REG - British Smaller Co's - Half-year Report
24/11/2023 07:00
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RNS Number : 5277U British Smaller Companies VCT PLC 24 November 2023
British Smaller Companies VCT plc
Unaudited Interim Results and Interim Management Report
for the six months ended 30 September 2023
British Smaller Companies VCT plc (the "Company") today announces its
unaudited interim results for the six months ended 30 September 2023.
HIGHLIGHTS
· Total Return increase of 0.7p to 259.3p per share
· Net Asset Value at 30 September 2023 of 82.4p per share (31 March
2023: 83.7p) following payment of 2.0p dividend in the period
· The Board has declared a second interim dividend of 2.0p per
share in respect of the year ending 31 March 2024, which will bring total
dividends paid in the current financial year to 4.0p per share, which equates
to 4.8 per cent of the opening net asset value per share.
· Two new investments and two follow-on investments totalling £6.0
million were completed during the period. Subsequent to the period end, a
further follow-on investment totalling £0.8 million has been completed.
· £44.3 million raised in fully subscribed November 2022 offer,
with shares allotted at the beginning of the year. Combined applications
exceeding £45 million received to date in relation to September 2023 offer.
Shares relating to approximately £30 million of combined applications to be
allotted between 29 and 31 January 2024 with second and final allotment in
early April 2024.
Chairman's Statement
I am pleased to present the interim results of British Smaller Companies VCT
plc (the "Company") for the six months to 30 September 2023.
The performance in the period reflects the Company's positive progress despite
ongoing macroeconomic challenges and geopolitical uncertainty, achieving a
Total Return of 0.7 pence, an increase of 0.8 per cent over the opening NAV.
In contrast the FTSE Small Cap fell by 0.4 per cent over the same period.
Underlying portfolio companies remain resilient, showing adaptability to
market conditions and focusing on efficient use of capital. Revenues continue
to grow, contributing to positive revaluations even with valuation multiples
remaining subdued.
Over the past six months, the Company has completed two new investments to the
portfolio, Workbuzz and GEEIQ totalling £4.9 million, and made two follow-on
investments, totalling £1.1 million. Following the period end, a further
£0.8 million has also been invested, taking the total invested so far this
year to £6.8 million, following the £28.4 million invested in the full year
to 31 March 2023.
Realisations in the Period
Realisations of investments generated total proceeds of £1.8 million in the
period.
The Company realised its investment in Ncam in April, generating initial
proceeds of £1.4 million. There is the potential for additional receipts of
up to £1.2 million depending on the achievement of certain milestones over
the coming years, which would see the Company fully recover its investment;
£0.3 million of deferred proceeds have been recognised at the period end.
Post-period end, in November 2023, the Company exited its investments in E2E,
a consultancy in the satellite industry, for £2.0 million, representing a
2.5x return on the Company's cost; and MacroArt, a large scale branding and
signage specialist, for £1.5 million, representing a 2.0x return on the
Company's cost. This was a pleasing outcome for the Company following a
challenging hold period and reflects the Company's ethos of working hard to
generate positive returns from all of its investments.
Financial Results
The investment portfolio generated a return of £2.4 million in the period,
driven by positive revaluations from a number of companies.
Given the current interest rate environment, the Company is managing its
treasury position to generate a positive return for shareholders, balanced
against the primary objective of capital preservation. The Company's
treasury operations generated £1.3 million of income in the period.
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 March 2023 83.7p 157,032
Net gain arising from investment portfolio 1.0p 2,376
Net operating costs (0.1p) (197)
Comprehensive income in the period 0.9p 2,179
Issue/buy-back of new shares* (0.2p) 44,169
Total Return in the period 0.7p 46,348
NAV before the payment of dividends 84.4p 203,380
Dividends paid (2.0p) (4,816)
NAV at 30 September 2023 82.4p 198,564
Cumulative dividends paid 176.9p
Total Return: At 30 September 2023 259.3p
At 31 March 258.6p
2023
* The allotment of shares from the 2022/23 fundraising reduces total return
per ordinary share as the fundraising was priced at the 31 December 2022 NAV,
being the latest published NAV at the allotment date shortly after 31 March
2023.
Dividends
An interim dividend of 2.0 pence per ordinary share in respect of the year
ending 31 March 2024 was paid on 28 July 2023, bringing the cumulative
dividends paid to date to 176.9 pence per ordinary share.
The Board has announced a second interim dividend of 2.0 pence per ordinary
share for the year ending 31 March 2024 which, when combined with the above
dividend, will bring total dividends paid in the current financial year to 4.0
pence per ordinary share (2023: 8.5 pence per ordinary share). The dividend
will be paid on 8 December 2023 to shareholders on the shareholder register on
10 November 2023.
Shareholder Relations
The shareholder workshop held on 20 June 2023 was well attended. Attendees
heard from Tom Dunlop, CEO of Summize, and Philip Hunt, Chair of Vuealta.
The Company will be hosting an online webinar on 27 November 2023 to provide
an update to shareholders; for further details please contact Tracey Nice at
tracey.nice@yfmep.com.
Documents such as the annual report are now received electronically by 81 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.
Regulatory Developments
In the Autumn Statement on 22 November 2023, the Government announced it would
extend the sunset clause currently in place for Venture Capital Trusts until
April 2035, and that it would include legislation to achieve this in the next
Finance Bill.
In the period there have been no regulatory changes that impact the 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
On 4 April 2023 the Company allotted shares from its fully subscribed 2022/23
share offer. £44.3 million was raised by the Company, resulting in the
allotment of 53,559,905 ordinary shares.
Having assessed its expected cash requirements, the Company announced a new
share offer on 20 September 2023, alongside British Smaller Companies VCT2
plc, with the intention of raising up to £90 million (in aggregate), which
includes an over-allotment facility of £25 million. Applications exceeding
£45 million have been received as of the date of this report, of which £27
million relate to the Company. The first allotment of £30 million of gross
proceeds will take place between 29 and 31 January 2024. The second and final
allotment will take place in early April 2024.
Outlook
Over the past six months it has been pleasing to see portfolio companies
continue to grow revenues, and to see positive exit outcomes despite
challenging conditions. The Company has a promising pipeline of both new
investment and exit opportunities, and will continue to look for opportunities
to deploy capital into the existing portfolio to support continued growth.
I thank shareholders for their continued support.
Rupert Cook
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.
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 the 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
The Company's portfolio at 30 September 2023 has a value of £130.3 million.
The top ten investments represent 42.4 per cent of the net asset value with
the largest representing 12.7 per cent of the net asset value.
The movements in the investment portfolio are set out below:
Portfolio Listed investment funds Investment portfolio
£million £million £million
Opening fair value at 1 April 2023 123.4 4.0 127.4
Additions 6.0 - 6.0
Disposal proceeds (1.7) (0.1) (1.8)
Gain (loss) arising from the investment portfolio 2.6 (0.3) 2.3
Closing fair value at 30 September 2023 130.3 3.6 133.9
The Company's portfolio delivered a positive performance over the period,
generating a return of £2.6 million.
There were upward revaluations from several portfolio companies including
Unbiased, Traveltek, E2E, Displayplan and MacroArt, offset by decreases from
Relative Insight, Wooshii and ACC.
Realisation of Investments
During the six months to 30 September 2023 the Company generated £1.8 million
from disposals, in line with the opening carrying value and a loss of £0.9
million on cost. Further details are given in note 6.
Investments
During the six months ended 30 September 2023, the Company completed four
investments, totalling £6.0 million. This comprised two new investments of
£4.9 million and two follow-on investments totalling £1.1 million. The
breakdown of these investments is shown below:
New Follow-on Total
Company Description £million £million £million
Workbuzz SaaS-based employee engagement survey and insights platform 2.6 - 2.6
GEEIQ Data and market intelligence platform in the gaming space 2.3 - 2.3
Relative Insight AI-based text data analytics platform - 0.8 0.8
Elucidat An e-learning software authoring platform - 0.3 0.3
Invested in the period 4.9 1.1 6.0
Subsequent to the period end, the Company has invested £0.8 million into
portfolio company Force24.
Cash Deposits and other Liquid Funds
Given the current environment of rising interest rates the Company is taking
an active approach to cash management, whilst pursuing its primary aim of
capital preservation. This is effected through the use of a pool of money
market funds (which can be converted back to cash with immediate notice), cash
deposits with tier one banking institutions, and a small, diversified
portfolio of listed investment funds. At 30 September 2023 this listed
portfolio was valued at £3.6 million, or 1.8 per cent of net assets; this
reduced in value by £0.3 million in the period, predominantly driven by a
reduction in the valuation of its bond investments.
Portfolio
The top 10 investments had a combined value of £84.1 million, 64.5 per cent
of the total portfolio.
Name of company Sector First investment Amount invested Value at 30 Sept 2023 Recognised income/proceeds to date Return to date
£000 £000 £000 £000
Matillion Limited Data Nov 16 2,666 25,233 7,071 32,304
Unbiased EC1 Limited Tech-enabled Services Dec 19 5,596 11,559 - 11,559
Outpost VFX Limited New Media Feb 21 4,500 8,936 38 8,974
Displayplan Holdings Limited Business Services Jan 12 1,300 8,611 3,168 11,779
Elucidat Ltd Application Software May 19 4,260 6,494 197 6,691
Wooshii Limited New Media May 19 4,644 6,006 581 6,587
Force24 Ltd Application Software Nov 20 3,150 4,792 - 4,792
ACC Aviation Group Limited Business Services Nov 14 2,068 4,405 5,280 9,685
Vypr Validation Technologies Limited Tech-enabled Services Jan 21 3,300 4,119 - 4,119
Quality Clouds Limited Cloud & DevOps May 22 3,916 3,942 - 3,942
SharpCloud Limited Data Oct 19 3,407 3,859 - 3,859
DrDoctor (via ICNH Ltd) Application Software Feb 23 3,565 3,565 - 3,565
Tonkotsu Limited Retail & Brands Jun 19 2,388 2,961 - 2,961
Workbuzz Analytics Limited Application Software Jun 23 2,577 2,945 - 2,945
AutomatePro Limited Cloud & DevOps Dec 22 2,225 2,875 - 2,875
Traveltek Group Holdings Limited Application Software Oct 16 1,716 2,797 901 3,698
GEEIQ (via Checkpoint GG Limited) Data Sep 23 2,358 2,358 - 2,358
Frescobol Carioca Ltd Retail & Brands Mar 19 1,800 2,143 - 2,143
Relative Insight Limited Tech-enabled Services Mar 22 3,804 2,092 - 2,092
Summize Limited Application Software Oct 22 1,800 2,070 - 2,070
Plandek Limited Cloud & DevOps Oct 22 2,070 2,070 - 2,070
KeTech Enterprises Limited Tech-enabled Services Nov 15 2,000 2,059 2,599 4,658
Vuealta Holdings Limited Tech-enabled Services Sep 21 3,045 2,013 4,601 6,614
E2E Engineering Limited Business Services Sep 17 900 1,942 243 2,185
Xapien (via Digital Insight Technologies Limited) Application Software Mar 23 1,740 1,846 - 1,846
Biorelate Limited Application Software Nov 22 1,560 1,562 - 1,562
Panintelligence (via Paninsight Limited) Data Nov 19 1,500 1,500 - 1,500
Sipsynergy (via Hosted Network Services Limited) Cloud & DevOps Jun 16 2,654 1,346 1 1,347
Macro Art Holdings Limited Business Services Jun 14 1,260 1,210 1,002 2,212
£1 million and below 11,153 2,983 6,819 9,802
Total portfolio 88,922 130,293 32,501 162,794
Full disposals to date 76,675 - 149,724 149,724
Total portfolio 165,597 130,293 182,225 312,518
Our 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 March 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 and Strategic;
> Regulatory;
> Legislative;
> Reputational;
> Operational;
> Cyber Security and Information Technology;
> ESG; and
> Liquidity.
Full details of the principal risks can be found in the financial statements
for the year ended 31 March 2023 on pages 31 to 33, a copy of which is
available at www.bscfunds.com (http://www.bscfunds.com) .
Directors' Responsibilities Statement
The directors of British Smaller Companies VCT 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 VCT 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 VCT plc are listed in note 10 of
these interim financial statements.
By order of the Board
Rupert Cook
Chairman
Unaudited Statement of Comprehensive Income
for the six months ended 30 September 2023
Notes Unaudited 6 months ended Unaudited 6 months ended
30 September 2023 30 September 2022
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains on investments held at fair value 6 - 2,280 2,280 - 650 650
Profit on disposal of investments 6 - 96 96 - 2,849 2,849
- 2,376 2,376 - 3,499 3,499
Income 2 1,629 - 1,629 658 - 658
Total income 1,629 2,376 4,005 658 3,499 4,157
Administrative expenses:
Manager's fee (367) (1,100) (1,467) (351) (1,052) (1,403)
Other expenses (359) - (359) (329) - (329)
(726) (1,100) (1,826) (680) (1,052) (1,732)
Profit (loss) before taxation 903 1,276 2,179 (22) 2,447 2,425
Taxation 3 - - - - - -
Profit (loss) for the period 903 1,276 2,179 (22) 2,447 2,425
Total comprehensive income (expense) for the period 903 1,276 2,179 (22) 2,447 2,425
Basic and diluted earnings (loss) per ordinary share 5 0.38p 0.53p 0.91p (0.01p) 1.31p 1.30p
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 September 2023
Notes Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
ASSETS
Non-current assets at fair value through profit or loss
Investments 6 130,293 99,010 123,361
Listed investment funds 6 3,620 4,181 4,045
Financial assets at fair value through profit or loss 6 133,913 103,191 127,406
Accrued income and other assets 1,891 1,014 1,556
135,804 104,205 128,962
Current assets
Accrued income and other assets 825 6,386 161
Current asset investments 32,500 14,471 7,501
Cash and cash equivalents 29,635 33,217 20,766
62,960 54,074 28,428
LIABILITIES
Current liabilities
Trade and other payables (200) (146) (358)
Net current assets 62,760 53,928 28,070
Net assets 198,564 158,133 157,032
Shareholders' equity
Share capital 26,452 20,612 20,969
Share premium account 41,586 62,861 1,700
Capital reserve 75,609 34,245 82,893
Investment holding gains and losses reserve 52,397 39,138 49,215
Revenue reserve 2,520 1,277 2,255
Total shareholders' equity 198,564 158,133 157,032
Net asset value per ordinary share 7 82.4p 85.0p 83.7p
Signed on behalf of the Board
Rupert Cook
Chairman
Unaudited Statement of Changes in Equity
for the six months ended 30 September 2023
Share capital Share premium account Capital reserve Investment holding gains and losses reserve Revenue reserve Total equity
£000 £000 £000 £000 £000 £000
At 31 March 2022 20,510 62,123 33,620 41,982 1,299 159,534
Revenue loss for the period - - - - (22) (22)
Expenses charged to capital - - (1,052) - - (1,052)
Investment holding gain on investments held at fair value - - - 650 - 650
Realisation of investments in the period - - 2,849 - - 2,849
Total comprehensive income (expense) for the period - - 1,797 650 (22) 2,425
Issue of shares - DRIS 102 760 - - - 862
Issue costs - (22) - - - (22)
Purchase of own shares - - (941) - - (941)
Dividends - - (3,725) - - (3,725)
Total transactions with owners 102 738 (4,666) - - (3,826)
Realisation of prior year investment holding gains - - 3,494 (3,494) - -
At 30 September 2022 20,612 62,861 34,245 39,138 1,277 158,133
Revenue return for the period - - - - 1,105 1,105
Expenses charged to capital - - (1,159) - - (1,159)
Investment holding gain on investments held at fair value - - - 7,502 - 7,502
Realisation of investments in the period - - 2,364 - - 2,364
Total comprehensive income for the period - - 1,205 7,502 1,105 9,812
Issue of shares - DRIS 357 2,485 - - - 2,842
Issue costs - (40) - - - (40)
Share premium cancellation - (63,606) 63,606 - - -
Purchase of own shares - - (1,556) - - (1,556)
Dividends - - (12,032) - (127) (12,159)
Total transactions with owners 357 (61,161) 50,018 - (127) (10,913)
Realisation of prior year investment holding losses - - (2,575) 2,575 - -
At 31 March 2023 20,969 1,700 82,893 49,215 2,255 157,032
Revenue return for the period - - - - 903 903
Expenses charged to capital - - (1,100) - - (1,100)
Investment holding gain on investments held at fair value - - - 2,280 - 2,280
Realisation of investments in the period - - 96 - - 96
Total comprehensive (expense) income for the period - - (1,004) 2,280 903 2,179
Issue of share capital 5,356 40,893 - - - 46,249
Issue of shares - DRIS 127 911 - - - 1,038
Issue costs - (1,918) - - - (1,918)
Purchase of own shares - - (1,200) - - (1,200)
Dividends - - (4,178) - (638) (4,816)
Total transactions with owners 5,483 39,886 (5,378) - (638) 39,353
Realisation of prior year investment holding losses - - (902) 902 - -
At 30 September 2023 26,452 41,586 75,609 52,397 2,520 198,564
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 75,609 2,520 78,129
Less: Income/proceeds not yet distributable (399) (1,952) (2,351)
Less: Cancelled share premium not yet distributable (40,769) - (40,769)
Reserves available for distribution* 34,441 568 35,009
*subject to filing these interim financial statements at Companies House.
The capital reserve and the revenue reserve are both distributable reserves.
These reserves total £78,129,000, representing a decrease of £7,019,000 in
the period since 31 March 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 £78,129,000 shown above,
£2,351,000 relates to income and proceeds not yet distributable and
£40,769,000 relates to cancelled share premium which becomes distributable
from the dates shown below.
Total share premium cancelled is available for distribution from the
following dates:
£000
1 April 2024 7,157
1 April 2025 32,128
1 April 2026 1,484
Cancelled share premium account not yet distributable 40,769
Unaudited Statement of Cash Flows
for the six months ended 30 September 2023
Notes Unaudited Unaudited Audited
6 months 6 months year
ended ended ended
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Profit before taxation 2,179 2,425 12,237
Decrease in trade and other payables (158) (641) (429)
Increase in accrued income and other assets (599) (224) (660)
Profit on disposal of investments (96) (2,849) (5,213)
Gains on investments held at fair value (2,280) (650) (8,152)
Capitalised income - - (60)
Net cash outflow from operating activities (954) (1,939) (2,277)
Cash flows from (used in) investing activities
Cash maturing from fixed term deposits - - 6,970
Purchase of financial assets at fair value through profit or loss 6 (6,039) (8,778) (28,832)
Proceeds from sale of financial assets at fair value through profit or loss 6 1,508 8,832 20,716
Net cash (outflow) inflow from investing activities (4,531) 54 (1,146)
Cash flows from (used in) financing activities
Issue of ordinary shares 46,249 - -
Costs of ordinary share issues* (1,918) (22) (62)
Purchase of own shares (1,200) (941) (2,497)
Dividends paid 4 (3,778) (2,863) (12,180)
Net cash inflow (outflow) from financing activities 39,353 (3,826) (14,739)
Net increase (decrease) in cash and cash equivalents 33,868 (5,711) (18,162)
Cash and cash equivalents at the beginning of the period 28,267 46,429 46,429
Cash and cash equivalents at the end of the period 62,135 40,718 28,267
Cash and cash equivalents comprise
Money market funds 32,500 7,501 7,501
Cash at bank 29,635 33,217 20,766
Cash and cash equivalents at the end of the period 62,135 40,718 28,267
*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)
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 March 2023 do not constitute full
financial statements and have been extracted from the Company's financial
statements for the year ended 31 March 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 March 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 (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 12 months from the
date these half year statements were approved. As at 30 September 2023 the
Company held cash balances, fixed term deposits and other liquid resources
with a combined value of £65,755,000. 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 for at least 12 months from the date of publication of this report.
In the year ended 31 March 2023 the Company's costs and discretionary
expenditures were:
£000
Administrative expenses (before fair value movements related to credit risk 3,480
and incentive fee)
Share buy-backs 2,497
Dividends (before DRIS) 15,884
Total 21,861
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
September September
2023 2022
£000 £000
Income from investments
- Interest on loans to unquoted companies 103 297
- Dividends from unquoted companies 243 172
Income from unquoted portfolio 346 469
Income from listed investment funds 62 54
Income from investments held at fair value through profit or loss 408 523
Interest on bank deposits/money market funds 1,221 135
1,629 658
3
Taxation
Unaudited 6 months ended Unaudited 6 months ended
30 September 2023 30 September 2022
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Profit (loss) before taxation 903 1,276 2,179 (22) 2,447 2,425
Profit (loss) before taxation multiplied by the standard small company rate of 172 242 414 (4) 465 461
corporation tax in UK of 19.0% (2022: 19.0%)
Effect of:
UK dividends received (47) - (47) (35) - (35)
Non-taxable profits on investments - (451) (451) - (665) (665)
Deferred tax not recognised (125) 209 84 39 200 239
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 September 2023 30 September 2022
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
First interim dividend for the year ending 31 March 2024 of 2.0p (2023: 2.0p) 638 4,178 4,816 - 3,725 3,725
per ordinary share
Proceeds from shares allotted under DRIS (1,038) (862)
Dividends paid in the Statement of Cash Flows 3,778 2,863
Audited year ended
31 March 2023
Revenue Capital Total
£000 £000 £000
First interim dividend for the year ending 31 March 2023 of 2.0p per ordinary - 3,725 3,725
share
Second interim dividend for the year ended 31 March 2023 of 5.0p per ordinary - 3,736 3,736
share
Third interim dividend for the year ended 31 March 2023 of 2.0p per ordinary 127 8,296 8,423
share
127 15,757 15,884
Proceeds from shares allotted under DRIS (3,704)
Dividends paid in the Statement of Cash Flows 12,180
The interim dividend of 2.0 pence per ordinary share was paid on 28 July 2023
to shareholders on the register as at 30 June 2023.
A second interim dividend of 2.0p per ordinary share, amounting to
approximately £4.8 million, has been announced. 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 Earnings per Ordinary Share
The basic and diluted earnings per ordinary share is based on the profit after
tax attributable to equity shareholders of £2,179,000 (30 September 2022:
£2,425,000) and 240,246,488 (30 September 2022: 186,454,862) ordinary shares
being the weighted average number of ordinary shares in issue during the
period.
The basic and diluted revenue earnings (loss) per ordinary share is based on
the revenue profit attributable to equity shareholders of £903,000 (30
September 2022: loss of £22,000) and 240,246,488 (30 September 2022:
186,454,862) 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 £1,276,000 (30
September 2022: £2,447,000) and 240,246,488 (30 September 2022: 186,454,862)
ordinary shares being the weighted average number of ordinary shares in issue
during the period.
During the period the Company allotted 53,559,905 new ordinary shares in
respect of the 2022/23 fundraising and 1,270,231 new ordinary shares in
respect of its DRIS.
The Company has also repurchased 1,517,931 of its own shares in the period and
these shares are held in the capital reserve. The total of 23,525,696 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 September 2023, 31 March 2023
and 30 September 2022.
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 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. 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 (2022: 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 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 March 2023, a copy of
which can be found at 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 September 2023 are summarised as follows:
IFRS 13 measurement classification Level 3 Level 1 Total
Unquoted investments Listed investment funds investments
£000 £000 £000
Opening cost 73,515 4,676 78,191
Opening valuation gain (loss) 49,846 (631) 49,215
Opening fair value at 1 April 2023 123,361 4,045 127,406
Additions at cost 6,039 - 6,039
Disposal proceeds (1,668) (147) (1,815)
Net profit (loss) on disposals* 9 (6) 3
Change in fair value 2,228 (272) 1,956
Foreign exchange gain 324 - 324
Closing fair value at 30 September 2023 130,293 3,620 133,913
Closing cost 77,041 4,475 81,516
Closing valuation gain (loss) 53,252 (855) 52,397
Closing fair value at 30 September 2023 130,293 3,620 133,913
* The net profit on disposals in the table above is £3,000 whereas that shown
in the Statement of Comprehensive Income is £96,000. The difference comprises
deferred proceeds in respect of assets which have been disposed of in prior
periods and were not included in the portfolio at 1 April 2023.
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 £6,220,000 (4.8 per cent) lower. Using the
upside alternative, the value would be increased by £6,157,000 (4.7 per
cent).
97 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.
3 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
September 2023 would have increased the net assets attributable to the
Company's shareholders and the total profit by £181,000. 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 March
2023: none).
The following disposals took place during the period.
Net proceeds from sale Cost Opening carrying value as at 1 April 2023 Profit (loss) over opening carrying value
£000 £000 £000 £000
Unquoted investments
Ncam Technologies Limited 1,668 2,512 1,659 9
Total from portfolio 1,668 2,512 1,659 9
Listed investment funds 147 202 153 (6)
Total from investment portfolio 1,815 2,714 1,812 3
Deferred consideration - Wakefield Acoustics (via Malvar Engineering Limited) 93 - - 93
Total from investment portfolio 1,908 2,714 1,812 96
The total from disposals in the table above is £1,908,000 whereas that shown
in the Statement of Cash Flows is £1,508,000. This is due to the timing
differences between the recognition of the deferred income and its receipt in
cash.
7 Basic and Diluted Net Asset Value per Ordinary
Share
The basic and diluted net asset value per ordinary share is calculated on
attributable assets of £198,564,000 (30 September 2022 and 31 March 2023:
£158,133,000 and £157,032,000 respectively) and 240,991,484 (30 September
2022 and 31 March 2023: 186,112,757 and 187,679,279 respectively) ordinary
shares in issue at 30 September 2023.
The treasury shares have been excluded in calculating the number of ordinary
shares in issue at 30 September 2023.
The Company has no potentially dilutive shares and consequently, basic and
diluted net asset values are equivalent at 30 September 2023, 31 March 2023
and 30 September 2022.
8 Total Return
Total Return per ordinary share is calculated on cumulative dividends paid of
176.9 pence per ordinary share (30 September 2022: 168.4 pence per ordinary
share and 31 March 2023: 174.9 pence per ordinary share) plus the net asset
value as calculated in note 7.
9 Post Balance Sheet Events
Subsequent to the period end the Company has invested £0.8 million into
portfolio company Force24.
In November 2023, the Company exited its investments in E2E for £2.0 million
and MacroArt for £1.5 million, in line with the companies' valuations at 30
September 2023.
10 Directors
The directors of the Company are: Rupert Cook, Adam Bastin, Jonathan
Cartwright and Purvi Sapre.
11 Interim Dividend for the year ending 31 March 2024
The directors have previously announced the payment of a second interim
dividend for the year ending 31 March 2024 of 2.0 pence per ordinary share
("Interim Dividend").
The Interim Dividend will be paid on 8 December 2023 to those shareholders on
the Company's register at the close of business on 10 November 2023. The
ex-dividend date will be 9 November 2023.
12 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 24 November 2023.
13 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
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