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Downing Three VCT PLC  -  DP3F   

Downing THREE VCT plc : Half-year Report

Released 16:20 28-Sep-2017

Downing THREE VCT plc : Half-year Report

Downing THREE VCT plc

Half-Yearly Report
for the six months ended 30 June 2017

Performance summary

'D' Share pool 30 Jun
2017
  31 Dec
2016
  30 Jun
2016
  Pence   Pence   Pence
Net asset value per 'D' Share 23.7   36.4   34.7
Net asset value per 'E' Share 0.1   0.1   0.1
Cumulative distributions per 'D' Share 80.0   66.5   66.5
Total return per 'D' Share and 'E' Share 103.8   103.0   101.3

'F' Share pool 30 Jun
2017
  31 Dec
2016
  30 Jun
2016
  Pence   Pence   Pence
Net asset value per 'F' Share 69.6   69.4   69.7
Cumulative distributions per 'F' Share 27.5   25.0   22.5
Total return per 'F' Share 97.1   94.4   92.2

'H' Share pool 30 Jun
2017
  31 Dec
2016
  30 Jun
2016
  Pence   Pence   Pence
Net asset value per 'H' Share 84.6   86.2   88.9
Cumulative distributions per 'H' Share 17.5   15.0   12.5
Total return per 'H' Share 102.1   101.2   101.4

'J' Share pool 30 Jun
2017
  31 Dec
2016
  30 Jun
2016
  Pence   Pence   Pence
Net asset value per 'J' Share 95.7   95.8   97.7

CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Half-Yearly Report for the six months ended 30 June 2017. The Company has a number of share pools, each of which is in a different stage in its planned exit life. Generally progress has been satisfactory over the period, with all the mature share pools seeing an increase in their total return.

Net asset values and overview
'D' Share pool
The 'D' Share pool is now in the process of exiting from its investments.

At 30 June 2017, the net asset value ("NAV") for a combined holding of one 'D' Share and one 'E' Share was 23.8p. Total Return (NAV plus dividends paid to date) is now 103.8p for a combined holding, compared to the original cost, net of income tax relief, of 70p per share.

Total dividends of 80p per combined share have been paid to date. The Manager is optimistic that one final dividend can be paid before the end of the year to bring the share pool to a close.

'F' Share pool
The 'F' Share pool launched in 2012 and is scheduled to start exiting from investments in early 2018.

At 30 June 2017, the net asset value ("NAV") for a holding of one 'F' Share was 69.6p, an increase of 2.7p (3.9%) over the period. Total Return (NAV plus dividends paid to date) is now 97.1p for a combined holding, compared to the original cost, net of income tax relief, of 70p per share.

The Manager anticipates that the first major distribution will be paid in the first quarter of 2018.

'H' Share pool
The 'H' Share pool raised funds in 2014 and has now completed its initial investment phase. The target date to start realising investments is 2019.

At 30 June 2017, the net asset value ("NAV") for a holding of one 'H' Share was 84.6p which represents a net increase of 0.9p (1.0%) over the period after adjusting for the dividends paid out. Total Return (NAV plus dividends paid to date) is now 102.1p, compared to the initial NAV, before income tax relief, of 100.0p.

'J' Share pool
The 'J' Share pool raised funds in 2015 and is continuing to build its initial investment portfolio. The target date to start realising investments is 2020.

At 30 June 2017, the net asset value ("NAV") and total return for a holding of one 'J' Share was 95.7p which represents a net decrease of 0.1p (0.1%) over the period, compared to the initial NAV, before income tax relief, of 100.0p.

The Investment Manager's Report below will provide more detail on each of the share pools.

Dividends
In line with the Company's stated policies, interim dividends will be paid as follows:

'F' Shares 2.5p per share
'H' Shares 2.5p per share

Each of the above dividends will be paid on 15 December 2017 to Shareholders on the register at 24 November 2017.

No interim dividend is being declared in respect of the 'D' Shares as additional dividends will be declared once further investment realisations have been completed. No dividend is being declared in respect of the 'J' Share pool as the VCT regulations effectively prohibit dividends at this early stage in the pool's life.
Share buybacks
The Company has a general policy in the first five years after the launch of a share class, of buying in its own shares that become available in the market for cancellation. As a result, the Company will currently buy 'H' Shares and 'J' Shares that become available in the market and will, subject to liquidity and regulatory constraints, buy at prices approximately equal to net asset value i.e. with no discount.

During the period to 30 June 2017, the Company repurchased and subsequently cancelled 14,562 'J' Shares for an aggregate consideration of £13,907, being an average price of 95.5p per 'J' Share.

No share buybacks in respect of any other share classes were undertaken during the period.

Outlook
The Manager will be engaged in a number of different activities for each of the share pools over the remainder of the year. We hope to see the 'D' Share come to the end of its life with a final dividend and expect preparations for investment realisations in the 'F' Share pool to advance significantly. The 'H' Share pool is expected to have limited investment activity over the remainder of the year while the Manager focuses on the existing portfolio, but we expect to see a small number of new additions to the 'J' Share portfolio as the funds raised continue to be employed.

Shareholders may be aware of the "Patient Capital Review" currently being undertaken by the Government which is seeking to strengthen the UK as a place for growing innovative businesses. It is possible that this review could result in some changes to the VCT regulations and the associated tax reliefs. We expect that any planned changes will be announced in the Budget in November. The Board and Manager are closely monitoring developments and we will communicate with Shareholders if we believe there are any changes which could have a significant impact on Shareholders' investments.

In addition to any communications in connection with the above, I will update all Shareholders in my statement in the next Annual Report, and I also expect to write separately to 'D' Shareholders as and when there is news of a final distribution.

Michael Robinson
Chairman

INVESTMENT MANAGER'S REPORT
'D' SHARE POOL

The 'D' Share pool is in the process of realising its investments in order to return funds to 'D' Shareholders. The process has continued to progress through the period and we are optimistic it will be completed in the near future.

Investment activity
During the period under review, there was one partial disposal of £245,000 in Mosaic Spa and Health Clubs Limited. This represented a gain of £68,000 against the previous carrying value. Further proceeds for this investment are expected in due course at which point the company will be fully exited from the pool. 

At 30 June 2017, the pool held seven investments with a valuation of £2.2 million. Three small valuation changes were made at the period end resulting in a total valuation reduction of £4,000. The carrying values adopted at the end of the period are consistent with the values at which we believe the investments can be exited.

Realisation plans
The pools most significant holding is in Gara Rock Resort Limited, formerly Aminghurst Limited. We are pleased to report that we have recently exchanged contracts for the sale of the investment and expect this transaction to complete shortly.

Of the remaining six investments Avon Solar Energy Limited and Westcountry Solar Solutions Limited are expected to exit in the next two months. Mosaic Spa and Health Clubs Limited has partially exited in the period and we are exploring options to facilitate a complete exit for the share pool. No further proceeds are expected from Quadrate Spa Limited or Future Biogas (Reepham Road) Limited.

Net asset value and results
At 30 June 2017, the net asset value ("NAV") for a combined holding of one 'D' Share and one 'E' Share was 23.8p, an increase of 0.8p (2.2%) over the period. Total Return (NAV plus dividends paid to date) is now 103.8p for a combined holding.

The profit on ordinary activities for the 'D' Shares, after taxation, for the period was £76,000, comprising a revenue loss of £22,000 and a capital profit of £98,000.

Outlook
The end of the task of realising all the share pool's investments is now in sight. The exact timing is dependent on transactions involving third parties so is somewhat uncertain, however we anticipate that the pool should be able to make one final payment before the end of the year.

Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO
'D' SHARE POOL
as at 30 June 2017

 
Cost
Valuation
Unrealised gain/
(loss)
in period
 
% of
 portfolio
 by value
 
£'000
£'000
£'000
 
       
 
VCT qualifying and partially qualifying investments      
 
Avon Solar Energy Limited 210 252 12
10.3%
Westcountry Solar Solutions Limited 250 216 (34)
8.9%
Mosaic Spa and Health Clubs Limited* 325 123 -
5.0%
Quadrate Spa Limited 144 - -
0.0%
       
 
Non-qualifying investments      
 
Gara Rock Resort Limited 1,322 1,322 -
54.2%
Fenkle Street LLP 122 287 18
11.8%
Future Biogas (Reepham Road) Limited 320 - -
0.0%
       
 
  2,693 2,200 (4)
90.2%
       
 
Cash at bank and in hand   240  
9.8%
       
 
Total   2,440  
100%

*    Partially qualifying investment
SUMMARY OF INVESTMENT MOVEMENTS
'D' SHARE POOL
for the six months ended 30 June 2017

Disposals
Cost
Market
value
at
01/01/17
Disposal
proceeds
 
Gain
against
cost
 Total
realised
 gain
 
£'000
£'000
£'000
£'000
£'000
VCT qualifying and partially qualifying
investments
         
Mosaic Spa and Health Clubs
Limited
 

196
 

177
 

245
 

49
 

68
           
  196 177 245 49 68

* Adjusted for additions in the year

INVESTMENT MANAGER'S REPORT
'F' SHARE POOL

The 'F' Share pool is fully invested in a portfolio focussed on asset backed businesses and those with predictable revenue streams. Planning has begun in respect of the process to realise investments and start returning funds to Shareholders which can commence early in 2018.

Investment activity
With the pool being fully invested, no new investments were made in the period although one follow-on investment of £194,000 was made in Goonhilly Earth Station Limited, where further funding was required.

Funds had previously been invested in two companies, Morava Limited and Brownfields Trading Limited to explore business opportunities in specific sectors. In the event both companies were unable to find suitable opportunities, the £275,000 of funds invested were returned to the Share pool.

One partial divestment took place in the period being the part repayment of a non-qualifying loan to Gara Rock Resort Limited, formerly Aminghurst Limited, which generated proceeds of £95,000.

The majority of investments remain valued at or above cost and there were several valuation movements in the period.

Merlin Renewables Limited, the anaerobic digestion plant in Norfolk continues to perform well and the valuation was increased by £67,000.

Vulcan Renewables Limited has been sold after the period and the increase in value of £66,000 reflected expected sales proceeds minus a discount for execution risk. The sale subsequently completed at a higher value than shown overleaf.

An uplift of £39,000 was recognised in the period on Fresh Green Power Limited. The domestic rooftop solar company is generating profits in line with our expectations and we are now exploring options to sell the investment.

The valuation of Lambridge Solar Limited, the owner of commercial solar arrays in Lincolnshire, has been increased by £26,000 as it continues to perform well.

Atlantic Dogstar Limited continues to perform to plan and a small valuation uplift of £7,000 has been recognised in the period.

Net asset value, results and dividend
At 30 June 2017, the net asset value ("NAV") for a holding of one 'F' Share was 69.6p, an increase of 2.7p (3.9%) over the period. Total Return (NAV plus dividends paid to date) is now 97.1p for a combined holding.

The gain on ordinary activities for the 'F' Shares, after taxation, for the period was £291,000, comprising a revenue profit of £86,000 and a capital gain of £205,000.

The Company will pay an interim dividend of 2.5p per 'F' Share, on 15 December 2017 to 'F' Shareholders on the register at 24 November 2017.

Outlook
The focus now for the 'F' Share portfolio is shifting towards planning for exits. Good progress is being made and we anticipate that the first major distribution will be paid in the first quarter of 2018.

Downing LLP
SUMMARY OF INVESTMENT PORTFOLIO
'F' SHARE POOL
as at 30 June 2017

 
Cost
Valuation
Unrealised
 gain in
 period
% of
 portfolio
 by value
 
£'000
£'000
£'000
 
       
 
VCT qualifying and partially qualifying investments      
 
Apex Energy Limited 1,000 1,000 -
13.4%
Goonhilly Earth Station Limited 954 954 -
12.8%
Vulcan Renewables Limited 653 844 66
11.3%
Merlin Renewables Limited 500 642 67
8.6%
Lambridge Solar Limited 500 595 26
8.0%
Pearce and Saunders Limited 497 497 -
6.6%
Augusta Pub Company Limited 290 349 -
4.7%
Vectis Alpha Limited 300 300 -
4.0%
Fresh Green Power Limited 200 239 39
3.2%
Pabulum Pubs Limited 200 237 -
3.2%
Atlantic Dogstar Limited 200 234 7
3.1%
City Falkirk Limited 422 177 -
2.4%
Fubar Stirling Limited 268 169 -
2.3%
Rhodes Solutions Limited 125 125 -
1.7%
Green Energy Production UK Limited 100 100 -
1.3%
Cheers Dumbarton Limited 48 17 -
0.2%
Lochrise Limited 13 - -
0.0%
       
 
Non-qualifying investments      
 
Baron House Developments Limited 481 481 -
6.4%
Gara Rock Resort Limited 163 163 -
2.2%
London City Shopping Centre Limited 66 66 -
0.9%
Pearce and Saunders DevCo Limited 46 46 -
0.6%
       
 
  7,026 7,235 205
96.9%
       
 
Cash at bank and in hand   232  
3.1%
       
 
Total   7,467  
100.0%

*    Partially qualifying investment

SUMMARY OF INVESTMENT MOVEMENTS
'F' SHARE POOL
as at 30 June 2017

Additions
£'000
   
Qualifying investments  
Goonhilly Earth Station Limited 194
   
Total 194

Disposals
Cost
Market
value at
01/01/17
Disposal
proceeds
Gain
against
cost
 Total
 realised
 gain
 
£'000
£'000
£'000
£'000
£'000
 
 
 
 
 
 
VCT qualifying and partially qualifying investments
 
 
 
 
 
Brownfields Trading Limited
150
150
150
-
-
Morava Limited
125
125
125
-
-
           
Non-qualifying investments          
Gara Rock Resort Limited 95
95
95 - -
           
  370
370
370 - -

* adjusted for purchases made in the period

INVESTMENT MANAGER'S REPORT
'H' SHARE POOL

The 'H' Share pool raised funds in 2014 and has made good progress in building the initial VCT qualifying portfolio. The fund is now fully qualifying.

Investment activity
During the last six months, there were no investment additions or realisations.

The majority of investments remain valued at cost and there were two valuation movements recognised in the period generating a total gain of £61,000.

Atlantic Dogstar Limited continues to perform to plan and a small valuation uplift of £38,000 has been recognised in the period.

The Antelope Pub Limited owns a pub of the same name in Tooting which continues to trade well and ahead of budget resulting in an increase in value of £23,000 being recognised in the period.

Net asset value and results
At 30 June 2017, the net asset value per 'H' Share was 84.6p, a net increase of 0.9p (1.0%) over the period. Total Return (NAV plus dividends paid to date) is now 102.1p.

Results and dividend
The gain on ordinary activities for the 'H' Shares, after taxation, for the period was £115,000, comprising a revenue profit of £54,000 and a capital gain of £61,000.

The Company will pay an interim dividend of 2.5p per 'H' Share, on 15 December 2017 to 'H' Shareholders on the register at 24 November 2017.

Outlook
The 'H' Share pool is now fully qualifying and therefore our focus is now on close monitoring and support of the portfolio companies in order to nurture growth before the ultimate exit date.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
'H' SHARE POOL
as at 30 June 2017

 
Cost
Valuation
Unrealised
 gain in
 period
% of
 portfolio
 by value
 
£'000
£'000
£'000
 
VCT qualifying investments      
 
Hermes Renewables Limited 1,500 1,500 -
13.1%
Apex Energy Limited 1,300 1,300 -
11.4%
Atlantic Dogstar Limited 1,000 1,175 38
10.3%
Zora Energy Renewables Limited 1,000 1,000 -
8.8%
Quadrate Catering Limited 850 850 -
7.4%
Ironhide Generation Limited 613 613 -
5.4%
Indigo Generation Limited 613 613 -
5.4%
Antelope Pub Limited 500 523 23
4.6%
Rockhopper Renewables Limited 492 492 -
4.3%
SF Renewables (Solar) Limited 281 281 -
2.5%
Oak Grove Renewables Limited 420 231 -
2.0%
       
 
Non-qualifying investments      
 
Hedderwick Limited 1,250 1,250 -
11.0%
Quadrate Spa Limited 850 850 -
7.4%
Pearce and Saunders Limited 193 193 -
1.7%
Augusta Pub Company Limited 155 155 -
1.4%
       
 
  11,017 11,026 61
96.7%
       
 
Cash at bank and in hand   372  
3.3%
       
 
Total   11,398  
100%

No investment movements in the period to 30 June 2017.

INVESTMENT MANAGER'S REPORT
'J' SHARE POOL

The fundraising for the 'J' Share pool was launched in December 2014 and raised £11 million prior to closing in 2015. The majority of these funds have now been invested as at the period end and the Share pool is due to become qualifying by the end of 2017.

Investment activity
During the last six months, three new qualifying investments have been made totalling £1.3 million as we continue to build the qualifying portfolio.

The qualifying investments include a £1 million investment in Ormsborough Limited. The company owns several pubs and restaurants across Yorkshire and this investment supported their continued expansion.

£297,000 was invested into Pilgrim Trading Limited. The company acquired two sites to be converted in to children's nurseries, one of which has recently been opened in Twickenham and the other is in the planning stage.

A £10,000 investment was made into Exclusive Events Venues Limited to pay a deposit to secure a site in Chester that will be used exclusively as a wedding venue. Since the period end, following a successful planning application, a further investment has been made to acquire and develop the site.

Funds were invested in Morava Limited to explore opportunities in the wood refinery sector, Brownfields Trading Limited to develop small scale waste disposal projects and Cedarville Limited to identify a wedding venue site. During the period, these funds have been returned to the Share pool to provide £3.0 million for alternative investment opportunities. There were no other disposals in the period.

One valuation adjustment was made in the period on Ormsborough Limited following good overall performance of the group which resulted in an uplift in valuation of £28,000.

Net asset value and results
At 30 June 2017, the net asset value per 'J' Share was 95.7p, a net decrease of 0.1p (0.1%) over the period.

The loss on ordinary activities for the 'J' Shares, after taxation, for the period was £10,000, comprising a revenue loss of £32,000 and a capital gain of £22,000.

Outlook
The 'J' Share pool will become fully qualifying at the year end, therefore we will continue to seek investment opportunities and develop the current investment portfolio over the remainder of the period.

Downing LLP

SUMMARY OF INVESTMENT PORTFOLIO
'J' SHARE POOL
as at 30 June 2017

 
Cost
Valuation
Unrealised
 gain in period
% of
portfolio
 by value
 
£'000
£'000
£'000
 
VCT qualifying investments      
 
Pilgrim Trading Limited 1,297 1,297 -
12.7%
Ormsborough Limited 1,000 1,028 28
10.1%
Rhodes Solutions Limited 1,000 1,000 -
9.8%
Jito Trading Limited 1,000 1,000 -
9.8%
Vectis Alpha Limited 900 900 -
8.8%
Yamuna Renewables Limited 800 800 -
7.8%
Indigo Generation Limited 613 613 -
6.0%
Ironhide Generation Limited 613 613 -
6.0%
Rockhopper Renewables Limited 492 492 -
4.8%
Zora Energy Renewables Limited 300 300 -
2.9%
SF Renewables (Solar) Limited 281 281 -
2.8%
Oak Grove Renewables Limited 420 231 -
2.3%
Exclusive Events Venues Limited 10 10 -
0.1%
       
 
  8,726 8,565 28
83.9%
       
 
Cash at bank and in hand   1,642  
16.1%
       
 
Total   10,207  
100%

SUMMARY OF INVESTMENT MOVEMENTS
'J' SHARE POOL
as at 30 June 2017

Additions
£'000
   
Qualifying investments  
Ormsborough Limited 1,000
Pilgrim Trading Limited 297
Exclusive Events Venues Limited 10
   
Total 1,307

Disposals
Cost
Market
value at
01/01/17
Disposal
proceeds
Loss
against
cost
 Total
 realised
 loss
 
£'000
£'000
£'000
£'000
£'000
 
 
 
 
 
 
VCT qualifying and partially qualifying investments
 
 
 
 
 
Morava Limited
1,150
1,150
1,149
(1)
(1)
Cedarville Limited
1,000
1,000
995
(5)
(5)
Brownfields Trading Limited
900
900
900
-
-
           
  3,050
3,050
3,044 (6) (6)

*Adjusted for additions made in the period

UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2017

*

 

*

 
     

30 Jun 2017
  30 Jun
2016
  31 Dec
2016

 

   

'D'
Shares
 

'F' Shares
 

'H' Shares

'J' Shares
 

 

Total
   

 

Total
   

 

Total

 

  £'000 £'000 £'000 £'000 £'000   £'000   £'000

 

                   
Fixed assets                    
Unquoted investments   2,200 7,235 11,026 8,565 29,026   32,065   30,836
                     
Current assets                    
Debtors   3 185 77 59 324   256   133
Cash at bank and in hand   240 232 372 1,642 2,486   1,573   2,337
    243 417 449 1,701 2,810   1,829   2,470
                     
Creditors: amounts falling due within one year  



(76)




(122)




(104)




(10)




(312)
   

 

(437)
  (286)
                     
Net current assets   167 295 345 1,691 2,498   1,392   2,184
                     
Net assets   2,367 7,530 11,371 10,256 31,524   33,457   33,020
                     
Capital and reserves                    
Called up share capital   25 11 13 11 60   78   78
Capital redemption reserve   124 - - - 124   106   106
Special reserve   2,319 8,051 (2,353) - 8,017   11,054   9,888
Share premium account   - - 13,608 11,031 24,639   24,639   24,639
Revaluation reserve   (597) 269 9 (162) (481)   (1,810)   (790)
Capital reserve - realised   - (1,033) - (6) (1,039)   (1,033)   (1,033)
Revenue reserve   496 232 94 (618) 204   423   132
 

Total equity
shareholders'
 funds
 

 

 

2,367
 

 

 

7,530
 

 

 

11,371
 

 

 

10,256
 

 

 

31,524
   

 

 

33,457
   

 

 

33,020
                     
Basic and diluted net asset value per:      
'D' Share   23.7p           34.7p 36.4p
'E' Share   0.1p           0.1p 0.1p
'F' Share     69.6p         69.7p 69.4p
'H' Share       84.6p       88.9p 86.2p
'J' Share         95.7p     97.7p 95.8p

* The comparative Balance Sheet at 30 June 2016 and 31 December 2016 includes the 'C' Share pool which has subsequently been cancelled.

STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2017

  Called up share
capital
Capital
redemption
reserve
Special
reserve
Share
premium
reserve
Revaluation
reserve
Capital
reserve
- realised
Revenue
reserve
Total
  £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
                 
At 1 January        2016 78 106 15,749 24,639 (1,466) (1,033) 1,350 39,423
Total comprehensive income - - - - 406 214 (333) 287
Transactions with owners                
Issue of new shares - - - - - - - -
Share issue costs - - - - - - - -
Transfer between
   reserves
- - (5,861) - 270 6,476 (885) -
Dividend paid - - - - - (6,690) - (6,690)
At 31 December 2016 78 106 9,888 24,639 (790) (1,033) 132 33,020
Total comprehensive income - - - - 290 96 86 472
Transactions with owners                
Purchase of own shares - - - - - - (14) (14)
Transfer between
   reserves
- - (1,871) - 19 1,852 - -
Dividend paid - - - - - (1,954) - (1,954)
Cancellation of shares (18) 18 - - - - - -
At 30 June 2017 60 124 8,017 24,639 (481) (1,039) 204 31,524
                 

INCOME STATEMENT
for the six months ended 30 June 2017

Company Total

   

Six months ended
30 Jun 2017

 
   

Six months ended
30 Jun 2016*
 
Year ended
31 Dec
2016
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 556 34 590   435 - 435   625
                   
Gains on investments                  
- realised - 62 62   - 110 110   174
- unrealised - 290 290   - 47 47   406
  556 386 942   435 157 592   1,205
                   
Investment management fees (303) - (303)   (328) - (328)   (643)
Other expenses (146) - (146)   (164) - (164)   (296)
                   
Return/(loss) on ordinary activities before taxation 107 386 493   (57) 157 100   266
                   
Tax on total comprehensive income and ordinary activities (21) - (21)   17 - 17   21
                   
Return/(loss) attributable to equity shareholders 86 386 472   (40) 157 117   287
       
Return per 'C' Share - - -   (0.4p) - (0.4p)   (0.4p)
Return per 'A' Share - - -   - - -   -
Return per 'D' Share (0.2p) 1.0p 0.8p   (0.1p) 0.5p 0.4p   2.0p
Return per 'E' Share - - -   - - -   -
Return per 'F' Share 0.8p 1.9p 2.7p   0.5p 0.2p 0.7p   2.8p
Return per 'H' Share 0.4p 0.5p 0.9p   0.3p 0.7p 1.0p   0.7p
Return per 'J' Share (0.3p) 0.2p (0.1p)   (0.8p) - (0.8p)   (2.8p)

* The comparative Income Statement as at 30 June 2016 and 31 December 2016 includes the 'C' Share pool which has subsequently been cancelled.

INCOME STATEMENT
for the six months ended 30 June 2017

'D' Shares  

Six months ended
30 Jun 2017

 
   

Six months ended
30 Jun 2016
 
Year ended
31 Dec
2016
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 9 34 43   19 - 19   123
                   
Gains/(losses) on investments                  
- realised - 68 68   - 109 109   168
- unrealised - (4) (4)   - (58) (58)   28
  9 98 107   19 51 70   319
                   
Investment management fees (19) - (19)   (27) - (27)   (52)
Other expenses (17) - (17)   (16) - (16)   (31)
                   
Return/(loss) on ordinary activities before taxation (27) 98 71   (24) 51 27   236
                   
Tax on total comprehensive income and ordinary activities 5 - 5   11 - 11   (30)
                   
Return/(loss) attributable to equity shareholders (22) 98 76   (13) 51 38   206

INCOME STATEMENT
for the six months ended 30 June 2017

'F' Shares

 
 

Six months ended
30 Jun 2017

 
   

Six months ended
30 Jun 2016
 
Year ended
31 Dec
2016
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 222 - 222   171 - 171   99
                   
Losses on investments                  
- realised - - -   - - -   5
- unrealised - 205 205   - 18 18   410
  222 205 427   171 18 189   514
                   
Investment management fees (68) - (68)   (69) - (69)   (136)
Other expenses (47) - (47)   (36) - (36)   (73)
                   
Return on ordinary activities before taxation 107 205 312   66 18 84   305
                   
Tax on total comprehensive income and ordinary activities (21) - (21)   (13) - (13)   3
                   
Return attributable to equity shareholders 86 205 291   53 18 71   308

INCOME STATEMENT
for the six months ended 30 June 2017

'H' Shares

 
 

Six months ended
30 Jun 2017

 
   

Six months ended
30 Jun 2016
 
Year ended
31 Dec
2016
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 226 - 226   202 - 202   355
                   
Gains/(losses) on investments                  
- realised - - -   - - -   -
- unrealised - 61 61   - 88 88   53
  226 61 287   202 88 290   408
                   
Investment management fees (116) - (116)   (120) - (120)   (239)
Other expenses (43) - (43)   (32) - (32)   (61)
                   
Return on ordinary activities before taxation 67 61 128   50 88 138   108
                   
Taxation on total comprehensive income and ordinary activities (13) - (13)   (10) - (10)   (11)
                   
Return attributable to equity shareholders 54 61 115   40 88 128   97

INCOME STATEMENT
for the six months ended 30 June 2017

'J' Shares

 
 

Six months ended
30 Jun 2017

 
   

Six months ended
30 Jun 2016
 
Year ended
31 Dec
2016
 
Revenue
Capital
Total
 
Revenue
Capital
Total
 
Total
 
£'000
£'000
£'000
 
£'000
£'000
£'000
 
£'000
                   
Income 99 - 99   37 - 37   42
                   
Losses on investments                  
- realised - (6) (6)   - - -   -
- unrealised - 28 28   - - -   (84)
  99 22 121   37 - 37   (42)
                   
Investment management fees (100) - (100)   (104) - (104)   (208)
Other expenses (39) - (39)   (45) - (45)   (96)
                   
Loss on ordinary activities before taxation (40) 22 (18)   (112) - (112)   (346)
                   
Tax on total comprehensive income and ordinary activities 8 - 8   22 - 22   52
                   
Loss attributable to equity shareholders (32) 22 (10)   (90) - (90)   (294)

UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2017

 

 
 

30 Jun 2017
  30 Jun 2016   31 Dec 2016
     

'D'
Shares
 

'F'
Shares
 

'H'
Shares

'J'

Shares
 

 

Total
  Total    

 

Total
Note   £'000 £'000 £'000 £'000 £'000   £'000   £'000
                     
Net cash (outflow)/inflow from operating activities 1   3 (30) 99 (113) (41)   278   (3)
                     
Cash flows from investing activities                    
Purchase of investments   - (194) - (1,307) (1,501)   (13,650)   (14,950)
Sale of investments   245 370 - 3,044  3,659   4,450   7,401
Net cash inflow/(outflow) from investing activities   245 176 - 1,737  2,158   (9,200)   (7,549)
                     
Net cash inflow/(outflow) before financing activities   248 146 99 1,624   2,117   (8,922)   (7,552)
                     
Cash flows from financing activities                    
Purchase of own shares   - - - (14) (14)   -   -
Equity dividends paid   (1,347) (271) (336) - (1,954)   (6,083)   (6,690)
Net cash (outflow)/inflow from financing   (1,347) (271) (336) (14)   (1,968)   (6,083)   (6,690)
Increase/(decrease) in cash 2 (1,099) (125) (237) 1,610 149   (15,005)   (14,242)

NOTES TO THE UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2017

 

 

  30 Jun 2017   30 Jun 2016   31 Dec 2016

 

   

'D'
Shares
 

'F'
Shares
 

'H'
Shares

'J'

Shares
 

 

Total
   

 

Total
   

 

Total

 

  £'000 £'000 £'000 £'000 £'000   £'000   £'000
1 Cash inflow from operating activities and returns on investments                    
Return/(loss) on ordinary activities before taxation   71 312 128 (18) 493   100   266
Corporation tax paid   - - - - -   12 (171)
Losses/(gains) on investments   (64) (205) (61) (22) (352)   (157)   (580)
Decrease/(increase) in other debtors   - (160) 28 (59) (191)   375   498
(Decrease)/increase in other creditors   (4) 23 4 (14) 9   (52)   (16)
Net cash inflow/(outflow)    from operating activities   3 (30) 99 (113) (41)   278   (3)
                     
2 Analysis of net funds                    
Beginning of period   1,339 357 609 32 2,337   16,578   16,579
Net cash (outflow)/inflow   (1,099) (125) (237) 1,610 149   (15,005)   (14,242)
End of period   240 232 372 1,642 2,486   1,573   2,337

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

1. General information
Downing Three VCT plc ("the Company") is a venture capital trust established under the legislation introduced in the Finance Act 1995 and is domiciled in the United Kingdom and incorporated in England and Wales.

2. Accounting policies - Basis of accounting
The unaudited half-yearly results cover the six months to 30 June 2017 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 and in accordance with the accounting policies set out in the statutory accounts for the year ended 31 December 2016, which were prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law), including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic of Ireland ("FRS 102").

3. All revenue and capital items in the Income Statement derive from continuing operations.

4. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

5. The comparative figures are in respect of the six month period ended 30 June 2016 and the year ended 31 December 2016 respectively.

6. Dividends

       

Six months ended
30 June 2017
  Year ended
31 Dec
2016
  Per share   Revenue Capital Total   Total
Paid in period pence   £'000 £'000 £'000   £'000
               
'C' Shares              
Special 'C' 2016 30.5p   - - -   2,184
Special 'A' 2016 14.8p   - - -   1,596
      - - -   3,780
               
'D' Shares              
Y/E Dec 2016 Final 13.5p   - 1,347 1,347   -
Y/E Dec 2015 Final 17.0p   - - -   1,697
      - 1,347 1,347   1,697
               
'F' Shares              
Y/E Dec 2016 Final 2.5p   - 271 271   -
Y/E Dec 2015 Final 2.5p   - - -   271
Y/E Dec 2015 Interim 2.5p   - - -   270
      - 271 271   541
               
'H' Shares              
Y/E Dec 2016 Final 2.5p   - 336 336   -
Y/E Dec 2015 Final 2.5p   - - -   336
Y/E Dec 2015 Interim 2.5p   - - -   336
      - 336 336   672

No dividends have been paid or declared in respect of the 'E' Shares or 'J' Shares.

7. Basic and diluted return per share

 

Weighted average number of shares in issue    

Revenue
return/(loss)
   

Capital
return
     

£'000
Per share    

£'000
Per
 share
             

'D' Shares

9,979,109   (22) (0.2p)   98 1.0p

'E' Shares

14,994,862   - -   - -

'F' Shares

10,821,660   86 0.8p   205 1.9p

'H' Shares

13,446,972   54 0.4p   61 0.5p

'J' Shares

10,718,653   (32) (0.3p)   22 0.2p

 

    86     386  

8. Net asset value per share

 

Shares in issue   Net asset value
      £'000   Per Share

 

 

       

'D' Shares

9,979,109

  2,352   23.7p

'E' Shares

14,994,862

  15   0.1p

'F' Shares

10,821,660

  7,530   69.6p

'H' Shares

13,446,972

  11,371   84.6p

'J' Shares

10,718,815

  10,256   95.7p

 

 

  31,524    

9. Reserves

  Period ended
 30 June
2017
  Year ended 31 Dec
 2016
  £'000   £'000
       
Capital redemption reserve 124   106
Special reserve 8,017   9,888
Share premium reserve 24,639   24,639
Revaluation reserve (481)   (790)
Capital reserve-realised (1,039)   (1,033)
Revenue reserve 204   132
  31,464   32,942

The Special reserve, Capital reserve - realised and Revenue reserve are all distributable reserves. The Revaluation reserve includes losses of £1,570,000 which are included in the calculation of distributable reserves. Total distributable reserves are £5,612,000 (31 Dec 2016: £7,407,000).

10. The fair value of investments is determined using the detailed accounting policy set out in the statutory accounts for the year ended 31 December 2016.

The Company has categorised its financial instruments using the fair value hierarchy as follows:

Level a     Reflects financial instruments quoted in an active market;
Level b     Reflects financial instruments that have prices that are observable either directly or indirectly; and
Level c     i) Reflects financial instruments that use valuation techniques that are based on observable market data.
ii) Reflects financial instruments that use valuation techniques that are not based on observable market data (unquoted equity investments and loan note investments).

   

 

Level
a
 

 

Level b
 

 

Level
 c (ii)
Period
ended
 30 June
 2017
   

 

Level
a
 

 

Level
 b
 

 

Level
 c (ii)
Year
ended
31 Dec
2016
  £'000 £'000 £'000 £'000   £'000 £'000 £'000 £'000
                   
Loan notes - - 5,794 5,794   - - 6,201 6,201
Unquoted equity  

-
 

-
 

23,232
 

23,232
   

-
 

-
 

24,635

24,635
  - - 29,026 29,026   - - 30,836 30,836

11. 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 December 2016 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.

12. 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 as well as in accordance with FRS 104 Interim Financial Reporting 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.
             
13. 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 reappointed Philip Hare & Associates LLP 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.

14. 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.

15. 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 Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Downing THREE VCT plc via Globenewswire


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Downing THREE VCT plc : Half-year Report - RNS