TIDMDP2F
Downing TWO VCT plc
LEI: 213800HJGTPW7F8YEY55
9 September 2019
Half-Yearly Report
for the six months ended 30 June 2019 (Correction)
The announcement released on 6 September 2019 at 5:02 p.m. by the
Company entitled "Half year report" incorrectly stated that dividends
are payable to Shareholders on the register at 17 October 2019. It
should have stated that dividends are payable to Shareholders on the
register at 18 October 2019. The full corrected text of the
announcement is as follows:
Performance summary
30 Jun 31 Dec 30 Jun
'F' Share pool 2019 2018 2018
Pence Pence Pence
Net asset value per 'F' Share 30.6 28.7 53.8
Cumulative distributions per 'F' Share 67.0 67.0 49.0
------ ------ ------
Total return per 'F' Share 97.6 95.7 102.8
====== ====== ======
30 Jun 31 Dec 30 Jun
'G' Share pool 2019 2018 2018
Pence Pence Pence
Net asset value per 'G' Share 63.2 60.9 81.4
Cumulative distributions per 'G' Share 37.5 37.5 27.5
------ ------ ------
Total return per 'G' Share 100.7 98.4 108.9
====== ====== ======
30 Jun 31 Dec 30 Jun
'K' Share pool 2019 2018 2018
Pence Pence Pence
Net asset value and Total Return per 'K' Share 72.9 91.3 94.1
====== ====== ======
Forthcoming dividends
'F' Shares 'G' Shares
Interim 2019 -- Payable 8 November 2019 5.0p 14.0p
CHAIRMAN'S STATEMENT
Introduction
I present the Half-Yearly Report for the six months ended 30 June 2019.
The Company has a number of share pools, each of which is in a different
stage in its planned exit life. Performance across the pools varies and
it is disappointing to have to report that there have been some negative
developments in a number of investee companies within the 'K' Share
pool.
A brief summary of each share pool is provided below.
Net asset values and overview
'F' Share pool
The 'F' Share pool launched in 2012 and is currently in its realisation
phase.
At 30 June 2019 the remaining net asset value ("NAV") was 30.6p per F
Share, an increase of 1.9p (6.6%) over the period. Total Return (NAV
plus dividends paid to date) is now 97.6p, compared to the original cost,
net of income tax relief, of 70p per share.
The pool still holds 10 investments, but plans are being progressed for
exits from each of them.
Following the period end, one further exit has been achieved. As a
result, the Share pool will pay a further dividend of 5.0p per 'F' Share
on 8 November 2019. This will bring total distributions to 72.0p and
leave a remaining NAV of 25.6p.
The task of exiting the remaining investments is dependent on third
parties and it is therefore difficult to accurately estimate when this
process will complete. However, the Investment Manager believes there
are reasonable prospects for completion during the course to this year,
with a final distribution to 'F' Shareholders to follow soon after.
'G' Share pool
The 'G' Share pool passed its five year anniversary in November 2018 and
therefore focus is on the process of realising investments to return
funds to Shareholders.
At 30 June 2019, the pool held 12 investments and the net asset value
("NAV") was 63.2p per 'G' Share which represents a net increase of 2.3p
(3.8%) over the period after adjusting for the dividends paid out. Total
Return (NAV plus dividends paid to date) is now 100.7p, compared to the
initial NAV, before income tax relief, of 100.0p (or original cost, net
of income tax relief, which was typically between 70.0p ad 75.0p,
depending on costs).
There were two significant realisations over the period, which generated
funds for a further dividend. A dividend of 14.0p will be paid on 8
November 2019 to Shareholders on the register at 18 October 2019. This
will bring total distributions to 51.5p and leave a remaining NAV of
49.2p.
The 'G' Share pool will make further distributions as realisations are
achieved. The Investment Manager expects to make good progress to this
end over the remainder of the year.
'K' Share pool
The 'K' Share pool raised funds in 2016 and the majority of these funds
have now been invested. The target date to start realising investments
is late 2021.
The 'K Share portfolio has suffered from some significant issues during
the period. Large provisions have been required against the investments
in several of the pool's largest investments: Yamuna Renewables Limited,
Ormsborough Limited and Jito Trading Limited. Further details are
included in the 'K' Share Investment Manager's Report below. The Board
is working with the Manager to ensure that appropriate action is taken
to recover as much value as possible for 'K' Shareholders.
At 30 June 2019, the share pool held 17 investments and had a net asset
value ("NAV") and Total Return of 72.9p per K Share. This represents a
net decrease of 18.4p (20.1%) over the period, compared to the initial
NAV, before income tax relief, of 100.0p (or original cost, net of
income tax relief, which was typically between 70.0p and 75.0p,
depending on costs).
Dividends
As discussed above, dividends have been declared in respect of two of
the share pools
'F' Shares 5.0p per share
'G' Shares 14.0p per share
Each of the above dividends will be paid on 8 November 2019 to
Shareholders on the register at 18 October 2019.
No dividend is being declared in respect of the 'K' Share pool as the
VCT regulations effectively prohibit dividends at this stage in the
pool's life.
Share buybacks
As announced in June 2019, the Company is now unlikely to make any
further purchases of any share class as the process of returning funds
to the 'F' and 'G' Shareholders is now underway and the 'K' Shareholders
are due to commence shortly.
No share buybacks in respect of any share class was undertaken during
the period.
Outlook
Over the remainder of the year we expect to see further realisations
made by the 'F' and 'G' Share pools as the Manager looks at maximising
Shareholder returns. Shareholders should note that timing of the exit
process can be difficult to predict and could take some time to complete
as the Board are keen to see that full value is achieved for all
investments.
In respect of the 'K' Share pool, focus is on working to recover as much
value as possible of the portfolio companies in question and nurturing
the investments such that they will eventually be well positioned to
deliver successful exits.
I will update Shareholders on progress in my statement with the annual
report to 31 December 2019.
Hugh Gillespie
Chairman
INVESTMENT MANAGER'S REPORT
'F' SHARE POOL
As at 30 June 2019, the 'F' Share pool holds 10 investments as focus for
the 'F' Share pool remains on the realisation of its investments and
maximising Shareholder returns.
'F' Share pool -- Portfolio valuation
The majority of the portfolio investments remain valued at or above cost,
with there being a small number of valuation movements in the period
which generated an uplift over opening value of GBP201,000.
The most significant increase in valuation was Baron House Developments
LLP, a company created to fund the purchase of a property opposite
Newcastle station, which qualifies under the BPRA scheme. At the period
end, an uplift of GBP192,000 was recognised following improved trading
and an uplift in value of the hotel site.
Realisation plans
Following the period end, one of the pool's larger investments,
Lambridge Solar Limited, the 9.0 MW ground mounted solar farm in
Pedwardine Lincolnshire, was exited and delivered a good return to the
pool.
Plans are in place for the successful exit of the Antic portfolio of
investments including Pearce and Saunders Limited, Downing Pub EIS One
Limited and Atlantic Dogstar Limited, which is expected to conclude
following the publication of this report. Realisation plans for the
remaining portfolio companies are in place although the exact timing of
the final exits is dependent on transactions involving third parties.
Net asset value, results and dividend
At 30 June 2019, the net asset value ("NAV") for a holding of one 'F'
Share was 30.6p, an increase of 1.9p (6.6%) over the period. Total
Return (NAV plus dividends paid to date) is now 97.6p.
The gain on ordinary activities for the 'F' Shares, after taxation was
GBP207,000 for the period, comprising a revenue gain of GBP6,000 and a
capital gain of GBP201,000.
The Company will pay an interim dividend of 5.0p per 'F' Share on 8
November 2019 to 'F' Shareholders on the register at 18 October 2019.
Outlook
Focus for the 'F' Share pool remains on the realisation of its
investments, with realisation plans in place for the final 10
investments held. However, Shareholders should note that any
transactions are dependent on many external factors and hurdles in order
to achieve a good return for 'F' Shareholders.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO
'F' SHARE POOL
as at 30 June 2019
Unrealised gain/ % of portfolio
Cost Valuation (loss) in period by value
GBP'000 GBP'000 GBP'000
VCT qualifying and
partially qualifying
investments
Pearce and Saunders
Limited 497 671 - 20.3%
Downing Pub EIS One
Limited 490 626 7 19.0%
Lambridge Solar Limited 500 605 - 18.3%
Atlantic Dogstar
Limited 200 272 2 8.2%
Fresh Green Power
Limited 189 210 - 6.4%
Apex Energy Limited 1,000 100 - 3.0%
Green Energy Production
UK Limited 100 54 - 1.6%
Non-qualifying
investments
Baron House
Developments LLP 481 673 192 20.4%
Pearce and Saunders
DevCo Limited 46 46 - 1.4%
London City Shopping
Centre Limited 66 - - 0.0%
3,569 3,257 201 98.6%
======= =================
Cash at bank and in
hand 46 1.4%
--------- --------------
Total 3,303 100.0%
========= ==============
INVESTMENT MANAGER'S REPORT
'G' SHARE POOL
The 'G' Share pool raised funds in 2013 and passed its five year
anniversary in November 2018. The focus for the Share pool remains on
the process of realising investments as it looks to maximise Shareholder
return before the ultimate exit date.
Investment activity
With the pool being in the realisation phase, no new investments are
expected to take place. However, two full exits were made in the six
months to 30 June 2019.Hedderwick Limited, the owner of two freehold
pubs located in Royston, Hertfordshire and Olney, Milton Keynes, was
successfully exited during the period and generated proceeds of GBP1.4
million for the Share pool. This represented an uplift over cost of
GBP144,000.
In addition, proceeds of GBP1.8 million were generated from the sale of
the Antelope Pub Limited, which owns a pub of the same name in Tooting,
London. This represented a gain over cost of GBP51,000.
The period to 30 June 2019 has seen a number of valuation movements,
resulting in an unrealised gain of GBP236,000.
The majority of the uplift in the period related to Baron House
Developments LLP, a company created to fund the purchase of a property
opposite Newcastle station, which qualifies under the BPRA scheme. The
valuation was uplifted by GBP437,000 following improved trading and an
uplift in value of the hotel site.
Atlantic Dogstar Limited, which owns a group of London pubs, was
uplifted by GBP31,000 based on expected returns.
The valuation gains in the period were partially offset by provisions of
GBP234,000 in Ormsborough Limited, the owner of several pubs and
restaurants in Yorkshire. The investment has been reduced in value as a
result of cost overruns on two of the company's pub developments.
Net asset value
At 30 June 2019, the net asset value ("NAV") for a holding of one 'G'
Share was 63.2p, which represents a net increase of 2.3p (3.8%) over the
period. Total Return (NAV plus dividends paid to date) is now 100.7p.
Results and dividend
The profit on ordinary activities for the 'G' Share pool, after taxation,
for the period was GBP563,000, comprising a revenue profit of GBP202,000
and a capital gain of GBP361,000.
The Company will pay an interim dividend of 14.0p per 'G' Share on 8
November 2019 to 'G' Shareholders on the register at 18 October 2019.
Outlook
Plans are now being progressed for the exit of all investments from the
Share pool following the passing of the pools five year anniversary at
the end of 2018. Good progress is being made on the disposal of these
investments, however Shareholders should note that any exit is dependent
on many third parties and external factors in order to provide a good
return for 'G' Shareholders.
Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO
'G' SHARE POOL
as at 30 June 2019
Unrealised gain/ % of portfolio
Cost Valuation (loss) in period by value
GBP'000 GBP'000 GBP'000
VCT qualifying and
partially qualifying
investments
Atlantic Dogstar
Limited 3,500 4,756 31 31.5%
Walworth House Pub
Limited 1,330 1,330 - 8.8%
Downing Pub EIS One
Limited 980 1,253 13 8.3%
Quadrate Catering
Limited 1,450 1,196 - 7.9%
Pearce and Saunders
Limited 193 193 - 1.3%
Hermes Wood Pellets
Limited 1,000 152 - 1.0%
Apex Energy Limited 1,300 130 - 0.9%
Ormsborough Limited 500 117 (234) 0.8%
Zora Energy Renewables
Limited 750 67 (11) 0.4%
Non-qualifying
investments
Baron House
Developments LLP 1,093 1,530 437 10.1%
Quadrate Spa Limited 1,450 669 - 4.4%
London City Shopping
Centre Limited 110 - - 0.0%
13,656 11,393 236 75.4%
======= =================
Cash at bank and in
hand 3,714 24.6%
--------- --------------
Total 15,107 100%
========= ==============
SUMMARY OF INVESTMENT MOVEMENTS
'G' SHARE POOL
as at 30 June 2019
Market value at Disposal Gain against Total realised
Disposals Cost 01/01/19 proceeds cost gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Hedderwick
Limited 1,250 1,320 1,394 144 74
Antelope
Pub
Limited 1,760 1,760 1,811 51 51
3,010 3,080 3,205 195 125
======= =============== ========= ============ ===============
INVESTMENT MANAGER'S REPORT
'K' SHARE POOL
The 'K' Share pool closed its fundraising in September 2016, having
raised GBP16.2 million.
The majority of these funds have been invested and the focus for the
pool is on the deployment of the remaining cash in the pool and the
close monitoring of the investee companies.
It is disappointing to report that the 'K' Share pool has suffered from
difficulties in a number of its investments over the period. The
required provisions have had a notable negative impact on the Total
Return over the period which has been detailed below.
Investment activity
With the pool entering the qualification test at the start of the year,
no new investments were made in the period. One partial exit completed
generating proceeds of GBP12,000 from the partial redemption of loan
notes in Snow Hill Developments LLP.
The period to 30 June 2019 has seen a number of valuation provisions,
resulting in an unrealised loss of GBP2.8 million.
As reported in the year end accounts, the most notable provision related
to Yamuna Renewables Limited, a wood pelleting plant in Gars am Kamp,
Austria. Consumer demand has substantially reduced following warmer than
expected weather. Additionally, production was halted following two
serious fires at the facility. Downing is working with the management
team to address these issues. The company is pursuing a business
interruption and consequential loss insurance claim. However, as the
business had not been operating for very long this is unlikely to cover
the real estimated losses. As the company has some borrowings, this may
ultimately make it difficult to recover any value. The investment has
been fully provided against as a result.
Jito Trading Limited, the operator of another wood pelleting plant in
Weitra, Austria, has suffered partly as a result of the demand problem
encountered by Yamuna discussed above. The investment valuation has been
reduced by GBP375,000 as a result of weaker trading and other concerns.
Ormsborough Limited, the owner of pubs and restaurants in Yorkshire, ran
into difficulties in respect of several pub developments which it was
undertaking. The investment partner and management company then went
into administration and subsequently we have identified some potentially
fraudulent transactions which we are continuing to investigate. We have
put a new management team in place but trading at the existing pubs has
weakened. The investment has been reduced in value by GBP632,000 as a
result. We continue to work with the new management team seeking to
recover value.
Indigo Generation Limited and Ironhide Generation Limited are developing
solar farms in India. Both plants were expected to complete this year,
however due to monsoon season and issues acquiring grid connection,
construction of the sites has been delayed, leading to a provision of
GBP221,000 in each company.
The unrealised losses were partially offset by gains in the period
totalling GBP57,000.
The majority of the gains in the period related to Fenkle Street LLP,
which was uplifted by GBP41,000, as the impact of discounting the
expected future cash flows unwinds over time.
Net asset value, results and dividend
At 30 June 2019, the net asset value ("NAV") and Total Return for a
holding of one 'K' Share was 72.9p, which represents a net decrease of
18.4p (20.1%) over the period. The loss on ordinary activities for the
'K' Share pool, after taxation was GBP2.9 million for the period,
comprising a revenue loss of GBP96,000 and a capital loss of GBP2.8
million.
Outlook
The provisions over the period experienced by the 'K' Share pool are
disappointing to report. Shareholders should note that management have
dedicated substantial resources to the portfolio companies in question
and are seeking to develop plans to recover as much value as possible
for investors.
Downing LLP
SUMMARY OF INVESTMENT MOVEMENTS
'K' SHARE POOL
as at 30 June 2019
Unrealised (loss)/ % of portfolio
Cost Valuation gain in period by value
GBP'000 GBP'000 GBP'000
VCT qualifying
investments
Apprise Pubs Limited 1,300 1,300 - 11.4%
Garthcliff Shipping
Limited 1,300 1,300 - 11.4%
Jito Trading Limited 1,500 1,125 (375) 9.9%
Ironhide Generation
Limited 736 515 (221) 4.6%
Indigo Generation
Limited 736 515 (221) 4.6%
Rockhopper Renewables
Limited 591 514 (77) 4.5%
Walworth House Pub
Limited 500 500 - 4.4%
Exclusive Events
Venues Limited 500 500 - 4.4%
Pilgrim Trading
Limited 432 432 - 3.8%
SF Renewables (Solar)
Limited 337 358 (30) 3.1%
Ormsborough Limited 1,400 316 (632) 2.8%
Zora Energy Renewables
Limited 350 32 (5) 0.3%
Mosaic Spa and Health
Clubs Limited 24 13 (13) 0.1%
Yamuna Renewables
Limited 1,300 - (1,300) 0.0%
Non-qualifying
investments
Fenkle Street LLP 287 335 41 2.9%
Snow Hill Developments
LLP 31 47 16 0.4%
London City Shopping
Centre Limited 15 - - 0.0%
11,339 7,802 (2,817) 68.6%
======= ==================
Cash at bank and in
hand 3,577 31.4%
--------- --------------
Total 11,379 100%
========= ==============
Market value Disposal Gain against Total realised
Disposals Cost at 01/01/19 proceeds cost gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Snow Hill
Developments
LLP 12 12 12 - -
12 12 12 - -
======= ============ ========= ============ ===============
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2019
30 Jun 31 Dec
30 Jun 2019 2018 2018
'F' 'G' 'K'
Shares Shares Shares Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Unquoted
investments 3,257 11,393 7,802 22,452 33,840 27,925
Current assets
Debtors 80 1,255 103 1,438 895 1,328
Cash at bank
and in hand 46 3,714 3,577 7,337 6,932 4,055
-------- -------- -------- ------- ------- -------
126 4,969 3,680 8,775 7,827 5,383
Creditors:
amounts
falling due
within one
year (75) (392) (27) (494) (437) (448)
-------- -------- -------- ------- ------- -------
Net current
assets 51 4,577 3,653 8,281 7,390 4,935
Net assets 3,308 15,970 11,455 30,733 41,230 32,860
======== ======== ======== ======= ======= =======
Capital and
reserves
Called up share
capital 11 25 16 52 77 52
Capital
redemption
reserve 149 - - 149 124 149
Special reserve 4,274 18,194 16,213 38,681 26,729 38,471
Share premium
account - - - - 16,170 -
Revaluation
reserve (561) (2,263) (3,537) (6,361) (12) (3,911)
Capital reserve
-- realised (1,033) (1,220) 4 (2,249) (2,252) (2,250)
Revenue reserve 468 1,234 (1,241) 461 394 349
-------- -------- -------- ------- ------- -------
Total equity
shareholders'
funds 3,308 15,970 11,455 30,733 41,230 32,860
======== ======== ======== ======= ======= =======
Basic and diluted net
asset value per:
'F' Share 30.6p 53.8p 28.7p
'G' Share 63.2p 81.4p 60.9p
'K' Share 72.9p 94.1p 91.3p
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2019
Called
up Capital redemption Special Share Premium Revaluation Capital reserve Revenue
share capital Reserve Reserve Reserve reserve realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2018 77 124 28,313 16,170 815 (2,252) 438 43,685
Total
comprehensive
income - - - - (4,866) 896 366 (3,604)
Share premium
cancellation - - 16,170 (16,170) - - - -
Transactions
with owners
Purchase of own
shares - - - - - - (55) (55)
Transfer
between
reserves - - (6,012) - 140 5,872 - -
Dividends paid - - - - - (6,766) (400) (7,166)
Cancellation of
shares (25) 25 - - - - - -
---- ------------------ -------- ------------- ----------- --------------- -------- --------
At 31 December
2018 52 149 38,471 - (3,911) (2,250) 349 32,860
Total
comprehensive
income - - - - (2,380) 141 112 (2,127)
Transaction
with owners
Purchase of own
shares - - - - - - - -
Transfer
between
reserves - - 210 - (70) (140) - -
Dividends paid - - - - - - - -
At 30 June 2019 52 149 38,681 - (6,361) (2,249) 461 30,733
==== ================== ======== ============= =========== =============== ======== ========
INCOME STATEMENT
for the six months ended 30 June 2019
Company Total
Six months ended Six months ended Year ended
30 Jun 2019 30 Jun 2018 31 Dec 2018
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 619 16 635 948 - 948 1,621
Gains/(losses)
on investments
- realised - 125 125 - 708 708 865
- unrealised - (2,380) (2,380) - (832) (832) (4,866)
619 (2,239) (1,620) 948 (124) 824 (2,380)
Investment
management
fees (289) - (289) (383) - (383) (711)
Other expenses (123) - (123) (138) - (138) (254)
Return/(loss)
on ordinary
activities
before
taxation 207 (2,239) (2,032) 427 (124) 303 (3,345)
Tax on total
comprehensive
income and
ordinary
activities (95) - (95) (55) - (55) (259)
Return/(loss)
attributable
to equity
shareholders 112 (2,239) (2,127) 372 (124) 248 (3,604)
======= ======= ======= ======= ======= ======= ============
Return per 'F'
Share 0.0p 1.9p 1.9p 0.2p 3.0p 3.2p (3.9p)
Return per 'G'
Share 0.8p 1.4p 2.2p 1.9p (0.1p) 1.8p (8.6p)
Return per 'K'
Share (0.6p) (17.8p) (18.4p) (0.9p) (2.7p) (3.6p) (6.3p)
Six months ended Six months ended Year ended
'F' Shares 30 Jun 2019 30 Jun 2018 31 Dec 2018
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 76 - 76 118 - 118 177
Gains/(losses)
on investments
- realised - - - - 220 220 350
- unrealised - 201 201 - 104 104 (780)
76 201 277 118 324 442 (253)
Investment
management
fees (24) - (24) (58) - (58) (97)
Other expenses (19) - (19) (39) - (39) (43)
Return/(loss)
on ordinary
activities
before
taxation 33 201 234 21 324 345 (393)
Tax on total
comprehensive
income and
ordinary
activities (27) - (27) (1) - (1) (31)
Return/(loss)
attributable
to equity
shareholders 6 201 207 20 324 344 (424)
======= ======= ======= ======= ======= ======== ============
Six months ended Six months ended Year ended
'G' Shares 30 Jun 2019 30 Jun 2018 31 Dec 2018
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 491 - 491 778 - 778 1,307
Gains/(losses)
on investments
- realised - 125 125 - 488 488 514
- unrealised - 236 236 - (508) (508) (3,325)
491 361 852 778 (20) 758 (1,504)
Investment
management
fees (148) - (148) (200) - (200) (369)
Other expenses (55) - (55) (56) - (56) (129)
Return/(loss)
on ordinary
activities
before
taxation 288 361 649 522 (20) 502 (2,002)
Tax on total
comprehensive
income and
ordinary
activities (86) - (86) (33) - (33) (178)
Return/(loss)
attributable
to equity
shareholders 202 361 563 489 (20) 469 (2,180)
======= ======= ======= ======= ======= ======= ============
Six months ended Six months ended Year ended
'K' Shares 30 Jun 2019 30 Jun 2018 31 Dec 2018
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 52 16 68 52 - 52 137
(Losses)/gains
on investments
- realised - - - - - - 1
- unrealised - (2,817) (2,817) - (428) (428) (761)
52 (2,801) (2,749) 52 (428) (376) (623)
Investment
management
fees (117) - (117) (125) - (125) (245)
Other expenses (49) - (49) (43) - (43) (82)
Loss on ordinary
activities
before
taxation (114) (2,801) (2,915) (116) (428) (544) (950)
Tax on total
comprehensive
income and
ordinary
activities 18 - 18 (21) - (21) (50)
Loss
attributable to
equity
shareholders (96) (2,801) (2,897) (137) (428) (565) (1,000)
======= ======= ======= ======= ======= ======= ============
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2019
30 Jun 31 Dec
30 Jun 2019 2018 2018
'F' 'G' 'K'
Shares Shares Shares Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net cash (outflow)/inflow
from operating activities (14) 185 (106) 65 224 (173)
Cash flows from investing activities
Sale of investments - 3,205 12 3,217 3,822 5,860
-------- -------- -------- ------- ------- -------
Net cash inflow from investing
activities - 3,205 12 3,217 3,822 5,860
-------- -------- -------- ------- ------- -------
Net cash (outflow)/inflow
before financing activities (14) 3,390 (94) 3,282 4,046 5,687
Cash flows from financing
activities
Equity dividend paid - - - - (2,687) (7,166)
Purchase of own shares - - - - (16) (55)
-------- -------- -------- ------- ------- -------
Net cash outflow from financing
activities - - - - (2,703) (7,221)
-------- -------- -------- ------- ------- -------
(Decrease)/increase in cash (14) 3,390 (94) 3,282 1,343 (1,534)
======== ======== ======== ======= ======= =======
NOTES TO THE UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2019
30 Jun 31 Dec
30 Jun 2019 2018 2018
'F' 'G' 'K'
Shares Shares Shares Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash inflow/(outflow) from operating activities
Return/(loss) on ordinary activities before
taxation 234 649 (2,915) (2,032) 303 (3,345)
Corporation tax (8) - - (8) (29) (174)
(Gains)/losses on investments (201) (361) 2,817 2,255 124 4,001
Decrease/(increase) in other debtors (26) (92) 10 (108) (128) (562)
(Decrease)/increase in other creditors (13) (11) (18) (42) (46) (93)
Net cash (outflow)/inflow from operating
activities (14) 185 (106) 65 224 (173)
======= ======= ========= ======= ======= =======
Analysis of net funds
Beginning of period 60 324 3,671 4,055 5,589 5,589
Net cash (outflow)/inflow (14) 3,390 (94) 3,282 1,343 (1,534)
------- ------- --------- ------- ------- -------
End of period 46 3,714 3,577 7,337 6,932 4,055
======= ======= ========= ======= ======= =======
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. General information
Downing TWO VCT plc ("the Company") is a venture capital trust
established under the legislation introduced in the Finance Act 1995 and
is domiciled in the United Kingdom and incorporated in England and
Wales.
2. Accounting policies - Basis of accounting
The unaudited half-yearly results cover the six months to 30 June 2019
and have been prepared in accordance with the Statement of Recommended
Practice "Financial Statements of Investment Trust Companies and Venture
Capital Trusts" issued in February 2018 ("AIC SORP") and in accordance
with the accounting policies set out in the statutory accounts for the
year ended 31 December 2018, which were prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom
accounting standards and applicable law), including Financial Reporting
Standard 102, the financial reporting standard applicable in the UK and
Republic of Ireland ("FRS 102").
3. All revenue and capital items in the Income Statement derive from
continuing operations.
4. The Company has only one class of business and derives its income
from investments made in shares, securities and bank deposits.
5. The comparative figures are in respect of the six-month period ended
30 June 2018 and the year ended 31 December 2018 respectively.
6. Dividends
Six months ended Year to
30 June 2019 31 Dec 2018
Per share Revenue Capital Total Total
Paid in
period pence GBP'000 GBP'000 GBP'000 GBP'000
'F' Shares
Y/E Dec 2018
Interim 18.0p - - - 1,946
Y/E Dec 2017
Final 19.0p - - - 2,054
- - - 4,000
========= ======= ======= ============
'G' Shares
Y/E Dec 2018
Interim 10.0p - - - 2,533
Y/E Dec 2017
Final 2.5p - - - 633
- - - 3,166
========= ======= ======= ============
No dividends have been paid or declared in respect of the 'K' Shares.
7. Basic and diluted return per share
Weighted average
number of Revenue Capital
shares in issue return/(loss) return/(loss)
GBP'000 Per share GBP'000 Per share
'F' Shares 10,810,859 6 0.0p 201 1.9p
'G' Shares 25,228,418 202 0.8p 361 1.4p
'K' Shares 15,734,429 (96) (0.6p) (2,801) (17.8p)
------- -------
112 (2,239)
======= =======
8. Net asset value per share
Shares in issue Net asset value
Per
GBP'000 share
'F' Shares 10,810,859 3,308 30.6p
'G' Shares 25,281,571 15,970 63.2p
'K' Shares 15,718,154 11,455 72.9p
---------
30,733
=========
9. Reserves
Period ended Year ended
30 Jun 2019 31 Dec 2018
GBP'000 GBP'000
Capital redemption reserve 149 149
Special reserve 38,681 38,471
Revaluation reserve (6,361) (3,911)
Capital reserve - realised (2,249) (2,250)
Revenue reserve 461 349
30,681 32,808
============ ============
The Special reserve, Capital reserve - realised and Revenue reserve are
all distributable reserves. The Revaluation reserve includes losses of
GBP9,111,000 which are included in the calculation of distributable
reserves. Total distributable reserves are GBP27,782,000 (31 Dec 2018:
GBP30,544,000).
10. The fair value of investments is determined using the detailed
accounting policy set out in the statutory accounts for the year ended
31 December 2018.
The Company has categorised its financial instruments using the fair
value hierarchy as follows:
Level 1 Reflects financial instruments quoted in an active market;
Level 2 Reflects financial instruments that have prices that are
observable either directly or indirectly; and
Level 3 Reflects financial instruments that use valuation techniques
that are not based on observable market data (unquoted equity
investments and loan note investments).
Period
ended Year
30 June Level Level ended
Level 1 Level 2 Level 3 2019 1 2 Level 3 31 Dec 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Loan
notes - - 5,502 5,502 - - 5,744 5,744
Unquoted
equity - - 16,950 16,950 - - 22,181 22,181
- - 22,452 22,452 - - 27,925 27,925
========= ========= ========= ======== ========= ======= ========= ============
11. The unaudited condensed financial statements set out herein do not
constitute statutory accounts within the meaning of Section 434 of the
Companies Act 2006 and have not been delivered to the Registrar of
Companies. The figures for the year ended 31 December 2018 have been
extracted from the financial statements for that year, which have been
delivered to the Registrar of Companies; the Auditor's report on those
financial statements was unqualified.
12. 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 as well as in accordance with FRS 104 Interim
Financial Reporting 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.
13. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required,
in the Company's half-yearly results, to report on principal risks and
uncertainties facing the Company over the remainder of the financial
year.
The Board concluded that the key risks facing the Company over the
remainder of the financial period are as follows:
(i) Compliance risk of failure to maintain approval as a VCT; and
(ii) Investment risk associated with investing in small and immature
businesses.
The Company's compliance with the VCT regulations is continually
monitored by the Manager, who reports regularly to the Board on the
current position. The Company has also reappointed Philip Hare and
Associates LLP to provide regular reviews and advice in this area.
In order to make VCT qualifying investments, the Company has to invest
in small businesses which are often immature. It also has a limited
period in which it must invest the majority of its funds. The Manager
follows a rigorous process in vetting and carefully structuring new
investments, including taking a charge over the assets of the business
wherever possible and, after an investment is made, closely monitoring
the business.
The Board is satisfied that these approaches provide satisfactory
management of the key risks.
14. Going concern
The Directors have reviewed the Company's financial resources at the
period end and conclude that the Company is well placed to manage its
business risks.
The Board confirms that it is satisfied that the Company has adequate
resources to continue in business for the foreseeable future. For this
reason, the Board believes that the Company continues to be a going
concern and that it is appropriate to apply the going concern basis in
preparing the financial statements.
15. Copies of the unaudited half-yearly 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) Dow Jones Newswires
September 09, 2019 08:15 ET (12:15 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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