British Smaller VCT : BSC Interim results for the six months ended 30 September 2016 - RNS

British Smaller Companies VCT plc

Unaudited Interim Results and Interim Management Report For the 6 months ended 30 September 2016

British Smaller Companies VCT plc ("the Company") today announces its unaudited interim results for the six months to 30 September 2016.

• Residual investment in GO Outdoors sold for £14.1 million on 27 November 2016 delivering a return of 37 times original cost over the life of the Company's investment. The gain over the valuation and net asset value ("NAV") at 30 September 2016 was £2.8 million, equivalent to 2.9 pence per ordinary share.

• Interim dividend of 16.5 pence per ordinary share (including 14.5 pence arising from the realisation of GO Outdoors) to be paid on 18 January 2017.

• Non-prospectus top-up to raise €5 million to be launched on 10 February 2017.

• Increase in total return of 3.8 pence per ordinary share to 212.5 pence per ordinary share at 30 September 2016 (208.7 pence per ordinary share as at 31 March 2016).

• Increase in NAV to 103.8 pence per ordinary share prior to the payment of dividends during the period totalling 5.5 pence per ordinary share. This growth was 3.8 per cent of the opening NAV of 100.0 pence per ordinary share.

• Total cumulative dividends paid since inception of 114.2 pence per ordinary share.

• The underlying growth in the overall investment portfolio was £3.3 million, 5.5 per cent of its opening value.

• Subsequent to 30 September 2016 £5.1 million invested into 3 companies.

Your Company's portfolio delivered a total return of 5.5 per cent of its opening value and continued to deliver a strong income stream.

During the period your Company's total return increased to 212.5 pence per ordinary share, with the net asset value having increased by 3.8 pence per ordinary share to 103.8 pence per ordinary share, prior to the payment of the final dividend of 3.5 pence per ordinary share for the year ended 31 March 2016 and a special dividend of

2.0 pence per ordinary share for the year ending 31 March 2017.

While the result of the EU referendum has caused some economic volatility the Company's portfolio has continued to perform well, with value growth in a number of businesses during the first half of the year.

I am pleased to inform you that your Company announced the sale of its residual investment in GO Outdoors to JD Sports Fashion plc on 28 November 2016 generating proceeds of £14.1 million. When aggregated with previous receipts the total proceeds over the life of your Company's investment were £23.1 million, a return of 37 times the original cost. Since your Company's investment in 1998 GO Outdoors has produced a near eighty-fold increase in sales and has grown from one store in Sheffield, with 33 employees, to a nationwide chain of over fifty stores and more than 2,000 employees.

The gain over the valuation and NAV at 30 September 2016 was £2.8 million, equivalent to 2.9 pence per ordinary share.

Following the success of this investment the Board has decided to pay an interim dividend of 16.5 pence per ordinary share (2015/16 2.0 pence per ordinary share), of which 14.5 pence arises from the realisation of GO Outdoors.

During the period your Company completed an investment of £1.4 million into Sipsynergy, a market-leading cloud collaboration solutions provider and since the end of the period a further £5.1 million has been invested into three businesses, Biz2Mobile, Traveltek and Matillion. In aggregate since HMRC issued its guidelines regarding the new legislation in May this year the Company has completed four new investments totalling £6.5 million. In addition heads of terms granting exclusivity for a further two investments totalling £2.5 million have been signed. Further information on the completed investments is provided in the Investment Review on page 9 of the Interim Report.

Our experience to date suggests that new investment will need to focus on younger businesses which will almost certainly be unable to provide the same level of regular cash returns and income as the current portfolio. While the existing investments should provide a reliable income stream until realisation, future returns will become more and more reliant on equity realisations which will mean a more volatile dividend stream for shareholders.

The movements in net asset value per ordinary share and the dividends paid in the six months to 30 September 2016 are shown in the table below.

The portfolio's strong performance resulted in a value gain of £3.3 million, equivalent to an increase in value to shareholders of 3.4 pence per ordinary share.

During the period a final dividend in respect of the year ended 31 March 2016 of 3.5 pence per ordinary share was paid, which, when taken together with the interim dividend paid in August of 2.0 pence per ordinary share for the year ending 31 March 2017 brings cumulative dividends paid to date to 114.2 pence per ordinary share.

As set out above the Board has proposed an interim dividend of 16.5 pence per ordinary share, which will take dividends paid in the financial year to 22.0 pence per ordinary share. The interim dividend will be paid on 18 January 2017 to shareholders on the register on 16 December 2016.

During the period the 21st shareholder workshop was held in conjunction with British Smaller Companies VCT2 plc at the British Library on 17 May 2016. The workshop was well attended, with over 200 attendees, and included presentations from Ness (Holdings) Limited and KeTech Enterprises Limited, two of our most recent investments, David Hall and David Bell from the Investment Adviser, as well as Wyndham North of HM Treasury.

The introduction of the electronic communications policy has been a great success, with 82 per cent of shareholders now receiving communications in this way. The policy, whereby documents such as the annual report are disseminated via the website www.bscfunds.com rather than by post, has saved on printing costs and is more environmentally friendly.

Your Company's website www.bscfunds.com is refreshed on a regular basis, and provides a comprehensive level of information in a user friendly format.

I am pleased to inform you that your Board has agreed to appoint Panmure Gordon (UK) Limited as corporate broker with effect from 1 January 2017. The Panmure Gordon team has a wealth of experience as broker to numerous VCTs and we look forward to working with them in the future. The Board would like to thank Nplus1 Singer for the work they have done as the Company's broker over many years.

The completion of new investments and developing pipeline of investment opportunities is encouraging and in this context the Company has decided that it will undertake a non-prospectus top-up to raise €5 million to be launched on Friday 10 February 2017. In order to address a number of concerns raised by shareholders following last year's oversubscribed fundraising the Board has amended the application process. In particular, only postal applications will be accepted by the receiving agent and the fundraising will remain open to existing shareholders until Monday 6 March 2017. If the fundraising is fully subscribed at that date it will be closed and shares will be allotted by way of a ballot and the fundraising subsequently closed.

If the fundraising remains undersubscribed at that date it will be opened to other investors and shares will then be allocated in order of receipt until fully subscribed. The final closing would be 5 April 2017 or earlier if fully subscribed before then. Full details will be provided to all shareholders nearer the time of the launch.

Although it will be some time before the full implications of the UK's decision to leave the European Union become clear, your Board is confident that the businesses in your Company's portfolio should be able to adapt to the new economic environment and in the short-term the devaluation of sterling against several major currencies will provide a benefit to exporters.

Your Board will continue to seek to further expand and diversify the portfolio recognising that its composition will change over time as the current portfolio is realised and replaced with newer investments in younger businesses. While the current portfolio should continue to generate more predictable returns, in the long term there is likely to be a greater volatility of returns and your Board will continue to monitor its dividend and buy-back policies through this transition.

Your Board remains committed to continue to build a strong and diversified portfolio to deliver long-term value to shareholders.

The Company's objective is to provide investors with an attractive long-term tax free dividend yield whilst seeking to maintain the capital value of their investment and maintain the Company's status as a venture capital trust.

The investment strategy of the Company is to create a portfolio with a mix of companies operating in traditional industries and those that offer opportunities in the development and application of innovation.

The Company invests in UK businesses across a broad range of sectors including but not limited to Software, IT

& Telecommunications, Business Services, Manufacturing & Industrial Services, Retail & Brands and Healthcare in VCT qualifying and non-qualifying unquoted securities.

The Company's portfolio at 30 September 2016 had a value of £62.7 million (excluding the gilt portfolio) consisting of £60.1 million (96 per cent) in unquoted investments and £2.6 million (4 per cent) in quoted investments. The largest single investment represents 11.9 per cent of the net asset value.

Over the six months to 30 September 2016 the portfolio saw a value gain of £3.3 million, which comprises a £2.9 million gain from unquoted investments, and a gain of £0.4 million from quoted investments.

The most significant gains in valuation in the period were:

These gains were partially offset by companies which saw profits impacted by difficult trading conditions:

In the six months to 30 September 2016 the Company has made a new investment of £1.35 million into Sipsynergy (via Hosted Network Services Limited), a market-leading cloud collaboration systems provider, and a follow on investment of £0.03 million into Intamac Systems Limited.

Since 30 September 2016, your Company has made the following new investments:

• £1.5 million into Biz2Mobile Limited, a leading provider of software for rugged and industrial enterprise mobile devices.

• £1.5 million into Traveltek Group Limited. Founded in 2002, Traveltek provides travel retailers, agents and wholesalers with the technology to package together an extensive range of hotels, flights, cruises and ancillary travel services in one seamless transaction.

• £2.1 million into Matillion Limited, a developer of big data integration software for the cloud.

In the six months to 30 September 2016, the Company received £0.8 million from disposals of investments and repayments of loans. This includes the reduction of AIM holdings following a period of strong share price performance.

A detailed analysis of all investments sold in the period to 30 September 2016 can be found in note 6 to the interim report.

On 27 November 2016 the Company sold its residual investment in GO Outdoors for £14.1 million, generating a gain of £2.8 million over the valuation at 30 September 2016.

At 30 September 2016 the top ten investments had a combined value of £40.2 million, 64 per cent of the portfolio.