Final Results
October 26 2001 - 10:24AM
UK Regulatory
RNS Number:2216M
Downing Healthcare Protectd.VCT PLC
26 October 2001
DOWNING HEALTHCARE PROTECTED VCT PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 30 JUNE 2001
NAV/
Total Return to
date 2001 2000
pence pence pence
Net asset value per share 79.5 79.5 90.3
Total dividends per ordinary share
(including tax credits where 16.9 3.1 3.0
reclaimable)
96.4
Revenue return per ordinary share 3.4 3.3
Net assets #7.7 #8.8
million million
The statement to shareholders by the Chairman, Chris Kay, includes the
following comments:
Introduction
The difficult conditions experienced by the care home sector have continued to
prevail throughout the year ended 30 June 2001. The focus of the Board has
been on seeking to obtain optimal performance from existing investments while
positioning the Company to enable it to be able to take advantage of potential
disposal opportunities.
Venture capital investments
Throughout the year under review the Company continued to hold stakes in ten
care home businesses. During this period the Company made just one new
investment, being the acquisition of preference shares with a par value of #
150,000 in Downing (Acacia House) Limited for #43,000. The shares were
acquired from the original owner of the home and should significantly improve
the return to the Company in any potential disposal which may arise in the
future.
Local authority fee pressure and rising costs (particularly in respect of
staffing and the implementation of the National Required Standards) have
combined to create an environment in which many care homes are not
economically viable. During 2000, it is estimated that 760 private or
voluntary care homes in the UK were closed, with a net loss, after allowing
for new homes that opened, of over 7,000 beds.
In light of the market conditions, the Board has undertaken a review of the
carrying values of the investments at the year end and have made a number of
adjustments. Trading results at Dovestone (The Gables) Limited and Evedale
Care Home Limited have been poor. In addition, the performances of Kimbolton
Lodge Limited, Downing (Acacia House) Limited and Downing (The Meadows)
Limited have been below budget. The Board has, therefore, made new provisions
totalling #1,193,000 against the valuations of these investments at the
previous year end.
Since the year end, the Company has successfully disposed of Downing Harnham
Croft Nursing Home Limited to BUPA for approximately #820,000. Although this
represents a gain of #108,000 over the carrying value at the previous year
end, it represents a loss when compared to the original cost of #950,000. The
Board believes that this is a satisfactory outcome in the current economic
climate. The Board has adopted this open market valuation as at 30 June 2001.
The remaining homes have performed in line with expectations and have been
held at original cost or, in the case of Downing (Chertsey Road) Limited, at
the Directors' previous valuation of #1,150,000, being a #150,000 uplift on
original cost.
The net affect of these adjustments has been to decrease net assets by #
1,085,000 which represents 11.1p per share. Although disappointed with this
level of reduction in net asset value, the Board feels that the new valuations
are realistic at this time.
Listed investments
During the year the Company's remaining fixed interest securities were
redeemed. At the year end the Company held the uninvested funds of #588,000
as cash.
Results and dividend
Gross revenue for the year was #559,000 and net revenue after taxation was #
336,000, an increase of 5.3% compared to the previous year. Net assets per
share were 79.5p compared to 90.3p at 30 June 2000. Although the revenue
return generated by the Company has been below that originally envisaged at
launch, the running costs of the Company were recently reported by Money
Management Magazine as the lowest of any VCT. Costs for the year under review
were just 1.4% of net assets.
An interim dividend of 1.5p per share was paid on 5 June 2000. Your Board is
proposing a final dividend of 1.6p per share that, subject to shareholder
approval, will be paid on 14 December 2001 to shareholders on the register on
16 November 2001. Therefore total dividends for the year will be 3.1p per
share, compared to 3.0p per share paid in respect of the year to 30 June 2000.
Annual General Meeting
The fifth Annual General Meeting of the Company will be held at 69 Eccleston
Square, London SW1V 1PJ at 11.00 a.m. on 11 December 2001. Notice of the
meeting is at the end of this document.
Share repurchase
Your Board is conscious that the Company's share price is affected by the
illiquidity of its shares in the market, resulting from the requirement that
shareholders must retain their shares for at least five years in order to
retain their tax benefits. The Company, therefore, has a policy of purchasing
its own shares and during the year repurchased 33,000 ordinary shares for #
22,000, which have subsequently been cancelled. A special resolution to
continue with this policy, which was approved at last year's AGM, is proposed
for the forthcoming AGM.
Publication of share price
The Company's share price continues to be quoted in the Financial Times on a
daily basis in the "Investment Companies" sector.
Outlook
The prolonged poor performance of the care home sector has impacted heavily to
date on the valuation of the portfolio. The closure of many private care
homes and failure of a number of operators suggests that there may be some
rewards in the future for the remaining operators as the over-supply of care
home places, which has existed in recent years, is gradually eliminated. The
Board intends to ensure that the Company is well placed to benefit from any
upturn in the fortunes of the industry.
April 2002 will mark the fifth anniversary of the Company. After that date,
original shareholders will be able to dispose of their shares without the loss
of the income tax reliefs that were received when the original investment was
made. As stated in the original prospectus, at the sixth Annual General
Meeting, scheduled for December 2002, a resolution will be put to shareholders
to decide whether the Company should continue as a VCT. The Board are
conscious that these events may result in the Company requiring significant
levels of liquid funds to buy back shares or perhaps even in steps being taken
to wind up the Company and return funds to shareholders. Over the coming
months the Board will therefore be considering various options for the future
of the Company. I would welcome any comments or shareholder views at the
forthcoming AGM.
Chris Kay
Chairman
STATEMENT OF TOTAL RETURN (incorporating the revenue account)
for the year ended 30 June 2001
Year Year
ended ended
30 June 30 June
2001 2000
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
(Losses) on investments
- realised - - - - (17) (17)
- unrealised - (1,085) (1,085) - (391) (391)
Income 559 - 559 543 - 543
Management incentive fees (4) (3) (7) (10) (10) (20)
Other expenses (102) - (102) (61) - (61)
Return on ordinary
activities before tax 453 (1,088) (635) 472 (418) 54
Tax on ordinary activities (117) 1 (116) (153) 9 (144)
Return attributable to
equity shareholders 336 (1,087) (751) 319 (409) (90)
Dividends in respect of
equity shareholders (302) - (302) (294) - (294)
Transfer to/(from) 34 (1,087) (1,053) 25 (409) (384)
reserves
Return per ordinary share 3.4p (11.1p) (7.7p) 3.3p (4.2p) (0.9p)
BALANCE SHEET
as at 30 June 2001
2001 2000
#'000 #'000 #'000 #'000
Fixed Assets
Venture capital investments 7,170 8,212
Listed fixed income investments - 200
7,170 8,412
Current assets
Debtors 283 448
Cash at bank and in hand 588 398
871 846
Creditors: amounts falling due within one year (294) (436)
Net current assets 577 410
Net assets 7,747 8,822
Capital and reserves
Called up share capital 4,871 4,887
Special reserve 4,393 -
Share premium account - 4,415
Capital redemption reserve 35 19
Capital reserve (1,600) (513)
Revenue reserve 48 14
Total equity shareholders' funds 7,747 8,822
Net asset value per ordinary share 79.5p 90.3p
CASHFLOW STATEMENT
for the year ended 30 June 2001
Year Year
ended ended
30 June 30 June
2001 2000
#'000 #'000
Net cash inflow from operating activities 316 532
Equity dividends paid (293) (304)
Taxation
Corporation tax paid (126) (246)
Tax credits received 122 -
ACT recovered 33 -
29 (246)
Investing activities
Purchase of listed fixed income securities - (204)
Purchase of venture capital investments (43) (1,180)
(43) (1,384)
Sale of fixed income securities 195 1,511
152 127
Net cash inflow from investing activities 204 109
Net cash inflow before financing
Financing
Repurchase of ordinary shares (14) (16)
Increase in cash and cash equivalents 190 93
Reconciliation of net cash flow to movement in net funds
Increase in cash during the year 190 93
Net funds at 1 July 2000 398 305
Net funds at 30 June 2001 588 398
Reconciliation of net revenue return before taxation to net
cash inflow from operating activities
Net revenue before taxation 453 472
Management fees charged to capital (3) (10)
(Increase) in accrued income (94) 126
(Increase) in other debtors (21) (65)
(Decrease) in other creditors (19) 9
Net cash inflow from operating activities 316 532
Notes:
1. The financial information has been prepared on the basis of the
accounting policies set out in the Company's financial statements for the year
ended 30 June 2000.
2. The financial information set out in the announcement does not
constitute the Company's statutory accounts for the year ended 30 June 2001.
The statutory accounts for the period ended 30 June 2001 will be finalised on
the basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
3. The financial information for the year ended 30 June 2000 is derived
from the statutory accounts for that year which have been delivered to the
Register of Companies. The auditors reported on those accounts; this report
was unqualified and did not contain a statement under section 237(2) or (3) of
the Companies Act 1985.
4. A copy of the full annual report and financial statements for the year
ended 30 June 2001 will be printed and posted to shareholders. Copies will
also be available to the public at the registered office of the company at 69
Eccleston Square, London SW1V 1PJ.
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