REG - British Smlr Comp 2 - Half-year Report
12/09/2024 07:00
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RNS Number : 8072D British Smaller Companies VCT2 Plc 12 September 2024
British Smaller Companies VCT2 plc
Unaudited Interim Results and Interim Management Report
for the six months ended 30 June 2024
British Smaller Companies VCT2 plc (the "Company") today announces its
unaudited interim results for the six months ended 30 June 2024.
HIGHLIGHTS
· As announced on 20 August 2024, Net Asset Value at 30 June 2024 of
57.50p per share (31 December 2023: 59.30p) following payment of 1.50p
dividend during the period
· Total Return decreased by 0.30p to 145.25p per share
· Fully subscribed offer raised net proceeds of £33.5 million
· The Board has declared a second interim dividend of 1.50p per share
in respect of the year ending 31 December 2024, which will bring total
dividends paid in the current financial year to 3.0p per share, which equates
to 5.1 per cent of the opening net asset value per share
· Three new investments and five follow-on investments totalling
£7.3 million completed during the period. Subsequent to the period-end, four
follow-on investments totalling £5.9 million completed, bringing the total
invested this year to £13.2 million
· Realisations generated total proceeds of £6.9 million in the
period, a gain of £0.5 million over the opening carrying value and £6.0
million over cost
Chairman's Statement
I am pleased to present the interim results of British Smaller Companies VCT2
plc (the "Company") for the six months to 30 June 2024.
The first six months of the year has been a period of changeable conditions
for the UK economy, with promising indicators, such as lowering rates of
inflation and interest rates reaching their peak, tempered by slow rates of
growth and political uncertainty in the lead up to July's general election.
This has been mirrored in the Company's performance, with promising progress
in many portfolio companies balanced against certain company-specific
circumstances that have constrained the portfolio's aggregate performance.
This has resulted in the Company's Total Return falling by 0.3 pence in the
period, a 0.5 per cent decrease on opening net asset value per share; in
contrast the FTSE Small Cap rose by 4.7 per cent over the same period. The
Company's net asset value per share now stands at 57.50 pence.
Portfolio Performance
The period has seen ongoing positive performance from a number of portfolio
companies, with many showing strong potential. Of the 26 companies valued on
a revenue basis, all but five have grown sales in the last year and 14 have
delivered growth of over 30 per cent. While the focus of recent periods has
been on capital efficiency, we are seeing opportunities to help our fastest
growing businesses to accelerate their progress by providing material further
funding. This was seen in the period, with an aggregate £2.7 million
invested into five portfolio companies in the period, and a further £5.9
million invested into four more businesses since 30 June.
The 14 companies that delivered growth of over 30 per cent produced aggregate
revaluation gains of £4.8 million in the first half of the year.
This has been balanced by aggregate downward revaluations of £5.5 million in
the period across four portfolio companies (Matillion, Wooshii, Outpost and
Relative Insight), movements which reflect the disciplined approach the
Company takes with valuations. The Company's Manager is working closely with
these businesses to address their market-specific challenges.
New Investments
The Company completed three new investments during the first half of the year,
with investments into Fuuse (£2.0 million), a provider of Electric Vehicle
charge point software; Spotless Water (£1.5 million), a provider of
self-service ultra-pure water dispensing stations; and Ohalo (£1.1 million),
a data governance software platform.
Realisations in the period
Realisations of portfolio investments generated total proceeds of £6.9
million in the period.
KeTech, a provider of communications systems, was split into its two component
parts (Rail and Defence) in 2023 to maximise shareholder value. The Defence
business was subsequently sold in January 2024, generating proceeds of £1.5
million. To date, the Company has realised proceeds of £4.1 million from
its KeTech investment, a 2.0x return on cost, while still retaining its
investment in the Rail business, which at the period-end was valued at £1.1
million.
In January 2024 the Company realised part of its investment in Arcus,
generating proceeds of £0.2 million, while still retaining its investment in
the remaining restructured business which at the period-end was valued at
£0.7 million. This combined £0.8 million of value to date equates to 0.4x
cost.
In February 2024, the Company sold its investment in Displayplan for £4.8
million. Total proceeds received over the life of the investment are £6.7
million, an excellent 9.6x return on the Company's cost. There is the
potential for further deferred proceeds in due course with £0.4 million of
deferred proceeds recognised at the period-end.
Financial Results
The movement in net asset value ("NAV") per ordinary share and the dividends
paid are set out in the table below.
Pence per £000
ordinary share
NAV at 31 December 2023 59.30 135,616
Net fall from investment portfolio (0.20) (645)
Net operating income 0.10 172
Total Return in period (0.10) (473)
Issue/buy-back of new shares* (0.20) 32,021
NAV before the payment of dividends 59.00 167,164
Dividends paid (1.50) (4,270)
NAV at 30 June 2024 57.50 162,894
Cumulative dividends paid 87.75
Total Return: At 30 June 145.25
2024
At 31 December 2023 145.55
* the first allotment on 30 January 2024 from the 2023/24 fundraising reduces
Total Return per ordinary share as the allotment was priced at the 30
September 2023 NAV, being the latest published NAV at the allotment date.
Dividends
An interim dividend of 1.5 pence per ordinary share for the year ending 31
December 2024 was paid on 28 June 2024, bringing the cumulative dividends paid
to date to 87.75 pence per ordinary share.
The Board has proposed a second interim dividend of 1.5 pence per ordinary
share for the year ending 31 December 2024 which, when combined with the above
dividend, will bring total dividends paid in the current financial year to 3.0
pence per ordinary share (2023: 5.25 pence per ordinary share). The dividend
will be paid on 1 November 2024 to shareholders on the register on 4 October
2024.
Shareholder Relations
The shareholder workshop held on 20 June 2024 was very well attended.
Attendees heard from Steve Frost, CEO of Workbuzz, and Scott Morris, Managing
Director of Displayplan.
Documents such as the annual report are now received electronically by 84 per
cent of shareholders, rather than by post, which helps to meet the Board's
impact objectives and reduces printing costs. The Board continues to encourage
all shareholders to take up this option.
The 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.
Board Changes
On 13 June 2024, Peter Waller retired as Chair and stood down from the
Board. The Board and the Manager thank Peter for all of his efforts and
valuable contributions over the course of his tenure.
Also on 13 June 2024, Arif Ahmed joined the Board. Arif is a serial
entrepreneur and private equity investor with particular expertise in
healthcare and technology.
Fundraising
In the period the Company allotted shares from its fully subscribed 2023/24
share offer across two allotments, on 30 January and 3 April 2024. Gross
proceeds of £34.5 million were raised by the Company, resulting in the
allotment of 57,199,459 ordinary shares.
On 20 August 2024, the Company announced its intention to launch a new joint
offer for subscription for the tax year 2024/25 later this year, alongside
British Smaller Companies VCT plc (together the "Companies"). As announced on
10 September 2024, the current intention is for the Companies, in aggregate,
to raise up to £50 million, with over-allotment facilities of up to a further
£25 million in aggregate, before issue costs. Any election to make use of
their over-allotment facility will be subject to the decision of the
individual boards of the Companies at the relevant time.
A prospectus with full details of the proposed Offer is expected to be
published in mid-October, with applications expected to open one week
following publication. Once published, the prospectus will be available from
the Companies' website, www.bscfunds.com (http://www.bscfunds.com) .
Outlook
The UK's economy is showing signs of promise, with CPI inflation at the Bank
of England's target of 2.0 per cent and August bringing a reduction in
interest rates from their 16-year high. There is also the expectation of
greater political stability following July's general election and a
growth-focused government agenda. However, globally uncertainty remains,
with some market turbulence driven by concerns over the US economy, as well as
the outcome of the US election in November.
In this environment, the Company continues to proceed cautiously, helping the
portfolio's most promising and fastest growing assets to accelerate their
growth; as well as supporting those companies currently working through
challenges.
There continues to be a promising pipeline of new opportunities and it is
expected that further new investments will be added to the portfolio in the
coming months.
I thank shareholders for their continued support.
Barbara Anderson
Chair
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.
Investment Strategy
The Company seeks to build a broad portfolio of investments in early-stage
companies focused on growth, with the aim of spreading the maturity profiles
and maximising return, as well as ensuring compliance with VCT Regulations.
The Company predominantly invests in unquoted smaller companies and expects
that this will continue to make up the significant majority of the portfolio.
It will also retain holdings in cash or near-cash investments to provide a
reserve of liquidity which will maximise the Company's flexibility as to the
timing of investment acquisitions and disposals, dividend payments and share
buy-backs.
Unquoted investments are structured using various investment instruments,
including ordinary shares, preference shares, convertible securities and very
occasionally loan stock, to achieve an appropriate balance of income and
capital growth, having regard to the VCT Regulations. The portfolio is
diversified by investing in a broad range of industry sectors. The normal
investment period into the portfolio companies is expected to be typically
between the range of five to seven years.
Investment policy
The investment policy 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 will be re-investing their profits for growth and the investments will
comprise mainly equity instruments.
The Company seeks to build a broad portfolio of investments in early-stage
companies focused on growth with the aim of spreading the maturity profiles
and maximising return as well as ensuring compliance with the VCT guidelines.
Investment Review
At 30 June 2024 the Company's portfolio was valued at £96.2 million. The
top ten investments represent 36.7 per cent of the net asset value with the
largest representing 12.5 per cent of the net asset value.
The movements in the investment portfolio are set out below:
Table A
Investment Portfolio
Portfolio
£million
Opening fair value at 1 January 2024 96.4
Additions 7.3
Disposal proceeds excluding deferred consideration (6.8)
Net revaluation arising from the investment portfolio (0.7)
Closing fair value at 30 June 2024 96.2
The Company's portfolio value decreased by £0.7 million in the period, of
which £1.1 million arose from the residual portfolio, offset by a gain of
£0.4 million from realisations.
There were upward revaluations from Unbiased, Teraview, Vypr, Arcus Global and
ACC Aviation, offset by decreases from Matillion, Wooshii, Outpost and
Relative Insight.
Realisation of Investments
During the six months to 30 June 2024, the company generated £6.9 million
from disposals, including deferred consideration, a gain of £0.5 million over
the opening carrying value and a gain of £6.0 million on cost. Further
details are given on page 3 of the interim report and in note 6.
Investments
During the six months ended 30 June 2024, the Company completed eight
investments, totalling £7.3 million. This comprised three new investments,
totalling £4.6 million, and five follow-on investments, totalling £2.7
million. The breakdown of these investments, and those completed after the
period end, is shown below:
Investments made £million
Company Description New Follow-on Total
Fuuse Electric vehicle charge point management system 2.0 - 2.0
Spotless Water Ultra-pure water distribution network 1.5 - 1.5
Ohalo Unstructured data governance platform 1.1 - 1.1
Plandek Software development analytics platform - 1.0 1.0
Outpost Visual effects for film and TV - 0.8 0.8
Summize Digital contracting software - 0.5 0.5
Relative Insight AI-based text data analytics platform - 0.3 0.3
SharpCloud B2B - 0.1 0.1
Invested in the period 4.6 2.7 7.3
Xapien Automated research on individuals and companies - 2.9 2.9
Quality Clouds B2B software - 1.3 1.3
AutomatePro Automated software testing - 1.2 1.2
SharpCloud B2B - 0.5 0.5
Invested in the year to date 4.6 8.6 13.2
Cash Deposits and other Liquid Funds
The Company is taking an active approach to cash management, while ensuring
its primary aim of capital preservation is met. A portion of the Company's
liquid assets are held across a diversified range of Triple-A rated money
market funds, managed by global institutions, while the balance is held as
readily accessible cash, all of which is held at Tier 1 Financial Institutions
(A2 rated or above). £1.4 million of income was earned from money market
funds and bank deposits during the period. At 30 June 2024, the Company was
achieving a weighted average return on liquid assets of 4.7 per cent.
Portfolio
The top 10 investments had a combined value of £59.7 million, 62.1 per cent
of the total portfolio.
Name of Company Sector First Amount invested Value at Recognised income/ proceeds Return
investment £000 30 June 2024 to date to date*
£000 £000 £000
Matillion Limited Data Nov 16 1,778 20,337 5,946 26,283
Unbiased EC1 Limited Tech-enabled Services Dec 19 3,731 9,260 - 9,260
Outpost VFX Limited New Media Feb 21 3,833 5,671 40 5,711
Elucidat Ltd Application Software May 19 2,840 4,070 281 4,351
Vypr Validation Technologies Limited Tech-enabled Services Jan 21 2,200 3,963 - 3,963
Force24 Ltd Application Software Nov 20 2,600 3,854 42 3,896
SharpCloud Software Limited Data Oct 19 2,385 3,711 - 3,711
ACC Aviation Group Limited Business Services Nov 14 1,379 3,547 3,525 7,072
Plandek Limited Cloud & DevOps Oct 22 2,360 2,696 - 2,696
Quality Clouds Limited Data May 22 2,610 2,619 - 2,619
Summize Limited Application Software Oct 22 1,700 2,493 - 2,493
DrDoctor (via ICNH Ltd) Application Software Feb 23 2,377 2,377 - 2,377
Workbuzz Analytics Ltd Application Software Jun 23 1,718 2,372 - 2,372
Traveltek Group Holdings Limited Application Software Oct 16 1,163 2,598 675 3,273
AutomatePro Limited Cloud & DevOps Dec 22 1,483 2,344 - 2,344
Tonkotsu Limited Retail & Brands Jun 19 1,592 2,227 - 2,227
Fuuse Ltd Application Software May 24 2,000 2,000 - 2,000
GEEIQ (via Checkpoint GG Limited) Data Data Sep 23 1,572 2,000 - 2,000
Wooshii Limited New Media May 19 3,096 1,797 487 2,284
Vuealta Holdings Limited Tech-enabled Services Sep 21 2,386 1,702 3,088 4,790
Spotless Water Limited Business Services Jun 24 1,456 1,456 - 1,456
Xapien (via Digital Insight Technologies Ltd Application Software Mar 23 1,160 1,412 - 1,412
Frescobol Carioca Ltd Retail & Brands Mar 19 1,200 1,376 - 1,376
Biorelate Limited Application Software Nov 22 1,040 1,138 - 1,138
Ohalo Limited Data Jun 24 1,110 1,110 - 1,110
KeTech Technology Holdings Limited Tech-enabled Services Nov 15 2,000 1,110 4,059 5,169
Teraview Limited Advanced Manufacturing Dec 11 377 1,100 - 1,100
Panintelligence (via Paninsight Limited) Data Nov 19 1,000 1,044 - 1,044
Relative Insight Limited Tech-enabled Services Mar 22 2,800 992 - 992
£0.75 million and below 13,465 3,802 4,792 8,594
Total investments 70,411 96,178 22,935 119,113
Full disposals to date 50,285 - 86,924 86,924
Total portfolio 120,696 96,178 109,859 206,037
* Represents recognised income and proceeds received to date plus the
unrealised valuation at 30 June 2024
THE PORTFOLIO AT A GLANCE
The charts on page 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
2023. 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:
> VCT Qualifying Status;
> Economic;
> Investment Performance;
> Strategy;
> Legislative & Regulatory;
> Operational;
> Cyber Security and Information Technology; and
> Liquidity.
Full details of the principal risks can be found in the financial statements
for the year ended 31 December 2023 on pages 32 to 34, a copy of which is
available at www.bscfunds.com (http://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 11 of
these interim financial statements.
By order of the Board
Barbara Anderson
Chair
Unaudited Statement of Comprehensive Income
for the six months ended 30 June 2024
Notes Unaudited 6 months ended Unaudited 6 months ended
30 June 2024 30 June 2023
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
(Loss) gain on investments held at fair value 6 - (1,104) (1,104) - 2,108 2,108
Gain (loss) on disposal of investments 6 - 459 459 - (73) (73)
Income 2 1,701 - 1,701 720 - 720
Total income 1,701 (645) 1,056 720 2,035 2,755
Administrative expenses:
Manager's fee (296) (890) (1,186) (250) (751) (1,001)
Incentive fee - - - - (1,180) (1,180)
Other expenses (343) - (343) (321) - (321)
(639) (890) (1,529) (571) (1,931) (2,502)
Profit (loss) before taxation 1,062 (1,535) (473) 149 104 253
Taxation 3 - - - - - -
Profit (loss) for the period 1,062 (1,535) (473) 149 104 253
Total comprehensive income (expense) for the period 1,062 (1,535) (473) 149 104 253
Basic and diluted earnings (loss) per ordinary share 5 0.40p (0.58p) (0.18p) 0.07p 0.05p 0.12p
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 July 2022 - "SORP") published by the Association of Investment Companies.
Unaudited Balance Sheet
as at 30 June 2024
Notes Unaudited Unaudited Audited
30 June 30 June 31 December
2024 2023 2023
£000 £000 £000
ASSETS
Non-current assets at fair value through profit or loss
Investments 6 97,716 89,174 97,702
Listed investment funds - 1,746 -
Financial assets at fair value through profit or loss 6 97,716 90,920 97,702
Accrued income and other assets - 1,403 210
97,716 92,323 97,912
Current assets
Accrued income and other assets 936 148 475
Current asset investments 38,000 21,750 23,500
Cash and cash equivalents 26,440 20,134 15,571
65,376 42,032 39,546
LIABILITIES
Current liabilities
Trade and other payables (198) (148) (1,842)
Provisions for liabilities and charges 7 - (1,180) -
Net current assets 65,178 40,704 37,704
Net assets 162,894 133,027 135,616
Shareholders' equity
Share capital 30,855 24,903 25,014
Share premium account 53,681 24,899 25,386
Capital redemption reserve 88 88 88
Other reserve 2 2 2
Merger reserve 217 5,525 5,525
Capital reserve 42,035 41,959 37,458
Investment holding gains and losses reserve 33,639 34,446 40,245
Revenue reserve 2,377 1,205 1,898
Total shareholders' equity 162,894 133,027 135,616
Net asset value per ordinary share 8 57.50p 57.95p 59.30p
Signed on behalf of the Board
Barbara Anderson
Chair
Unaudited Statement of Changes in Equity
for the six months ended 30 June 2024
Share Share Other reserves* Capital Investment Revenue Total
capital premium £000 reserve holding reserve equity
£000 account £000 gains and £000 £000
£000 losses
reserve
£000
At 31 December 2022 20,014 858 5,615 52,263 31,762 1,357 111,869
Revenue return for the period - - - - - 149 149
Expenses charged to capital - - - (1,931) - - (1,931)
Investment holding gain on investments held at fair value - - - - 2,108 - 2,108
Realisation of investments in the period - - - (73) - - (73)
Total comprehensive (expense) income for the period - - - (2,004) 2,108 149 253
Issue of share capital 4,636 24,077 - 28,713
Issue of shares - DRIS 253 1,201 - - - - 1,454
Issue costs - (1,237) - - - - (1,237)
Purchase of own shares - - - (497) - - (497)
Dividends - - - (7,227) - (301) (7,528)
Total transactions with owners 4,889 24,041 - (7,724) - (301) 20,905
Realisation of prior year investment holding losses - - - (576) 576 - -
At 30 June 2023 24,903 24,899 5,615 41,959 34,446 1,205 133,027
Revenue return for the period - - - - - 693 693
Expenses charged to capital - - - (1,281) - - (1,281)
Investment holding gain on investments held at fair value - - - - 5,935 - 5,935
Realisation of investments in the period - - - 1,091 - - 1,091
Total comprehensive (expense) income for the period - - - (190) 5,935 693 6,438
Issue of shares - DRIS 111 519 - - - - 630
Issue costs - (32) - - - - (32)
Purchase of own shares - - - (1,019) - - (1,019)
Dividends - - - (3,428) - - (3,428)
Total transactions with owners 111 487 - (4,447) - - (3,849)
Realisation of prior year investment holding gains - - - 136 (136) - -
At 31 December 2023 25,014 25,386 5,615 37,458 40,245 1,898 135,616
Revenue return for the period - - - - - 1,062 1,062
Expenses charged to capital - - - (890) - - (890)
Investment holding loss on investments held at fair value - - - - (1,104) - (1,104)
Realisation of investments in the period - - - 459 - - 459
Total comprehensive (expense) income for the period - - - (431) (1,104) 1,062 (473)
Issue of share capital 5,720 28,814 - 34,534
Issue of shares - DRIS 121 577 - - - - 698
Issue costs - (1,096) - - - - (1,096)
Purchase of own shares - - - (2,115) - - (2,115)
Dividends - - - (3,687) - (583) (4,270)
Total transactions with owners 5,841 28,295 - (5,802) - (583) 27,751
Transfer between reserves - - (5,308) 5,308 - - -
Realisation of prior year investment holding gains - - - 5,502 (5,502) - -
At 30 June 2024 30,855 53,681 307 42,035 33,639 2,377 162,894
* Other reserves includes 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 Revenue Total
reserve reserve £000
£000 £000
Distributable reserves as above 42,035 2,377 44,412
Cancelled share premium not yet distributable (27,580) - (27,580)
Income/proceeds not yet distributable (589) (1,578) (2,167)
Reserves available for distribution* 13,866 799 14,665
*subject to filing these interim financial statements at Companies House.
The capital reserve and the revenue reserve are both distributable reserves.
These reserves total £44,412,000, representing an increase of £5,056,000 in
the period since 31 December 2023. 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 £44,412,000 shown above,
£2,167,000 relates to income/proceeds not yet receivable.
Total share premium cancelled is available for distribution from the
following dates:
£000
1 January 2025 7,387
1 January 2026 20,193
Cancelled share premium account not yet distributable 27,580
Unaudited Statement of Cash Flows
for the six months ended 30 June 2024
Notes Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
£000 £000 £000
(Loss) profit before taxation (473) 253 6,691
Increase in provisions for liabilities and charges - 1,080 -
(Decrease) increase in trade and other payables (1,644) (573) 1,021
Increase in accrued income and other assets (178) (118) (472)
(Gain) loss on disposal of investments (459) 73 (1,018)
Losses (gains) on investments held at fair value 1,104 (2,108) (8,043)
Net cash outflow from operating activities (1,650) (1,393) (1,821)
Cash flows from (used in) investing activities
Cash maturing from fixed term deposits - 1,988 1,988
Purchase of financial assets at fair value through profit or loss 6 (7,257) (7,817) (10,696)
Proceeds from sale of financial assets at fair value through profit or loss 6 6,482 1,715 6,031
Deferred consideration 6 43 - 27
Net cash outflow from investing activities (732) (4,114) (2,650)
Cash flows from (used in) financing activities
Issue of ordinary shares 34,534 28,713 28,713
Costs of ordinary share issues** (1,096) (1,237) (1,268)
Purchase of own shares (2,115) (497) (1,516)
Dividends paid 4 (3,572) (6,074) (8,873)
Net cash inflow from financing activities 27,751 20,905 17,056
Net increase in cash and cash equivalents 25,369 15,398 12,585
Cash and cash equivalents at the beginning of the period 39,071 26,486 26,486
Cash and cash equivalents at the 64,440 41,884 39,071
end of the period
Cash and cash equivalents comprise
Money market funds 38,000 21,750 23,500
Cash at bank 26,440 20,134 15,571
Cash and cash equivalents at the end of the period 64,440 41,884 39,071
* includes net income from:
Dividends - 139 341
Interest 1,448 418 2,899
** 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 11, 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 2023 do not constitute full
financial statements and have been extracted from the Company's financial
statements for the year ended 31 December 2023. 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 2023. 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 2023 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 July 2022 - "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 (International Financial Reporting
Standards ("IFRS") and International Accounting Standards ("IAS")) and
interpretations in force at the reporting date. The Company has performed a
review of its existing accounting policies and updated where relevant. Other
new standards coming into force during the year and future standards that come
into effect after the year-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 2024 the
Company held cash balances and money market funds with a combined value of
£64,440,000. 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 2023 the Company's costs and discretionary expenditures were:
£'000
Administrative expenses (before incentive fee) 2,816
Share buybacks 1,516
Dividends (before DRIS) 10,956
Total 15,288
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 30 ended 30
June June
2024 2023
£000 £000
Income from investments
- Interest on loans to unquoted companies 71 71
- Dividends from unquoted companies 213 153
Income from unquoted portfolio 284 224
Income from listed investment funds - 29
Income from investments held at fair value through profit or loss 284 253
Interest on bank deposits/money market funds 1,417 467
1,701 720
3
Taxation
Unaudited 6 months ended Unaudited 6 months ended
30 June 2024 30 June 2023
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Profit (loss) before taxation 1,062 (1,535) (473) 149 104 253
Profit (loss) before taxation multiplied by the standard small company rate of 202 (292) (90) 28 20 48
corporation tax in UK of 19.0% (2023: 19.0%)
Effect of:
UK dividends received (40) - (40) (29) - (29)
Non-taxable losses (profits) on investments - 123 123 - (387) (387)
Deferred tax not recognised (162) 169 7 1 367 368
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 6 months ended Unaudited 6 months ended
30 June 2024 30 June 2023
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
First interim dividend for the year ending 31 December 2024 of 1.5p (2023: 583 3,687 4,270 - 4,097 4,097
2.25p) per ordinary share
Second interim dividend for the year ended 31 December 2023 of 1.5p per - - - 301 3,130 3,431
ordinary share
583 3,687 4,270 301 7,227 7,528
Shares allotted under DRIS (698) (1,454)
Dividends paid in the Statement of Cash Flows 3,572 6,074
Audited year ended
31 December 2023
Revenue Capital Total
£000 £000 £000
First interim dividend for the year ending 31 December 2023 of 2.25p per - 4,097 4,097
ordinary share
Second interim dividend for the year ended 31 December 2023 of 1.5p per 301 3,130 3,431
ordinary share
Third interim dividend for the year ended 31 December 2023 of 1.5p per - 3,428 3,428
ordinary share
301 10,655 10,956
Shares allotted under DRIS (2,083)
Dividends paid in the Statement of Cash Flows 8,873
The first interim dividend of 1.5 pence per ordinary share was paid on 28 June
2024 to shareholders on the register as at 31 May 2024.
A second interim dividend of 1.5p per ordinary share amounting to
approximately £4.2 million is proposed. This 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 (loss) earnings per ordinary share is based on the loss
after tax attributable to equity shareholders of £473,000 (30 June 2023:
profit of £253,000) and 262,540,942 (30 June 2023: 204,822,093) 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 £1,062,000 (30 June
2023: £149,000) and 262,540,942 (30 June 2023: 204,822,093) ordinary shares
being the weighted average number of ordinary shares in issue during the
period.
The basic and diluted capital (loss) earnings per ordinary share is based on
the capital loss attributable to equity shareholders of £1,535,000 (30 June
2023: profit of £104,000) and 262,540,942 (30 June 2023: 204,822,093)
ordinary shares being the weighted average number of ordinary shares in issue
during the period.
During the period the Company allotted 57,199,459 new ordinary shares from the
fundraising, and 1,208,910 new ordinary shares in respect of its DRIS.
The Company has also repurchased 3,766,651 of its own shares in the period and
these shares are held in the capital reserve. The total of 25,150,419 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 2024, 31 December 2023
and 30 June 2023
6 Financial Assets at Fair Value through Profit or
Loss
30 June 2024 30 June 2023
£000 £000
Investment portfolio 96,178 89,174
Accrued income and other assets* 1,538 -
Financial assets at fair value through profit and loss 97,716 89,174
* Relates to accrued income which is not past due which has been disclosed as
part of the investment value. Prior year income was not included as it was not
material.
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 listed investment funds classified as held at
fair value through profit or loss. The Company held no such investments at 30
June 2024.
> 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
revenue multiples. If one or more of the significant inputs is not based on
observable market data, the instrument is included in Level 3. All 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 (2023: 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
("IPEV") Valuation Guidelines ("the Guidelines") issued in December 2022.
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 2023, 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 revenue 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.
Movements in investments at fair value through profit or loss during the six
months to 30 June 2024 are summarised as follows:
IFRS 13 measurement classification Level 3
Unquoted
Investments
£000
Opening cost 56,209
Opening valuation gain 40,218
Opening fair value at 1 January 2024 96,427
Additions at cost 7,257
Disposal proceeds (6,850)
Net profit on disposals* 448
Change in fair value (1,217)
Foreign exchange gain 113
Closing fair value at 30 June 2024 96,178
Closing cost 62,567
Closing valuation gain 33,611
Closing fair value at 30 June 2024 96,178
* the net profit on disposal in the table above is £448,000 whereas that
shown in the Statement of Comprehensive Income is £459,000. The difference
comprises the change in the value of deferred proceeds totalling £11,000 in
respect of assets that have been disposed of and are not included in the
investment portfolio at 1 January 2024.
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 the fair value measurement. Each
unquoted portfolio company has been reviewed in order to identify the
sensitivity of the valuation methodology to using alternative assumptions,
which still fall within the IPEV Guidelines. Where discounts have been applied
(for example to revenue/earnings levels or multiple ratios) alternatives have
been considered. For each unquoted investment, two scenarios have been
modelled, principally a 5 per cent change to discount rates, although other
factors were considered on an individual portfolio company basis: more prudent
assumptions (downside case) and more optimistic assumptions (upside case).
Applying the downside case, the value of the unquoted investments would be
£4.0 million or 4.1 per cent lower (2023: £4.3 million or 4.8 per cent
lower). Using the upside case, the value would be increased by £4.1 million
or 4.3 per cent (2023: £4.4 million or 5.0 per cent).
All 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.
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 2023: none).
The following disposals took place during the period.
Net Cost Opening Profit
proceeds carrying over
from sale value as at opening
1 January carrying
2024 value
£000 £000 £000 £000
Unquoted investments
DisplayPlan Holdings Limited 5,189 70 4,741 448
KeTech Holdings Limited* 1,461 - 1,461 -
Arcus Global Limited* 200 830 200 -
Total from portfolio 6,850 900 6,402 448
Ncam Technologies Limited 11 - - 11
Deferred consideration 11 - - 11
Total from investment portfolio 6,861 900 6,402 459
*partial disposal
The total from disposals in the table above is £6,861,000 whereas that shown
in the Statement of Cash Flows is £6,525,000. This is due to the timing
differences between the recognition of the deferred income arising on
realisations and its receipt in cash.
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 or payable 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 2024 is 141.295 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 2024 the
total of cumulative cash dividends paid and the mid-market price was 142.750
pence per ordinary share, with the Hurdle exceeded due to share price growth
in March 2024 following the publication of December 2023 accounts and the
gains associated with this earlier period.
No accrual for incentive fee has been recognised in the period as the Manager
believes that it is not probable that a fee will arise at year-end due to the
downward movement of the Company's net asset value per share in the year to
date. If the Company's total of cumulative cash dividends paid and the
mid-market price was 142.750 pence per ordinary share at the year-end date, a
fee of £825,000 would be due.
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 £162,894,000 (30 June 2023 and 31 December 2023:
£133,027,000 and £135,616,000 respectively) and 283,400,383 (30 June 2023
and 31 December 2023: 229,484,783 and 228,758,665 respectively) ordinary
shares in issue at 30 June 2024.
Treasury shares have been excluded in calculating the number of ordinary
shares in issue at 30 June 2024.
The Company has no potentially dilutive shares and consequently, basic and
diluted net asset values are equivalent at 30 June 2024, 31 December 2023 and
30 June 2023.
9 Total Return
Total Return per ordinary share is calculated on cumulative dividends paid of
87.75 pence per ordinary share (30 June 2023: 84.75 pence per ordinary share
and 31 December 2023: 86.25 pence per ordinary share) plus the net asset value
as calculated in note 8.
10 Post Balance Sheet Events
Subsequent to the period end the Company has invested a further £5.9 million
into portfolio companies Xapien, AutomatePro, Quality Clouds and SharpCloud.
11 Directors
The directors of the Company are Barbara Anderson, Arif Ahmed and Roger
McDowell.
12 Other Information
Copies of the interim report can be obtained from the Company's registered
office: 4th Floor, 2 Bond Court, Leeds, LS1 2JZ or from www.bscfunds.com
(http://www.bscfunds.com) .
13 Interim Dividend for the year ending 31 December 2024
The directors are pleased to announce the payment of a second interim dividend
for the year ending 31 December 2024 of 1.5 pence per ordinary share ("Interim
Dividend").
The Interim Dividend will be paid on 1 November 2024 to those shareholders on
the Company's register at the close of business on 4 October 2024. The
ex-dividend date will be 3 October 2024.
14 Dividend Re-investment Scheme ("DRIS")
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 18 October 2024.
15 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:
Marcus Karia YFM Equity Partners
Tel: 0113 244 1000
Alex Collins Panmure
Liberum Tel: 0207 886 2767
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