Half-yearly report
August 31 2010 - 10:21AM
UK Regulatory
TIDMDPV9
Downing Planned Exit VCT 9 plc
Half-Yearly Report for the six months ended 30 June 2010
SHAREHOLDER INFORMATION
Performance summary
30 June 30 June 31 Dec
2010 2009 2009
Pence Pence Pence
Net asset value per Ordinary Share 80.4 90.8 88.1
Net asset value per 'A' Share 0.1 0.1 0.1
Cumulative distributions per Ordinary Share and 'A' 5.0 2.5 2.5
Share
--------- --------- -------
Total return per Ordinary Share and 'A' Share 85.5 93.4 90.7
I present the Company's Half-Yearly report for the period ended 30 June 2010.
With the Company having effectively completed its investing phase, the focus is
now on working with the existing portfolio as these investments are steered
towards exits which are targeted to commence in 2013.
Change of name
Following Shareholder approval at the AGM on 25 May 2010, the Company changed
its name to "Downing Planned Exit VCT 9 plc". The new name better describes the
Company's objectives and differentiates it from other Downing funds with
different strategies.
Investment activity
During the period, the Company made investments of GBP50,000 in each of Chapel
Street Services Limited and Chapel Street Food and Beverage Limited in March
2010. The companies have agreements in place to operate and to provide
management services to a café bar and restaurant at the Hotel Indigo at Chapel
Street, Liverpool which is due to open in 2011.
The Company also made a small GBP2,000 non-qualifying investment in Chapel Street
Hotel Limited, which owns the land where the Hotel Indigo is being developed.
Two non VCT-qualifying loan stock investments were also made at a total cost of
GBP1,000,000, one which was subsequently also realised at par during the period.
There was one other realisation in the period of a non-qualifying loan stock
investment which gave rise to a small gain of GBP7,000.
Investment valuations
The Board has undertaken a review of the investment valuations at the period end
and made two adjustments from the carrying values at the previous year-end.
A major refurbishment of the health club operated by The Thames Club Limited was
completed last year. The disruption arising from the refurbishment work had a
significant negative impact on the Company's trading performance and progress
has been slower than budgeted in rebuilding the membership base in spite of the
improved facilities. For this reason, the Board have made a further provision
of GBP150,000 against the investment valuation.
A refurbishment at Horsham Bowl Limited, which operates an entertainment centre
including a tenpin bowling alley, has also now been completed. However, the
trade at the night club within the centre, which represents a significant part
of the company's income, is not performing to budget and a provision of GBP180,000
has been made.
All other investments continue to be held at valuations equal to original cost,
except for West Tower Holding Limited, where a provision of GBP400,000 was made in
2008/2009 as reported to you in the last Annual Report.
Net Asset Value and results
At 30 June 2010, the Net Asset Value ("NAV") per Ordinary Share stood at 80.4p
and the NAV per 'A' Share stood at 0.1p, producing a combined total of 80.5p.
This is a decrease of 5.2p per share (5.9%) since 31 December 2009 (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 85.5p per Ordinary
Share and 'A' Share combined.
The loss on ordinary activities after taxation for the period was GBP447,000.
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:
(i) investment risk associated with investing in small and immature businesses;
(ii) investment risk arising from having to invest funds during a period of
difficult economic conditions; and
(iii) 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 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
this approach reduces the investment risks 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 difficult economic conditions have clearly had a notable impact on three of
the company's investments, resulting in current valuations lower than original
cost. The Company's plan is, however, to start to return funds to Shareholders
in 2013, so there is a significant period before investment realisations will be
sought. The Manager is working closely with the underperforming investments and
believes that these can be brought back on track to deliver satisfactory exits
in line with the Company's timetable.
Hugh Gillespie
Chairman
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2010
30 June 30 June 31 Dec
2010 2009 2009
GBP'000 GBP'000 GBP'000
Fixed assets
Investments 6,637 7,721 6,913
Current assets
Debtors 43 182 168
Cash at bank and in hand 455 121 727
--------- --------- -------
498 303 895
Creditors: amounts falling due within one year (157) (151) (167)
--------- --------- -------
Net current assets 341 152 728
--------- --------- -------
Net assets 6,978 7,873 7,641
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 8,034 8,034 8,034
Investment holding losses (980) (300) (650)
Capital reserve - realised 9 - 2
Revenue reserve (110) 114 230
--------- --------- -------
Equity shareholders' funds 6,978 7,873 7,641
Net asset value per Ordinary Share 80.4p 90.8p 88.1p
Net asset value per "A" Share 0.1p 0.1p 0.1p
--------- --------- -------
80.5p 90.9p 88.2p
UNAUDITED INCOME STATEMENT
for the six months ended 30 June 2010
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Income 91 - 91
Losses on investments - (323) (323)
--------- --------- -------
91 (323) (232)
Investment management fees (51) - (51)
Other expenses (164) - (164)
--------- --------- -------
Return on ordinary activities before taxation (124) (323) (447)
Taxation - - -
--------- --------- -------
Return attributable to equity shareholders (124) (323) (447)
Return per Ordinary Share (1.4p) (3.7p) (5.2p)
Return per 'A' Share - - -
Six months ended Year ended
31 December
30 June 2009 2009
Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Income 260 - 260 529
Losses on investments - (150) (150) (498)
--------- --------- -------- -------------
260 (150) 110 31
Investment management fees (54) - (54) (108)
Other expenses (66) - (66) (125)
--------- --------- -------- -------------
Return on ordinary activities before 140 (150) (10) (202)
taxation
Taxation (41) - (41) (80)
--------- --------- -------- -------------
Return attributable to equity 99 (150) (51) (282)
shareholders
Return per Ordinary Share 1.1p (1.7p) (0.6p) (3.3p)
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 2010
30 June 30 June 31 Dec
2010 2009 2009
GBP'000 GBP'000 GBP'000
Opening shareholders' funds 7,641 8,140 8,140
Total recognised (loss) for the period (447) (51) (282)
Dividends paid (216) (216) (217)
----------- ----------- ---------
Closing shareholders' funds 6,978 7,873 7,641
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2010
30 Jun 30 Jun 31 Dec
2010 2009 2009
Note GBP'000 GBP'000 GBP'000
Cash (outflow)/inflow from operating
activities and returns on investments 1 (9) 41 225
--------- --------- --------
Taxation
Corporation tax paid - - (38)
Capital expenditure
Purchase of investments (1,102) (2,659) (3,491)
Sale of investments 1,055 64 1,356
--------- --------- --------
Net cash outflow from capital expenditure (47) (2,595) (2,135)
--------- --------- --------
Equity dividends paid (216) (216) (217)
Net cash outflow before financing (272) (2,770) (2,165)
Financing
Net cash inflow from financing - - -
--------- --------- --------
(Decrease) in cash 2 (272) (2,770) (2,165)
Notes to the cash flow statement:
1 Cash inflow from operating activities
and returns on investments
Net revenue before taxation (447) 140 (202)
Losses on investments 323 - 498
Increase/(decrease) in other debtors 125 (83) (69)
(Decrease)/increase in other creditors (9) (14) (1)
(Decrease) in amounts due to subsidiary
undertaking (1) (2) (1)
--------- --------- --------
Net cash inflow from operating (9) 41 225
activities
2 Analysis of net funds
Beginning of period 727 2,892 2,892
Net cash (outflow) (272) (2,770) (2,165)
--------- --------- --------
End of period 455 122 727
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 June 2010
Unrealised % of
Cost Valuation gain/(loss) portfolio
GBP'000 GBP'000 GBP'000 by value
VCT-Qualifying
Crossco (1135) Limited 998 998 - 14.1%
West Tower Holding Limited 1,150 750 - 10.6%
Hoole Hall Country Club Holdings Limited 750 750 - 10.6%
Cadbury House Holdings Limited 700 700 - 9.9%
The Thames Club Limited 1,000 700 (150) 9.9%
Hoole Hall Spa and Leisure Club Limited 562 562 - 7.9%
Horsham Bowl Limited 600 420 (180) 5.9%
Chapel Street Food and Beverages Limited 50 50 - 0.7%
Chapel Street Services Limited 50 50 - 0.7%
--------------------------------------
5,860 4,980 (330) 70.3%
--------------------------------------
Non-VCT Qualifying
Fenkle Street LLP 400 400 - 5.6%
Hoole Hall Country Club Holdings Limited 344 344 - 4.9%
Kings Gap Group Limited 400 300 - 4.2%
Horsham Bowl Limited 261 261 - 3.7%
Sanguine Hospitality Limited 250 250 - 3.5%
Bijou Wedding Venues Limited 100 100 - 1.4%
Chapel Street Hotel Limited 2 2 - 0.0%
The Swan Holding Company - - - 0.0%
Hoole Hall Hotel Limited - - - 0.0%
--------------------------------------
1,757 1,657 - 23.3%
--------------------------------------
Total investments 7,617 (330) 93.6%
Cash at bank and in hand 455 6.4%
----------- ----------
Total 7,092 100.0%
SUMMARY OF INVESTMENT MOVEMENTS
as at 30 June 2010
Additions
GBP'000
VCT-Qualifying investments Activity
Chapel Street Food and Beverages Limited Restaurant operator 50
www.hotelindigoliverpool.co.uk
Chapel Street Services Limited Hotel operator 50
www.hotelindigoliverpool.co.uk
Chapel Street Hotel Limited Hotel and restaurant owner 2
www.hotelindigoliverpool.co.uk
Non-VCT qualifying investments
Fenkle Street LLP Hotel owner/operator 400
Bowman Care Homes Limited Care Home 600
------
1,102
Profit/
Disposals Gain/ (loss)
Cost Proceeds (loss) in period
GBP'000 GBP'000 GBP'000 GBP'000
Loan Stock redemptions:
Non-VCT qualifying investments
Pocket Living Limited 448 455 7 7
Bowman Care Homes Limited 600 600 - -
------- ---------- ------- ---------
1,048 1,055 7 7
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half yearly financial results cover the six months to 30 June
2010 and have been prepared in accordance with the accounting policies set out
in the statutory accounts for the year ended 31 December 2009 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 12,986,657 '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 12,986,657 Shares, being the weighted average number of shares in
issue during the period.
6. Reserves
Investment Capital
Special holding reserve - Revenue
reserve losses realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2009 8,034 (650) 2 230 7,616
Losses on investments - (330) 7 - (323)
Distributions paid - - - (216) (126)
Retained net revenue - - - (124) (124)
------------------------------------------------
At 30 June 2010 8,034 (980) 9 (110) 6,953
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.
[HUG#1441688]
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 9 PLC via Thomson Reuters ONE
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