British Smaller Cos VCT2 backs portfolio amid challenging backdrop

British Smaller Cos VCT2 PLC on Friday reported a lower net asset value following a dividend payment and expects to pay a lower total dividend for the current year.

The UK business-focused venture capital trust's net asset value per share was 52.25 pence as of June 30, down from 54.40p at December 31, following the payment of a 1.50p per share dividend during the half-year period.

The total return per share was 147.00p per share, down from 147.65p.

Shares in British Smaller Cos VCT2 were untraded at 50.00p on Friday in London.

The company declared a second interim dividend of 1.50p per share. This will bring the total for 2026 to 3.00p per share, down from 4.00p in 2025.

British Smaller Cos VCT2 noted that it completed four new investments and three follow-ons totalling £11.7 million during the first half, followed by one new investment and five follow-ons totalling £2.9 million after June 30, bringing the total invested so far in 2026 to £14.6 million.

The new investments included £1.8 million into tipping and service charge platform TiPJAR, £1.6 million into data insight firm StudentCrowd, and £1.2 million into consultancy platform NextWave.

The company's proceeds from realisations totalled £2.6 million during the period.

"The first half of the year has seen continued macroeconomic challenges, with ongoing geopolitical tensions and political change at home," Chair Barbara Anderson commented. "For the company, the most significant challenge arose from market concerns around the risk of AI impacting existing software solutions, which caused a reduction in the revenue multiples used to value many of the company's investments.

"Against this backdrop, it has been pleasing to see two of the fastest growing businesses in the portfolio, Summize and Xapien, both close significant Series B funding rounds in recent months, validating our position that the fastest growing businesses with AI embedded into their offering will continue to attract premium valuations."

Looking ahead, she continued: "There has been some improvement in valuation multiples for software technology companies over the summer months...It is too early to say how these valuation multiples will react in the second half of 2026, but over the longer-term, we would expect businesses that are developing innovative products and services and delivering strong financial performance to command strong levels of interest from potential acquirers at exit.

"Given the encouraging rates of growth shown by a number of the portfolio companies, we believe that the portfolio is well-positioned to enable the company to achieve its investment objectives over the long-term."

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