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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Downing Abs.2 | LSE:DA2O | London | Ordinary Share | GB00B4K0JB10 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 64.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Downing Absolute Income VCT 2 plc
Half-Yearly Report for the six months ended 30 September 2012
PERFORMANCE SUMMARY
30 Sept 31 Mar 30 Sept
2012 2012 2011
pence pence pence
Net asset value per Ordinary Share and 'A' Share 69.8 72.3 85.0
Cumulative distributions per Ordinary Share 12.5 10.0 7.5
------------------------------
Total return per Ordinary Share and 'A' Share 82.3 82.3 92.5
------------------------------
CHAIRMAN'S STATEMENT
I present the Company's Half-Yearly Report for the period ended 30 September
2012. Following the very disappointing results I had to report at the last year
end, the last six months has seen a stable performance. Difficulties with the
problem investments are not yet fully resolved but there has been some positive
news from some portfolio companies.
Venture capital investments
The Company now has in excess of 70% of its funds invested in VCT qualifying
investments. As a result, investment activity over the period has been limited
to one new investment and some small follow-on investments.
A GBP200,000 non-qualifying investment was made in Baron House LLP. The
partnership is developing a Hampton by Hilton hotel in central Newcastle. The
investment will pay an ongoing yield and will also pay a share of the final
development profit.
The other sizeable addition arose from further investments in Helcim, where a
total of GBP235,000 of was invested over the period. This company has faced major
difficulties and required several further injections of funds in order to ensure
that it could continue trading, while all possible options for the future of the
business were explored. Ultimately, the best outcome that could be achieved was
a sale of the business for deferred consideration equivalent to GBP211,000 paid
over the next three years plus an additional sum based on profits. At the period
end, the investment has been valued at GBP211,000.
The other major investment transaction involved the reorganisation of the
Liverpool Nurseries companies, such that they are now all held under one holding
company.
In respect of disposals, there were a small number of loan stock redemptions.
A small number of adjustments were made to the unquoted investment valuations at
the period end. Tramps Nightclub and Alpha Schools were increased by GBP60,000 and
GBP12,000 following steady progress by both companies.
As described above, the investment in Helcim was written down to the minimum
expected deferred consideration from the sale, being an additional provision of
GBP235,000. Camandale, the company which owns a pub and nightclub in Kilmarnock,
has also been written down by GBP90,000, such that both venues are now valued at a
third party "bricks and mortar" valuation.
Rostima was also written down by GBP170,000 in the period. The company, which
mainly provides software systems to shipping ports, has struggled to transform
its order pipeline into firm contracts and has required further working capital
since the period end. A provision has been made equivalent to the equity element
of our investment.
The share price of Tracsis plc, one of the companies AIM-quoted holdings,
performed very strongly over the period, producing a rise of GBP221,000 in the
investment value. Part of the holding was also sold, generating realised gains
of GBP32,000 in the period. Accumuli, the other AIM-quoted holding, saw a small
fall of GBP19,000.
Overall, the investment portfolio showed a net unrealised loss of GBP221,000 and
net realised gains in the year of GBP32,000. The portfolio also generated
investment income of GBP365,000 over the period.
In view of the ongoing difficulties with a small number of investments which
have resulted in losses, as a goodwill gesture, Downing LLP, the manager, has
again offered to waive its investment and administration fees for the period.
These total GBP164,000 and this offer has been accepted by the Board.
Net asset value and results
At 30 September 2012, the net asset value ("NAV") per Ordinary Share stood at
69.7p and the NAV per 'A' Share stood at 0.1p, producing a combined total of
69.8p. This is unchanged since the year end of 31 March 2012 (after adjusting
for the 2.5p dividend paid during the period). Total return (NAV plus dividends
to date) was 82.3p at 30 September 2012, compared to an initial cost to original
subscribers (net of income tax relief) of 70p.
The profit on ordinary activities after taxation for the period was GBP8,000,
comprising a profit of GBP197,000 on the revenue account and a loss of GBP189,000 on
the capital account.
Dividends
As set out in the Company's prospectus, the Board intends to pay dividends of
5.0p per annum. Despite the losses suffered to date, the Company still has
sufficient distributable reserves and cash resources to be able to continue to
pay such a dividend. The Board therefore intends to continue with this policy,
but will monitor cash resources to ensure that the Company continues to hold
sufficient cash to ensure that it would be able to support existing investee
companies in the event that they require further funding.
The next dividend of 2.5p per Ordinary Share will be paid on 28 March 2013 to
Ordinary Shareholders on the register at 1 March 2013.
Share buybacks
The Company operates a share buyback policy whereby, subject to certain
restrictions, it intends to buy in any of its own shares that become available
in the market for cancellation. In its initial years, the Company will normally
seek to undertake any buybacks at a price equal to the latest published NAV
(i.e. at a nil discount).
During the period, the Company purchased 29,950 Ordinary Shares and 20,775 'A'
Shares at an average price of 72.0p and 0.001p per share respectively.
Outlook
I believe that the major difficulties faced by a number of investee companies
have been properly addressed and, in most cases, the businesses have now been
stabilised. Unfortunately, a significant amount of value has been lost and there
are no prospects for a quick recovery of the ground that has been lost. The
investment portfolio does include a number of investments which have reasonable
prospects for building value over the medium-term, however, as with many
businesses in the current climate, the portfolio is not without risk.
The Board will continue to work closely with the Manager to ensure a high level
of monitoring of the portfolio companies is maintained and support given when
appropriate.
Chad Murrin
Chairman
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 September 2012
30 Sept 30 Sept 31 Mar
2012 2011 2012
Total Total Total
GBP'000 GBP'000 GBP'000
Fixed assets
Investments 13,730 14,640 13,591
Current assets
Debtors 136 284 482
Cash at bank and in hand 282 2,369 556
--------- --------- --------
418 2,653 1,038
Creditors: amounts falling due within one year (249) (310) (222)
--------- --------- --------
Net current assets 169 2,343 816
--------- --------- --------
Net assets 13,899 16,983 14,407
--------- --------- --------
Capital and reserves
Called up share capital 20 20 20
Share premium 30 30 30
Special reserve 16,741 17,591 17,204
Revaluation reserve (3,161) (793) (2,964)
Capital reserve - realised 54 18 -
Revenue reserve 215 117 117
--------- --------- --------
Equity shareholders' funds 13,899 16,983 14,407
--------- --------- --------
Net asset value per Ordinary Share 69.7p 84.9p 72.2p
Net asset value per 'A' Share 0.1p 0.1p 0.1p
UNAUDITED INCOME STATEMENT
for the six months ended 30 September 2012
Period
Period ended ended
30 Sept 2012 Period ended 31 Mar
30 Sept 2011 2012
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 365 - 365 419 - 419 669
Gains/(losses) on investments
- realised - 32 32 - 18 18 (3,041)
- unrealised - (221) (221) - (870) (870) (132)
----------------------- ------------------------ ----------
365 (189) 176 419 (852) (433) (2,504)
Investment management - - - (82) (82) (164) -
fees
Other expenses (95) - (95) (136) - (136) (191)
----------------------- ------------------------ ----------
Return/(loss) on
ordinary activities
before taxation 270 (189) 81 201 (934) (733) (2,695)
Taxation (73) - (73) (35) - (35) (113)
----------------------- ------------------------ ----------
Return/(loss)
attributable to
equity shareholders 197 (189) 8 166 (934) (768) (2,808)
----------------------- ------------------------ ----------
Return per Ordinary 1.0p (1.0p) 0.0p 0.8p (4.7p) (3.9p) (14.1p)
Share
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 September 2012
30 Sept 30 Sept 31 Mar
2012 2011 2012
GBP'000 GBP'000 GBP'000
Opening Shareholders' funds 14,407 18,266 18,266
Dividends paid (498) (500) (997)
Purchase of own shares (18) (15) (54)
Total recognised gain/(loss) for the period 8 (768) (2,808)
--------- --------- --------
Closing Shareholders' funds 13,899 16,983 14,407
--------- --------- --------
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 September 2012
30 Sept 30 Sept 31 Mar
2012 2011 2012
Note GBP'000 GBP'000 GBP'000
Cash inflow from operating activities and returns
on investments 1 570 1,074 1,070
--------- --------- --------
Taxation
Corporation tax paid - (110) (111)
Capital expenditure
Purchase of investments (844) (3,294) (8,844)
Sale of investments 517 3,189 7,467
--------- --------- --------
Net cash outflow from capital expenditure (327) (105) (1,377)
--------- --------- --------
Equity dividends paid (498) (500) (997)
--------- --------- --------
Net cash inflow/(outflow) before financing (255) 359 (1,415)
Financing
Purchase of own shares (19) (15) (54)
--------- --------- --------
Net cash (outflow)/inflow from financing (19) (15) (54)
--------- --------- --------
(Decrease)/Increase in cash 2 (274) 344 (1,469)
--------- --------- --------
Notes to the cash flow statement:
1 Cash inflow/(outflow) from operating activities
and returns on investments
Return/(loss) on ordinary activities before taxation 81 (733) (2,695)
Loss on investments 189 852 3,173
Decrease in other debtors 346 899 701
(Decrease)/Increase in other creditors (46) 56 (109)
--------- --------- --------
Net cash inflow/(outflow) from operating activities 570 1,074 1,070
--------- --------- --------
2 Analysis of net funds
Beginning of period 556 2,025 2,025
Net cash inflow (274) 344 (1,469)
--------- --------- --------
End of period 282 2,369 556
--------- --------- --------
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 September 2012
Unrealised % of
gain/(loss) portfolio
Cost Valuation in period by value
GBP'000 GBP'000 GBP'000
Qualifying investments
Tramps Night Club Limited* 1,224 1,346 60 9.6%
Antelope Pub Company Limited* 1,050 1,106 - 7.9%
Quadrate Catering Limited 887 887 - 6.3%
Quadrate Spa Limited* 873 873 - 6.2%
Rostima Limited* 866 696 (170) 5.0%
Data Centre Response Limited 607 607 - 4.3%
Redmed Limited* 562 562 - 4.0%
Residential PV Trading Limited 500 500 - 3.6%
Future Biogas (Reepham Road) Limited 499 499 - 3.6%
Tracsis plc* ** 161 470 221 3.4%
Accumuli Plc* ** 250 404 (19) 2.9%
Domestic Solar Limited 400 400 - 2.8%
Mosaic Spa and Health Club (Shrewsbury) 400 400 - 2.8%
Limited*
Slopingtactic Limited 380 380 - 2.7%
The 3D Pub Co Limited 517 362 - 2.6%
Mosaic Spa and Health clubs Limited* 350 350 - 2.5%
Alpha Schools (Holdings) Limited 333 346 12 2.4%
Camandale Limited* 1,199 328 (90) 2.3%
Angel Solar Limited 250 250 - 1.8%
Chapel Street Food and Beverage Limited 250 250 - 1.8%
Chapel Street Services Limited 250 250 - 1.8%
Helcim Group Limited* 2,017 211 (235) 1.5%
Ridgeway Pub Company Limited 136 136 - 1.0%
EPI Service Limited* 920 107 - 0.8%
---------------------------------------
14,881 11,720 (221) 83.6%
---------------------------------------
Non-qualifying investments
Retallack Surfpods Limited 500 500 - 3.6%
Fenkle Street LLP 346 346 - 2.5%
Liverpool (Nurseries) Holdings Limited 339 339 - 2.4%
Kidspace Adventures Holdings Limited 300 300 - 2.1%
Baron House Developments LLP 200 200 - 1.4%
Kidspace Adventures Limited 200 200 - 1.4%
Commercial Street Hotel Limited 115 115 - 0.8%
Chapel Street Hotel Limited 10 10 - 0.1%
---------------------------------------
2,010 2,010 - 14.3%
---------------------------------------
-------- -------------
Total 16,891 13,730 (221) 97.9%
-------- -------------
Cash at bank and in hand 282 2.1%
----------- ----------
Total investments 14,012 100.0%
----------- ----------
* partly non-qualifying ** quoted on AIM
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 30 September 2012
Additions
GBP'000
Qualifying investments
Helcim Group Limited* 235
Rostima Limited* 35
Quadrate Spa Limited* 34
Tracsis plc* ** 1
--------
305
Non-qualifying investments
Liverpool (Nurseries) Holdings Ltd 339
Baron House Developments LLP 200
--------
539
--------
Total 844
--------
Disposals
Total
Market Gain realised
value at Disposal against gain in
Cost 01/04/12 proceeds cost period
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Qualifying investments
Tramps Night Club Limited* 79 79 79 - -
Tracsis plc* 40 62 94 54 32
Residential PV Trading Limited* 33 33 33 - -
EPI Service Limited* 60 14 14 (46) -
-----------------------------------------
212 188 220 8 32
Non-qualifying investments
Liverpool Nurseries (House) Ltd 148 148 148 - -
Liverpool Nurseries (Greenbank) Limited 100 100 100 - -
Liverpool Nurseries (Cottage) Ltd 49 49 49 - -
-----------------------------------------
297 297 297 - -
-----------------------------------------
Total 509 485 517 8 32
-----------------------------------------
* partly non-qualifying ** quoted on AIM
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half-yearly results cover the six months to 30 September 2012
and have been prepared in accordance with the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital Trusts"
revised January 2009 ("SORP") and in accordance with the accounting policies set
out in the statutory accounts for the period ended 31 March 2012, which were
prepared under UK Generally Accepted Accounting Practice ("UK GAAP").
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 are in respect of the six month period ended 30
September 2011 and the year ended 31 March 2012 respectively.
5. Net asset value per share has been calculated on 19,906,708 Ordinary Shares
and 29,918,670 'A' Shares, being the number of shares in issue at the period
end.
6. Return per share has been calculated on 19,816,909 Ordinary Shares and
29,933,494 'A' Shares, being the weighted average number of shares during the
period.
7. Dividends
Six months ended Period ended
30 September 2012 31 March 2012
Per share Revenue Capital Total Total
pence GBP'000 GBP'000 GBP'000 GBP'000
Paid in year
2012 Final 2.5p 99 399 498 -
2012 Interim 2.5p - - - 498
2011 Final 2.5p - - - 499
----------- ----------- --------- ------------
99 399 498 997
----------- ----------- --------- ------------
No dividends have been paid or declared in respect of the 'A' Shares.
8. Reserves
Capital
Special Revaluation reserve Revenue
reserve reserve - realised reserve
GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2012 17,204 (2,964) - 117
Realised gain on investments - - 32 -
Unrealised loss on investments - (221) - -
Purchase of own shares (18) - - -
Expenses capitalised - - - -
Transfer between reserves (445) 24 421 -
Dividends paid - - (399) (99)
Retained revenue - - - 197
--------- ----------- ------------ --------
At 30 September 2012 16,741 (3,161) 54 215
--------- ----------- ------------ --------
The Revenue reserve, Special reserve and Capital reserve - realised are
distributable reserves. The Revaluation reserve includes losses of GBP3,816,000
which are included in the calculation of distributable reserves. Distributable
reserves at 30 September 2012 were GBP13,194,000.
9. 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
period ended 31 March 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. 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.
11. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required, in the
Company's half-yearly results, to report on principal risks and uncertainties
facing the Company over the remainder of the financial year.
The Board concluded that the key risks facing the Company over the remainder of
the financial period are as follows:
(i) Compliance risk of failure to maintain approval as a VCT; and
(ii) Investment risk associated with investing in small and immature businesses.
The Company's compliance with the VCT regulations is continually monitored by
the Manager, who reports regularly to the Board on the current position. The
Company has also appointed PricewaterhouseCoopers to provide regular reviews and
advice in this area.
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 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 these approaches provide satisfactory management of
the key risks.
12. Going concern
The Directors have reviewed the Company's financial resources at the period end
and conclude that the Company is well placed to manage its business risks.
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.
13. Copies of the unaudited half-yearly report will be sent to Shareholders
shortly. Further copies can be obtained from the Company's Registered Office or
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 Absolute Income VCT 2 Plc via Thomson Reuters ONE
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