BSV British Smaller Companies Vct Plc

British Smaller Companies VCT plc

Unaudited Interim Results and Interim Management Report

for the six months ended 30 September 2024

British Smaller Companies VCT plc (the "Company") today announces its unaudited interim results for the six months ended 30 September 2024.

HIGHLIGHTS

·   Net Asset Value ("NAV") at 30 September 2024 of 81.8p per share (31 March 2024: 83.6p) following payment of 2.0p dividend during the period

·     Total Return increased by 0.2p to 262.7p per share

·    Four new investments and seven follow-on investments totalling £20.4 million completed during the period

·      The Board has declared a second interim dividend of 2.0p per share in respect of the year ending 31 March 2025, 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. This will result in a corresponding reduction in the Company's NAV per ordinary share, adjusting the last reported NAV to 79.8p per share

·      Combined applications exceeding £52 million received to date in relation to October 2024 offer

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 2024.

The performance in the period reflects the Company's positive progress despite ongoing macroeconomic challenges and geopolitical uncertainty, achieving a Total Return of 0.2 pence from 262.5 to 262.7 pence per share, an increase of 0.2 per cent over the opening NAV. AIC data continues to rank the Company first across all generalist VCTs when considering a blended average performance ranking over 1, 3, 5, and 10 years.

The majority of the portfolio continues to perform well, with promising levels of underlying growth seen in many companies.  However, performance in the quarter was constrained by certain company-specific circumstances that have reduced valuations in these companies, as well as a decrease in anticipated deferred proceeds the Company expects to receive from previously exited investments.

Over the past six months, the Company completed four new investments to the portfolio, Fuuse, Spotless Water, Integrum ESG and Ohalo, totalling £8.6 million.  The Company also made seven follow-on investments, totalling £11.8 million, while a further £0.5 million was invested after the period-end, taking the total invested so far this year to £20.9 million.

Realisations in the Period

While there were no realisations in the six months to 30 September, in October 2024 the Company sold its investment in Traveltek for £2.6 million. Total proceeds over the life of the investment are £3.6 million, a 2.1x return on the Company's cost. There is the potential for further deferred proceeds in due course.

Financial Results

The investment portfolio generated a return of £0.1 million in the period. This was offset by a fall of £0.7 million in the anticipated deferred proceeds from realisations completed in previous periods.

In the current interest rate environment, the Company continues to actively manage its treasury position to generate a positive return for shareholders, balanced against the primary objective of capital preservation.  This generated £2.6 million of income in the period, resulting in overall net operating income of £0.9 million over the six months.

The movement in net asset value ("NAV") per ordinary share and the dividends paid are set out in the table below. 

Dividends

An interim dividend of 2.0 pence per ordinary share in respect of the year ending 31 March 2025 was paid on 26 July 2024, bringing the cumulative dividends paid to date to 180.9 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 2025 which, when combined with the above dividend, will bring total dividends paid in the current financial year to 4.0 pence per ordinary share (2024: 4.0 pence per ordinary share). The dividend will be paid on 20 December 2024 to shareholders on the shareholder register on 22 November 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, an investment that was sold earlier this year. 

Documents such as the annual report are now received electronically by 84 per cent of shareholders, 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

During the period, the process of extending the Venture Capital Trust regime to 2035 was completed by the Government, with the underlying regulations brought into force.  As part of the Budget on 30 October 2024, Chancellor Rachel Reeves noted this extension as a sign of the Government's commitment to supporting growth and entrepreneurship.

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 from HMRC where there is an element of uncertainty over the application of the rules.

Fundraising

On 3 April 2024 the Company allotted shares from the final allotment of its fully subscribed 2023/24 share offer. £55.5 million was raised over the whole fundraising by the Company, including £36.8 million allotted on 3 April 2024, resulting in the issue of 42,588,037 ordinary shares.

Having assessed its expected cash requirements, the Company announced a new share offer on 17 October 2024, alongside British Smaller Companies VCT2 plc, with the intention of raising up to £75 million (in aggregate), which includes an over-allotment facility of £25 million. Applications exceeding £52 million have been received as of the date of this report, of which £31.5 million relate to the Company. The allotment of the first £25 million of gross proceeds will take place between 27 and 31 January 2025. The second and final allotment will take place between 1 and 4 April 2025.  Funds awaiting allotment will receive additional shares equivalent to a 3.35 per cent per annum return (rate subject to change by the receiving agent's banking provider).

Outlook

There continues to be strong levels of underlying growth in the portfolio, across a range of investments.  The Company took the opportunity to invest further into many of these companies in the period to accelerate their growth, which is hoped will come through to value in subsequent periods.

With four new investments made in the year to date, and a pipeline of opportunities to add further to the portfolio, there continues to be opportunities to deploy capital into fast-growing, innovative businesses.  The positive progress of the 2024/25 fundraising to date will ensure that the Company continues to have the firepower to support these opportunities.

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 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 buybacks.

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 September 2024 the Company's portfolio was valued at £147.1 million.  The top ten investments represent 35.5 per cent of the net asset value, with the largest representing 9.1 per cent.

The movements in the investment portfolio are set out below:

Investment Portfolio

The Company's portfolio delivered a small positive performance overall over the period, of £0.1 million. This was offset by a fall of £0.7 million in the anticipated deferred proceeds from realisations completed in previous periods.

There were upward revaluations from ACC, Unbiased, Summize, Teraview, AutomatePro, Vypr, Plandek and Xapien, offset by decreases from Matillion, Outpost and Wooshii.

Realisation of Investments

There were no disposals during the period. Subsequent to the period-end, the Company sold its investment in Traveltek for £2.6 million. Total proceeds over the life of the investment are £3.6 million, a 2.1x return on the Company's cost. There is the potential for further deferred proceeds in due course.

Investments

During the six months ended 30 September 2024, the Company completed 11 investments, totalling £20.4 million. This comprised four new investments of £8.6 million; and seven follow-on investments totalling £11.8 million. The breakdown of these investments is shown below:

Subsequent to the period-end, the Company invested £0.5 million into existing portfolio companies Wooshii and Relative Insight.

Cash Deposits and other Liquid Funds

The Company takes 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 at Tier 1 Financial Institutions (A2 rated or above). £2.6 million of income was earned from money market funds and bank deposits during the period. At 31 October 2024, the Company was achieving a weighted average return on liquid assets of 4.5 per cent.

Portfolio

The top 10 investments had a combined value of £87.6 million, 59.6 per cent of the total portfolio.

* represents recognised income and proceeds received to date, plus the unrealised valuation at 30 September 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 March 2024. 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 March 2024 on pages 31 to 33, a copy of which is available at 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 2024

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 2024

Unaudited Statement of Changes in Equity

for the six months ended 30 September 2024

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.

* subject to filing these interim financial statements at Companies House.

The capital reserve and the revenue reserve are both distributable reserves.  These reserves total £73,678,000, representing a decrease of £9,592,000 in the period since 31 March 2024.  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 £73,678,000 shown above, £2,905,000 relates to income and proceeds not yet distributable and £33,612,000 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:

Unaudited Statement of Cash Flows

for the six months ended 30 September 2024

* includes net income from:

**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 2024 do not constitute full financial statements and have been extracted from the Company's financial statements for the year ended 31 March 2024. 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 2024. 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 2024 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 twelve months from the date these half year statements were approved. As at 30 September 2024 the Company held cash balances and money market funds with a combined value of £96,555,000. 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 2024 the Company's costs and discretionary expenditures were:

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

3             Taxation                    

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:

The interim dividend of 2.0 pence per ordinary share was paid on 26 July 2024 to shareholders on the register as at 28 June 2024.

A second interim dividend of 2.0p per ordinary share, amounting to approximately £6.0 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 £264,000 (30 September 2023: £2,179,000) and 303,413,390 (30 September 2023: 240,246,488) 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 £2,214,000 (30 September 2023: £903,000) and 303,413,390 (30 September 2023: 240,246,488) 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 £1,950,000 (30 September 2023: profit of £1,276,000) and 303,413,390 (30 September 2023: 240,246,488) ordinary shares being the weighted average number of ordinary shares in issue during the period.

During the period the Company allotted 42,588,037 new ordinary shares in respect of the 2023/24 fundraising and 1,369,910 new ordinary shares in respect of its DRIS.

The Company has also repurchased 4,725,559 of its own shares in the period and these shares are held in the capital reserve. The total of 30,363,980 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 2024, 31 March 2024 and 30 September 2023.

6             Financial Assets at Fair Value through Profit or Loss

* 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 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. The Company held no such investments at 30 September 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 at 30 September 2024.

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").

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 2024, 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 2024 are summarised as follows:

* The net loss on disposals in the table above is £nil whereas that shown in the Statement of Comprehensive Income is a loss of £662,000. The difference comprises the change in anticipated deferred proceeds in respect of assets which have been disposed of in prior periods and were not included in the portfolio at 1 April 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 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 £6,257,000 (4.3 per cent) lower. Using the upside alternative, the value would be increased by £6,414,000 (4.4 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 March 2024: none).

There were no disposals during the period.

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 £246,809,000 (30 September 2023 and 31 March 2024: £198,564,000 and £219,600,000 respectively) and 301,891,749 (30 September 2023 and 31 March 2024: 240,991,484 and 262,659,361 respectively) ordinary shares in issue at 30 September 2024.

The treasury shares have been excluded in calculating the number of ordinary shares in issue at 30 September 2024.

The Company has no potentially dilutive shares and consequently, basic and diluted net asset values are equivalent at 30 September 2024, 31 March 2024 and 30 September 2023.

8             Total Return

Total Return per ordinary share is calculated on cumulative dividends paid of 180.9 pence per ordinary share (30 September 2023: 176.9 pence per ordinary share and 31 March 2024: 178.9 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 invested £0.5 million into existing portfolio companies Wooshii and Relative Insight.

In October 2024 the Company sold its investment in Traveltek for £2.6 million. Total proceeds over the life of the investment are £3.6 million, a 2.1x return on the Company's cost. There is the potential for further deferred proceeds in due course.

10           Directors

The directors of the Company are Rupert Cook, Adam Bastin, Jonathan Cartwright and Purvi Sapre.

11            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.

13           Interim Dividend for the year ending 31 March 2025

The directors have previously announced the payment of a second interim dividend for the year ending 31 March 2025 of 2.0 pence per ordinary share ("Interim Dividend").

The Interim Dividend will be paid on 20 December 2024 to those shareholders on the Company's register at the close of business on 22 November 2024. The ex-dividend date will be 21 November 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 6 December 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