Interim Results
10 Novembre 2006 - 4:31PM
UK Regulatory
RNS Number:9197L
Pennine Downing AIM VCT 2 PLC
10 November 2006
Pennine Downing AIM VCT 2 plc
Interim Statement for the six months ended 31 August 2006
SHAREHOLDER INFORMATION
Recent Performance summary
31 Aug 28 Feb 31 Aug
2006 2006 2005
pence pence pence
Net asset value per Ordinary share 92.5 88.3
85.4
Cumulative distributions per Ordinary share 9.5 9.5
13.5
Total return per Ordinary share 102.0 97.8
98.9
CHAIRMAN'S STATEMENT
While the performance of much of the portfolio has been satisfactory over the
six-month period ended 31 August 2006, disappointing performances by a small
number of investments has impacted on the performance on your Company.
Net Asset Value
As at 31 August 2006, the Company's Net Asset Value per share ("NAV") stood at
85.4p, a decrease of 3.1p (3.4%) since the last year end of 28 February 2006
after adjusting for the 4p dividend paid in the period.
The total return (NAV plus cumulative dividends) to shareholders who invested at
the launch of the Company now stands at 98.9p per share, compared to an original
investment net of income tax relief of 80p per share.
Venture capital investments
As mentioned in my statement with the last annual report, in addition to the
main VCT qualifying portfolio, the Company has started to operate a small "
trading" portfolio of non-qualifying investments.
Investments made during the period are summarised below:
Main portfolio #'000
Chariot (UK) plc 25
Nu Nu plc 40
Sundry investments 4
Trading portfolio
Care Capital Group plc 100
Cardpoint plc 21
RC Group plc 46
Waterline Group plc 44
280
The Company also made two partial disposals in the period, summarised as
follows:
Cost Proceeds Realised gains/
#'000 #'000 (losses) in period
Valn at 28/2/ #'000
06
#'000
Main portfolio
Synergy Healthcare 39 65 74 9
Trading portfolio
Daniel Stewart Securities 28 39 46 7
67 104 120 16
Of the investments held throughout the period there were several that
experienced significant falls in value.
Chariot UK plc was considered to be a relatively risky investment when the
Company first invested, however the Board and Investment Manager felt that there
was a good chance that the Company would be able to successfully launch and
develop its "Monday" lottery which gives a high proportion of its funds to
charities. In the event the launch was not as successful as had been hoped and
the Company now has a long difficult path ahead, if it is to be successful. The
Company's share price has fallen heavily reflecting this challenge.
Trading at Cellcast Group, the interactive TV and mobile phone application
developer, has suffered adversely from changes made to Sky TV's electronic
programme guide and has also seen a sharp decline in its share price.
Hill Station plc has acquired several ice cream brands and is in the process of
integrating these businesses. Although progress has been satisfactory, the need
to raise some additional funds has depressed the share price. Torex Retail plc
appears to have lost investor confidence as its share price has gradually
drifted lower.
These four investments accounted for total unrealised losses of #687,000 over
the period. There however been some positive movements to reduce the impact.
In particular, Computer Software Group plc has continued its strong growth and
Oasis Healthcare plc's share price has improved as a result of improved trading
and a bid approach.
Although Elektron plc has experienced significant share price volatility, it
showed a good increase over the period and has attracted a bid since the period
end.
Overall the portfolio produced a net unrealised loss of #296,000 over the
period.
Unit trust portfolio
At the period end the unit trust portfolio was valued at #1.0 million. This
portfolio gave rise to realised gain of #1,000 and unrealised gain of #11,000
during the period.
Results and dividend
The loss on activities after taxation for the period was #366,000, comprising of
a revenue loss of #20,000 and a capital loss of #346,000. In line with the
Company's normal practice, no interim dividend will be paid.
Repurchase of shares
The Directors are conscious that the market in the Company's shares is
relatively illiquid as a result of the fact that there is no upfront income tax
relief for investors purchasing second-hand shares in the market. The Company,
therefore, has a policy of purchasing its own shares to help provide liquidity
to those Shareholders that need it.
During the period the Company purchased 169,228 shares at an average price of
78.4p per share. These shares were subsequently cancelled.
Outlook
The Company's results over this period have been heavily influenced by a small
number of underperforming investments and, with rather difficult market
conditions, the stronger investments have not shown as much growth as we might
have hoped.
The Board, however, remains satisfied that the Company has a well-balanced
portfolio, comprising mainly of good quality companies which can deliver good
results with supportive market conditions.
James Leek
Chairman
UNAUDITED SUMMARISED BALANCE SHEET
as at 31 August 2006
31 Aug 31 Aug 28 Feb
2006 2005 2006
#'000 #'000 #'000
Investments 9,472 9,611 9,702
Net current assets 160 804 883
Net assets 9,632 10,415 10,585
Capital and reserves
Called up share capital 564 589 572
Capital redemption reserve 62 37 54
Special reserve 7,893 8,567 8,177
Capital reserve - realised 756 891 1,131
Capital reserve - unrealised 517 427 791
Revenue reserve (160) (96) (140)
Total equity shareholders' funds 9,632 10,415 10,585
Net asset value per share 85.4p 88.3p 92.5p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
31 Aug 31 Aug 28 Feb
2006 2005 2006
#'000 #'000 #'000
Opening shareholders' funds 10,585 11,633 11,633
Repurchase of own shares (133) (267) (529)
Total recognised losses for the (366) (466) (34)
period
Distributions paid in period (454) (485) (485)
Closing shareholders' funds 9,632 10,415 10,585
INCOME STATEMENT
for the six months ended 31 August 2006
Six months ended
31 Aug 2006
Revenue Capital Total
#'000 #'000 #'000
Income 91 - 91
Realised gains/(losses) on investments - 16 16
Unrealised losses on investments - (307) (307)
91 (291) (200)
Investment management fees (18) (55) (73)
Other expenses (93) - (93)
Return on ordinary activities (20) (346) (366)
Taxation - - -
Return attributable to equity shareholders (20) (346) (366)
Return per Ordinary share (0.2p) (3.0p) (3.2p)
Six months ended Year ended
31 Aug 2005 28 Feb 2006
Revenue Capital Total Total
#'000 #'000 #'000 #'000
Income 101 - 101 176
Realised gains/(losses) on investments - (122) (122) 172
Unrealised losses on investments - (264) (264) (16)
101 (386) (285) 332
Investment management fees (22) (62) (84) (171)
Other expenses (97) - (97) (195)
Return on ordinary activities (18) (448) (466) (34)
Taxation - - - -
Return attributable to equity shareholders (18) (448) (446) (34)
Return per Ordinary share (0.1p) (3.7p) (3.8p) (0.3p)
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 31 August 2006
Six months ended
31 August 2006
Revenue Capital Total
#'000 #'000 #'000
Return attributable to equity shareholders (20) (346) (366)
Total recognised losses for the period (20) (346) (366)
Six months ended Year ended
31 Aug 2005 28 Feb 2006
Revenue Capital Total Total
#'000 #'000 #'000 #'000
Return attributable to equity shareholders (18) (448) (466) (34)
Total recognised losses for the period (18) (448) (466) (34)
Prior year adjustment - (244) (244) (244)
Total recognised gains/(losses) since last report (18) (692) (710) (278)
UNAUDITED CASH FLOW STATEMENT
for the six months ended 31 August 2006
Six months Six months Year
ended ended ended
31 Aug 2006 31 Aug 2005 28 Feb 2006
Note #'000 #'000 #'000
Cash outflow from operating activities and returns on 1 (92) (115) (217)
investments
Capital expenditure
Purchase capital investments (280) (951) (1,841)
Sale of investments 185 1,561 2,837
Net cash (outflow)/inflow from capital expenditure (95) 610 996
Equity dividends paid (458) (485) (485)
Net cash (outflow)/inflow before financing (645) 10 294
Financing
Purchase of own shares (116) (267) (524)
Net cash outflow from financing (116) (267) (524)
Decrease in cash 2 (761) (257) (230)
Notes to the cash flow statement:
1 Cash flow from operating activities and returns on
investments
Net loss before taxation (20) (18) (62)
Expenses charged to capital (55) (62) (128)
Decrease/(increase) in other debtors 3 (11) (26)
Increase in accruals and deferred income (20) (24) (1)
Net cash outflow from operating activities (92) (115) (217)
2 Analysis of net funds
Beginning of period 817 1,047 1,047
Net cash outflow (761) (257) (230)
End of period 56 790 817
SUMMARY OF INVESTMENT PORTFOLIO
as at 31 August 2006
Cost Valuation % of Movement
portfolio in the
by value period
#'000 #'000 #'000
Top twenty venture capital investments
Glisten plc 223 715 7.4% (27)
Computer Software Group plc 301 605 6.3% 162
Supporta plc 245 451 4.7% (76)
Elektron plc 241 441 4.6% 73
Huveaux plc 246 437 4.5% (22)
Synergy Healthcare plc 90 388 4.0% 72
FSG Security plc* 500 337 3.5% -
Hill Station Public Limited Company 250 313 3.2% (125)
Torex Retail plc 168 296 3.1% (284)
Colliers CRE plc 150 293 3.0% 43
Nu Nu plc ** 242 291 3.0% 8
Cadbury House Hotel and Country Club Limited** 225 290 3.0% 65
Waterline Group plc 244 250 2.6% 70
AT Communications plc 223 249 2.6% (26)
Dipford Group plc 245 236 2.5% (36)
Straight plc 105 225 2.3% 54
Cardpoint plc 211 212 2.2% (8)
Media Square plc 164 209 2.2% 20
Sanastro Limited ** 200 200 2.1% -
Keycom plc* 425 179 1.9% 14
4,698 6,617 68.7% (51)
Other venture capital investments 3,552 1,832 18.9% (267)
Rathbone Unit Trusts 705 1,023 10.7% 11
Total investments 8,955 9,472 98.3% (307)
Net current assets (including cash) 160 1.7%
Total 9,632 100.0%
All venture capital investments are quoted on AIM unless otherwise stated.
* Quoted on OFEX
** Unquoted
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. Accounting policies
Basis of accounting
The Company has prepared its financial statements under UK Generally Accepted
Accounting Practice ("UK GAAP"). Where presentation guidance set out in the
Statement of Recommended Practice "Financial Statements of Investment Trust
Companies" revised December 2005 ("SORP") is inconsistent with the requirements
of UK GAAP, the Directors have sought to prepare the financial statements on a
basis compliant with the recommendations of the SORP.
The financial statements are prepared under the historical cost convention
except for the revaluation of certain financial instruments.
Presentation of Income Statement
In order to better reflect the activities of an investment trust company and in
accordance with guidance issued by the AITC, supplementary information which
analyses the income statement between items of a revenue and capital nature has
been presented alongside the income statement. The net revenue is the measure
the directors believe appropriate in assessing the Company's compliance with
certain requirements set out in Section 842 Income and Corporation Taxes Act
1988.
Investments
All investments are designated as "fair value through profit or loss" assets and
are initially measured at cost. Thereafter the investments are measured at
subsequent reporting dates at fair value.
Listed fixed income investments and investments quoted on the Alternative
Investment Market ("AIM") are designated measured using bid prices with
illiquidity discounts applied where deemed appropriate.
In respect of unquoted instruments, fair value is established by using
International Private Equity and Venture Capital Valuation Guidelines. Where no
reliable fair value can be estimated for such unquoted equity investments they
are carried at cost, subject to any provision for impairment. Where an investee
company has gone into receivership or liquidation the investment, although not
physically disposed of, is treated as being realised.
Gains and losses arising from changes in fair value are included in the income
statement for the year as a capital item and transaction costs on acquisition or
disposal of the investment expensed.
It is not the Company's policy to exercise either significant or controlling
influence over investee companies. Therefore the results of these companies are
not incorporated into the revenue account except to the extent of any income
accrued.
Income
Dividend income from investments is recognised when the shareholders' rights to
receive payment has been established, normally the ex dividend date.
Interest income is accrued on a timely basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount, and only where there
is reasonable certainty of collection.
Expenses
All expenses are accounted for on an accruals basis. In respect of the analysis
between revenue and capital items presented within the income statement, all
expenses have been presented as revenue items except as follows:
* Expenses which are incidental to the disposal of an investment are deducted
from the disposal proceeds of the investment.
* Expenses are split and presented partly as capital items where a connection
with the maintenance or enhancement of the value of the investments held can be
demonstrated and accordingly the investment management fee and finance costs
have been allocated 25% to revenue and 75% to capital, in order to reflect the
directors expected long-term view of the nature of the investment returns of the
Company.
Deferred taxation
Deferred taxation is provided in full on timing differences that result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in financial statements.
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 period ended 31 August 2005
and the year ended 28 February 2006 respectively.
5. Return per share for the period has been calculated on 11,404,336 shares,
being the weighted average number of shares in issue during the period.
6. Dividends
31 August 2006 28 Feb 2006
Revenue Capital Total Total
Pence #'000 #'000 #'000 #'000
Paid in period
2006 Final 4.0 - 454 454 -
2005 Final 4.0 - - - 485
- 454 454 485
7. Reserves
Special Capital Capital Capital Revenue Total
reserve redemption reserve reserve reserve
reserve -realised -unrealised
#'000 #'000 #'000 #'000 #'000 #'000
At 1 March 2006 8,177 54 1,131 791 (140) 10,013
Shares repurchased (133) 8 - - - (125)
Expenses charged to capital - - (55) - - (55)
Realised gains in year - - 16 - - 16
Increase in unrealised depreciation - - - (307) - (307)
Realisation of revaluations from previous years - - (33) 33 - -
Distributions paid - - (454) - - (454)
Transfer between reserves (151) - 151 - - -
Retained net revenue - - - - (20) (20)
At 31 August 2006 7,893 62 756 517 (160) 9,068
The Special Reserve, Capital Reserve - Realised and Revenue Reserve are all
distributable reserves.
8. 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. The figures for the
year ended 28 February 2006 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.
9. Copies of the unaudited interim results will be sent to shareholders
shortly. Further copies can be obtained from the Company's Registered Office.
Copies of the interim statement will also be available for download from
www.downing.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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