23rd Jun 2005 12:30
Murray VCT 2 PLC23 June 2005 23 June 2005 MURRAY VCT 2 PLC Preliminary announcement of final results for the year ended 28 February 2005 Murray VCT 2 PLC ("the Company"), managed by Close Venture Management Limited,today announces preliminary results for the year ended 28 February 2005. Theannouncement has been approved by the Board of Directors on 23 June 2005 Key Facts unaudited 29 February % change 28 February 2004 2005Assets Net Assets £12,240,000 £15,962,000 (23.3)% Cumulative returns to Shareholders sincelaunchTotal return (without tax reliefs) note1 66.4p 74.4p (10.8)%Total return (with tax reliefs) notes 1and 2 86.4p 94.4p (8.5)% Ordinary shares Net Asset Value 34.5p 43.5p (20.7)%Share price 32.0p 31.0p 3.2%Discount to Net Asset Value 7.2% 28.7%Ordinary shares issued during year - 496,340Ordinary shares bought back during year 1,166,520 461,500Ordinary shares in issue at period end 35,497,136 36,663,656 Proposed Dividends per share 1.0p 2.5p Note 1: Sum of current Net Asset Value and dividends paid to date.Note 2: Income tax relief at 20%. For further information, please contact: Patrick Reeve/ Emil Gigov Derek Douglas/ David GaffneyClose Venture Management Limited Beattie Communications GroupTel: 020 7422 7830 Tel: 01324 602 550 www.closeventures.co.uk Notes to the Financial Statements 1) Murray VCT 2 PLC is managed by Close Venture Management Limited. 2) Close Venture Management Limited is part of Close Brothers Group plc and is regulated by the FSA. 3) Accounting policies The financial information set out in the announcement does not constitute theCompany's statutory accounts for the year ended 28 February 2005, as defined inSection 240 of the Companies Act 1985. Statutory accounts for the year ended 29February 2004 have been delivered to the Registrar of Companies. The Auditorshave reported on those accounts; their report was unqualified and did notcontain statements under section 237(2) or (3) of the Companies Act 1985.Statutory accounts for the year ended 28 February 2005 have not yet beenapproved, audited or filed with the Registrar of Companies. The financialinformation for the year ended 29 February 2004 is derived from the statutoryaccounts delivered to the Registrar of Companies. Although the Company is no longer an investment company, as investment companystatus was revoked in order to permit the distribution of capital profits, theDirectors believe that the presentation of the profit and loss account and thestatement of total recognised gains and losses is enhanced by showing thereturns attributable to revenue and to capital. The Profit and Loss Account and the Statement of Total Recognised Gains andLosses have been prepared in accordance with Schedule 4 of the Companies Act1985 and Financial Reporting Standard No.3: "Reporting Financial Information".As mentioned above, for illustrative purposes non-statutory informationcomprising revenue and capital accounts has also been presented. 4)Earnings per share and net asset values Earnings per Ordinary share for the year ended 28 February 2005 have beencalculated using the weighted average number of Ordinary shares in issue duringthe period of 36,179,044 (2004: 36,780,417). The net asset value per Ordinaryshare has been calculated based on Equity Shareholders' funds and on 35,497,136Ordinary shares (29 February 2004: 36,663,656), being the number of shares inissue at the period end. Chairman's Statement Introduction This has been a year of major change for the Company and further positivedevelopments are expected later in the year. The Board remains committed, aftera number of years of disappointing investment performance and poor returns forshareholders, to finding means of improving shareholder value. The recent change of investment manager and the prospect of a merger with MurrayVCT PLC and Murray VCT 3 PLC, sharing as they do a number of common investments,are two significant steps in that direction. A merger would create a successorcompany with net assets of circa £38 million (based on the net assets of thecompanies as at 28 February 2005). Performance The Company's net asset value as at 28 February 2005 declined to 34.5 pence pershare, or £12.2 million from 43.5 pence per share or £16.0 million as at 28February 2004. The reported net asset value per share at 31 August 2004 was 46.0pence. As announced on 10 December 2004, this valuation was further revised downby 1.9 pence because an anticipated sale of an investee company did not takeplace. The disappointing decline in net asset value at the financial year end has beendriven by increased provisions against the Company's unquoted portfolio. Theseprovisions reflect the British Venture Capital Association's valuationguidelines, and in particular forward-looking judgements about the portfolio'sunderlying businesses. Increased provisions against two of the Company'sinvestments account for over half the reduction in net asset value since thelast announcement of net asset value on 10 December 2004. Clearly, the Board wants to see improvement in the portfolio value and the totalreturn from the Company. This is not, however, a task that can be accomplishedquickly given the longer term nature of the investments in the portfolio, themajority of which are unquoted. The new investment manager's progress will bemonitored closely as it aims to restore and develop value from the Company'sinvestments. Portfolio A number of developments took place in the portfolio during the year.Investments in nine new companies were made, including five companies quoted onAIM. Investments in 11 companies were disposed of, realising proceeds of£5,094,000 against costs of £4,925,000. Following the year end, an investment inFirstLine was sold for £528,000, realising a small loss on cost but a gain onthe investment's valuation as at 31 August 2004, and £593,000 was received fromthe redemption of loan stock in Clamonta. Since the year end and following the appointment of Close Venture Management("CVM"), two new investments have been made comprising a follow-on investment inGrosvenor Healthcare, a profitable and successful provider of occupationalhealth services to large corporates; and an investment in the GB Pub Company toenable the Company to acquire its first 2 freehold pubs. CVM is working on anumber of larger opportunities for the Company, particularly in respect ofasset-based investments. The Company now has £5.6 million in cash or gilts available for new investment. Dividends and charging to capital The Board is proposing to pay a 1p final dividend per share for the year ended28 February 2005, resulting in total dividends per share for the year of 1p.This final dividend will be paid out of capital and payment has been authorisedby the Inland Revenue. For the current financial year onwards, 75 per cent of management fees will becharged to capital, rather than the former policy of charging 60 per cent ofmanagement fees to capital. The new policy is in line with the VCT industrygenerally and should improve the prospects for the payment of revenue dividendsto shareholders in future years. Share Buy-Backs It will continue to be the Company's policy to buy in shares from thoseshareholders who wish to sell, within the overall constraints of ensuring thatsufficient resources are maintained for investment in existing and new investeecompanies. Change of Investment Manager In late 2004, the Boards of the Company, Murray VCT PLC and Murray VCT 3 PLC atseparate meetings arrived independently and unanimously at the same conclusion -that a change of investment manager was required. The investment performance record over a number of years had been consistentlypoor in relative and absolute terms and Board initiatives to promote animprovement in investment performance through insisting on new and extra humanresources; reducing investment management fees (from 2.5% to 1.75%); and,reducing the notice period of the investment manager (from 12 months to 6months), had not resulted in any enhancement in net asset value, as theperformance record shows. After a review of the alternatives available to the Company, includingconsideration of other possible managers in this specialist sector and theirperformance records, the Board unanimously agreed to seek a new investmentmanager, and approached CVM. In addition, it was agreed that the exploration ofany possible merger should be deferred until satisfactory managementarrangements were in place. Accordingly, the Board announced its intention to terminate the managementagreement with Aberdeen Murray Johnstone on 8 February 2005 and new managementarrangements with CVM commenced on 6 April 2005. Under the terms of an agreementreached with Aberdeen Murray Johnstone, the Company paid an agreed sum of£325,000 plus VAT in respect of management contract termination costs toAberdeen Murray Johnstone. The Board is delighted with the appointment of CVM. CVM has an outstanding trackrecord in the VCT sector over many years, winning the accolade of "Best VCTProvider" at the Professional Adviser Awards in 2005. The Company nowparticipates in all relevant VCT qualifying investments made by CVM across itsportfolio of funds, including asset-based investments, one of CVM's areas ofspecialism. CVM manages aggregate VCT funds of approximately £200 million. Since the appointment of CVM, an extensive review of the Company's investmentportfolio has taken place. The new investment manager has been actively engagingwith investee companies in an effort to restore and develop shareholder valuefrom the current portfolio. The first task in repositioning the Company is tosupport and encourage those of the Company's investments with growth prospectsand, where deemed necessary, to achieve an orderly realisation of thoseunderperforming assets where the Company's resources may be more profitablyemployed elsewhere Proposed merger With the transfer of management to CVM now completed, work has begun to examinein detail the feasibility of merging the interests of the Company with MurrayVCT PLC and Murray VCT 3 PLC. Such a merger has been under active considerationsince autumn 2004 following the publication of the enabling legislation butcould only be pursued vigorously once satisfactory management arrangements werein place. As a result of exploring the possibility of a merger, the Company hasbeen in an offer period since 26 May 2005 when Murray VCT PLC first announcedthat it was considering a merger with the Company. Murray VCT 3 PLC will go intoan offer period from the date of this announcement. It is the view of the Board that a merger of the three VCTs will provideimmediate and long term benefits from a significant reduction in running costs;the creation of a broader investment portfolio in the enlarged successorcompany; and an increase in share liquidity. It is currently envisaged that any merger of the companies will be achievedthrough a scheme of reconstruction under section 425 of the Companies Act 1985but the actual process of the merger will be driven by cost and taxconsiderations. The Board expects to report its conclusions on the proposed merger toshareholders at the time of the AGM. At the same time, the Board will also setin motion the process for a change of the Company's name. The actions of Mr Clark and the 2005 AGM As announced on 23 May 2005, the Board had become aware that Mr Clark, ashareholder in the Company (and also in Murray VCT PLC and Murray VCT 3 PLC) hadbeen soliciting support from shareholders for the removal of the Board and theappointment of new board members nominated by him. Mr Clark has also questionedthe Board's decision to terminate the management arrangements with AberdeenMurray Johnstone and the appointment of CVM. Neither Mr Clark nor his proposed directors contacted the Board regarding theirproposed action before writing to shareholders nor have they since, Mr Clarkapparently preferring to conduct his campaign through the press and throughcomments in the market. The Board (and the boards of Murray VCT PLC and MurrayVCT 3 PLC) have written, through the Company's solicitors, to Mr Clark and hisproposed directors making detailed enquiries of them. The Board is particularlykeen to ascertain who is supporting the initiative, what Mr Clark and theproposed directors' ambitions are for potential changes to the companies andwhat has given rise to such an unusual shareholder action. The Board is disappointed at this turn of events and criticisms made in thepress and by Mr Clark, of Board actions taken. In changing to CVM, a managerwith one of the best records in the sector from one whose performance in thecase of Murray VCT PLC, Murray VCT 2 PLC and Murray VCT 3 PLC has beenconsistently poor for a number of years, the Board believes it is takingappropriate action to improve performance. Contrary to Mr Clark's assertion inhis circular of 18 May 2005, the Board never had sufficient information on theproposed management buyout by the Aberdeen Murray Johnstone management team tobe supportive or otherwise of this potential change. In addition, while somepersonnel changed following the failure of the management buyout, the vastmajority of those involved in the investment process remained. The Board intends to call the annual general meeting of the Company afterresponses have been received from Mr Clark and the directors proposed by him.The Board should then be in a position to provide shareholders with sufficientinformation on which to base their voting decisions as well as to receive theBoard's recommendations. The Board will present the resolutions put forward byMr Clark and meet its statutory duties accordingly. The Board will continue to exercise its responsibilities to all of the Company'sshareholders in aiming to provide them with improved investment prospects underCVM and a cost effective merger which will create an improved successor company.Once the merger has taken place a new board of the enlarged entity will berequired. The Board is neither protective of its role nor its remuneration andis fully prepared, and indeed intends, to stand down when the new board assumesresponsibility for the merged entity. Prospects The further decline in the Company's net asset value in the period to 28February 2005 reinforces the Board's decision to change investment manager. Thetask of CVM will be to generate value for shareholders through proactiveportfolio management and sourcing new investments. This is not, however, a taskthat can be accomplished quickly; CVM will be measured on its ability to restorethe Company's fortunes over the medium term. The Board is satisfied that a platform for improvement has been achieved andwill report fully to shareholders in advance of the annual general meeting onall the developments affecting the Company so that shareholders are in the bestposition to make an informed view when voting on the business put forward atthat meeting. On behalf of the BoardMaxwell PackeChairman23 June 2005 Investment Portfolio Summary As at 28 February 2005 ------------------ --------------------- -------- -------- Nature of Business Invested to Valuation date at cost £'000s as at February 2005 £'000s --------------------- -------- --------UnquotedInvestmentsClamonta Manufacturer of aircraft engine 750 851 components.TransrentHoldings Rental of commercial truck 597 597 trailersELE AdvancedTechnologies Manufacturer of precision 596 547 engineering components for the industrial gas turbine, aerospace and automotive markets.First Line Investment sold. Valuation 596 528 represents future expected distributions.Carmichael Valuation represents expected 631 500 recovery from receivership.RMS EuropeLimited Stevedoring and ships agency 405 405 services .Sanastro B2B financial publishing. 375 375Synexus Patient recruitment for 862 372 clinical trials.J&S Marine Acoustic, electromechanical and 54 367 data network systems.Palgrave Brown Manufacturer of specialist 250 250 timber products including roof trusses, windows and doors.Link Up Mitaka Translation services. 369 226Working People Supplier of temporary drivers 159 159Citel Telephony Internet Protocol 150 73 technology.PLM Dollar On-shore helicopter services. 177 59Conveco Investment sold. Valuation 758 48 represents future expected distributionsAberdeenFootball Club Football club 861 23BusinessHealth Provision of occupational 1,066 8 health services and fitness -------- -------- testing equipment to health clubs. 5,388 AIM QuotedInvestmentsCello GroupPlc Market research, brand 267 336 advertising, direct marketing and database managementAugean GroupPlc Waste management 211 299Avanti ScreenMedia Plc Suppliers of retail television 194 293 servicesCareforceGroup Plc A group providing home care 201 276 services to the elderly, principally on behalf of local authorities.Tanfield GroupPlc Supplier of engineering 189 227 services and electric -------- -------- vehicles. 1,431 Listed fixedincomeConversion9.5% 2005 2,515 2,515Treasury 8.5%12/2005 2,346 2,351Treasury 4.5%2007 240 239------------------ --------------------- -------- -------- 5,105------------------ --------------------- -------- --------Totalinvestments 11,924------------------ --------------------- -------- -------- Profit and Loss Account For the year ended 28 February 2005 --------------- --------------- Year ended Year ended 28 February 2005 29 February 2004 unaudited ------- ------ ------ ------- ------ ------ Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 ------- ------ ------ ------- ------ ------ ------- ------ ------ ------- ------ ------Investment and depositincome 825 - 825 816 - 816------------------ ------- ------ ------ ------- ------ ------Investment managementfees (84) (254) (338) (142) (213) (355)------------------ ------- ------ ------ ------- ------ ------Other expenses (429) - (429) (251) - (251)------------------ ------- ------ ------ ------- ------ ------ Operating profit (excluding exceptional items) 312 (254) 58 423 (213) 210------------------ ------- ------ ------ ------- ------ ------ Exceptional items ------------------ ------- ------ ------ ------- ------ ------Investment Managementtermination fees (95) (287) (382) - - ------------------- ------- ------ ------ ------- ------ ------Other expenses inrespect of termination (103) - (103) - - ------------------- ------- ------ ------ ------- ------ ------ (198) (287) (485) - - - ------- ------ ------ ------- ------ ------Operating Loss 114 (541) (427) - - - Profit on realisationof investments - 830 830 - 1,003 1,003------------------ ------- ------ ------ ------- ------ ------Amounts written offfixed assetinvestments - (569) (569) - - ------------------- ------- ------ ------ ------- ------ ------(Loss)/profit onordinary activitiesbefore taxation 114 (280) (166) 423 790 1,213------------------ ------- ------ ------ ------- ------ ------Tax on ordinaryactivities (14) 14 - (84) 84 ------------------- ------- ------ ------ ------- ------ ------(Loss)/profit onordinary activitiesafter taxation 100 (266) (166) 339 874 1,213------------------ ------- ------ ------ ------- ------ ------Ordinary dividends onequity shares ------- ------ ------ ------- ------ ------------------------Final dividends - (355) (355) (257) (660) (917)------------------ ------- ------ ------ ------- ------ ------Over accrual in prioryears 2 7 9 2 - 2------------------ ------- ------ ------ ------- ------ ------ Balance transferred(from)/to reserves 102 (614) (512) 84 214 298------------------ ------- ------ ------ ------- ------ ------ Earnings per share(pence) (Note 4) 0.2 (0.7) (0.5) 1.2 2.2 3.4------------------ ------- ------ ------ ------- ------ ------ Statement of Total Recognised Gains and Losses For the year ended 28 February 2005 Year ended Year ended 28 February 2005 29 February 2004 unaudited--------------------- ------ ------ ------ ------ ------ ------ Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000---------------------- ------ ------ ------ ------ ------ ---------------------------- ------ ------ ------ ------ ------ ------(Loss)/profit onordinary activitiesafter taxation 100 (266) (166) 339 874 1,213------------------- ------ ------ ------ ------ ------ ------Unrealised loss onrevaluation ofinvestments - (2,837) (2,837) - (1,478) (1,478)------------------- ------ ------ ------ ------ ------ ------Total recognisedlosses relating to theperiod 100 (3,103) (3,003) 339 (604) (265)------------------- ------ ------ ------ ------ ------ ------ Balance sheet As at 28 February 2005 28 February 2005 29 February 2004 unaudited £'000 £'000 Fixed assets Investments 11,924 15,752 Current assetsDebtors 1,099 1,055Cash and overnight deposits 485 218 1,584 1,273 Creditors falling due within one year 1,268 1,063 Net current assets 316 210 Total assets less current liabilities 12,240 15,962 Capital and reservesCalled up share capital 8,874 9,166Share premium account 99 99Revaluation reserve (10,840) (11,287)Capital redemption reserve 764 472Profit and loss account 13,343 17,512 Equity shareholders' funds 12,240 15,962 Net asset value per ordinary share(pence) 34.5 43.5 Cash flow statement for the year ended 28 February 2005 Year ended Year ended 28 February 2005 29 February 2004 unaudited £'000 £'000 ------------ ----------- Operating activitiesInvestment income received 949 911Deposit interest and other incomereceived 14 11Investment management fees paid (337) (330)Secretarial fees paid (58) (58) ------ ------Cash paid to and on behalf of Directors (64) (78)Other cash payments (97) (144) Net cash inflow from operatingactivities 407 312 ------ ------TaxationCorporation tax - - Financial investmentPurchase of investments (7,939) (5,009)Sales of investments 9,008 6,661 Net cash inflow from financialinvestment 1,069 1,652 ------ ------Dividends paid Equity dividends paid (908) (1,927) Net cash inflow before financing 568 37 FinancingIssue of Ordinary shares - 231Repurchase of Ordinary shares (301) (127) Net cash (outflow)/inflow from financing (301) 104Increase in cash 267 141---------------------- ------------ ----------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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