British Smlr Comp 2 - Half-year Report
20/09/2022 09:30
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RNS Number : 9593Z British Smaller Companies VCT2 Plc 20 September 2022
British Smaller Companies VCT2 plc
Unaudited Interim Results and Interim Management Report
for the six months ended 30 June 2022
British Smaller Companies VCT2 plc (the "Company") today announces its
unaudited interim results for the six months ended 30 June 2022.
HIGHLIGHTS
· Total Return increased by 0.3p to 139.8p per share
· Two new investments and four follow-on investments totalling £5.7
million were completed during the period. Subsequent to the period end, four
follow-on investments totalling £2.4 million completed, bringing the total
invested this year to £8.1 million, following the £6.1 million invested in
the full year to 31 December 2021
· Net Asset Value at 30 June 2022 of 60.3p per share (31 December
2021: 61.5p) following payment of a 1.5p dividend per share on 6 May 2022
· Fully subscribed offer raised net proceeds of £24.2 million
· The Board has declared a second interim dividend of 1.5p per share
in respect of the year ending 31 December 2022, which will bring total
dividends paid in the current financial year to 3.0p per share
CHAIRMAN'S STATEMENT
In recent updates, I have discussed how the Company has enjoyed a strong
performance, driven by the accelerating transition of many areas of the
economy to have a greater focus on technology-led solutions, as a result of
the Covid-19 pandemic. However, since the start of the year sentiment
towards technology stocks has cooled, as inflationary concerns have driven up
interest rates in the western world.
When set against this backdrop, it is pleasing to report that the Company has
continued to grow, recording a 0.3 pence total return in the period. This
current resilience in a challenging environment arises from the portfolio's
significant business-to-business focus, with clients continuing to adopt and
use tools and services delivered by portfolio companies even as the economic
environment is becoming more challenging.
This continuing performance has seen a number of the investments within the
portfolio seeking to extend their growth plans, with the Company supportive of
providing further long term funding to businesses with growth potential that
can deliver value through economic cycles. This has resulted in further
investment of £2.7 million into four portfolio companies in the period. At
the same time, the Company has added two new investments, totalling £3.0
million. Subsequent to the period end, a further £2.4 million has also been
invested into four portfolio companies, taking the total invested so far this
year to £8.1 million, following the £6.1 million invested in the full year
to 31 December 2021.
Financial Results
The portfolio generated a return of £2.4 million in the period, driven by
positive revaluations from a number of companies, particularly those based in
UK regions outside of London. The movement in net asset value ("NAV") per
ordinary share and the dividends paid are set out in the table below. The
allotment of shares from the 2021/22 fundraising reduces total return per
share as the fundraising was priced at the 30 September 2021 NAV per share but
allotted shortly after 31 December 2021 for operational purposes.
Pence per ordinary share £000
NAV at 31 December 2021 61.5p 87,375
Net gain arising from investment portfolio 1.3p 2,364
Incentive fee accrual (0.2p) (363)
Net operating costs (0.5p) (838)
Issue/buy-back of new shares (0.3p) 23,816
Total Return in period 0.3p 24,979
NAV before the payment of dividends 61.8p 112,354
Dividends paid (1.5p) (2,718)
NAV at 30 June 2022 60.3p 109,636
Cumulative dividends paid 79.5p
Total Return: At 30 June 2022 139.8p
At 31 December 2021 139.5p
Investments made since the changes to the VCT rules in November 2015 now
comprise £58.4 million (75 per cent, cost of £35.0 million) of the unquoted
portfolio as at 30 June 2022, with £19.8 million (25 per cent, cost of £12.8
million) of investments made prior to the rule changes. In general, the more
recent additions to the portfolio are re-investing their profits for growth,
with those investments comprising mainly equity instruments.
Dividends
An interim dividend of 1.5 pence per ordinary share in respect of the year
ending 31 December 2022 was paid on 6 May 2022, bringing the cumulative
dividends paid to date to 79.5 pence per ordinary share.
Your Board has proposed a second interim dividend of 1.5 pence per ordinary
share for the year ending 31 December 2022 which, when combined with the above
dividend paid in May, will bring total dividends paid in the current financial
year to 3.0 pence per ordinary share (2021: 8.0 pence per ordinary share).
The interim dividend will be paid on 3 October 2022 to shareholders on the
register on 2 September 2022.
Shareholder Relations
The shareholder workshop, held on 29 June 2022 was well attended. Attendees
heard from economist and author Paul Collier and Ben Hookway, CEO of Relative
Insight, one of the Company's recent investments. As Matthew Scullion of
Matillion was unable to attend in person, there was a short film of him being
interviewed and the YFM team provided an update on the financial performance
and the portfolio, along with a glimpse into the future. The Matillion
interview and the slides can be viewed on the website www.bscfunds.com
(http://www.bscfunds.com) .
Following the popularity of the online webinars over the past couple of years,
we will be hosting a further event in December 2022.
Documents such as the annual report are now received by 82 per cent of
shareholders electronically, rather than by post, which helps to meet the
Board's impact objectives and reduces printing costs. Your Board continues to
encourage all shareholders to take up this option.
Your Company's website is refreshed on a regular basis and provides a
comprehensive level of information in what I hope is a user-friendly format.
Registrars
The Company is in the process of changing its registrar, from Link Group to
The City Partnership; transition is expected to take place over the weekend of
21-23 October 2022; The City Partnership will send further correspondence on
this to all shareholders in due course.
Regulatory Developments
In the period there have been no regulatory changes that impact your Company;
the Manager continues to monitor for any amendments.
Most new portfolio investments are now self-assured as VCT qualifying on a
case-by-case basis and always with confirmation from professional advisers
that they are Qualifying Investments. Advance assurance is sought where
there is an element of uncertainty over the application of the rules.
Fundraising
The Company allotted 40,224,521 shares in January 2022, relating to the
2021/22 fundraising, after which net proceeds of £24.2 million were received.
On 2 August 2022, the Company announced its intention to launch a joint new
offer for subscription for the tax year 2022/23 later this year, alongside
British Smaller Companies VCT plc. A prospectus with full details of the
proposed Offer will be published in due course.
Outlook
As noted above, the portfolio's resilience is encouraging in the face of an
increasingly challenging economic environment. A planned fundraise later
this year will maintain the Company's strong position to continue to support
the portfolio, particularly with a growing focus on ensuring that companies
are well funded through to profitability, and also allow the Company to take
advantage of new opportunities arising across the UK.
I thank shareholders for their continued support.
Peter Waller
Chairman
OBJECTIVES AND STRATEGY
The Company's objective is to maximise Total Return and provide investors with
a long-term tax free dividend yield whilst maintaining the Company's status as
a venture capital trust.
The investment strategy of the Company is to invest in UK businesses across a
broad range of sectors that blends a mix of businesses operating in
established and emerging industries that offer opportunities in the
application and development of innovation in their products and services.
These investments will all meet the definition of a Qualifying Investment and
be primarily in unquoted UK companies. It is anticipated that the majority of
these businesses will be re-investing their profits for growth and the
investments will comprise mainly equity investments.
The Company seeks to build a diversified portfolio which ensures compliance
with the VCT guidelines in this regard.
INVESTMENT REVIEW
The Company's portfolio at 30 June 2022 had a value of £78.2 million.
Investments made since the VCT rule changes in 2015 comprised £58.4 million
(75 per cent of the total value of the portfolio). The largest single
investment represents 20.1 per cent of the net asset value.
The Company's portfolio delivered a positive performance over the period,
generating a return of £2.4 million.
There were upward revaluations from Displayplan, Outpost, Springboard,
Unbiased, Intelligent Office and ACC, offset by more difficult trading
conditions at Arcus Global and Sipsynergy. Matillion's valuation reduced due
to decreases in valuation multiples of comparable public companies
Realisation of Investments
There were no realisations during the period.
Investments
During the six months ended 30 June 2022, the Company completed six
investments, totalling £5.7 million. This comprised two new investments of
£3.0 million and four follow-on investments totalling £2.7 million. The
breakdown of these investments is shown below:
Company Investments made £million
New Follow-on Total
Relative Insight 2.0 - 2.0
Quality Clouds 1.0 - 1.0
Outpost - 2.0 2.0
Sipsynergy - 0.4 0.4
Other follow-on investments - 0.3 0.3
Invested in the period 3.0 2.7 5.7
Relative Insight is an AI-based text analytics platform. The Company's
investment will provide growth capital to expand operations in the US and
strengthen new product development. Quality Clouds, a tool for the control and
governance of critical SaaS platforms within corporations, will be supported
to recruit and grow their sales teams in the UK and US. The follow-on
investment into Outpost will help the company develop new studios in London
and Mumbai, building their technology; while Sipsynergy's product is looking
to exploit the widescale adoption of Microsoft Teams.
Subsequent to the period end the Company has invested £2.4 million into four
portfolio companies.
Cash Deposits
Under the revised VCT legislation it is no longer possible to deposit funds
for longer than seven days, which has reduced the Company's interest income
from cash deposits. The Board and the Manager continually review opportunities
to generate a higher level of income, without significantly changing the risk
profile of the funds held. As part of this, the Company has recently invested
into a small, diversified portfolio of listed investment funds. At 30 June
2022 this quoted portfolio was valued at £0.6 million, or 0.6 per cent of net
assets.
INVESTMENT PORTFOLIO
The top 10 investments had a combined value of £56.4 million, 72.1 per cent
of the total portfolio.
Name of Company Sector First Current Value at Proceeds Capital return to date
investment cost 30 June to date
2022
£000 £000 £000 £000
Matillion Limited Data & Analytics Nov 16 1,456 22,040 5,946 27,986
Springboard Research Holdings Limited Data & Analytics Oct 14 1,881 5,488 120 5,608
Outpost VFX Limited New Media Feb 21 3,000 5,325 - 5,325
Unbiased EC1 Limited Software Dec 19 1,964 4,229 - 4,229
Intelligent Office UK (IO Outsourcing Limited t/a as Intelligent Office Business Services May 14 1,956 3,843 - 3,843
DisplayPlan Holdings Limited New Media Jan 12 70 3,797 820 4,617
Wooshii Limited New Media May 19 2,440 3,248 - 3,248
Elucidat Ltd Software May 19 1,800 3,000 - 3,000
ACC Aviation Group Limited* Business Services Nov 14 145 2,752 1,233 3,985
SharpCloud Software Limited Data & Analytics Oct 19 2,271 2,657 - 2,657
Total top 10 investments 16,983 56,379 8,119 64,498
Remaining portfolio
Force24 Ltd Software Nov 20 1,600 2,649 - 2,649
Relative Insight Limited Data & Analytics Mar 22 2,000 2,107 - 2,107
KeTech Enterprises Limited Data & Analytics Nov 15 10 1,847 1,775 3,622
Vuealta Group Limited Software Sep 21 1,578 1,704 - 1,704
Tonkotsu Limited Retail & Brands Jun 19 1,592 1,535 - 1,535
Ncam Technologies Limited New Media Mar 18 1,675 1,506 87 1,593
Sipsynergy Software Jun 16 2,045 1,505 - 1,505
(via Hosted Network Services Limited)
Vypr Validation Technologies Limited Data & Analytics Jan 21 1,000 1,360 - 1,360
Frescobol Carioca Ltd Retail & Brands Mar 19 1,200 1,209 - 1,209
Quality Clouds Limited Software May 22 1,000 1,000 - 1,000
Traveltek Group Holdings Limited Software Oct 16 1,163 997 - 997
Panintelligence Data & Analytics Nov 19 1,000 921 - 921
(via Paninsight Limited)
e2E Engineering Limited Business Services Sep 17 600 729 - 729
£0.5 million and below Other investments 14,338 2,713 5,384 8,097
Total investments 47,784 78,161 15,365 93,526
Full disposals to date 38,885 - 56,000 56,000
Total portfolio 86,669 78,161 71,365 149,526
* Additional ordinary dividends of £1.93 million have also been received.
OUR PORTFOLIO AT A GLANCE
The charts on pages 12 and 13 of the interim report illustrate the broad range
of the investment portfolio.
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
2021. 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;
• Cyber/IT;
• Climate;
• Financial; and
• Market/liquidity.
Full details of the principal risks can be found in the financial statements
for the year ended 31 December 2021 on pages 32 to 34, a copy of which is
available at www.bscfunds.com.
DIRECTORS' RESPONSIBILITIES STATEMENT
The directors of British Smaller Companies VCT2 plc confirm that, to the best
of their knowledge, the condensed set of financial statements in this interim
report have been prepared in accordance with International Accounting Standard
34 "Interim Financial Reporting" as adopted by the UK, and give a true and
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 true and 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 10.
By order of the Board
Peter Waller
Chairman
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2022
Unaudited 6 months ended Unaudited 6 months ended
30 June 2022 30 June 2021
Notes Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains on investments held at fair value 6 - 2,364 2,364 - 17,741 17,741
Gains on disposal of investments - - - - 105 105
- 2,364 2,364 - 17,846 17,846
Income 2 275 - 275 337 - 337
Total income 275 2,364 2,639 337 17,846 18,183
Administrative expenses:
Manager's fee (205) (613) (818) (163) (491) (654)
Incentive fee 7 - (363) (363) - (3,316) (3,316)
Other expenses (295) - (295) (208) - (208)
(500) (976) (1,476) (371) (3,807) (4,178)
(Loss) profit before taxation (225) 1,388 1,163 (34) 14,039 14,005
Taxation 3 - - - - - -
(Loss) profit for the period (225) 1,388 1,163 (34) 14,039 14,005
Total comprehensive (expense) income for the period (225) 1,388 1,163 (34) 14,039 14,005
Basic and diluted (loss) earnings per ordinary share 5 (0.13p) 0.77p 0.64p (0.02p) 10.28p 10.26p
The Total column of this statement represents the Company's Unaudited
Statement of Comprehensive Income, prepared in accordance with UK adopted
international accounting standards. 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 April 2021 - "SORP") published by the Association of Investment Companies.
UNAUDITED BALANCE SHEET
as at 30 June 2022
Notes Unaudited Unaudited Audited
30 June 30 June 31 December
2022 2021 2021
£000 £000 £000
ASSETS
Non-current assets at fair value through profit and loss
Investments 6 78,161 71,162 70,019
Listed investment funds 6 647 - -
Financial assets at fair value through profit or loss 6 78,808 71,162 70,019
Accrued income and other assets 688 545 493
79,496 71,707 70,512
Current assets
Accrued income and other assets 48 131 217
Cash on fixed term deposit 1,988 1,988 1,988
Cash and cash equivalents 28,583 18,613 19,201
30,619 20,732 21,406
LIABILITIES
Current liabilities
Trade and other payables (116) (82) (4,543)
Provisions for liabilities and charges 7 (363) (3,316) -
Net current assets 30,140 17,334 16,863
Net assets 109,636 89,041 87,375
Shareholders' equity
Share capital 19,921 15,483 15,808
Share premium account 430 22,634 24,122
Capital redemption reserve 88 88 88
Other reserve 2 2 2
Merger reserve 5,525 5,525 5,525
Capital reserve 52,519 15,498 12,818
Investment holding gains and losses reserve 30,373 27,154 28,009
Revenue reserve 778 2,657 1,003
Total shareholders' equity 109,636 89,041 87,375
Net asset value per ordinary share 8 60.3p 63.5p 61.5p
Signed on behalf of the Board
Peter Waller
Chairman
UNAUDITED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2022
Share Share Other Capital Investment Revenue Total
capital premium reserves* reserve holding reserve equity
account gains and losses reserve
£000 £000 £000 £000 £000 £000 £000
At 31 December 2020 14,133 16,735 5,615 22,461 9,254 2,731 70,929
Revenue loss for the period - - - - - (34) (34)
Expenses charged to capital - - - (3,807) - - (3,807)
Investment holding gain on investments held at fair value - - - - 17,741 - 17,741
Realisation of investments in the period - - - 105 - - 105
Total comprehensive (expense) income for the period - - - (3,702) 17,741 (34) 14,005
Issue of share capital 1,276 5,772 - - - - 7,048
Issue of shares - DRIS 74 324 - - - - 398
Issue costs - (197) - (47) - - (244)
Purchase of own shares - - - (1,161) - - (1,161)
Dividends - - - (1,934) - - (1,934)
Total transactions with owners 1,350 5,899 - (3,142) - - 4,107
Realisation of prior year investment holding losses - - - (119) 159 (40) -
At 30 June 2021 15,483 22,634 5,615 15,498 27,154 2,657 89,041
Revenue loss for the period - - - - - (95) (95)
Expenses charged to capital - - - (1,719) - - (1,719)
Investment holding gain on investments held at fair value - - - - 2,961 - 2,961
Realisation of investments in the period - - - 5,237 - - 5,237
Total comprehensive income (expense) for the period - - - 3,518 2,961 (95) 6,384
Issue of shares - DRIS 325 1,529 - - - - 1,854
Issue costs - (41) - - - - (41)
Purchase of own shares - - - (782) - - (782)
Dividends - - - (7,522) - (1,559) (9,081)
Total transactions with owners 325 1,488 - (8,304) - (1,559) (8,050)
Realisation of prior year investment holding losses - - - 2,106 (2,106) - -
At 31 December 2021 15,808 24,122 5,615 12,818 28,009 1,003 87,375
Revenue loss for the period - - - - - (225) (225)
Expenses charged to capital - - - (976) - - (976)
Investment holding gain on investments held at fair value - - - - 2,364 - 2,364
Total comprehensive (expense) income for the period - - - (976) 2,364 (225) 1,163
Issue of share capital 4,023 21,274 - - - - 25,297
Issue of shares - DRIS 90 452 - - - - 542
Issue costs - (1,103) - - - - (1,103)
Share premium cancellation - (44,315) - 44,315 - - -
Purchase of own shares - - - (920) - - (920)
Dividends - - - (2,718) - - (2,718)
Total transactions with owners 4,113 (23,692) - 40,677 - - 21,098
At 30 June 2022 19,921 430 5,615 52,519 30,373 778 109,636
*Other reserves include the capital redemption reserve, the merger reserve and
the other reserve, which are non-distributable.
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
£000 £000 £000
Distributable reserves as above 52,519 778 53,297
Less: Income not yet distributable (325) (778) (1,103)
Less: Cancelled share premium account not yet distributable (44,315) - (44,315)
Reserves available for distribution* 7,879 - 7,879
* subject to filing these interim financial statements at Companies House.
The capital reserve and the revenue reserve are both distributable reserves.
These reserves total £53,297,000, representing an increase of £39,476,000 in
the period since 31 December 2021. The directors also consider 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 £53,297,000 shown above,
£1,103,000 relates to income not yet distributable and £44,315,000 to
cancelled share premium which becomes distributable from 2022 onwards (see
below).
Total share premium previously cancelled is available for distribution from
the following dates.
£000
Once these interim accounts have been filed at Companies House 4,351
1 January 2023 12,085
1 January 2024 299
1 January 2025 7,387
1 January 2026 20,193
Cancelled share premium account not yet distributable 44,315
UNAUDITED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2022
Notes Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£000 £000 £000
Profit before taxation 1,163 14,005 20,389
Increase in provisions for liabilities and charges 7 363 3,316 -
(Decrease) increase in trade and other payables (4,427) (49) 4,412
Increase in accrued income and other assets (30) (87) (117)
Gains on disposal of investments - (105) (5,342)
Gains on investments held at fair value (2,364) (17,741) (20,702)
Capitalised income - - (59)
Net cash outflow from operating activities (5,295) (661) (1,419)
Cash flows (used in) from investing activities
Purchase of financial assets at fair value through profit or loss 6 (6,425) (4,306) (6,092)
Proceeds from sale of financial assets at fair value through profit or loss 6 - - 11,182
Deferred consideration 6 4 471 471
Net cash (outflow) inflow from investing activities (6,421) (3,835) 5,561
Cash flows from (used in) financing activities
Issue of ordinary shares 25,297 7,048 7,050
Costs of ordinary share issues* (1,103) (244) (286)
Purchase of own shares (920) (1,161) (1,942)
Dividends paid 4 (2,176) (1,536) (8,765)
Net cash inflow (outflow) from financing activities 21,098 4,107 (3,943)
Net increase (decrease) in cash and cash equivalents 9,382 (389) 199
Cash and cash equivalents at the beginning of the period 19,201 19,002 19,002
Cash and cash equivalents at the end of the period 28,583 18,613 19,201
*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 10, each of whom has confirmed that to the best of their
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 International Standard on Review Engagements (UK and
Ireland) 2410 guidance on Review of Interim Financial Information performed by
the independent Auditor of the entity. 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 2021 do not constitute full
financial statements and have been extracted from the Company's financial
statements for the year ended 31 December 2021. 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 2021. They do not include
all disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the 2021 annual
report.
The accounts have been prepared on a going concern basis as set out below and
in accordance with UK adopted international accounting standards.
The accounts have been prepared under the historical cost basis as modified by
the measurement of investments at fair value through profit or loss.
The accounts have been prepared in compliance with the recommendations set out
in the Statement of Recommended Practice 'Financial Statements of Investment
Trust Companies and Venture Capital Trusts' issued by the Association of
Investment Companies (issued in April 2021 - "SORP") to the extent that they
do not conflict with UK adopted international accounting standards.
The financial statements are prepared in accordance with UK adopted
international accounting standards (IFRSs) and interpretations in force at the
reporting date. New standards coming into force during the period and future
standards that come into effect after the period-end have not had a material
impact on these financial statements.
The Company has carried out an assessment of accounting standards, amendments
and interpretations that have been issued by the IASB and that are effective
for the current reporting period. The Company has determined that the
transitional effects of the standards do not have a material impact.
The financial statements are presented in sterling and all values are rounded
to the nearest thousand (£000), 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 2022 the
Company held cash balances and fixed term deposits with a combined value of
£30,571,000. 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. In the year ended 31
December 2021 the Company's costs and discretionary expenditures were:
£'000
Administrative expenses (before incentive fee) 1,909
Share buybacks 1,942
Dividends (before DRIS) 11,015
Total 14,866
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
2022 2021
£000 £000
Income from investments
- Dividends from unquoted companies 114 155
- Interest on loans to unquoted companies 100 152
Income from investments held at fair value through profit or loss 214 307
Interest on bank deposits 61 30
275 337
3 Taxation
Unaudited 6 months ended Unaudited 6 months ended
30 June 2022 30 June 2021
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
(Loss) profit before taxation (225) 1,388 1,163 (34) 14,039 14,005
(Loss) profit before taxation multiplied by the standard small company rate of (43) 264 221 (6) 2,667 2,661
corporation tax in UK of 19.0% (2021: 19.0%)
Effect of:
UK dividends received (22) - (22) (30) - (30)
Non-taxable profits on investments - (449) (449) - (3,391) (3,391)
Deferred tax not recognised 65 185 250 36 724 760
Tax charge - - - - - -
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 2022 30 June 2021 31 December 2021
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Interim dividend for the year ending 31 December 2022 of 1.5p (2021: 1.5p) per - 2,718 2,718 - 1,934 1,934 - 1,934 1,934
ordinary share
Second interim dividend for the year ended 31 December 2021 of 1.5p per - - - - - 1,559 544 2,103
ordinary share
Third interim dividend for the year ended 31 December 2021 of 5.0p per - - - 6,978 6,978
ordinary share
- - -
- 2,718 2,718 - 1,934 1,934 1,559 9,456 11,015
Shares allotted under DRIS (542) (398) (2,250)
Dividends paid in the Statement of Cash Flows 2,176 1,536 8,765
The interim dividend of 1.5 pence per ordinary share was paid on 6 May 2022 to
shareholders on the register as at 1 April 2022.
An interim dividend of 1.5 pence per ordinary share, amounting to
approximately £2.7 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 (Loss) / Earnings per Ordinary Share
The basic and diluted earnings per ordinary share is based
on the profit after tax attributable to equity shareholders of £1,163,000 (30
June 2021: £14,005,000) and 180,486,872 (30 June 2021: 136,437,520) ordinary
shares being the weighted average number of ordinary shares in issue during
the period.
The basic and diluted revenue loss per ordinary share
is based on the revenue loss attributable to equity shareholders of £225,000
(30 June 2021: £34,000) and 180,486,872 (30 June 2021: 136,437,520) 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
£1,388,000 (30 June 2021: £14,039,000) and 180,486,872 (30 June 2021:
136,437,520) ordinary shares being the weighted average number of ordinary
shares in issue during the period.
During the period the Company allotted 40,224,521 new
ordinary shares from the fundraising, and 903,714 new ordinary shares in
respect of its DRIS.
The Company has also repurchased 1,562,710 of its own shares in the period and
these shares are held in the capital reserve. The total of 17,492,484 treasury
shares has been excluded in calculating the weighted average number of
ordinary shares during the period.
The Company has no dilutive shares and consequently,
basic and diluted earnings per ordinary share are equivalent at 30 June 2022,
31 December 2021 and 30 June 2021.
6 Financial Assets at Fair Value through Profit or Loss
IFRS 13 and IFRS 7, in respect of financial instruments
that are measured in the balance sheet at fair value, require 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 listed investment funds 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 revenue or
earnings 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 (2021: 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
Unquoted investments are valued in accordance with IFRS 13
"Fair Value Measurement" and using the International Private Equity and
Venture Capital ("IPEVC") Valuation Guidelines ("the Guidelines") issued in
December 2018.
Initial measurement
The best estimate of the initial fair value of an unquoted investment is the
cost of the investment. Unless there are indications that this is
inappropriate, an unquoted investment will be held at this value within the
first three months of investment.
Subsequent measurement
Based on the Guidelines we have identified 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 pages 66 and
67 of the financial statements for the year ended 31 December 2021, a copy of
which can be found at www.bscfunds.com (http://www.bscfunds.com) .
The primary methods used for valuing non-quoted investments, and the key
assumptions relating to them are:
Unquoted Investments
> revenue multiple. An appropriate multiple, given the risk profile and
sales growth prospects of the underlying company, is applied to the revenue of
the 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 used to derive the multiple.
> earnings multiple. An appropriate multiple, given the risk profile and
earnings growth prospects of the underlying company, is applied to the
maintainable earnings of the 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 used to derive the multiple.
Level 3 Unquoted Investments Level 1 Listed Investment Funds Total Investments
IFRS 13 measurement classification £000 £000 £000
Opening cost 42,037 - 42,037
Opening valuation gain 27,982 - 27,982
Opening fair value at 1 January 2022 70,019 - 70,019
Additions at cost 5,747 678 6,425
Change in fair value 2,395 (31) 2,364
Closing fair value at 30 June 2022 78,161 647 78,808
Closing cost 47,784 678 48,462
Closing valuation gain (loss) 30,377 (31) 30,346
Closing fair value at 30 June 2022 78,161 647 78,808
Movements in investments at fair value through profit
or loss during the six months to 30 June 2022 are summarised as follows:
Level 3 valuations include assumptions based on non-observable data, such as
discounts applied either to reflect changes in the fair value of financial
assets held at the price of recent investment, or to adjust revenue or
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 £3,943,000 (5.0 per cent) lower. Using the
upside alternative the value would be increased by £3,826,000 (4.9 per cent).
99 per cent of the Company's investments are in unquoted companies held at
fair value. The valuation methodology for these investments includes the
application of externally produced revenue and earnings multiples. Therefore
the value of the unquoted element of the portfolio is also indirectly affected
by price movements on the listed market. Those using revenue and earnings
multiple methodologies include judgements regarding the level of discount
applied to that multiple. The effect of changing the level of discounts
applied to the multiples is considered above.
1 per cent of the Company's investments are investment funds listed on the
main market of the London Stock Exchange (including FCA authorised and
regulated UCITS funds). A 5 per cent increase in stock prices as at 30 June
2022 would have increased the net assets attributable to the Company's
shareholders and the total profit by £32,000. An equal change in the opposite
direction would have decreased the net assets attributable to the Company's
shareholders and the total profit 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 2021: none).
There were no realisations during the period. £4,000 was received during the
period relating to investments realised prior to 31 December 2021.
7 Provisions for Liabilities and Charges
Incentive Fee
Under the terms of the Subscription Rights Agreement, the Manager and Chord
Capital are entitled to a performance-related incentive fee if the cumulative
dividends per ordinary share paid as at the last business day of December in
any year, plus the average of the middle market price per ordinary share of
the five dealing days prior to that day, exceeds a Hurdle. The Hurdle for the
year ending 31 December 2022 is 135.5 pence per ordinary share. The value of
the incentive fee is 20 per cent of the excess to the Hurdle, multiplied by
the number of ordinary shares issued. At 30 June 2022 the total of
cumulative cash dividends paid and the mid-market price was 136.5 pence per
ordinary share. In accordance with the Company's accounting policy, an
accrual of £363,000 has been recognised based on the number of shares in
issue at 30 June 2022.
8 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 £109,636,000 (30 June 2021 and 31
December 2021: £89,041,000 and £87,375,000 respectively) and 181,720,724 (30
June 2021 and 31 December 2021: 140,231,049 and 142,155,199 respectively)
ordinary shares in issue at 30 June 2022.
The 17,492,484 (30 June 2021 and 31 December 2021:
14,601,235 and 15,929,774 respectively) treasury shares have been excluded in
calculating the number of ordinary shares in issue at 30 June 2022.
The Company has no potentially dilutive shares and
consequently, basic and diluted net asset values are equivalent at 30 June
2022, 31 December 2021 and 30 June 2021.
9 Total Return
Total Return per ordinary share is calculated on cumulative
dividends paid of 79.5 pence per ordinary share (30 June 2021: 71.5 pence per
ordinary share and 31 December 2021: 78.0 pence per ordinary share) plus the
net asset value as calculated in note 8.
10 Directors
The directors of the Company are: Peter C Waller, Barbara L
Anderson, and Roger S McDowell.
11 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 (http://www.bscfunds.com) .
12 Interim Dividend for the year ending 31 December 2022
The directors have previously announced the payment of a second interim
dividend for the year ending 31 December 2022 of 1.5 pence per ordinary share
("Interim Dividend").
The Interim Dividend will be paid on 3 October 2022 to those shareholders on
the Company's register at the close of business on 2 September 2022. The
ex-dividend date will be 1 September 2022.
13 Dividend Re-investment Scheme
The Company operates a 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 16 September 2022.
14 Inside Information
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
Alex Collins Panmure Gordon
(UK) Limited Tel: 0207 886 2767
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 (mailto:rns@lseg.com)
or visit
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.
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. END IR DBLBLLKLXBBB
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