Downing P.E VCT 8 Downing Planned Exit Vct 8 Plc : Half-yearly Report
August 28 2013 - 11:43AM
UK Regulatory
TIDMDPV8
Downing Planned Exit VCT 8 plc
Half-Yearly Report for the six months ended 30 June 2013
PERFORMANCE SUMMARY
30 Jun 31 Dec 30 Jun
2013 2012 2012
Pence Pence Pence
Net asset value per Ordinary Share 77.4 80.1 80.8
Net asset value per 'A' Share 0.1 0.1 0.1
Cumulative distributions per Ordinary Share 12.5 10.0 10.0
Total return per Ordinary Share and 'A' Share 90.0 90.2 90.9
CHAIRMAN'S STATEMENT
I am pleased to present the Company's Half-Yearly Report for the period
ended 30 June 2013. Although the investment portfolio suffered from some
minor write downs in the period, these were offset by income generated
from the portfolio which, after running costs, has resulted in a small
decrease in net asset value over the period after adding back dividends
paid. More positively, shortly after the period end, the Manager has
been able to complete the first investment realisations and will now
start the process of returning funds to Shareholders.
Net asset value and results
At 30 June 2013, the net asset value ("NAV") per Ordinary Share and
per 'A' Share stood at 77.4p and 0.1p respectively, producing a combined
total of 77.5p. This is a decrease of 0.2p per share (0.2%) since 31
December 2012 (after adjusting for the 2.5p dividend paid during the
period). Total Return (NAV plus cumulative dividends paid to date) is
now 90.0p for a combined holding of one Ordinary Share and one 'A'
Share. This compares to the original cost, net of income tax relief, of
70p.
The loss on ordinary activities after taxation for the period was
GBP20,000, which comprised a revenue surplus of GBP135,000 and a capital
loss of GBP155,000.
Investment review
With the Company effectively fully invested, investment activity was at
a low level during the period. However, one small new non-qualifying
investment of GBP89,000 was made in Dominions House Limited. The company
has acquired two development sites which have the potential to deliver
an attractive capital uplift in a short period.
In terms of investment disposals, there was one small redemption of loan
stock of GBP15,000 from Fenkle Street LLP. The only other investment
activity was a reorganisation whereby Gatewales Limited took over the
interests of West Tower Holdings Limited, which had no impact on the
investment valuation.
As usual, the Board has undertaken a review of the investment valuations
at the period end and some adjustments were made.
The most significant adjustment has been a provision against the
investment in Horsham Bowl Limited. The company owns a ten pin bowling
alley and nightclub in Horsham, West Sussex. Attempts by management to
improve the trading performance of the site do not appear to be making
headway. Following the withdrawal of a potential purchaser and
indications that the market for such sites has weakened, we have
reassessed the value of the business and concluded that it is
appropriate to make a provision of GBP210,000 against the investment.
The Company holds three small investments in Chapel Street Food and
Beverage Limited, Chapel Street Services Limited and Chapel Street Hotel
Limited, each of which operates from the new Hotel Indigo in Liverpool.
The hotel market in Liverpool has become very competitive, which has
resulted in occupancy of the hotel building more slowly than expected.
With bank debt ranking ahead of the VCT's investments, the Board have
concluded that a provision of GBP49,000 across the three investments is
appropriate.
The portfolio has also provided some positive news from Crossco (1135)
Limited and its related company, Brunswick International Associates
Limited. The companies operate children's nurseries which form part of
the Complete Childcare group. Trading at the nurseries has been steady
and has justified a total uplift in valuation of GBP104,000 over the
period.
All other investments are performing more or less in line with
expectations and have been held at previous carrying value. Overall the
portfolio produced unrealised losses of GBP155,000 over the period.
Investment realisation update
The Company has now passed the fifth anniversary of the close of its
offer for subscription and is at the stage where it is seeking to
realise its investments in order to be able to return funds to
Shareholders.
As I mentioned in my statement in the last Annual Report, the ongoing
lack of bank funding is a significant hindrance to this process and, as
a result, we expect that the process will take some considerable time to
complete.
Having said that, I am pleased to report that, in July, the Manager
managed to complete the disposal of Crossco (1135) Limited and Brunswick
International Associates Limited, with a significant proportion of the
consideration paid in cash (GBP1.0 million) and the remainder in the
form of loan notes which are expected to be redeemed in 12 months' time.
The valuation of the consideration is equal to our carrying value at the
period end and represents a gain against original cost of GBP236,000.
If the loan stock is redeemed in full at par, this will result in a
further small gain.
Additionally, I can report a partial redemption of loan notes in
Gatewales Limited in July, producing proceeds of GBP526,000.
I can also report that the Manager is in discussions with a potential
funder that could allow a partial exit from Cadbury House however this
is not yet finalised.
Exit prospects are less clear for some of the other remaining
investments. In the case of both Horsham Bowl and The Thames Club, the
businesses need to stabilise and establish an improving trading record
in order to support possible trade sales at reasonable prices. The
Manager is continuing to work to this end.
Dividend
As a result of the exits discussed above, the Company is now in a
position to make its first major return of funds to Shareholders.
A dividend of 21.5p per Ordinary Share will be paid to Shareholders on 4
October 2013 to Shareholders on the register at 13 September 2013.
Following the payment of the dividend, Shareholders will have received
total dividends since launch of 34.0p per Ordinary Share.
Share buybacks
In view of the fact the Company is now in the process of returning fund
to Shareholders, the Company is unlikely to buy in any more shares for
cancellation. The Board intends to retain any surplus liquid funds in
the Company and distribute to Shareholders by way of dividends as and
when sufficient levels have accumulated.
Outlook
There are still significant challenges ahead in exiting from the
remaining investments, however the Board is pleased with progress made
in the difficult conditions over the last two months and is encouraging
the Manager to vigorously pursue further realisations.
As I mentioned in my previous statement, the Board is considering
whether it might be in the best interests of Shareholders for the
Company to enter a formal VCT winding up period in the near future. In
such a period, a liquidator is appointed and various VCT regulations are
relaxed, which allows the Company to delist its shares from the London
Stock Exchange and make significant running costs savings.
I will, of course, communicate with Shareholders as soon as there is any
further news on the above plans. Additionally, if there are any further
major investment realisations prior to the next scheduled report, I will
write to Shareholders at that time and expect to provide details of the
next dividend.
Hugh Gillespie
Chairman
UNAUDITED BALANCE SHEET
as at 30 June 2013
30 Jun 30 Jun 31 Dec
2013 2012 2012
GBP'000 GBP'000 GBP'000
Fixed assets
Investments 6,461 6,347 6,542
Current assets
Debtors 268 145 209
Cash at bank and in hand 110 632 274
378 777 483
Creditors:
amounts falling due within one year (163) (153) (114)
Net current assets 215 624 369
Net assets 6,676 6,971 6,911
Capital and reserves
Called up Ordinary Share capital 9 9 9
Called up 'A' Share capital 13 13 13
Deferred share capital 3 3 3
Special reserve 7,262 7,753 7,752
Revaluation reserve (797) (912) (1,042)
Capital reserve - realised 44 44 44
Revenue reserve 142 61 132
Equity shareholders' funds 6,676 6,971 6,911
Net asset value per Ordinary Share 77.4p 80.8p 80.1p
Net asset value per 'A' Share 0.1p 0.1p 0.1p
77.5p 80.9p 80.2p
UNAUDITED INCOME STATEMENT
for the six months ended 30 June 2013
Year
ended
Six months ended30 Jun Six months ended30 Jun 31 Dec
2013 2012 2012
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 280 - 280 177 - 177 365
Gains/(losses)
on
investments - (155) (155) - 24 24 (106)
280 (155) 125 177 24 201 259
Investment
management
fees (37) - (37) (35) - (35) (70)
Other expenses (63) - (63) (67) - (67) (134)
Return on
ordinary
activities
before
taxation 180 (155) 25 75 24 99 55
Taxation (45) - (45) (16) - (16) (33)
Return
attributable
to equity
shareholders 135 (155) (20) 59 24 83 22
Return per
Ordinary
Share 1.6p (1.8p) (0.2p) 0.7p 0.3p 1.0p 0.3p
Return per 'A' - - - - - - -
Share
A Statement of Total Recognised Gains and Losses has not been prepared
as all gains and losses are recognised in the Income Statement as noted
above.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 30 June 2013
30 Jun 30 Jun 31 Dec
2013 2012 2012
GBP'000 GBP'000 GBP'000
Opening Shareholders' funds 6,911 7,119 7,119
Total recognised (loss)/profit for the period (20) 83 22
Dividends paid (215) (216) (215)
Purchase of own shares - (15) (15)
Closing Shareholders' funds 6,676 6,971 6,911
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2013
30 Jun 30 Jun 31 Dec
2013 2012 2012
Note GBP'000 GBP'000 GBP'000
Cash inflow from operating activities and returns
on investments 1 125 108 143
Taxation
Corporation tax paid - - (69)
Capital expenditure
Purchase of investments (89) (25) (350)
Sale of investments 15 456 456
Net cash (outflow)/inflow from capital expenditure (74) 431 106
Equity dividends paid (215) (216) (215)
Net cash (outflow)/inflow before financing (164) 323 (35)
Financing
Purchase of own shares - (15) (15)
Net cash outflow from financing - (15) (15)
(Decrease)/increase in cash 2 (164) 308 (50)
Notes to the cash flow statement:
1 Cash inflow from operating activities and returns
on investments
Return on ordinary activities before taxation 25 99 55
Losses/(gains) on investments 155 (24) 106
(Increase)/decrease in other debtors (59) 51 (13)
(Decrease) in other creditors (16) (15) -
Increase/(decrease) in amounts due to subsidiary
undertaking 20 (3) (5)
Net cash inflow from operating activities 125 108 143
2 Analysis of net funds
Beginning of period 274 324 324
Net cash (outflow)/inflow (164) 308 (50)
End of period 110 632 274
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 June 2013
% of
Unrealised portfolio
Cost Valuation gain/(loss) by value
GBP'000 GBP'000 GBP'000
VCT qualifying
Crossco (1135) Limited t/a
Kingsclere Nurseries 998 1,189 59 18.1%
Hoole Hall Country Club Holdings
Limited * 1,094 1,161 - 17.7%
Cadbury House Holdings Limited 700 763 - 11.6%
Gatewales Limited 750 750 - 11.4%
Hoole Hall Spa and Leisure Club
Limited 562 613 - 9.3%
Horsham Bowl Limited * 861 471 (210) 7.2%
The Thames Club Limited * 1,125 350 - 5.3%
Chapel Street Food and Beverage
Limited 50 26 (24) 0.4%
Chapel Street Services Limited 50 26 (24) 0.4%
6,190 5,349 (199) 81.4%
Non-qualifying
Future Biogas (SF) Limited 350 350 - 5.3%
Southampton Hotel Developments
Limited 300 300 - 4.6%
Snow Hill Developments LLP 250 250 - 3.8%
Dominions House Limited 89 89 - 1.4%
Fenkle Street LLP 77 77 - 1.2%
Brunswick International
Associates Limited - 45 45 0.7%
Chapel Street Hotel Limited 2 1 (1) 0.0%
The New Swan Holding Company
Limited - - - 0.0%
Hoole Hall Hotel Limited - - - 0.0%
London City Shopping Centre
Limited - - - 0.0%
Southampton Spa Limited - - - 0.0%
1,068 1,112 44 17.0%
Total investments 7,258 6,461 (155) 98.4%
Cash at bank and in hand 110 1.6%
Total 6,571 100%
* partly non-qualifying
SUMMARY OF INVESTMENT MOVEMENTS
as at 30 June 2013
Additions
GBP'000
Qualifying investment
Gatewales Limited ** 750
Non-qualifying investment
Dominions House Limited 89
839
Disposals
Realised
Valuation at Loss vs. gain in
Cost 01/01/13 Proceeds cost period
GBP'000 GBP'000 * GBP'000 GBP'000 GBP'000
Qualifying investment
West Tower Holdings
Limited ** 1,150 750 750 (400) -
Non-qualifying
investments
Fenkle Street LLP 15 15 15 - -
1,165 765 765 (400) -
* adjusted for purchases in the period
** reorganisation whereby Gatewales Limited took over the interests of
West Tower Holdings Limited
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half-yearly financial results cover the six months to
30 June 2013 and have been prepared in accordance with the accounting
policies set out in the statutory accounts for the year ended 31
December 2012 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 and Venture
Capital Trusts" revised January 2009 ("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 30
June 2012 and the year ended 31 December 2013 respectively.
5. Net asset value per share at the period end has been calculated on
8,615,627 Ordinary Shares and 12,951,610 'A' Shares, being the number of
shares in issue at the period end.
6. Return per share for the period has been calculated on 8,615,627
Ordinary Shares and 12,951,610 'A' Shares, being the weighted average
number of shares in issue during the period.
7. Dividends
Six months ended Year ended
30 June 2013 31 Dec 2012
Per share Revenue Capital Total Total
pence GBP'000 GBP'000 GBP'000 GBP'000
Paid in year
2012 Final 2.5p 125 90 215 -
2011 Final 2.5p - - - 215
171 44 215 215
8. Reserves
Capital
Special Revaluation reserve Revenue
reserve reserve - realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2012 7,752 (1,042) 44 132 6,886
(Losses) on
investments - (155) - - (155)
Distributions paid - - (90) (125) (215)
Purchase of own shares - - - - -
Retained net revenue - - - 135 135
Realisation of
revaluations from
previous years - 400 (400) - -
Transfer between
reserves (490) 490 - -
At 30 June 2013 7,262 (797) 44 142 6,651
The Special reserve, Capital reserve - realised and Revenue reserve are
all distributable reserves. Revaluation reserve includes losses of
GBP1,214,000, which are included in the calculation of distributable
reserves. Total distributable reserves are GBP6,234,000 (31 Dec 2013:
GBP6,753,000).
9. The unaudited 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 2012 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.
10. Risk and uncertainties
Under the Disclosure and Transparency Directive, the Board is 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; and
(ii) 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 has
followed 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 monitors the
business. The Board is satisfied that this approach reduces the
investment risks described in (i) as far as reasonably possible.
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 an acceptable level.
11. Going concern
The Company has sufficient financial resources at the period end, and
holds a diversified portfolio of investments. As a consequence, the
Directors believe that the Company is well placed to manage its business
risks successfully.
The Directors have concluded that the Company has adequate resources to
continue in business for the foreseeable future. For this reason, they
believe 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.
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 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 current 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. Copies of the Half-Yearly Report will be sent to Shareholders
shortly. Further copies can be obtained from the Company's registered
office or can be downloaded from www.downing.co.uk.
This announcement is distributed by Thomson Reuters on behalf of Thomson
Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other
applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the
information contained therein.
Source: Downing Planned Exit VCT 8 plc via Thomson Reuters ONE
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