Half-yearly report
February 27 2009 - 6:32AM
UK Regulatory
TIDMDPV1
Downing Protected VCT I plc
Half-Yearly Financial Report for the six months ended 31 December
2008
CHAIRMAN'S STATEMENT
Although the substantial deterioration in economic conditions over
the six months ended 31 December 2008 has inevitably had some impact
on the Company's Net Asset Value ("NAV"), the Board remains generally
satisfied with the Company's investment portfolio. It is pleasing to
be able to report that the Company remains one of the top ten best
performing VCT's in terms of Total Return (NAV plus cumulative
dividends paid since launch).
Net Asset Value
At 31 December 2008, the Company's NAV stood at 96.4p, a decrease of
7.5p per share or 7.0% compared to 30 June 2008 (after adjusting for
the 2.5p dividend paid in December 2008). The Total Return to
original shareholders at 31 December 2008 now stands at 149.8p per
share.
Venture capital investments
With the Company essentially fully invested, there was limited
investment activity during the period. The Company restructured its
investment in Congress House Limited by investing in a new holding
company, Blue Cedars Holdings Limited, and investing a net GBP475,000
to facilitate the exit of the original investment partner. Part of
the funds for this investment were generated by the redemption of
GBP250,000 of loan stock by Downing Office Villages Contractor
Limited. The Company also received a small amount of retention
monies from a previous disposal.
The majority of the portfolio companies have performed satisfactorily
over the period. The three special needs care homes (Congress House
Limited, Downing (Pirbright Road) Limited and Bowman Care Homes
Limited) all continued to make progress in improving occupancy whilst
controlling costs.
The Company's one remaining investment which operates a care home for
the elderly (Kimbolton Lodge Limited) continues to find it difficult
to achieve satisfactory occupancy levels and, as a result, the Board
have reduced the carrying value of the investment by GBP100,000 to
GBP700,000.
The Company's contracting and developer investments (Downing Office
Villages Limited, Heyford Homes (Thornton Hall) Limited and Heyford
Homes (VCT) Limited) have made further progress with their various
developments.
Heyford Homes (VCT) Limited will complete a residential development
over the coming months and will then start to market these
properties. In the current climate, this investment is clearly not
without risk and, accordingly, the Directors have made a 50%
provision against the equity element of the investment, equivalent to
a GBP150,000 reduction in value.
Kings Gap Limited owns a hotel for which planning permission to
develop the premises is being sought. Trading of the hotel has been
a disappointing to date, such that the Directors have made a
provision of GBP330,000 against the valuation, representing the full
amount of the equity investment. The prime objective of this company
remains the development of the site and the Manager feels comfortable
that the investment can deliver a satisfactory return over an
appropriate time horizon.
Bond Contracting Limited owns a site with planning permission for a
hotel. The company's management had been in advanced negotiations
with a third party for a turnkey sale of the hotel. Unfortunately
the third party withdrew at a late stage and the management are now
exploring several options on how to best capitalise on the company's
asset.
Gatewales Limited disposed of the hotel it previously owned but has
retained two sites suitable for residential development. The
company's management is reviewing its options, but, in the current
climate, there is now some uncertainty as to the market value of
development sites. The Directors have made a provision of GBP150,000
against the value of the investment in recognition of this
uncertainty.
Honeycombe Pubs VCT Limited owns and operates a pub in Burnley which,
Shareholders may recall, suffered from the collapse of its previous
management company. New management is now in place and operational
problems have been addressed, however the climate for pub operators
is particularly difficult and, as this is one of the Company's few
investments with external borrowings, the investment continues to be
valued at nil. The Company is in discussions to buy out the third
party borrowings which may give the opportunity to build value.
Venture capital investments (continued)
Despite the falls in valuations, the Board is generally satisfied
with the portfolio and takes comfort from the fact that the Company's
investments are spread across several "asset-backed" sectors which
may provide more resilience during a recession than would otherwise
be the case.
Results and Dividend
The loss on ordinary activities after taxation for the period was
GBP617,000 (2007: return GBP152,000) comprising a revenue return of
GBP122,000 (2007: GBP177,000) and a capital loss of GBP739,000 (2007:
capital loss GBP25,000).
The Company will pay an interim dividend of 1.0p per share on 24
April 2009 to Shareholders on the register at 20 March 2009.
Following the payment of this dividend, original Shareholders will
have received tax-free dividends totalling 54.4p per share since the
Company's launch.
Repurchase of shares
The Company has operated a policy of buying in its own shares that
become available in the market in order to provide liquidity for
Shareholders wishing to dispose of their holding. During the period,
the Company purchased 87,000 of its own shares at an average price of
93.5p per share, being at approximately a 10% discount to the most
recently published NAV.
The Board will continue to regularly review the Company's share
buyback policy and will make adjustments, if required, in light of
factors such as the Company's liquidity and market conditions.
Risk and uncertainties
Under the Disclosure and Transparency Directive, the Board is now
required in the Company's half year results, to report on principal
risks and uncertainties facing the Company over the remainder of the
financial year.
The Board has concluded that the key risks facing the Company over
the remainder of the financial period are as follows:
(i) investment risk associated with investing in small and
immature businesses;
(ii) market risk in respect of the various assets held by the
investee companies and;
(iii) failure to maintain approval as a VCT.
In order to make VCT qualifying investments, the Company has to
invest in small businesses which are often immature. The Investment
Manager follows a rigorous process in vetting and careful structuring
of new investments and, after an investment is made, close monitoring
of the business. The Manager also seeks to diversify the portfolio to
some extent, by holding investments which operate in various sectors.
The Board is satisfied with this approach.
The Company's compliance with the VCT regulations is continually
monitored by the Administration Manager, who reports regularly to the
Board on the current position. The Company also retains
PricewaterhouseCoopers to provide regular reviews and advice in this
area. The Board considers that this approach reduces the risk of a
breach of the VCT regulations to a minimal level.
Outlook
With the UK economy now officially in recession and many experts and
commentators taking a pessimistic view of the short-term outlook, it
is clear that the Company's investments are not without risk. The
portfolio is, however, spread across a range of sectors and, in most
cases, the investments have no external borrowings. In addition, a
fairly high proportion of the investments are in businesses that are
growing or developing which could help to offset general falls in
business valuations that the recession might bring. As with most
businesses, the Company will face significant challenges over the
short and medium term, but the Board believes that it is reasonably
well-positioned to face these testing times.
Chris Kay
Chairman
INCOME STATEMENT
for the six months ended 31 December 2008
Six months ended
31 December 2008
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Income 269 - 269
Gains/ ( on investments
Realised - 14 14
Unrealised - (730) (730)
269 (716) (447)
Investment management fees (10) (32) (42)
Management incentive fees - - -
Other expenses (89) - (89)
Return on ordinary activities before 170 (748) (578)
taxation
Taxation (48) 9 (39)
Return attributable to equity shareholders 122 (739) (617)
Return per share 1.5p (9.1p) (7.6p)
Six months ended Year ended
31 December 2008 30 June 2008
Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Income 343 - 343 662
Gains/ ( on investments
Realised - - - 70
Unrealised - - - (275)
343 - 343 457
Investment management fees (12) (35) (47) (92)
Management incentive fees - - - (61)
Other expenses (79) - (79) (160)
Return on ordinary activities 252 (35) 217 144
before taxation
Taxation (75) 10 (65) (87)
Return attributable to equity 177 (25) 152 57
shareholders
Return per share 2.1p (0.3p) 1.8p 0.7p
A Statement of Total Recognised Gains and Losses has not been
prepared as all gains/losses are recognised in the Income Statement
as noted above.
UNAUDITED SUMMARISED BALANCE SHEET
as at 31 December 2008
31 December 31 December 30 June
2008 2007 2008
GBP'000 GBP'000 GBP'000
Fixed assets
Investments 7,298 8,883 7,803
Net current assets 495 277 893
Net assets 7,793 9,160 8,696
Capital and reserves
Called up share capital 4,042 4,156 4,086
Capital redemption reserve 864 750 820
Special reserve 2,493 2,738 2,584
Capital reserve - realised 764 406 764
Capital reserve - unrealised (560) 870 170
Revenue reserve 190 240 272
Total equity shareholders' 7,793 9,160 8,696
funds
Net asset value per share 96.4p 110.2p 106.4p
Total Return 149.80p 158.35p 157.30p
(Net asset value per share plus cumulative paid dividends)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
31 December 31 December 30 June
2008 2007 2008
GBP'000 GBP'000 GBP'000
Opening shareholders' funds 8,696 9,415 9,415
Repurchase of own shares (82) (112) (253)
Total recognised (losses)/gains for the (617) 152 57
period
Distributions paid (204) (295) (523)
Closing shareholders' funds 7,793 9,160 8,696
UNAUDITED CASH FLOW STATEMENT
for the six months ended 31 December 2008
Six months Six
ended months Year
31 December ended ended
2008 31 30 June
December 2008
2007
Note GBP'000 GBP'000 GBP'000
Cash inflow from operating
activities and returns on 1
investments 159 75 297
Taxation
Corporation tax paid (61) - (99)
Capital expenditure
Purchase of investments (850) (1,025) (1,225)
Sale of investments 639 1,000 2,075
Net cash (outflow)/inflow from (211) (25) 850
capital expenditure
Equity dividends paid (204) (295) (523)
Net cash (outflow)/inflow (317) (245) 525
before financing
Financing
Repurchase of shares (82) (160) (300)
Net cash outflow from financing (82) (160) (300)
(Decrease)/increase in cash 2 (399) (405) 225
Notes to the cashflow
statement:
1 Cash inflow from operating
activities and returns on
investments
Net revenue return before 170 252 452
taxation
Expenses charged to capital (32) (35) (103)
Decrease/(increase) in other 84 (93) (49)
debtors
Decrease in other creditors (63) (49) (3)
Net cash inflow from 159 75 297
operating activities
2 Analysis of net funds
Beginning of period 916 691 691
Net cash (outflow)/inflow (399) (405) 225
End of period 517 286 916
SUMMARY OF INVESTMENT PORTFOLIO
as at 31 December 2008
Movement
Cost Valuation % of portfolio in period
GBP'000 GBP'000 by value GBP'000
Venture capital
investments
Bowman Care Homes Limited 1,000 1,250 16.0% -
Downing (Pirbright Road) 700 950 12.1% -
Limited
Gatewales Limited 1,000 850 10.9% (150)
Heyford Homes (VCT) 1,000 850 10.9% (150)
Limited
Blue Cedars Limited 850 850 10.9% -
Kimbolton Lodge Limited 605 700 9.0% (100)
Kings Gap Group Limited 1,000 670 8.5% (330)
Downing Office Villages 600 600 7.7% -
Contractor Limited
Heyford Homes (Thornton 372 372 4.7% -
Hall) Limited
Bond Contracting Limited 200 200 2.6% -
Sanguine Hospitality 6 6 0.1% -
Limited
Honeycombe Pubs VCT 475 - - -
Limited
Other investments 50 - - -
7,858 7,298 93.4% (730)
Cash at bank and in hand 517 6.6%
Total investments 7,815 100.0%
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 31 December 2008
Additions
GBP'000
Blue Cedars Limited 850
Disposals
Market
value at Total
1 July Disposal Gain Realised
Cost 2008 Proceeds against cost gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Congress House Limited 375 375 375 - -
Downing Office
Villages Contractor
Limited 250 250 250 - -
Downing (Meadows)
Limited (retention
monies) - - 14 14 14
625 625 639 14 14
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half yearly financial results cover the six months
to 31 December 2008 and have been prepared in accordance with the
accounting policies set out in the statutory accounts for the year
ended 30 June 2008 which were prepared under UK Generally Accepted
Accounting Practice ("UK GAAP") and in accordance with the Statement
of Recommended Practice "Financial Statements of Investment Trust
Companies" revised December 2005 ("SORP").
2. All revenue and capital items in the Income Statement derive from
continuing operations.
3. The Company has only one class of business and derives its
income from investments made in shares, securities and bank deposits.
4. The comparative figures were in respect of the six months ended
31 December 2007 and the year ended 30 June 2008 respectively.
5. Return per share for the period has been calculated on 8,153,561
shares, being the weighted average number of shares in issue during
the period.
6. Dividends
31 December 2008 30 June 2008
Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Paid in period/year
2008 Final 204 - 204 -
2008 Interim - - - 103
2008 Interim - - - 125
2007 Final - - - 295
204 - 204 523
7. Reserves
Capital Capital Capital
redemption Special reserve reserve Revenue
reserve reserve - - reserve
realised unrealised
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2008 820 2,584 764 170 272
Shares repurchased 44 (82) - - -
Expenses capitalised - - (32) - -
Tax on capital - - 9 - -
expenses
Gains/(losses) on - - 14 (730) -
investments
Transfer between - (9) 9 - -
reserves
Retained net revenue - - - - 122
for the period
Distributions paid in - - - - (204)
period
At 31 December 2008 864 2,493 764 (560) 190
The Special Reserve, Capital Reserve - realised and Revenue Reserve
are all distributable reserves.
8. The unaudited financial statements set out herein do not
constitute statutory accounts within the meaning of Section 240 of
the Companies Act 1985 and have not been delivered to the Registrar
of Companies. The figures for the year ended 30 June 2008 have been
extracted from the financial statements for that year, which have
been delivered to the Registrar of Companies; the auditors' report on
those financial statements was unqualified.
9. The Directors confirm that, to the best of their knowledge, the
half-yearly financial statements have been prepared in accordance
with the "Statement: Half-Yearly Financial Reports" issued by the UK
Accounting Standards Board and the half-yearly financial report
includes a fair review of the information required by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements, and a description of the principal risks
and uncertainties for the remaining six months of the year; and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period, and any changes in the related party transactions
described in the last annual report that could do so.
10. Copies of the unaudited half-yearly financial report will be sent
to shareholders shortly. Further copies can be obtained from the
Company's Registered Office or will be available for download from
www.downing.co.uk.
=--END OF MESSAGE---
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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