RNS Number:6270W
British Smaller Tech Cos VCT PLC
17 March 2004
BRITISH SMALLER TECHNOLOGY COMPANIES VCT PLC
UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED
31 DECEMBER 2003
British Smaller Technology Companies VCT plc ("the Company"), the venture
capital trust specialising in growing smaller technology companies, today
announces its unaudited preliminary results for the year to 31 December 2003.
Financial results
Unaudited Audited
2003 2002
Income #88,000 #126,000
Net revenue loss before andafter tax #(432,000) #(394,000)
Total loss per share (9.04)p (27.70)p
Net assets #5.99m #7.23m
NAV per share 43.6p 52.6p
Commenting on the results, the Chairman, Sir Andrew Hugh Smith, said that,
although the result is disappointing, especially given the encouraging
performance in the first half of the year, he remains confident that there are
still a number of companies in the portfolio that are expected to produce
significant returns in the longer term. The continued improvement in the economy
is a factor which reinforces this optimism.
Investments
The net movement on the portfolio valuation in the year was a reduction of
#669,000. Sir Andrew commented on the revised British Venture Capital
Association (BVCA) valuation guidelines that became effective on 1 August 2003
and which the Company has adopted. He said that, although it is difficult to
make precise comparisons, with the exception of one investment, the change from
the former guidelines to the revised basis had not materially affected the
reported net asset value.
The one exception was Primal Pictures Limited, where the board was of the view
that none of the methodologies under the revised BVCA guidelines resulted in a
fair value for this investment. On this basis, the board considered macro
economic factors as well as those specific to the business itselfand the sector
in which it operates compared to the time of the last valuation in order to
estimate any level of impairment. The net effect was to reduce the valuation of
Primal Pictures by #161,000, equivalent to 1.17 pence per share.
Financial Results and Dividend
The total return for the year was a loss of 9.04 pence per share with a net
asset value at 31 December 2003 of 43.6 pence per share. The investment policy,
as set out in the original prospectus, of investing in early stage, pre-profit
businesses means that revenue returns are expected to remain at a low level in
the short to medium term.
The aim of the Company is to realise capital growth from the portfolio in order
to enhance shareholder value and, due to the deficit on the revenue account, no
dividend will be paid for the year just ended.
Commenting on the prospects for the portfolio, David Hall, Managing Director of
Yorkshire Fund Managers, the Investment Adviser to the Company, said, "It is
satisfying to see those companies which are more advanced beginning to move
towards, or into, profit. Should the level of economic and business sentiment
continue to improve we expect to see an increasing level of corporate
transactions, which will improve the likelihood of achieving realisations from
investments in the short to medium term.
Revision to Investment Advisory Fees
The Chairman reported that agreement has been reached in principle with
Yorkshire Fund Managers for a substantial reduction in the annual investment
advisory fee. This will reduce the Company's cost base by #200,000 and ensure
sufficient cash resources for the foreseeable future. The Directors intend to
revise the overall terms of the Investment Advisory Agreement and, to this end,
are in discussions with Yorkshire Fund Managers. Pending such agreement,
Yorkshire Fund Managers has undertaken that its investment advisory fee will not
exceed #200,000 plus VAT, on an annualised basis, with effect from 1 January
2004.
Mr Halladded, "I believe that this change will allow the Company an additional
degree of freedom in encouraging the portfolio to mature so that exits are made
at the best value." He also confirmed that there would be no reduction in the
level of resource allocated to managing the portfolio.
Shareholder Relations
Sir Andrew reported that the Court had now approved the share buy-back
arrangements agreed by Shareholders at the last Annual General Meeting. He said
that the Company was now in a position to buy back a limited number of shares
where the directors consider this to be in the best interests of other
Shareholders.
John Ashcroft
It was with deep sadness that Sir Andrew formally reported the death of John
Ashcroft who had been a non-executive director of this Company since its initial
launch. Paying tribute to Mr Ashcroft, he said, "John had been fighting against
illness for some time, yet his energy and perceptive contributions to boardroom
debates continued, as always, to bea source of inspiration to me and his fellow
directors. He will be greatly missed by all who knew him."
Outlook
Commenting on the Company's prospects, Sir Andrew said that, "The mood into 2004
has remained optimistic. There is a rising increasein public issues by good
quality smaller companies. In the short term, the environment can only be
positive for portfolio liquidity. Some timing lag is inherent for an unquoted
portfolio but, in the medium term, we expect to see realisation opportunities
for a number of companies, either through IPO or trade sale, as competitors or
new market entrants look to exploit proven technology. "
He added, "The deferment of a large proportion of the investment advisory fee
will allow realisations to be managed to achieve optimum value without the need
for any forced sale disposals."
For further information, please contact:
David Hall Yorkshire Fund Managers Limited Tel: 0161 832 7603
Alan Davies Yorkshire Fund Managers Limited Tel: 0113 2945000
Keith Williams Brewin Dolphin Securities Limited Tel: 0113 241 0130
Chairman's Statement
During 2003 the technology sector in the US and Europe began to show signs of
recovery as part of a general economic improvement. During the year our
benchmark index, the FTSE techMARK All Share, rose 42%. With greater confidence
in the quoted market and an improving outlook for new share issues, we expect to
find more opportunities to realise some of the investments in our portfolio and,
by doing so, to create value for our shareholders.
In my interim report to 30 June 2003 I reported a slight increase in net asset
value since the last annual report to 31 December 2002. Over the second half of
the year the performance of the investment portfolio has been mixed. There have
been early indications of corporate acquisition interest in some of the investee
companies and progress continues to be made by a number of businesses. However,
it has still been necessary to write down the valuation on certain investments
where the business has not developed as well as previously anticipated, where it
requires further funding and your board has taken the view that it does not
merit further support, or due to the revisions in the valuation guidelines under
which VCTs report. The net effect has been to reduce the net asset value to 43.6
pence per share, a fall of 17% over the year as a whole.
This result is disappointing, especially given the encouraging performance in
the first half of the year, but, over the longer term, there are a number of
businesses within the portfolio that we expect to produce significant returns to
your Company. This optimism is reinforced by the continued improvement in the
economy.
Investment valuations
I gave notice in my interim report that, with effect from 1 August 2003, the
British Venture Capital Association (BVCA) has revised its guidelines for the
valuation of venture capital investments. Your board has adopted these revised
guidelines and the investment portfolio at 31 December 2003 has been valued
accordingly. For early stage companies that are typical of this portfolio, the
main change is a move away from a cost base and provisioning in standard banding
of 25% increments to applying more specifically defined methodologies, which aim
to produce reliable fair valuations. Although it is difficult to make precise
comparisons, the directors' view is that, with the exception of one investment,
this change has not had a materialeffect on the reported net asset value.
The one exception is Primal Pictures Limited. At this stage in Primal Pictures'
development, your board are of the view that none of the valuation methodologies
suggested in the BVCA guidelines result in a fair value for the business at this
point in time. In these circumstances, under the revised guidelines, the
directors are obliged to consider whether any impairment should be applied to
the last valuation and this must take into account general macroeconomic
factors as well as those more specific to the individual business. This
impairment judgement is, by nature, intuitive. Under these revised guidelines,
Primal Pictures shows a fall in value of #161,000 since the last audited
results, which equates to 1.17 pence per share. Your board remain confident
about the longer term prospects for this investment.
This revision to the valuation methodology represents a change in the basis of
measurement and not a change in accounting policy. Therefore, the prior year
comparative figures have not been restated.
Operations
The only investment in the second half of the year was a further #10,000 in
Amino Holdings Limited. This followed the #65,000 invested earlier in the year
into this company. Amino Holdings, which has developed an Ethernet-based set-top
box, has made strong progress in 2003 on the back of a low cost, feature rich
product range and an ability to rapidly customise its boxes to incorporate
additional communication protocols without any changes to the hardware. In light
of the speed of adoption of its products and the potential size of the
opportunity that presented itself, the company decided to raise further capital
to strengthen its balance sheet and provide additional working capital.
Over the year as a whole, a total of #247,000 was invested into three existing
portfolio businesses. Each of these investments was part of a much larger
syndication. Your Company remains fully invested and your board and its
investment adviser, Yorkshire Fund Managers, are focusing on achieving
realisations to grow shareholder value.
Financial Results
The total return for the year was a loss of 9.04 pence per Ordinary share. As I
explained in my last annual report to shareholders, the nature of the investment
policy set out in the original prospectus and the fact that the portfolio is
substantially invested in early stage unquoted companies means that revenue
returns are expected to remain at a low level inthe short to medium term.
Apart from the focus on potential realisations, your board's other main
objective has been to minimise cash expenditure so that sufficient liquid
resources are retained to allow your Company to operate effectively. To this
end, your board has been in discussions with Yorkshire Fund Managers to
restructure the cost base. I am pleased to inform you that agreement has been
reached in principle to reduce the investment advisory fee. After taking account
of irrecoverableVAT, this will represent an annual saving of #200,000. The
Directors intend to revise the overall terms of the Investment Advisory
Agreement and, to this end, are in discussions with Yorkshire Fund Managers.
This will link future fees, which, subject to prior Shareholder approval, may be
partly paid in shares, to cash realisations and will be announced to
Shareholders as soon as it has been finalised. Pending such agreement, Yorkshire
Fund Managers has undertaken that its investment advisory fee will not exceed
#200,000 plus VAT, on an annualised basis, with effect from 1 January 2004.
Warrants
A notice was sent to Shareholders and Warrantholders on 20 February 2004
alerting them to the dates on which the Warrants can be exercised. This is the
last year in which Warrants can be exercised, after which time they will lapse.
Shareholder Relations
As I reported in September 2003, the proposals to enable your Company to buy
back its own shares were approved by Shareholders at theAnnual General Meeting
held on 15 May 2003. I am pleased to confirm that Court approval has been
granted and the Company is now in a position to buy back a limited number of
shares where the directors determine it is in the best interests of other
shareholders to do so taking account of the price per share and the cash
reserves of the Company at the time.
In the year under review, Yorkshire Fund Managers held a total of four investor
workshops that were well attended, and received, by many Shareholders across the
three venture capital trusts under its management. The forum provides a good
opportunity for Shareholders to get a better understanding of the companies in
the portfolio, the strategic and operating issues of these VCTs and changes to
the legislative environment in which this type of company operates. Your board
and Yorkshire Fund Managers are keen to continue this programme and the next
workshop will be held on 21 April 2004 in London.
John Ashcroft
It is with deep sadness that I have to report to you the death of John Ashcroft
who had been an independent non-executive director of this Company and of
British Smaller Technology Companies VCT 2 plc since the initial issue. John had
been fighting against illness for some time, yet his energy and perceptive
contributions to boardroom debates continued, as always, to be a source of
inspiration to me and his fellow directors. Our heartfelt condolences go out to
his wife, Alison, and family. He will be greatly missed by all who knew him.
Outlook
The economic conditions and the Stock Market recovery during 2003 have provided
an improved environment for smaller, growing companies. The mood into 2004 has
remained optimistic. There is a general consensus that UK interest rates will
continue to rise in 2004 but as long as this is kept to forecast levels it
should not unduly dampen general economic activity or the current increase being
seen in corporate finance activity.
There is a rising increase ininterest in public issues by good quality smaller
companies. The main risk to business confidence is likely to come from the US
where the market is perceived as overvalued and the presidential elections may
cause nervousness in the markets. If this does happen, I would expect it to feed
back into the UK economy.
In the short term, the environment can only be positive for portfolio liquidity.
Some timing lag is inherent for an unquoted portfolio but, in the medium term,
we expect to see realisation opportunities for a number of companies, either
through IPO or trade sale, as competitors or new market entrants look to exploit
proven technology. The deferment of a large proportion of the investment
advisory fee provides your Company with sufficient cash resources for the
foreseeable future. This will allow realisations to be managed to achieve
optimum value without the need for any forced sale disposals.
Sir Andrew Hugh Smith
Chairman
Unaudited Statement of Total Return(incorporating the Revenue Account)
for the year ended 31 December 2003
Unaudited Year ended Audited Year ended
31 December 2003 31 December 2002
Notes Revenue Capital Total Revenue Capital Total
#000 #000 #000 #000 #000 #000
Net losses on investments - (680) (680) - (3,281) (3,281)
Income 88 - 88 126 - 126
Investment advisory fee (304) (131) (435) (304) (131) (435)
Other expenses (216) - (216) (216) - (216)
------ ------ ------ ------ ------ ------
Net loss on ordinary activities
before taxation (432) (811) (1,243) (394) (3,412) (3,806)
Tax on ordinary activities 2 - - - - - -
------ ------ ------ ------ ------ ------
Net loss on ordinary activities
after taxation (432) (811) (1,243) (394) (3,412) (3,806)
Dividends 3 - - - - - -
------ ------ ------ ------ ------ ------
Transfer from reserves (432) (811) (1,243) (394) (3,412) (3,806)
====== ====== ====== ====== ====== ======
Return per Ordinary share
Basic and diluted 4 (3.14)p (5.90)p (9.04)p(2.87)p (24.83)p (27.70)p
Notes
The revenue column of this statement is the profit and loss account of the
Company.
All activity has arisen from continuing operations.
There is no difference between the net revenue loss on ordinary activities
before taxation and the transfer from revenue reserves in either year and their
historic cost equivalents.
Unaudited Balance Sheet
at 31 December 2003
Unaudited Audited
Note 2003 2002
#000 #000
Fixed Assets
Investments 5,445 5,867
-------- --------
Current Assets
Debtors 24 42
Investments 534 1,287
Cash 19 71
-------- --------
577 1,400
Creditors: amounts payable within one year (34) (39)
-------- --------
Net Current Assets 543 1,361
-------- --------
Total Net Assets 5,988 7,228
======== ========
Capital and Reserves
Called-up share capital 1,375 1,375
Share premium account 11,354 11,351
Capital redemption reserve 2 2
Capital reserve
Realised (657) (563)
Unrealised (5,496) (4,779)
-------- --------
(6,153) (5,342)
Warrant reserve 335 336
Other reserve 3 2
Revenue reserve (928) (496)
-------- --------
Equity shareholders' funds 5,988 7,228
======== ========
Net asset value per Ordinary share 5 43.6p 52.6p
======== ========
Unaudited Cash Flow Statement
for the year ended 31 December 2003
Unaudited Audited
Year ended Year ended
31 December 2003 31 December 2002
#000 #000
Net cash outflow from operating activities (550) (539)
-------- --------
Investing activities
Purchase of investments (247) (932)
-------- --------
Net cash outflow before management of liquid
resources and financing (797) (1,471)
-------- --------
Management of liquid resources
Proceeds from the sale of fixed interest
Government stocks 742 1,310
-------- --------
Financing
Issue of Ordinary shares on exercise of warrants 3 17
-------- --------
Decrease in cash in the year (52) (144)
======== ========
Notes to Financial Statements
for the year ended 31 December 2003
1. Basis of Reporting
This preliminary announcement, which has been prepared on a basis consistent
with the previous year, does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. This announcement has been
agreed with the Company's auditors for release.
The information for the year ended 31 December 2002 is an extract from the
statutory accounts to that date which have been delivered to the Registrar of
Companies. Those accounts included an audit report which was unqualified and
which did not contain a statement under Section 237(2) or (3) of the Companies
Act 1985. The statutory accounts for the year ended 31 December 2003, upon which
the auditors have still to report, will be delivered to the Registrar following
the Company's Annual General Meeting.
2. Tax on Ordinary activities
Year ended 31 December 2003 Year ended 31 December 2003
Revenue Capital Total Revenue Capital Total
#000 #000 #000 #000 #000 #000
Corporation tax payable at 19% - - - - - -
(2002: 19.25%) ------ ------ ------ ------ ------ ------
3. Dividends
There is no proposed dividend in the year (2002: #nil).
4. Return per Ordinary share
The basic revenue return per Ordinary share is based on net revenue loss from
ordinary activities after tax of #432,000 (2002: #394,000) and 13,748,000 (2002:
13,732,000) shares being the weighted average number of shares in issue during
the year.
The basic capital return per Ordinary share is based on net loss from ordinary
activities of #811,000 (2002: #3,412,000) and 13,748,000 (2002: 13,742,000)
shares being the weighted average number of shares in issue during the year.
The Company has no securities that would have a dilutive effect in either year
and hence basic and diluted return per share are the same.
5. Net Asset Value per Ordinary share
The basic and diluted net asset value per Ordinary share is calculated on
attributable assets of #5,988,000 (2002: #7,228,000) and 13,748,000 (2002:
13,746,000) shares in issue at the year end.
The Company has no securities that would have a dilutive effect in either year
and hence basic and diluted net asset value per share are the same.
6. Annual General Meeting
Copies of the full financial statements for the period ended 31 December 2003
will be available to the public at the registered office of the Company at Saint
Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZ thereafter. The Company's
AGM is due to be held at 12.45p.m. on 6 May 2004 at 23 Berkeley Square, London,
W1J 6HE.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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