Brexit impact.
The more mature investments in the portfolio continue to perform
well and opportunities to crystallise value are constantly
reviewed.
The level of investment in the first half of the year is
encouraging and investments made under the new rules now make up 30
per cent of the portfolio. It is pleasing that Matillion, one of
your Company's most recent investments, has attracted further
investment from two well-established specialist US venture
investors.
Your Board remains optimistic that the level of investment can
be sustained over the medium term and therefore we hope that
shareholders will take the opportunity to add to their investment
in the Company in the fundraising planned for later in the
year.
OBJECTIVES AND STRATEGY
The Company's objective is to grow Total Return over the medium
to long-term whilst maintaining 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 that offer opportunities in the development
and application of innovation.
The Company will invest in UK businesses across a broad range of
sectors including but not limited to software, information
technology and telecommunications, retail and brands, business
services, manufacturing and industrial services and healthcare.
These investments will primarily be in unquoted UK companies which
meet the definition of a Qualifying Investment, in order to
maintain the Company's VCT status. It is anticipated that the
majority of these businesses will be re-investing their profits for
growth and the investments will, therefore, comprise mainly equity
instruments.
INVESTMENT REVIEW
The Company's portfolio at 30 June 2018 had a value of GBP46.63
million consisting of GBP44.25 million (95 per cent) in unquoted
investments and GBP2.38 million (5 per cent) in quoted investments.
The largest single investment represents 5.8 per cent of the net
asset value.
Over the six months to 30 June 2018 the portfolio saw an
underlying value gain of GBP1.62 million from the ongoing portfolio
comprising GBP1.39 million from the unquoted portfolio and GBP0.23
million from the quoted portfolio.
The most significant upward movements in the period were:
GBP1.12 million
* ACC Aviation GBP1.07 million
GBP0.52 million
* Matillion Limited
* Deep-Secure Ltd
These gains were offset by companies which saw profits impacted
by difficult trading conditions:
down GBP0.43
* DisplayPlan Holdings Limited million
down GBP0.31
million
* Seven Technologies Holdings Limited down GBP0.31
million
* Intelligent Office UK
New and Follow-on Investments
In the six months to June 2018 the Company has invested GBP5.06
million into new investments and GBP0.47 million into follow-on
investments, including GBP0.38 million into Matillion Limited as
part of an GBP18 million series B fundraising that was supported by
two well-known US investors, Sapphire Ventures and Scale Venture
Partners.
The new investments comprise:
-- GBP2.00 million into Eikon Holdco Limited
-- GBP1.20 million into Arcus Global Limited
-- GBP0.98 million into Ncam Technologies Limited and
-- GBP0.88 million into Hutchinson Networks Limited.
Realisation of Investments
During the six months to 30 June 2018 the Company generated
GBP1.00 million from disposals and repayments of loans. This
included the full exit from its AIM investment in Allergy
Therapeutics plc.
A detailed analysis of all investments realised in the period to
30 June 2018 can be found in note 6 to this interim report.
INVESTMENT PORTFOLIO
The top 10 investments had a combined value of GBP25.7 million,
55.1 per cent of the total portfolio.
Name of Company Sector Name of Company Current Investment Proceeds Realised and
cost Valuation to date unrealised
at 30 June value
2018 to date
GBP000 GBP000 GBP000 GBP000
Matillion Limited Software Nov 16 1,778 3,667 - 3,667
ACC Aviation (via Newacc Business
(2014) Limited) Services Nov 14 145 3,622 1,233 4,855
Intelligent Office UK
(IO Outsourcing Limited Business
t/a Intelligent office) Services May 14 1,956 2,995 - 2,995
Mangar Health Limited Healthcare Jan 14 1,640 2,921 - 2,921
KeTech Enterprises
Limited Software Nov 15 2,000 2,624 - 2,624
Gill Marine Holdings
Limited Retail Sep 13 1,870 2,052 - 2,052
Business Collaborator
Limited Software Nov 14 1,340 2,004 - 2,004
Eikon Holdco Limited Software Mar 18 2,000 2,000 - 2,000
GTK (Holdco) Limited Manufacturing Oct 13 146 1,945 1,204 3,149
Springboard Research Business
Holdings Limited Services Oct 14 1,765 1,883 - 1,883
Total top 10 investments 14,640 25,713 2,437 28,150
Remaining unquoted
portfolio
Deep-Secure Limited Software Dec 09 500 1,790 - 1,790
Leengate Holdings
Limited Manufacturing Dec 13 934 1,532 - 1,532
Arcus Global Limited Software May 18 1,200 1,200 - 1,200
Friska Limited Retail Jul 17 1,200 1,200 - 1,200
Sipsynergy
(via Hosted Network
Services Limited) Software Jun 16 1,309 1,022 - 1,022
Ncam Technologies
Limited Software Mar 18 977 977 - 977
Traveltek Group Holdings
Limited Software Oct 16 980 968 - 968
Immunobiology Limited Healthcare Jun 03 2,582 920 - 920
Wakefield Acoustics
(via Malvar Engineering
Limited) Manufacturing Dec 14 720 898 41 939
Hutchinson Networks
Limited Software Apr 18 880 880 - 880
Macro Art Holdings Business
Limited Services Jun 14 480 798 359 1,157
Biz2Mobile Limited Software Oct 16 1,000 722 - 722
DisplayPlan Holdings Business
Limited Services Jan 12 70 681 820 1,501
GBP0.5 million and below Other investments 7,371 4,954 1,371 6,325
------------------------- ------------------------------------ -------- ------------ --------- ----------------
Total unquoted investments 34,843 44,255 5,028 49,283
--------------------------------------------------------------- -------- ------------ --------- ----------------
Quoted portfolio
AB Dynamics plc Manufacturing May 13 49 588 628 1,216
EKF Diagnostics plc Healthcare Jun 11 437 514 - 514
Iomart Group plc Software May 11 119 512 209 721
GBP0.5 million and below Other investments 292 765 838 1,603
------------------------- ------------------------------------ -------- ------------ --------- ----------------
Total quoted investments 897 2,379 1,675 4,054
--------------------------------------------------------------- -------- ------------ --------- ----------------
Total portfolio 35,740 46,634 6,703 53,337
Full disposals to date 22,885 - 28,455 28,455
--------------------------------------------------------------- -------- ------------ --------- ----------------
Total investment portfolio 58,625 46,634 35,158 81,792
--------------------------------------------------------------- -------- ------------ --------- ----------------
The charts on page 14 of the interim report show the composition
of the portfolio as at 30 June 2018 by industry sector, age of
investment, investment instrument and the value compared to
cost.
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 2017. 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 of the 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 2017 on pages
27 and 28, a copy of which is available at www.bscfunds.com.
DIRECTOR'S 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 of these interim financial statements.
By order of the Board
Richard Last
Chairman
17 August 2018
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2018
Unaudited 6 months ended Unaudited 6 months ended
30 June 2018 30 June 2017
Notes Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gains on investments held at fair value - 1,616 1,616 - 221 221
Income 2 859 - 859 741 - 741
Gains on disposal of investments 6 - 65 65 - 600 600
Total income 859 1,681 2,540 741 821 1,562
Administrative expenses:
--------- --------- ------- --------- --------- -------
Investment Adviser's fee (147) (444) (591) (140) (421) (561)
Other expenses (228) - (228) (229) - (229)
--------- --------- ------- --------- --------- -------
(375) (444) (819) (369) (421) (790)
----------------------------------------------- ------ --------- --------- ------- --------- --------- -------
Profit before taxation 484 1,237 1,721 372 400 772
Taxation 3 (41) 41 - (42) 42 -
----------------------------------------------- ------ --------- --------- ------- --------- --------- -------
Profit for the period 443 1,278 1,721 330 442 772
----------------------------------------------- ------ --------- --------- ------- --------- --------- -------
Total comprehensive income for the period 443 1,278 1,721 330 442 772
----------------------------------------------- ------ --------- --------- ------- --------- --------- -------
Basic and diluted earnings per ordinary share 5 0.42p 1.21p 1.63p 0.33p 0.45p 0.78p
----------------------------------------------- ------ --------- --------- ------- --------- --------- -------
The Total column of this statement represents the Company's
Unaudited 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' (issued in November 2014 and updated in February
2018 with consequential amendments - "SORP") published by the
Association of Investment Companies.
UNAUDITED BALANCE SHEET
as at 30 June 2018
Notes Unaudited Unaudited Audited
30 June 30 June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
Assets
Non-current assets
Financial assets at fair value through profit or loss 6 46,634 38,692 40,423
Trade and other receivables 1,004 863 825
------------------------------------------------------- ------ ---------- ---------- -------------
47,638 39,555 41,248
Current assets
Trade and other receivables 462 530 392
Cash on fixed term deposit 1,988 1,988 1,988
Cash and cash equivalents 13,318 17,508 15,681
------------------------------------------------------- ------ ---------- ---------- -------------
15,768 20,026 18,061
Liabilities
Current liabilities
Trade and other payables (172) (206) (253)
------------------------------------------------------- ------ ---------- ---------- -------------
Net current assets 15,596 19,820 17,808
------------------------------------------------------- ------ ---------- ---------- -------------
Net assets 63,234 59,375 59,056
Shareholders' equity
Share capital 11,252 10,389 10,450
Share premium account 4,073 20,579 257
Capital redemption reserve 88 88 88
Other reserve 2 2 2
Merger reserve 5,525 5,525 5,525
Capital reserve 29,745 14,376 32,198
Investment holding gains and losses 10,925 7,021 9,090
Revenue reserve 1,624 1,395 1,446
------------------------------------------------------- ------ ---------- ---------- -------------
Total shareholders' equity 63,234 59,375 59,056
------------------------------------------------------- ------ ---------- ---------- -------------
Net asset value per ordinary share 7 58.8p 59.0p 58.8p
------------------------------------------------------- ------ ---------- ---------- -------------
UNAUDITED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2018
Share Share Other Capital Investment Revenue Total
capital premium reserves* reserve holding reserve equity
account gains
and
losses
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
At 31 December 2016 9,652 16,902 5,615 15,621 7,077 1,242 56,109
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
Revenue return for
the period - - - - - 372 372
Capital expenses - - - (421) - - (421)
Investment holding
gain on investments
held at fair value - - - - 221 - 221
Realisation of investments
in the period - - - 600 - - 600
Taxation - - - 42 - (42) -
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
Total comprehensive
income for the period - - - 221 221 330 772
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
Issue of ordinary
share capital 679 3,571 - - - - 4,250
Issue of shares
- DRIS 58 268 - - - - 326
Issue costs of ordinary
shares** - (162) - (10) - - (172)
Purchase of own
shares - - - (399) - - (399)
Dividends - - - (1,334) - (177) (1,511)
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
Total transactions
with owners 737 3,677 - (1,743) - (177) 2,494
Realisation of prior
year investment
holding gains - - - 277 (277) - -
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
At 30 June 2017 10,389 20,579 5,615 14,376 7,021 1,395 59,375
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
Revenue return for
the period - - - - - 314 314
Capital expenses - - - (445) - - (445)
Investment holding
gain on investments
held at fair value - - - - 1,988 - 1,988
Realisation of investments
in the period - - - (560) - - (560)
Taxation - - - 31 - (31) -
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
Total comprehensive
(expense) income
for the period - - - (974) 1,988 283 1,297
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
Issue of shares
- DRIS 61 271 - - - - 332
Issue costs of ordinary
shares** - (14) - - - - (14)
Cancellation of
share premium account,
net of costs - (20,579) - 20,569 - - (10)
Purchase of own
shares - - - (415) - - (415)
Dividends - - - (1,277) - (232) (1,509)
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
Total transactions
with owners 61 (20,322) - 18,877 - (232) (1,616)
Realisation of prior
year investment
holding losses - - - (81) 81 - -
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
At 31 December 2017 10,450 257 5,615 32,198 9,090 1,446 59,056
----------------------------- --------- --------- ----------- --------- ----------- --------- --------
Revenue return
for the period - - - - - 484 484
Capital expenses - - - (444) - - (444)
Investment holding
gain on investments
held at fair value - - - - 1,616 - 1,616
Realisation of
investments in
the period - - - 65 - - 65
Taxation - - - 41 - (41) -
---------------------------- --------- --------- ----------- --------- ----------- --------- --------
Total comprehensive
(expense) income
for the period - - - (338) 1,616 443 1,721
---------------------------- --------- --------- ----------- --------- ----------- --------- --------
Issue of ordinary
share capital 737 3,663 - - - - 4,400
Issue of shares
- DRIS 65 294 - - - - 359
Issue costs of
ordinary shares** - (141) - (5) - - (146)
Purchase of own
shares - - - (544) - - (544)
Dividends - - - (1,347) - (265) (1,612)
---------------------------- --------- --------- ----------- --------- ----------- --------- --------
Total transactions
with owners 802 3,816 - (1,896) - (265) 2,457
Realisation of
prior year investment
holding losses - - - (219) 219 - -
---------------------------- --------- --------- ----------- --------- ----------- --------- --------
At 30 June 2018 11,252 4,073 5,615 29,745 10,925 1,624 63,234
---------------------------- --------- --------- ----------- --------- ----------- --------- --------
*Other reserves include the capital redemption reserve, the
merger reserve and the other reserve, which are
non-distributable.
**Issue costs include both fundraising costs (where applicable)
and costs incurred from the Company's DRIS.
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 reserve Revenue reserve Total
GBP000 GBP000 GBP000
Distributable reserves 29,745 1,624 31,369
Less : Interest and dividends not yet distributable - (1,423) (1,423)
: Cancelled share premium not yet distributable (20,237) - (20,237)
---------------------------------------------------------- ---------------- ---------------- ---------
Reserves available for distribution* 9,508 201 9,709
---------------------------------------------------------- ---------------- ---------------- ---------
* subject to filing these interim financial statements at
Companies House.
The capital reserve (GBP29,745,000) and the revenue reserve
(GBP1,624,000) are both distributable reserves. These reserves
total GBP31,369,000, representing a decrease of GBP2,275,000 in the
period since 31 December 2017. The directors also take into account
the level of the 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 GBP31,369,000 shown
above, GBP1,423,000 relates to interest and dividends receivable
from 2019 onwards and GBP20,237,000 to cancelled share premium
which becomes distributable from 1 January 2019 onwards (see
below).
Total share premium previously cancelled will be available for
distribution from the following dates.
GBP000
1 January 2019 12,995
1 January 2020 3,565
1 January 2021 3,677
------------------------------------------------ -------
Cancelled share premium not yet distributable 20,237
------------------------------------------------ -------
UNAUDITED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2018
Notes Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP000 GBP000 GBP000
Profit before taxation 1,721 772 2,069
Decrease in trade and other payables (176) (95) (45)
(Increase) decrease in trade and other receivables (81) 83 73
Gains on disposal of investments (65) (600) (40)
Gains on investments held at fair value (1,616) (221) (2,209)
Capitalised interest and dividends - - (59)
----------------------------------------------------------------------- ------ ---------- ---------- -------------
Net cash outflow from operating activities (217) (61) (211)
----------------------------------------------------------------------- ------ ---------- ---------- -------------
Cash flows from investing activities
Purchase of financial assets at fair value through profit or loss 6 (5,534) (571) (2,371)
Proceeds from sale of financial assets at fair value through profit or
loss 6 931 1,770 3,479
Deferred consideration - - 34
Cash maturing from fixed term deposit - 1,052 1,049
Net cash (outflow) inflow from investing activities (4,603) 2,251 2,191
----------------------------------------------------------------------- ------ ---------- ---------- -------------
Cash flows from financing activities
Issue of ordinary shares 4,380 4,230 4,230
Costs of ordinary share issues* (126) (153) (166)
Purchase of own shares (544) (399) (814)
Share premium cancellation costs - - (10)
Dividends paid 4 (1,253) (1,186) (2,365)
Net cash inflow from financing activities 2,457 2,492 875
----------------------------------------------------------------------- ------ ---------- ---------- -------------
Net (decrease) increase in cash and cash equivalents (2,363) 4,682 2,855
----------------------------------------------------------------------- ------ ---------- ---------- -------------
Cash and cash equivalents at the beginning of the period 15,681 12,826 12,826
----------------------------------------------------------------------- ------ ---------- ---------- -------------
Cash and cash equivalents at the end of the period 13,318 17,508 15,681
----------------------------------------------------------------------- ------ ---------- ---------- -------------
*Issue costs include both fundraising costs and expenses
incurred from the Company's DRIS.
EXPLANATORY NOTES TO THE UNAUDITED CONDENSED 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; and
-- the half year statements have been prepared in accordance
with IAS 34 'Interim financial reporting' and the Disclosure and
Transparency Rules of the Financial Conduct 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 2017 do not constitute full financial statements
and have been extracted from the Company's financial statements for
the year ended 31 December 2017. 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 2017. New standards coming into force during the period
have not had a material impact on these interim financial
statements.
The financial statements for the year ended 31 December 2017
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 SORP is
consistent with the requirements of IFRS, the financial statements
have been prepared in compliance with the recommendations of the
SORP.
Standards, amendments to standards and interpretations have been
issued which are effective for the current reporting period. These
include IFRS 9, IFRS 15, and amendments to IFRS 2 and IFRS 10. The
Company has carried out an assessment and considers that these
standards, amendments and interpretations do not affect the
Company's accounting policies, results or net assets. In particular
the Company is able to continue to classify its investments at fair
value through profit and loss under IFRS 9, and consequently does
need to apply the impairment model.
The financial statements are presented in sterling and all
values are rounded to the nearest thousand (GBP000), except where
stated.
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 2018 the Company held cash balances
and fixed term deposits with a combined value of GBP15,306,000.
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 ended
30 June 30 June
2018 2017
GBP000 GBP000
Income from investments
- Dividends from unquoted companies 263 151
- Dividends from AIM quoted companies 8 6
------------------------------------------------------------------- ---------- ----------
271 157
- Interest on loans to unquoted companies 527 525
------------------------------------------------------------------- ---------- ----------
Income from investments held at fair value through profit or loss 798 682
Interest on bank deposits 61 59
------------------------------------------------------------------- ---------- ----------
859 741
------------------------------------------------------------------- ---------- ----------
3 Taxation
Unaudited 6 months ended Unaudited 6 months ended
30 June 2018 30 June 2017
----------------------------- -----------------------------
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Profit before taxation 484 1,237 1,721 372 400 772
-------------------------------------------------------- --------- --------- ------- --------- --------- -------
Profit before taxation multiplied by the blended
standard small company rate of corporation
tax in UK of 19.0% (2017: 19.25%) 92 235 327 72 77 149
Effect of:
UK dividends received (51) - (51) (30) - (30)
Non-taxable profits on investments - (319) (319) - (158) (158)
Excess expenses - 43 43 - 39 39
-------------------------------------------------------- --------- --------- ------- --------- --------- -------
Tax charge (credit) 41 (41) - 42 (42) -
-------------------------------------------------------- --------- --------- ------- --------- --------- -------
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 2018 30 June 2017 31 December 2017
--------------------------- --------------------------- ---------------------------
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 2017 of
1.5p (2016: 1.5p) per
ordinary share 265 1,347 1,612 177 1,334 1,511 177 1,334 1,511
Interim dividend for the year
ended 31 December 2017 of
1.5p per ordinary share - - - - - - 232 1,277 1,509
------------------------------- -------- -------- ------- -------- -------- ------- -------- -------- -------
265 1,347 1,612 177 1,334 1,511 409 2,611 3,020
------------------------------- -------- -------- ------- -------- -------- ------- -------- -------- -------
Shares allotted under DRIS (359) (326) (658)
Unclaimed dividends - 1 3
------------------------------- -------- -------- ------- -------- -------- ------- -------- -------- -------
Dividends paid in the
Statement of Cash Flows 1,253 1,186 2,365
------------------------------- -------- -------- ------- -------- -------- ------- -------- -------- -------
An interim dividend of 1.5 pence per ordinary share, amounting
to approximately GBP1.61 million, 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
GBP1,721,000 (30 June 2017: GBP772,000) and 105,882,952 (30 June
2017: 99,223,205) 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
GBP443,000 (30 June 2017: GBP330,000) and 105,882,952 (30 June
2017: 99,223,205) ordinary shares being the weighted average number
of ordinary shares in issue during the period.
The basic and diluted capital earnings per ordinary share is
based on the capital profit attributable to equity shareholders of
GBP1,278,000 (30 June 2017: GBP442,000) and 105,882,952 (30 June
2017: 99,223,205) ordinary shares being the weighted average number
of ordinary shares in issue during the period.
During the period the Company allotted 655,669 new ordinary
shares in respect of its dividend re-investment scheme and
7,366,700 new ordinary shares of 10 pence each under the offer for
subscription launched on 11 January 2018, which raised gross
proceeds of GBP4.40 million.
The Company has repurchased 974,500 of its own shares in the
period and these shares are held in the capital reserve. The total
of 4,980,851 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
Adviser Agreement. No such shares have been issued or are currently
expected to be issued. Consequently basic and diluted earnings per
ordinary share are equivalent at 30 June 2018, 31 December 2017 and
30 June 2017.
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 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 or sales multiples. If one or more of the significant
inputs is not based on observable market data, the instrument is
included in Level 3. The majority of the Company's investments fall
into this category.
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
(2017: 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.
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 (IPEV) 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 53 of the financial statements for the year ended 31 December
2017, 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: This represents the cost of the investment or the price at
which a significant amount of new investment has been made by an
independent third party adjusted, if necessary, for factors
relevant to the background of the specific investment. The value of
the investment is assessed for changes or events that would imply
either a reduction or increase to its fair value through comparison
of financial, technical and marketing milestones set at the time of
investment. Where it is considered that the fair value no longer
approximates to the cost of the recent investment an estimated
adjustment to the cost, based on objective data, will be made to
the investment's carrying value.
-- Earnings multiple: A multiple that is appropriate and
reasonable, given the risk profile and earnings growth prospects of
the underlying company, is applied to the maintainable earnings of
that company. The multiple is adjusted to reflect any risk
associated with lack of marketability and to take account of the
differences between the investee company and the benchmark company
or companies.
-- Sales multiples and industry valuation benchmarks: Where
appropriate comparator companies can be identified, multiples of
revenues may be used as a valuation benchmark.
Movements in investments at fair value through profit or loss
during the six months to 30 June 2018 are summarised as
follows:
IFRS 13 measurement classification Level 3 Level 1 Total
Unquoted Quoted Investments
Investments Equity
Investments
GBP000 GBP000 GBP000
Opening cost 30,115 1,248 31,363
Opening valuation gain 8,026 1,034 9,060
-------------------------------------- ------------- ------------- -------------
Opening fair value at 1 January 2018 38,141 2,282 40,423
Additions at cost 5,534 - 5,534
Disposal proceeds (807) (124) (931)
Net loss on disposal - (8) (8)
Change in fair value 1,387 229 1,616
-------------------------------------- ------------- ------------- -------------
Closing fair value at 30 June 2018 44,255 2,379 46,634
-------------------------------------- ------------- ------------- -------------
Closing cost 34,843 897 35,740
Closing valuation gain 9,412 1,482 10,894
-------------------------------------- ------------- ------------- -------------
Closing fair value at 30 June 2018 44,255 2,379 46,634
-------------------------------------- ------------- ------------- -------------
The net loss on disposal in the table above is GBP8,000 whereas
that shown in the Statement of Comprehensive Income is a profit of
GBP65,000. The difference comprises the gain of GBP73,000 arising
on deferred proceeds in respect of assets which have been disposed
of and are not included within the investment portfolio at the
period end.
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. Each unquoted portfolio company 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 GBP3,697,000 (8.4 per cent)
lower. Using the upside alternative the value would be increased by
GBP3,525,000 (8.0 per cent).
Of the Company's investments, 95 per cent are in unquoted
companies held at fair value (31 December 2017: 94 per cent). The
valuation methodology for these investments includes the
application of externally produced FTSE(R) PE 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 GBP3,133,000 (5.0 per cent of net assets). An equal
change in the opposite direction would have decreased net assets
attributable to the Company's shareholders and the total profit by
GBP3,133,000 (5.0 per cent of net assets).
Of the Company's equity investments, 5 per cent are quoted on
AIM (31 December 2017: 6 per cent). A 5 per cent increase in stock
prices as at 30 June 2018 would have increased the net assets
attributable to the Company's shareholders and the total profit for
the period by GBP119,000 (31 December 2017: GBP114,000). 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.
There have been no individual fair value adjustments downwards
during the period that exceeded 5 per cent of the total assets of
the Company (31 December 2017: none).
The following disposals and loan repayments took place during
the period (all companies are unquoted unless otherwise
stated).
Net Cost Opening Gain (loss) Profit
proceeds carrying over (loss)
from sale value as at opening on
1 January carrying original
2018 value cost
GBP000 GBP000 GBP000 GBP000 GBP000
Unquoted investments
ACC Aviation (via NewACC (2014) Limited) 615 615 615 - -
GTK (Holdco) Limited 149 149 149 - -
Macro Art Holdings Limited 43 43 43 - -
807 807 807 - -
-------------------------------------------- ----------- ------- ------------- ------------ ----------
Quoted investments
Allergy Therapeutics plc 124 351 132 (8) (227)
124 351 132 (8) (227)
-------------------------------------------- ----------- ------- ------------- ------------ ----------
Total from disposals in the period 931 1,158 939 (8) (227)
-------------------------------------------- ----------- ------- ------------- ------------ ----------
Revaluation of deferred consideration:
Selima Holding Company Ltd 73 - - 73 73
-------------------------------------------- ----------- ------- ------------- ------------ ----------
Total from quoted and unquoted investments 1,004 1,158 939 65 (154)
-------------------------------------------- ----------- ------- ------------- ------------ ----------
The proceeds in the table above total GBP1,004,000, whereas that
shown in the Statement of Cash Flows is GBP931,000. The difference
comprises deferred consideration which is expected to be received
after 30 June 2018.
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 GBP63,234,000 (30 June 2017
and 31 December 2017: GBP59,375,000 and GBP59,056,000 respectively)
and 107,538,444 (30 June 2017 and 31 December 2017: 100,634,746 and
100,490,575 respectively) ordinary shares in issue at 30 June
2018.
The 4,980,851 (30 June 2017 and 31 December 2017: 3,255,746 and
4,006,351) treasury shares have been excluded in calculating the
number of ordinary shares in issue at 30 June 2018.
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
Adviser Agreement. No such shares have been issued or are currently
expected to be issued. Consequently, basic and diluted net asset
values are equivalent at 30 June 2018, 31 December 2017 and 30 June
2017.
8 Total Return
Total Return per share is calculated on cumulative dividends
paid of 57.0 pence per ordinary share (30 June 2017: 54.0 pence per
ordinary share and 31 December 2017: 55.5 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 2018
Further to the announcement of its interim results for the six
months to 30 June 2018, the Company confirms that an interim
dividend of 1.5 pence per ordinary share ("Interim Dividend") will
be paid on 28 September 2018 to those shareholders on the Company's
register at the close of business on 31 August 2018. The
ex-dividend date for these dividends will be 30 August 2018.
12. Dividend Re-investment Scheme ("DRIS")
The Company operates a dividend re-investment 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 2018.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU No. 596/2014). Upon the
publication of this announcement via Regulatory Information Service
this inside information is now considered to be in the public
domain.
For further information, please contact:
David Hall YFM Private Equity Limited Tel: 0113 244 1000
Jonathan Becher Panmure Gordon (UK) Limited Tel: 0207 886 2715
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DDLBFVVFBBBL
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