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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
British Smaller Companies Vct2 Plc | LSE:BSC | London | Ordinary Share | GB0005001796 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 56.50 | 55.50 | 57.50 | 56.50 | 56.50 | 56.50 | 3,564 | 00:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Investors, Nec | 8.95M | 6.25M | 0.0272 | 20.77 | 129.78M |
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.
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