Downing Plan VCT 7 Downing Planned Exit VCT 7 PLC : Half-yearly report
28 Settembre 2012 - 12:10PM
UK Regulatory
TIDMDPV7
Downing Planned Exit VCT 7 plc
Half-Yearly Report for the six months ended 31 July 2012
PERFORMANCE SUMMARY
31 Jul 31 Jan 31 Jul
2012 2012 2011
pence pence pence
Net asset value per Ordinary Share 70.20 76.30 82.20
Net asset value per 'A' Share 0.10 0.10 0.10
Cumulative distributions per Ordinary Share 9.75 7.75 7.75
--------- -------- -------
Total return per Ordinary Share and 'A' Share 80.05 84.15 90.05
--------- -------- -------
CHAIRMAN'S STATEMENT
I present the Company's Half-Yearly Report for the six month period ended 31
July 2012. It is disappointing to report a further deterioration in the
Company's net asset value ("NAV"). This has arisen from a further significant
write down of one of the Company's investments.
Venture capital investments
There was a very limited level of investment activity during the period. One
small follow-on non-qualifying investment was made of GBP25,000 in The Thames Club
Limited to provide additional working capital to the business. Also, three
investee companies redeemed loan stock, either fully or in part, generating
proceeds of GBP486,000.
In reviewing the investment valuations at the period end, the Board concluded
that the investment in Coast Constructors required a significant downwards
adjustment. Coast is building the Gara Rock hotel and apartment complex near
Salcombe in South Devon. It has become clear that, in the current economic
climate, the original plan is not viable. The investment partner and management
team have been removed from the project and some significant revisions have now
been made to the plans in an attempt to maximise the recovery of value.
In order to complete the Gara Rock project, a significant level of new funding
has been needed. Your Company has not been in a position to consider
participating in the further funding and, accordingly, our investment now ranks
behind the new funds. Although the project still has a fairly wide range of
possible outcomes, the Board considers it appropriate to write the investment
down to a value of GBP125,000. This is a reduction in value of GBP514,000.
There were two other minor changes to the investment valuations at the period
end which together showed a small net gain.
Net asset value and results
At 31 July 2012, the net asset value ("NAV") per Ordinary Share stood at 70.2p
and the NAV per 'A' Share at 0.1p, giving a combined total of 70.3p. This is a
decrease of 4.1p per share (5.4%) since the year end of 31 January 2012 (after
adjusting for the 2.0p dividend paid during the period).
Total Return (NAV plus dividends paid to date) is 80.05p at 31 July 2012
compared to the original cost, net of income tax relief, of 70p per share.
The loss on ordinary activities after taxation for the period, as set out in the
Income Statement, was GBP362,000, comprising a revenue profit of GBP144,000 and a
capital loss of GBP506,000. In line with the Company's policy, no interim dividend
will be paid.
Share Realisation and Reinvestment Programme
In my statement with the Annual Report, I warned Shareholders that, with the
continuing lack of bank finance, the realisation of the investment portfolio
would be likely to take much longer than originally envisaged. I also mentioned
that the Board was considering plans to offer Shareholders the chance to obtain
a further 30% income tax relief on the current value of their investment by
holding their shares for a further five years.
The Company will shortly launch the Share Realisation and Reinvestment Programme
("SRRP"). Full details will be sent to Shareholders with the Half-Yearly Report.
The Board believes that the SRRP brings benefits to both those Shareholders who
wish to obtain further income tax relief on their investment and commit to
holding their investment for a further five years and those Shareholders who
wish to exit at the earliest opportunity.
Once it is clear what proportion of Shareholders wish to participate in the
SRRP, the Manager and the Board will seek to devise a realisation strategy which
can meet the objectives of those wishing to exit while continuing to hold a
suitable portfolio which has reasonable prospects for growth over the next five
years.
Share buybacks
In view of the plans to seek to return funds to those Shareholders that do not
participate in the SRRP, the Company is unlikely to make any market purchases of
shares now or in the near future. Proceeds from the realisations of investments
are likely to be used to return funds to Shareholders by way of one or more
tender offers.
Outlook
With most of the Company's funds initially being invested during 2007 and 2008,
it is clear that the timing in the economic cycle has been poor. A number of
investments were made at, what we now know to be, the top of the market and the
Company's exit strategy has been severely hampered by the fact that, in 2012,
there is still no sign of the return of readily available bank finance.
The Board believes that there are prospects for growth from the current position
within the portfolio over the next five years and that, with the chance to
obtain further income tax relief, participating in the SRRP may be an attractive
option for many Shareholders.
For those Shareholders who do not wish to participate in the SRRP, we hope to
see some realisations over the remainder of the year which will allow the
Company to make its first significant distribution.
Hugh Gillespie
Chairman
UNAUDITED SUMMARISED BALANCE SHEET
as at 31 July 2012
31 Jul 31 Jul 31 Jan
2012 2011 2012
GBP'000 GBP'000 GBP'000
Fixed assets
Investments 5,418 7,064 6,385
Current assets
Debtors 326 494 226
Cash at bank and in hand 714 40 365
--------- --------- --------
1,040 534 591
Creditors: amounts falling due within one year (105) (159) (80)
--------- --------- --------
Net current assets 935 375 511
--------- --------- --------
Net assets 6,353 7,439 6,896
--------- --------- --------
Capital and reserves
Called up share capital 23 23 23
Deferred shares 3 3 3
Capital redemption reserve - - -
Share premium - - -
Special reserve 8,163 8,428 8,344
Revenue reserve 304 282 160
Revaluation reserve (2,290) (1,297) (1,784)
Capital reserve - realised 150 - 150
--------- --------- --------
Equity shareholders' funds 6,353 7,439 6,896
--------- --------- --------
Net asset value per Ordinary Share 70.2p 82.2p 76.3p
Net asset value per 'A' Share 0.1p 0.1p 0.1p
UNAUDITED INCOME STATEMENT
for the six months ended 31 July 2012
Year
ended
Six months ended Six months ended 31 Jan
31 Jul 2012 31 Jul 2011 2012
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 289 - 289 273 - 273 305
Gains/(losses) on investments
- realised - - - - 35 35 -
- unrealised - (506) (506) - 11 11 (375)
---------------------- --------------------- -------
289 (506) (217) 273 46 319 (70)
Investment management fees
(28) - (28) (38) - (38) (80)
Other expenses (71) - (71) (69) - (69) (219)
--------------------- --------------------- -------
Return on ordinary activities
before taxation
190 (506) (316) 166 46 212 (369)
Taxation (46) - (46) (43) - (43) (5)
---------------------- --------------------- -------
Return/(loss) attributable
to equity Shareholders
144 (506) (362) 123 46 169 (374)
---------------------- --------------------- -------
Return per Ordinary Share 1.5p (5.5p) (4.0p) 1.4p 0.5p 1.9p (4.1p)
Return per 'A' Share - (0.1p) (0.1p) - - - -
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 31 July 2012
31 Jul 31 Jul 31 Jan
2012 2011 2012
GBP'000 GBP'000 GBP'000
Opening Shareholders' funds 6,896 7,451 7,451
Purchase of own shares - - -
Distributions paid (181) (181) (181)
Total recognised gains/(losses) for the period (362) 169 (374)
-------- -------- -------
Closing Shareholders' funds 6,353 7,439 6,896
-------- -------- -------
UNAUDITED CASH FLOW STATEMENT
for the six months ended 31 July 2012
Six Six
months months Year
ended ended ended
31 Jul 31 Jul 31 Jan
2012 2011 2012
Note GBP'000 GBP'000 GBP'000
Cash inflow/(outflow) from operating activities and
returns on investments
1 69 31 149
-------- -------- -------
Taxation
Corporation tax paid - - (52)
Capital expenditure
Purchase of investments (25) (247) (587)
Proceeds from sale of investments 486 253 852
-------- -------- -------
Net cash inflow/(outflow) from capital expenditure 461 6 265
-------- -------- -------
Equity dividends paid (181) (181) (181)
-------- -------- -------
Net cash outflow before financing 349 (144) 181
Financing
Repurchase of own shares - - -
-------- -------- -------
Net cash outflow from financing - - -
-------- -------- -------
Decrease in cash 2 349 (144) 181
-------- -------- -------
Notes to the cash flow statement:
1 Cash inflow from operating activities and returns on investments
Net revenue before taxation (316) 212 (369)
(Gains)/losses on investments 506 (46) 375
(Increase)/decrease in other debtors (100) (123) 145
Increase in other creditors (16) (15) 1
Decrease in amounts due to subsidiary undertaking (5) 3 (3)
-------- -------- -------
Net cash inflow/(outflow) from operating activities 69 31 149
-------- -------- -------
2 Analysis of net funds
Beginning of period 365 184 184
Net cash outflow 349 (144) 181
-------- -------- -------
End of period 714 40 365
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SUMMARY OF INVESTMENT PORTFOLIO
as at 31 July 2012
Unrealised
gain/(loss)
Cost Valuation in period % of portfolio by value
GBP'000 GBP'000 GBP'000
Qualifying investments
Cadbury House Limited 1,300 1,417 - 23.1%
Hoole Hall Country Club
Holdings Limited 750 818 - 13.4%
Complete Childcare Limited 665 753 33 12.3%
West Tower Holdings Limited 1,150 750 - 12.2%
Hoole Hall Spa & Leisure
Club Limited 563 613 - 10.0%
The Thames Club Limited 1,075 455 - 7.4%
Coast Constructors Limited 932 125 (514) 2.0%
Future Films Production
Services Limited 128 - - 0.0%
----------------------------------------------------
6,563 4,931 (481) 80.4%
----------------------------------------------------
Non-qualifying investments
Snow Hill Developments LLP 250 250 - 4.1%
The Meredith Pub Group
Limited 166 166 - 2.7%
Fenkle Street LLP 46 46 - 0.8%
Vermont Developments Limited 451 25 - 0.4%
Aminghurst Limited 208 - - 0.0%
The Thames Club Limited 25 - (25) 0.0%
----------------------------------------------------
1,146 487 (25) 8.0%
----------------------------------------------------
Total 7,709 5,418 (506) 88.4%
-----------------------------
Cash at bank and in hand 714 11.6%
----------- ------------------------
Total investments 6,132 100.0%
----------- ------------------------
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 31 July 2012
Additions
Non-qualifying investments GBP'000
The Thames Club Limited 25
--------
25
--------
Disposals
Gain/(loss)
Cost Proceeds Gain/(loss) in period
Non-qualifying investments GBP'000 GBP'000 GBP'000 GBP'000
Kings Gap Group Limited 400 400 - -
Sanguine Hospitality Limited 50 50 - -
The Meredith Pub Group Limited 36 36 - -
------- ---------- ----------- ----------
486 486 - -
------- ---------- ----------- ----------
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half-yearly results cover the six months to 31 July 2012 and
have been prepared in accordance with the accounting policies set out in the
statutory accounts for the year ended 31 January 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" 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 has been calculated on 9,032,500 Ordinary Shares
and 13,589,743 'A' Shares, being the shares in issue at the period end.
5. Return per share for the period has been calculated on 9,032,500 Ordinary
Shares and 13,589,743 'A' Shares, being the weighted average number of shares in
issue during the period.
6. Dividends
31 Jul 2012 31 Jan 2012
Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Paid in year
2012 Final - 181 181 181
----------- ----------- --------- ----------
7. Reserves
Capital redemption Capital
reserve
Special Revenue Revaluation reserve
reserve reserve reserve
-
realised
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 February 2012 - 8,344 160 (1,784) 150
Purchase of own shares - - - - -
Net gains on - - - (506) -
investments
Transfer between - - - - -
reserves
Distributions paid - (181) - - -
Retained net revenue - - 144 - -
--- ------------- ------------- ----------------- -------
At 31 July 2012 - 8,163 304 (2,290) 150
--- ------------- ------------- ----------------- -------
The Revenue reserve, Special reserve, and Revaluation reserve are distributable
reserves. Total distributable reserves at 31 July 2012 were GBP6,005,000.
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. Risks and uncertainties
The Board has reviewed the principal risks and uncertainties facing the Company
over the remainder of the financial period and concluded that the key risks are:
· investment risk associated with investing in small and immature businesses;
and
· failure to maintain approval as a VCT.
In both cases the Board is satisfied with the Company's approach to these risks.
The strategy of, where possible, taking charges over assets to secure its
investments helps to limit any potential losses which could arise from the
failure of an investee business.
The Company continually monitors its compliance with the VCT regulations and
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 a minimal level.
10. Going concern
The Directors have reviewed the Company's financial resources at the period end
and concluded that the Company is well placed to manage its business risks.
11. 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.
12. 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 January 2012 have been extracted from the financial
statements for that year, which have been delivered to the Registrar of
Companies; the auditors' report on those financial statements was unqualified.
13. Copies of the unaudited half-yearly results will be sent to Shareholders
shortly. Further copies can be obtained from the Company's Registered Office and
will be available for download 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 7 PLC via Thomson Reuters ONE
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