RNS Number:4587K
Murray VCT 2 PLC
29 April 2003
MURRAY VCT 2 PLC
Preliminary results for the year ended 28 February 2003
The Directors announce the preliminary results, subject to final audit, of
Murray VCT 2 PLC for the year ended 28 February 2003.
Key facts
*Realisation of Palgrave Brown, resulting in special dividend of 4.76p per
share ("pps").
*Final dividend of 0.5pps.
*Total dividends paid and proposed since launch of 28.4pps - representing
35% of the initial cost returned to investors.
*Qualifying investment level of 87%.
*Net Asset Value ("NAV") of 52.3pps before annual dividends.
*Total return since launch, being the sum of dividends paid and NAV, of
75pps.
Investment activity
Further investment during the year ended 28 February 2003 totalled #2.4 million.
At 28 February 2003 the portfolio stood at 41 investments having a total cost of
#29.6 million and representing a qualifying investment level of 87%.
Two new investments have been made since the publication of the interim report:
Palgrave Brown (Holdings) Limited (October 2002) - #250,000: Based in Chorley,
Palgrave Brown manufactures specialist timber products, roof trusses and wooden
windows, servicing major house builders and builders' merchants. In October
2002, the Company participated in the secondary buy out of Palgrave Brown (UK)
to retain an interest in the future developments of this investee company. See
portfolio developments below.
PLM Dollar Group Limited (November 2002) - #176,732: Based in Inverness, PLM
which trades as PDG Helicopters, is an operator of a fleet of commercial
helicopters.
Portfolio developments
Palgrave Brown (UK) was sold in a secondary buy out transaction which was funded
by clients of Aberdeen Murray Johnstone Private Equity, including a small new
investment by the selling VCTs, although this will be non-qualifying. Murray VCT
2 realised a gain of #1,745,559, equivalent to over 4.76pps, over the cost of
the investment.
Performance
Market conditions continue to be difficult and this is evident in reduced
investor confidence in the stock market and increasing reports of weakening
profits.
These conditions continue to have an adverse impact on corporate performance and
therefore on the valuations of the Company's investment portfolio. Realisations
are difficult to achieve in these depressed markets, although the disposal of
Palgrave Brown in the period was a significant and very positive result for the
Company.
The NAV per share at 28 February 2003, before payment of all dividends in
respect of the year then ended, was 52.3p compared with 66.4p at 28 February
2002. This decrease in NAV of 21.2% compares with the significant reduction in
stock market indices generally and, in particular, the FTSE Small Cap Index
which fell by 28.6% over the period and the FTSE AIM Index which fell by 31.9% .
Investment Strategy
The Company is almost fully invested. The Manager is concentrating on intense
portfolio management to help the investee companies manage through current
market conditions, the aim being to restore value and ultimately achieve
successful disposals from a position of strength when market conditions recover.
In these circumstances it is not only capital valuations which are under
pressure but also the ability of the investee companies to pay dividends and
interest to investors. The Manager is working to assist certain companies to
enable them to resume payments to the Company.
At the moment, the Company has approximately 22% of its assets in cash and
gilts. The manager is retaining this in order to be able to support with new
investment, where required, those investee companies which are believed to have
potential. In the longer term, surplus funds from realisations will be invested
where possible in larger companies through co-investment with the other Murray
VCTs.
Valuation process
Murray VCT 2's investments in unlisted companies are valued in accordance with
the British Venture Capital Association guidelines. Investments are normally
valued at cost or cost less a provision until they have been held for at least
one year. As a result, should performance be ahead of plan, which may imply an
increase in the value of the investment, this would not be reflected for at
least 12 months; on the other hand any material underperformance would be
immediately reflected in a reduced valuation. Listed equities and AIM stocks are
valued at their mid market price, discounted where necessary to reflect any
trading restrictions.
In the short-term, the NAV is a less important measure of performance as the
underlying investments are long-term in nature and not readily realisable. The
most important measures for a VCT are the long term record of income and capital
gains dividend payments and the timing of those payments over the life of the
Company.
Dividends and returns to date
An interim dividend of 0.5p for the year ended 28 February 2003 was paid to
shareholders on 10 December 2002. The Board is proposing a final dividend of
0.5p to be paid on 18 July 2003 to Shareholders on the register on 20 June 2003.
The dividend of 4.76pps arising from the sale of Palgrave Brown will be paid
when approval has been obtained from the Inland Revenue. The total dividend for
the year ended 28 February 2003 will therefore amount to 5.76p per share.
Since the Company's launch and including the dividend due on the realisation of
Palgrave Brown, most shareholders will have received 28.4p in tax free
dividends, comprising 17.8pps in income dividends and 10.6pps in distributions
of capital gains. To an investor who took advantage of the initial income tax
relief, this represents a return from 35% of the effective initial investment
cost of 80p per share. Including dividends capital gains, this is equivalent to
an annual dividend yield of 8.64% from a conventional listed equity for a higher
rate taxpayer. This yield ignores the benefit of capital gains tax deferrals
which some shareholders may have received, and compares with the FTSE SmallCap
yield of 3.0% and the FTSE All-Share yield of 2.8%. The total return since
launch is 75pps, being the sum of dividends paid plus NAV per share.
Cancellation of share premium account
At the Company's Extraordinary General Meeting, held on 3 December 2002,
Shareholders approved the cancellation of the share premium account. This has
now been approved by the Court and the transaction has been reflected in the
Financial Statements. As a result, the Company will be able to continue to
purchase its own shares and distribute its capital gains and income.
Amendment to management agreement
The Manager has offered to reduce the annual management fee from 2.5% p.a. to
1.75% p.a. with effect from 1 September 2002, to reflect the maturity of the
existing portfolio and the reduced emphasis on new investment at this stage of
the life of the Company. In recognition of this concession, the Board has
revised the existing incentive arrangements to the effect that if the total
return achieved over initially the next three years and annually thereafter
exceeds 5% per annum ("the hurdle"), the Manager will recover the fee reduction
from 50% of the excess over the hurdle. In addition, a performance fee of 20%
will be paid from any further excess.
Outlook
The Board and the Manager expect that the coming year will be every bit as
testing as the last. Existing portfolio investments will be the subject of
careful attention to help them develop further.
The portfolio includes a core of investments which have good prospects but it is
likely to be some time before those prospects can be demonstrated in further
profitable realisations. The Manager is continuing to work with the portfolio
companies to improve performance with a view to maximising the proceeds from
eventual exits.
The falls in stock market indices over the last three years have led to more
realistic pricing expectations in the private equity market. This, together with
the continuing strong deal flow being generated by the Aberdeen Murray Johnstone
Private Equity regional network of offices, should lead to greater investment
activity and ensure that there will be adequate opportunity to reinvest proceeds
from future realisations as they are achieved.
MURRAY VCT 2 PLC
PROFIT AND LOSS ACCOUNT
for the year ended 28 February 2003
Year ended Year ended
28 February 28 February
2003 2002
#'000 #'000
Investment income and deposit interest 939 1,685
Investment management fees (598) (879)
Other expenses (196) (230)
----------- -----------
Operating profit 145 576
Profit/(loss) on realisation of investments 1,113 (15)
Amounts written off fixed asset investments - (992)
----------- -----------
Profit/(loss) on ordinary activities before 1,258 (431)
taxation
Tax on ordinary activities 9 5
----------- -----------
Profit/(loss) on ordinary activities after 1,267 (426)
taxation
Dividends (2,431) (2,169)
----------- -----------
Balance transferred from reserves (1,164) (2,595)
----------- -----------
Earnings/(loss) per share (pence) 3.4 (1.1)
----------- -----------
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 28 February 2003
Year ended Year ended
28 February 28 February
2003 2002
#'000 #'000
Profit/(loss) on ordinary activities after 1,267 (426)
taxation
Unrealised loss on revaluation of investments (6,185) (3,448)
----------- -----------
Total recognised gains and losses relating to (4,918) (3,874)
the year ----------- -----------
NOTE OF HISTORICAL COST PROFITS AND LOSSES
for the year ended 28 February 2003
Year ended Year ended
28 February 28 February
2003 2002
#'000 #'000
Profit/(loss) on ordinary activities before 1,258 (431)
taxation
Realisation of revaluation gains of previous 293 1,061
years ----------- -----------
Historical cost profit on ordinary activities 1,551 630
before taxation ----------- -----------
Historical cost loss for the year retained (871) (1,555)
after taxation and dividends ----------- -----------
All items in the above statement are derived from continuing operations.
The Company has only one class of business and derives its income from
investments made in shares, securities and bank deposits.
MURRAY VCT 2 PLC
BALANCE SHEET
as at 28 February 2003
28 February 2003 28 February 2002
#'000 #'000 #'000 #'000
Fixed assets
Investments 17,497 23,847
Current assets
Debtors 1,610 1,547
Cash and short-term 77 250
deposits ------- -------
1,687 1,797
Creditors
Amounts falling due 2,121 867
within one year ------- -------
Net current (434) 930
(liabilities)/assets
------- -------
17,063 24,777
======= =======
Capital and reserves
Called up share 9,157 9,335
capital
Share premium account 12 11,587
Revaluation reserve (12,288) (5,810)
Capital redemption 357 134
reserve
Profit and loss 19,825 9,531
account
------- -------
Equity Shareholders' 17,063 24,777
funds ======= =======
Net Asset Value per 46.6 66.4
Ordinary share (pence)
MURRAY VCT 2 PLC
CASH FLOW STATEMENT
for the year ended 28 February 2003
Year ended Year ended
28 February 2003 28 February 2002
#'000 #'000 #'000 #'000
Operating activities
Investment income received 1,366 1,245
Deposit interest received 13 22
Investment management fees (742) (905)
paid
Secretarial fees paid (56) (65)
Cash paid to and on behalf of (51) (60)
Directors
Other cash payments (107) (88)
-------- -------
Net cash inflow from 423 149
operating activities
Taxation
Corporation tax - (345)
Financial investment
Purchase of investments (7,055) (2,900)
Sale of investments 7,847 5,292
-------- -------
Net cash inflow from 792 2,392
financial investment
Equity dividends paid (1,062) (2,334)
------ ------
Net cash inflow/(outflow) 153 (138)
before financing
Financing
Issue of Ordinary shares 156 216
Repurchase of Ordinary (482) (139)
shares -------- -------
Net cash (outflow)/inflow (326) 77
from financing
------ ------
Decrease in cash (173) (61)
====== ======
Earnings per Ordinary share have been calculated using the average number of
shares in issue during the year of 36,984,300. Net Asset Values per Ordinary
share have been calculated using the number of shares in issue at 28 February
2003 of 36,628,816.
A summary of investment changes during the year and the portfolio of investments
as at 28 February 2003 are attached.
The results stated above for the year ended 28 February 2002 are abridged from
the full accounts for that year, which received an unqualified report from the
auditors and have been filed with the Registrar of Companies.
The results for the year to 28 February 2003, which are subject to final audit,
will be filed with the Registrar of Companies.
A full copy of the annual report will be printed and issued to shareholders.
Copies of this announcement will be available to the public at the registered
office of the Company, One Bow Churchyard, London and at Murray Johnstone's
office at 123 St Vincent Street, Glasgow.
By Order of the Board
MURRAY JOHNSTONE LIMITED
SECRETARY
29 April 2003
MURRAY VCT 2 PLC
SUMMARY OF INVESTMENT CHANGES
For the year to 28 February 2003
Valuation
28 February Net Appreciation Valuation
2002 investment
(disinvestment) (depreciation) 28 February
2003
#'000 % #'000 #'000 #'000 %
Unlisted
investments
Equities 7,003 28.3 (2,462) (1,026) 3,515 20.6
Preference 1,891 7.6 253 (524) 1,620 9.5
shares
Loan stocks 10,313 41.6 319 (3,229) 7,403 43.4
------- ----- ---------- --------- -------- ------
19,207 77.5 (1,890) (4,779) 12,538 73.5
AIM
investments
Equities 1,646 6.6 - (326) 1,320 7.7
Listed
investments
Equities 17 0.1 (20) 3 - -
Fixed income 2,977 12.0 632 30 3,639 21.3
------- ----- ---------- --------- -------- ------
Total 23,847 96.2 (1,278) (5,072) 17,497 102.5
investments
Other net 930 3.8 (1,364) - (434) (2.5)
assets/
(liabilities)
------- ----- ---------- --------- -------- ------
Total assets* 24,777 100.0 (2,642) (5,072) 17,063 100.0
======= ===== ========== ========= ======== ======
* Total assets represents equity Shareholders' interests
MURRAY VCT 2 PLC
INVESTMENT PORTFOLIO SUMMARY
As at 28 February 2003
% of
Valuation total
Unlisted and AIM investments #'000 assets
Conveco Convenience store 1,674 9.8
operator
Poulter Independent communications 1,063 6.2
agency
Connaught* Specialist building 1,018 6.0
services
Intron Manufacturer and 1,000 5.9
distributor of entrance
doors
Businesshealth Provider of health 942 5.5
management services to
employers
Power Gems Manufacturer of specialist 829 4.8
power supply units
Clamonta Precision Engineering 750 4.4
Synexus Management of clinical 646 3.8
trials
First Line Supplier of automotive 596 3.5
parts to the after-market
ELE Advanced Manufacturer of precision 596 3.5
Technologies components for jet engines
and gas turbines
Other investments valued individually at #595,000 4,744 27.8
or less ------- ------
13,858 81.2
Listed fixed income investments
Treasury 8% Stock 177 1.0
2003
Treasury 6.75% Stock 1,725 10.1
2004
Treasury 5% Stock 1,737 10.2
2004 ------- ------
3,639 21.3
------- ------
Total investments 17,497 102.5
======= ======
* Shares traded on Alternative Investment Market (AIM)
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAKLPADKDEFE