Half-yearly report
August 14 2009 - 10:55AM
UK Regulatory
TIDMDPV9
Downing Protected VCT IX plc
Half Yearly Report for the six months ended 30 June 2009
SHAREHOLDER INFORMATION
Performance summary
30 June 30 June 31 Dec
2009 2008 2008
pence pence pence
Net asset value per Ordinary Share 90.8 94.4 93.9
Net asset value per 'A' Share 0.1 0.1 0.1
Cumulative distributions per Share 2.5 - -
Net asset value per Ordinary Share and 'A' 93.4 94.5 94.0
Share
CHAIRMAN'S STATEMENT
I am pleased to present the Company's Half-Yearly Report for the six
months ended 30 June 2009. Further progress has been made in
investing the Company's funds over the period and the target of 70%
of funds invested in VCT qualifying investments is now close to being
satisfied.
Investment activity
Three new VCT-qualifying investments were made during the period as
follows:
Crossco (1135) Limited
An investment of GBP997,500 was made in February 2009 in a vehicle to
allow an established management team, operating as Complete Childcare
Limited, to acquire Kingsclere Nurseries, which owns seven children's
nurseries. The enlarged group now owns and operates ten nurseries
within a 20 miles radius of Reading.
Horsham Bowl Limited
An GBP880,000 investment was made in this company which owns and
operates "The Big Apple" family entertainment centre in Horsham. The
centre includes a ten-pin bowling alley, a Laser Quest site, a café,
a bar and a nightclub.
West Tower Holdings Limited
A follow-on investment of GBP150,000 was made in this company, which
operates two hotel and conference facilities near Ormskirk. The
company has modified its original plans to develop both venues and
has required some further funding to ensure it is able create the
customer offering that is envisaged.
The Company also made several non VCT-qualifying investments,
totalling GBP630,000 in three companies. These investments are
considered to be very low-risk but provide the company with a higher
yield than available from gilts and cash deposits.
Investment valuations
Performance of the investee companies has generally been satisfactory
over the period, with the difficult economic climate not impacting
too heavily on the businesses.
As mentioned above, West Tower unexpectedly required some further
funding. This appears to have brought the project back on track and
the Directors have decided there is no need to increase the provision
of GBP150,000 against original cost which was made in the previous
year.
The Thames Club Limited owns a health club which it is in the process
of being refurbished to a higher standard. This is progressing to
plan and prospects appear good. However, an independent valuation,
undertaken for the bank, has suggested that the value of the club has
fallen since it was acquired in July 2008. The Directors are
satisfied that the investment is developing to plan, but in view of
the valuation, have made a provision of GBP150,000 against the
investment's original cost of GBP967,500.
All other investments continue to be held at valuations equal to
original cost.
Net Asset Value and Results
At 30 June 2009, the Net Asset Value ("NAV") per Ordinary Share stood
at 90.8p and the NAV per 'A' Share stood at 0.1p, producing a
combined total of 90.9p. This is a small decrease of 0.6p per share
(0.6%) since 31 December 2008 (after adjusting for the 2.5p dividend
paid during the period). Total Return (NAV plus cumulative dividends
paid to date) now stands at an aggregate 93.4p per Ordinary Share and
A Share combined.
The loss on ordinary activities after taxation for the period was
GBP49,000.
Share buybacks
The Company operates a policy, subject to certain restrictions, of
buying its own shares when any become available in the market.
Buybacks will generally be undertaken at a 10% discount to the latest
NAV, but the Directors regularly review this discount level and make
adjustments if they believe it is appropriate. No shares were
purchased for cancellation in the period.
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:
* investment risk associated with investing in small and
immature businesses;
* investment risk arising from the having to invest
funds during a period of difficult economic conditions; and
* failure to maintain provisional approval as a VCT.
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 Investment Manager follows a rigorous process in vetting and
careful structuring of 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 this approach reduces the investment risk described in
(i) and (ii) 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.
Outlook
The Company is now close to meeting the VCT "70% test" well before
the deadline of 31 December 2010. One or two further qualifying
investments are likely to be made but after that investment activity
is expected to reduce to a low level.
The focus of the Investment Manager is now shifting towards
monitoring and nurturing the existing portfolio of investments to
meet the objective of providing profitable exits in line with the
Company's timetable of starting to return funds to Shareholders in
2013.
It seems likely that economic climate will remain difficult for some
time. As the Company does not need to seek investment realisations
for almost four years, the Board believes that the Company will have
a good chance of being able to exit in improved conditions.
Hugh Gillespie
Chairman
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2009
30 June 30 June 31 Dec
2009 2008 2008
GBP'000 GBP'000 GBP'000
Fixed assets
Investments 7,721 1,813 5,276
Net current assets 152 6,274 2,864
Net assets 7,873 8,087 8,140
Capital and reserves
Called up share capital - 25 -
Called up Ordinary share capital 9 - 9
Called up 'A' share capital 13 - 13
Deferred share capital 3 - 3
Special reserve 8,034 - 8,164
Investment holding losses (300) - (150)
Share premium - 8,062 -
Revenue reserve 114 - 101
Equity shareholders' funds 7,873 8,087 8,140
Net asset value per Ordinary Share 90.8p 94.4p 93.9p
Net asset value per "A" Share 0.1p 0.1p 0.1p
90.9p 94.5p 94.0p
UNAUDITED INCOME STATEMENT
for the six months ended 30 June 2009
Six months ended
30 June 2009
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Income 260 - 260
Losses on investments - (150) (150)
260 (150) 110
Investment management fees (54) - (54)
Other expenses (66) - (66)
Return on ordinary activities before 140 (150) (10)
taxation
Taxation (41) - (41)
Return attributable to equity shareholders 99 (150) (51)
Return per Ordinary Share 1.1p (1.7p) (0.6p)
Return per 'A' Share - - -
Period ended Period ended
30 June 2008 31 December 2008
Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Income 134 - 134 392
Losses on investments - - - (150)
134 - 134 242
Investment management fees (47) - (47) (82)
Other expenses (82) - (82) (171)
Return on ordinary 5 - 5 (11)
activities before taxation
Taxation (5) - (5) (38)
Return attributable to - - - (49)
equity shareholders
Return per Ordinary Share - - - 0.5p
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 2009
30 June 30 June 31 Dec
2009 2008 2008
GBP'000 GBP'000 GBP'000
Opening shareholders' funds 8,140 - -
Issue of shares - 8,607 8,665
Share issue costs - (470) (476)
Redemption of preference shares - (50) -
Total recognised gains/(losses) for the period (51) - (49)
Dividends (216) - -
Closing shareholders' funds 7,873 8,087 8,140
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2009
30 Jun 30 Jun 31 Dec
2009 2008 2008
Note GBP'000 GBP'000 GBP'000
Cash inflow from operating activities
and returns on investments 1 41 50 129
Capital expenditure
Purchase of investments (2,659) (1,813) (5,426)
Sale of investments 64 - -
Net cash outflow from capital (2,595) (1,813) (5,426)
expenditure
Equity dividends paid (216) - -
Net cash outflow before financing (2,770) (1,763) (5,297)
Financing
Shares issued - 8,607 -
Proceeds from ordinary share issue - - 8,649
Proceeds from 'A' share issue - - 16
Proceeds from preference share issue - - 50
Redemption of preference shares - (50) (50)
Share issue costs - (470) (476)
Net cash inflow from financing - 8,087 8,189
(Decrease)/increase in cash 2 (2,770) 6,324 2,892
Notes to the cash flow statement:
1. Cash inflow from operating
activities and returns on investments
Net revenue before taxation 140 5 (11)
Losses on investments - - 150
Increase in other debtors (83) (52) (99)
(Decrease)/increase in other creditors (14) 97 51
(Decrease)/increase in amounts due to
subsidiary undertaking (2) - 38
Net cash inflow from operating 41 50 129
activities
2. Analysis of net funds
Beginning of period 2,892 - -
Net cash (outflow)/inflow (2,770) 6,324 2,892
End of period 122 6,324 2,892
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 June 2009
Unrealised % of
Cost Valuation gain/(loss) portfolio
GBP'000 GBP'000 GBP'000 by value
VCT-Qualifying
West Tower Holding Limited 1,150 1,000 (150) 12.8%
Crossco (1135) Limited 998 998 - 12.7%
Horsham Bowl Limited 866 866 - 11.0%
The Thames Club Limited 967 817 (150) 10.4%
Hoole Hall Country Club
Holdings Limited 750 750 - 9.6%
Hoole Hall Spa and Leisure Club
Limited 563 563 - 7.2%
5,294 4,994 (300) 63.7%
Non-VCT Qualifying
Pocket Living Limited 946 946 - 12.1%
Bowman Care Homes Limited 600 600 - 7.6%
Kings Gap Group Limited 400 400 - 5.1%
Hoole Hall Country Club
Holdings Limited 344 344 - 4.4%
Sanguine Hospitality Limited 250 250 - 3.2%
Downing Acquisitions 1 Limited 187 187 - 2.4%
The Swan Holding Company - - - 0.0%
Hoole Hall Hotel Limited - - - 0.0%
2,727 2,727 - 34.8%
Total investments 8,021 (300) 98.5%
Cash at bank and in hand 122 1.5%
Total 7,843 100.0%
SUMMARY OF INVESTMENT MOVEMENTS
as at 30 June 2009
Additions GBP'000
VCT-Qualifying investments Activity
Crossco (1135) Limited Children's nurseries owner/operator 998
www.kingsclere-nurseries.co.uk
Horsham Bowl Limited Family entertainment centre 880
www.thebigapple.co.uk
West Tower Holdings Dinning and wedding venue, hotel and 150
Limited restaurant owner/operator
www.west-tower.co.uk
Non-VCT qualifying
investments
Pocket Living Limited Affordable housing developer 100
Hoole Hall Country Club Conference/wedding venue 344
Holdings Limited
Downing Acquisitions 1 Children's nurseries 187
Limited
2,659
Profit/
Disposals (loss)
Gain/ in
Cost Proceeds (loss) period
GBP'000 GBP'000 GBP'000 GBP'000
Loan Stock redemptions:
VCT-Qualifying investments
Horsham Bowl Limited 14 14 - -
Non-VCT qualifying investments
Pocket Living Limited 50 50 - -
64 64 - -
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half yearly financial results cover the six months
to 30 June 2009 and have been prepared in accordance with the
accounting policies set out in the statutory accounts for the period
ended 31 December 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 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. Net Asset Value per share at the period end has been calculated on
8,657,673 Ordinary Shares and 12,986,507 'A' Shares, being the number
of shares in issue at the period end.
5. Return per share for the period has been calculated on 8,657,673
Ordinary Shares and 12,986,507 Shares, being the weighted average
number of shares in issue during the period.
6. Reserves
Share Investment
premium Special holding Revenue
account reserve losses reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2008 - 8,164 (150) 101 8,115
Issue of new shares - - - - -
Share issue costs - - - - -
Transfer between reserves - - - - -
Losses on investments - - (150) - (150)
Distributions paid - (130) - (86) (216)
Retained net revenue - - - 99 99
At 30 June 2009 - 8,034 (300) 114 7,848
The Revenue Reserve and Special Reserves are distributable reserves.
7. 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.
8. 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.
9. 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.
=--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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