TIDMDP2F
Downing TWO VCT plc
LEI: 213800HJGTPW7F8YEY55
Half-Yearly Report
for the six months ended 30 June 2020
Performance summary
30 Jun 31 Mar 31 Dec 30 Jun
'F' Share pool 2020 2020 2019 2019
Pence Pence Pence Pence
Net asset value per 'F' Share 18.8 21.6 24.7 30.6
Cumulative distributions per 'F' Share 72.0 72.0 72.0 67.0
------ ------ ------ ------
Total return per 'F' Share 90.8 93.6 96.7 97.6
====== ====== ====== ======
30 Jun 31 Mar 31 Dec 30 Jun
'G' Share pool 2020 2020 2019 2019
Pence Pence Pence Pence
Net asset value per 'G' Share 34.1 36.0 48.1 63.2
Cumulative distributions per 'G' Share 53.5 51.5 51.5 37.5
------ ------ ------ ------
Total return per 'G' Share 87.6 87.5 99.6 100.7
====== ====== ====== ======
30 Jun 31 Mar 31 Dec 30 Jun
'K' Share pool 2020 2020 2019 2019
Pence Pence Pence Pence
Net asset value per 'K' Share 36.6 50.3 58.2 72.9
Cumulative distributions per 'K' Share 7.5 - - -
------ ------ ------ ------
Total return per 'K' Share 44.1 50.3 58.2 72.9
====== ====== ====== ======
Forthcoming dividends
'K' Shares
Interim 2020 -- Payable 27 November 2020 2.5p
CHAIRMAN'S STATEMENT
Introduction
I present the Half-Yearly Report for the six months ended 30 June 2020.
As Shareholders will be aware, a number of the Company's portfolio
businesses have faced some significant challenges over the last couple
of years. With significant exposure to the hospitality sector, the
coronavirus pandemic has unfortunately further impacted a number of the
portfolio companies
The Company has three share pools, two of which are in process of
realising investments and one which is preparing to start the
realisation process.
A brief summary of each share pool is provided below.
Net asset values and overview
'F' Share pool
The 'F' Share pool launched in 2012 and is currently in its realisation
phase. Exits from a number of investments have been effectively put on
hold as a result of the ongoing pandemic, however the Manager is still
working on a number of possible divestments in order to return funds to
Shareholders.
At 30 June 2020, the remaining net asset value ("NAV") was 18.8p per F
Share, a decrease of 5.9p (23.9%) over the period. Total Return (NAV
plus dividends paid to date) is now 90.8p, compared to the original cost,
net of income tax relief, of 70p per share.
The 'F' Share pool still holds nine investments, with plans resuming for
exits from each of them.
The task of exiting from the remaining investments is dependent on third
parties and it is therefore difficult to accurately estimate when this
process will complete. A number of investments in the portfolio are in
industries that have been severely impacted by the pandemic, and as a
result have suffered delays in the divestment timeline.
The Investment Manager believes there are reasonable prospects for
completion of some exits from the portfolio during the course of this
year. The Manager anticipates that the next major distribution will be
paid in 2021.
'G' Share pool
The 'G' Share pool passed its five-year anniversary in November 2018 and
the focus remains on the process of realising the remaining investments,
in order to return funds to Shareholders.
At 30 June 2020, the pool held 12 investments and the net asset value
("NAV") was 34.1p per 'G' Share, which represents a net decrease of
12.0p (24.9%) over the period, after adjusting for the dividends paid
out. Total Return (NAV plus dividends paid to date) is now 87.6p,
compared to the initial NAV, before income tax relief, of 100.0p (or
original cost, net of income tax relief, which was typically between
70.0p and 75.0p, depending on costs).
The 'G' Share pool is expected to make distributions as realisations are
achieved. The Investment Manager expects to resume this process over the
remainder of the year.
'K' Share pool
The 'K' Share pool raised funds in 2016. The target date to start
realising investments is 2021.
Unfortunately, the portfolio has suffered heavily over the six-month
period with most investments badly impacted by the consequences of the
pandemic.
At 30 June 2020, the share pool held 15 investments and the net asset
value ("NAV") was 36.6p per 'K' Share, which represents a net decrease
of 14.1p (24.2%) over the period, after adjusting for the dividends paid
out of 7.5p. Total Return (NAV plus dividends paid to date) is now 44.1p
per K Share, compared to the initial NAV before income tax relief, of
100.0p (or original cost, net of income tax relief, which was typically
between 70.0p and 75.0p, depending on costs).
The Board acknowledges that overall performance of the K Share pool is
extremely poor. As noted previously, the Board has reached agreement
with the Investment Manager such that no further management fees will be
paid in respect of the K Share pool.
The K Share pool does have cash available so will pay an interim
dividend of 2.5p per 'K' Share on 27 November 2020, to Shareholders on
the register at the close of business on 6 November 2020.
Share buybacks
The Company is now unlikely to make any further purchases of any of its
shares as the process of returning funds to all groups of shareholders
is progressing.
No share buybacks in respect of any share class were undertaken during
the period.
Outlook
The further losses of value on all pools since the valuation at 31 March
2020 are extremely disappointing. Although there is the possibility of
recoveries in value, the recent increase in coronavirus infections in
the UK may further harm the sectors in which many of the portfolio
companies operate and could result in further losses.
The Board has given consideration to the best way forward from this
position. The Board does not consider that a change of manager at this
stage is practical or would be in the best interest of shareholders, but
believes that continuing to work closely with the existing manager to
ensure everything is done to recover value is the best route.
The Board does not expect to raise any new funds for the Company in
future and so is now considering putting proposals to Shareholders for
the Company to take advantage of the VCT winding up regulations which
involves entering into a members' voluntary liquidation. This will
allow the company to reduce its running cost while it realises the
investments across all share pools. The Board intends to prepare
proposals for shareholder approval in the coming months.
Hugh Gillespie
Chairman
30 September 2020
INVESTMENT MANAGER'S REPORT
'F' SHARE POOL
As at 30 June 2020, the 'F' Share pool held nine investments. Focus for
the 'F' Share pool remains on the realisation of its investments and
maximising Shareholder returns which has been delayed due to the ongoing
coronavirus pandemic.
Net asset value, results and dividend
At 30 June 2020, the net asset value ("NAV") for a holding of one 'F'
Share was 18.8p, a decrease of 5.9p (23.9%) over the period. Total
Return (NAV plus dividends paid to date) is now 90.8p.
The loss on ordinary activities for the 'F' Shares, after taxation was
GBP641,000 for the period, comprising a revenue loss of GBP32,000 and a
capital loss of GBP609,000.
'F' Share pool -- Portfolio valuation
The period to 30 June 2020 has seen a number of unforeseen developments
which has impacted the 'F' Share portfolio. The portfolio companies are
heavily exposed to the effective lockdown in the UK economy, resulting
in an unrealised loss of GBP609,000.
The most significant decreases in valuation were in respect of Pearce
and Saunders Limited and Downing Pub EIS ONE Limited which both operate
in the pub and hospitality industry.
Pearce and Saunders Limited, the owner of freehold pubs in south east
London, was decreased by GBP457,000 to reflect the forced closure of the
site and the wider economic impact of COVID-19.
Downing Pub EIS ONE Limited, which acquired the holdings of two other
pub companies in 2017, was decreased in value by GBP134,000 following
the collapse of the proposed management buy out that was due to complete
in March 2020.
The Investment Manager has supported both of the above investee
companies during this difficult time as well as ensuring the businesses
have taken advantage of the Government support that has been made
available.
There were a small number of valuation increases in the period. The most
notable being a GBP42,000 increase in value to Fresh Green Power Limited,
the domestic rooftop solar company, which was increased due to improved
operating performance over the period.
Realisation plans
A number of the investment companies within the portfolio had proposed
exit plans in place which have now been effectively paused or have
collapsed as a result of the ongoing pandemic and have forced the
Investment Manager to seek other opportunities to exit.
Despite the divestment timeline suffering, the Investment Manager is
hopeful that there are reasonable prospects for completion from a small
number of the investee companies across the remainder of the year if
conditions improve, although shareholders should note it is currently
unclear when and if these will be achieved. The exact timing will be
dependent on third parties and a number of external factors.
Outlook
Valuations of investments within the 'F' Share pool have been impacted
as a result of the ongoing coronavirus pandemic. The pool is exposed to
a number of the sectors which have suffered heavily from the effective
lockdown in the UK. Focus for the Investment Manager remains on the exit
of the final nine investments in the portfolio as well as continuing to
support all investee companies during this difficult period.
Downing LLP
30 September 2020
SUMMARY OF INVESTMENT PORTFOLIO
'F' SHARE POOL
as at 30 June 2020
Unrealised % of
gain/(loss) in portfolio
Cost Valuation period by value
GBP'000 GBP'000 GBP'000
VCT qualifying and partially
qualifying investments
Downing Pub EIS ONE Limited 490 522 (134) 26.2%
Fresh Green Power Limited 189 273 42 13.7%
Atlantic Dogstar Limited 200 179 (79) 9.0%
Pearce and Saunders Limited 497 93 (457) 4.6%
Green Energy Production UK
Limited 100 64 10 3.2%
Apex Energy Limited 1,000 26 9 1.3%
Non-qualifying investments
Baron House Developments LLP 481 673 - 33.8%
London City Shopping Centre
Limited 66 - - 0.0%
Pearce and Saunders DevCo
Limited 44 - - 0.0%
3,067 1,830 (609) 91.8%
======= ===============
Cash at bank and in hand 162 8.2%
--------- ----------
Total 1,992 100.0%
========= ==========
SUMMARY OF INVESTMENT MOVEMENTS
'F' SHARE POOL
as at 30 June 2020
Market Total
value at Disposal Gain against realised
Disposals Cost 01/01/20 proceeds cost gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Pearce and Saunders
DevCo Limited 2 2 2 - -
2 2 2 - -
======= ========= ========= ============ ==========
INVESTMENT MANAGER'S REPORT
'G' SHARE POOL
The 'G' Share pool raised funds in 2013 and focus for the Share pool
remains on the process of realising investments, as it looks to maximise
Shareholder returns. Over the period to 30 June 2020, the process has
been significantly delayed as a result of the ongoing coronavirus
pandemic.
Investment activity
During the period a partial exit was successfully completed from Pearce
and Saunders Limited, the owner of freehold pubs in south east London.
Proceeds of GBP230,000 were generated, which represented an uplift over
cost of GBP173,000.
'G' Share pool -- Portfolio valuation
The period to 30 June 2020 has seen a number of disappointing valuation
movements, resulting in an unrealised loss of GBP3.6 million.
The majority of the unrealised loss is driven from holding a portfolio
of investments which have been severely impacted by the effective
lockdown within the UK and its resulting consequences.
The largest decrease in value at the period end related to Atlantic
Dogstar Limited, which owns a group of London pubs. As a result of the
lockdown restrictions, the two London pubs were forced to close and the
planned management buy out that was due to complete in March 2020
collapsed, leading to a reduction in value of GBP1.4 million.
The investments in Quadrate Spa Limited and Quadrate Catering Limited,
which own and operate a health club business and a top floor restaurant
in The Cube complex in Birmingham were both written down to nil,
generating a combined loss of GBP1.9 million.
A sale and leaseback transaction was due to complete in February 2020.
However as a result of the coronavirus pandemic, both companies are not
operational following government-imposed lockdown measures and the offer
has been withdrawn. We continue to monitor the situation and are
assisting management where possible.
Realisation plans
Prior to the unforeseen coronavirus pandemic, there were a number of
realisation plans in place for the exit of several portfolio companies.
As a result of the ongoing situation, these plans have either collapsed
or have been delayed. It is currently unclear when further exits will be
achieved, although the manager is seeking opportunities where possible.
Net asset value
At 30 June 2020, the net asset value ("NAV") for a holding of one 'G'
Share was 34.1p, which represents a net decrease of 12.0p (24.9%) over
the period. Total Return (NAV plus dividends paid to date) is now 87.6p.
Results
The loss on ordinary activities for the 'G' Share pool, after taxation,
for the period was GBP3.0 million, comprising a revenue profit of
GBP344,000 and a capital loss of GBP3.4 million.
Outlook
The falls in value experienced by the 'G' Share pool during the year are
extremely disappointing. Businesses in the leisure and hospitality
sector have clearly suffered heavily from the lockdown and provisions
have been required as a result.
We continue to dedicate substantial resources to supporting the investee
companies through these difficult and unprecedented times as we look to
continue the process of realising investments and return funds to
investors.
Downing LLP
30 September 2020
SUMMARY OF INVESTMENT PORTFOLIO
'G' SHARE POOL
as at 30 June 2020
Unrealised % of
gain/(loss) in portfolio by
Cost Valuation period value
GBP'000 GBP'000 GBP'000
VCT qualifying and
partially qualifying
investments
Atlantic Dogstar Limited 3,500 3,142 (1,379) 42.1%
Walworth House Pub Limited 1,330 1,176 (47) 15.8%
Downing Pub EIS ONE
Limited 980 1,044 (267) 14.0%
Hermes Wood Pellets
Limited 1,000 152 - 2.0%
Pearce and Saunders
Limited 136 136 - 1.8%
Zora Energy Renewables
Limited 750 49 (19) 0.7%
Apex Energy Limited 1,300 33 11 0.4%
Ormsborough Limited 500 - 0.0%
Quadrate Catering Limited 1,450 - (1,196) 0.0%
Non-qualifying investments
Baron House Developments
LLP 1,093 1,530 20.5%
Quadrate Spa Limited 1,450 - (669) 0.0%
London City Shopping
Centre Limited 110 - 0.0%
13,599 7,262 (3,566) 97.3%
======= ===============
Cash at bank and in hand 204 2.7%
--------- -------------
Total 7,466 100%
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SUMMARY OF INVESTMENT MOVEMENTS
'G' SHARE POOL
as at 30 June 2020
Market value Total
at Disposal Gain against realised
Disposals Cost 01/01/20 proceeds cost gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Pearce and
Saunders Limited 57 57 230 173 173
57 57 230 173 173
======= ============ ========= ============ ==========
INVESTMENT MANAGER'S REPORT
'K' SHARE POOL
At the period end, the 'K' Share pool held 15 investments across a range
of industries. It is very disappointing to have to report that several
investee companies have suffered further setbacks which have required
significant provisions for the six months to 30 June 2020.
'K' Share pool -- Portfolio valuation
As noted in the year end accounts, the portfolio faced a number of
challenges in the first few months of 2020, leading to an unrealised
loss of GBP2.0 million as at 30 June 2020.
A significant portion of the unrealised loss for the period related to
three investments. Further details on each is noted below.
The most notable provision is in respect of Garthcliff Shipping Limited,
which owns a feeder container vessel that is chartered to third parties
to transport containers to and from ports. Following a period of reduced
demand for container vessels as worldwide economies suffered as a result
of the coronavirus pandemic, a buyer for the vessel has been sought and
the value has been reduced by GBP1.0 million in line with anticipated
exit proceeds.
Apprise Pubs Limited, was established to build an estate of quality
freehold pubs across the south of England alongside long-term Downing
partner, Oakman Inns. As a result of the government-imposed lockdown,
one site was forced to close whilst refurbishment at a second site was
postponed leading to a provision of GBP442,000.
Exclusive Events Venues Limited, the operator of an exclusive use
wedding venue in Chester, England, completed refurbishment in February
2020. In line with government-imposed measures, the venue was forced to
postpone events, resulting in a provision of GBP157,000.
We continue to work closely and support each of the portfolio companies,
ensuring that they have benefited from the Government aid that is
available and take sensible decisions as they deal with these
extraordinary circumstances.
Net asset value, results and dividend
At 30 June 2020, the net asset value ("NAV") and Total Return for a
holding of one 'K' Share was 36.6p, which represents a net decrease of
14.1p (24.2%) over the period. The loss on ordinary activities for the
'K' Share pool, after taxation, was GBP2.2 million for the period,
comprising a revenue loss of GBP186,000 and a capital loss of GBP2.0
million.
The Company will pay an interim dividend of 2.5p per 'K' Share on 27
November 2020, to Shareholders on the register at 6 November 2020.
Outlook
Regrettably, the coronavirus pandemic has further hit investment
valuations during the period to 30 June 2020, with a large number of
portfolio companies within the leisure and hospitality sectors being
impacted most severely.
The process of realising the investments to return funds to shareholders
is due to commence 2021. Prior to this, we shall be supporting each
investee company within the portfolio as much as possible, seeking to
position them as well as we can to facilitate an exit in line with the
divestment timeline and at optimal value.
Downing LLP
30 September 2020
SUMMARY OF INVESTMENT PORTFOLIO
'K' SHARE POOL
as at 30 June 2020
Unrealised % of
(loss)/gain in portfolio
Cost Valuation period by value
GBP'000 GBP'000 GBP'000
VCT qualifying investments
Apprise Pubs Limited 1,300 858 (442) 15.0%
Walworth House Pub Limited 500 442 (18) 7.7%
Pilgrim Trading Limited 432 347 (85) 6.1%
Exclusive Events Venues
Limited 500 343 (157) 6.0%
SF Renewables (Solar) Limited 337 292 (12) 5.1%
Garthcliff Shipping Limited 1,300 255 (1,045) 4.4%
Rockhopper Renewables Limited 591 222 (73) 3.9%
Indigo Generation Limited 736 179 (79) 3.1%
Ironhide Generation Limited 736 161 (96) 2.8%
Zora Energy Renewables
Limited 350 23 (8) 0.4%
Ormsborough Limited 1,400 - - 0.0%
Yamuna Renewables Limited 1,300 - - 0.0%
Jito Trading Limited 1,500 - - 0.0%
Non-qualifying investments
Fenkle Street LLP 287 306 (12) 5.3%
London City Shopping Centre
Limited 15 - - 0.0%
11,284 3,428 (2,027) 59.8%
======= ===============
Cash at bank and in hand 2,308 40.2%
--------- ----------
Total 5,736 100%
========= ==========
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2020
30 Jun 31 Dec
30 Jun 2020 2019 2019
'F' 'G' 'K'
Shares Shares Shares Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Unquoted
investments 1,830 7,262 3,428 12,520 22,452 18,781
Current assets
Debtors 93 1,450 6 1,549 1,438 1,374
Cash at bank
and in hand 162 204 2,308 2,674 7,337 4,136
------- -------- -------- -------- ------- -------
255 1,654 2,314 4,223 8,775 5,510
Creditors:
amounts
falling due
within one
year (53) (302) 9 (346) (494) (306)
------- -------- -------- -------- ------- -------
Net current
assets 202 1,352 2,323 3,877 8,281 5,204
Net assets 2,032 8,614 5,751 16,397 30,733 23,985
======= ======== ======== ======== ======= =======
Capital and
reserves
Called up share
capital 11 25 16 52 52 52
Capital
redemption
reserve 149 - - 149 149 149
Special reserve 3,949 14,671 14,986 33,606 38,681 34,938
Share premium
account - - - - - -
Revaluation
reserve (1,419) (5,726) (3,642) (10,787) (6,361) (4,585)
Capital reserve
-- realised (1,099) (1,831) (4,155) (7,085) (2,249) (7,105)
Revenue reserve 441 1,475 (1,454) 462 461 536
------- -------- -------- -------- ------- -------
Total equity
shareholders'
funds 2,032 8,614 5,751 16,397 30,733 23,985
======= ======== ======== ======== ======= =======
Basic and diluted net
asset value per:
'F' Share 18.8p 30.6p 24.7p
'G' Share 34.1p 63.2p 48.1p
'K' Share 36.6p 72.9p 58.2p
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2020
Called
up Share Capital
share Capital Special Premium Revaluation reserve Revenue
capital redemption Reserve Reserve Reserve reserve realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2019 52 149 38,471 - (3,911) (2,250) 349 32,860
Total
comprehensive
income - - - - (5,388) 256 337 (4,795)
Realisation of
impaired
valuations - - - - 4,891 (4,891) - -
Transactions
with owners
Purchase of own
shares - - - - - - - -
Transfer
between
reserves - - (3,533) - (177) 3,710 - -
Dividends paid - - - - - (3,930) (150) (4,080)
Cancellation of
shares - - - - - - - -
------------------- -------- -------- ----------- --------- -------- ---------
At 31 December
2019 52 149 34,938 - (4,585) (7,105) 536 23,985
Total
comprehensive
income - - - - (6,202) 173 126 (5,903)
Transaction
with owners
Purchase of own
shares - - - - - - - -
Transfer
between
reserves - - (1,332) - - 1,332 - -
Dividends paid - - - - - (1,485) (200) (1,685)
At 30 June 2020 52 149 33,606 - (10,787) (7,085) 462 (16,397)
=================== ======== ======== =========== ========= ======== =========
INCOME STATEMENT
for the six months ended 30 June 2020
Company Total
Year
Six months ended Six months ended ended
30 Jun 2020 30 Jun 2019 31 Dec 2019
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 1,908 - 1,908 619 16 635 1,198
Gains/(losses)
on investments
- realised - 173 173 - 125 125 240
- unrealised - (6,202) (6,202) - (2,380) (2,380) (5,388)
1,908 (6,029) (4,121) 619 (2,239) (1,620) (3,950)
Investment
management
fees (116) - (116) (289) - (289) (551)
Other expenses (1,557) - (1,557) (123) - (123) (244)
Return/(loss)
on ordinary
activities
before
taxation 235 (6,029) (5,794) 207 (2,239) (2,032) (4,745)
Tax on total
comprehensive
income and
ordinary
activities (109) - (109) (95) - (95) (50)
Return/(loss)
attributable
to equity
shareholders 126 (6,029) (5,903) 112 (2,239) (2,127) (4,795)
======= ======= ======= ======= ======= ======= ============
Return per 'F'
Share (0.3p) (5.6p) (5.9p) - 1.9p 1.9p 1.0p
Return per 'G'
Share 1.4p (13.4p) (12.0p) 0.8p 1.4p 2.2p 1.2p
Return per 'K'
Share (1.2p) (12.9p) (14.1p) (0.6p) (17.8p) (18.4p) (33.2p)
INCOME STATEMENT (analysed by Share pool)
for the six months ended 30 June 2020
Year
Six months ended Six months ended ended
'F' Shares 30 Jun 2020 30 Jun 2019 31 Dec 2019
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 111 - 111 76 - 76 105
Gains/(losses)
on investments
- realised - - - - - - 110
- unrealised - (609) (609) - 201 201 (10)
111 (609) (498) 76 201 277 205
Investment
management
fees (20) - (20) (24) - (24) (49)
Other expenses (118) - (118) (19) - (19) (39)
Return/(loss)
on ordinary
activities
before
taxation (27) (609) (636) 33 201 234 117
Tax on total
comprehensive
income and
ordinary
activities (5) - (5) (27) - (27) (7)
Return/(loss)
attributable
to equity
shareholders (32) (609) (641) 6 201 207 110
======= ======= ======= ======= ======= ========= ============
INCOME STATEMENT (analysed by Share pool)
for the six months ended 30 June 2020
Year
Six months ended Six months ended ended
'G' Shares 30 Jun 2020 30 Jun 2019 31 Dec 2019
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 1,738 - 1,738 491 - 491 941
Gains/(losses)
on investments
- realised - 173 173 - 125 125 125
- unrealised - (3,566) (3,566) - 236 236 (271)
1,738 (3,393) (1,655) 491 361 852 795
Investment
management
fees (96) - (96) (148) - (148) (288)
Other expenses (1,189) - (1,189) (55) - (55) (110)
Return/(loss)
on ordinary
activities
before
taxation 453 (3,393) (2,940) 288 361 649 397
Tax on total
comprehensive
income and
ordinary
activities (109) - (109) (86) - (86) (94)
Return/(loss)
attributable
to equity
shareholders 344 (3,393) (3,049) 202 361 563 303
======= ======= ======= ======= ======= ======= ============
INCOME STATEMENT (analysed by Share pool)
for the six months ended 30 June 2020
Year
Six months ended Six months ended ended
'K' Shares 30 Jun 2020 30 Jun 2019 31 Dec 2019
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 59 - 59 52 16 68 152
(Losses)/gains
on investments
- realised - - - - - - 5
- unrealised - (2,027) (2,027) - (2,817) (2,817) (5,107)
59 (2,027) (1,968) 52 (2,801) (2,749) (4,950)
Investment
management
fees - - - (117) - (117) (214)
Other expenses (250) - (250) (49) - (49) (95)
Loss on ordinary
activities
before
taxation (191) (2,027) (2,218) (114) (2,801) (2,915) (5,259)
Tax on total
comprehensive
income and
ordinary
activities 5 - 5 18 - 18 51
Loss
attributable to
equity
shareholders (186) (2,027) (2,213) (96) (2,801) (2,897) (5,208)
======= ======= ======= ======= ======= ======= ============
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2020
30 Jun 31 Dec
30 Jun 2020 2019 2019
'F' 'G' 'K'
Shares Shares Shares Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net cash (outflow)/
inflow from operating
activities (46) 119 (82) (9) 65 166
Cash flows from investing
activities
Sale of investments 2 230 - 232 3,217 3,995
------- ------- ------- ------- --------------- -------
Net cash inflow from investing
activities 2 230 - 232 3,217 3,995
------- ------- ------- ------- --------------- -------
Net cash (outflow)
/inflow before
financing
activities (44) 349 (82) 223 3,282 4,161
Cash flows from
financing activities
Equity dividend paid - (506) (1,179) (1,685) - (4,080)
Net cash outflow from financing
activities - (506) (1,179) (1,685) - (4,080)
------- ------- ------- ------- --------------- -------
(Decrease)/increase in cash (44) (157) (1,261) (1,462) 3,282 81
======= ======= ======= ======= =============== =======
NOTES TO THE UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2020
30 Jun 31 Dec
30 Jun 2020 2019 2019
'F' 'G' 'K'
Shares Shares Shares Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash inflow/(outflow) from operating
activities
Return/(loss) on ordinary activities before
taxation (636) (2,940) (2,218) (5,794) (2,032) (4,745)
Corporation tax - - - - (8) (145)
(Gains)/losses on investments 609 3,393 2,027 6,029 2,255 5,148
(Increase)/decrease in other debtors (24) (310) 159 (175) (108) (45)
(Decrease)/increase in other creditors 5 (24) (50) (69) (42) (47)
Net cash (outflow)/inflow from operating
activities (46) 119 (82) (9) 65 166
======= ======= ======= ======= ======= =======
Analysis of net funds
Beginning of period 206 361 3,569 4,136 4,055 4,055
Net cash (outflow)/inflow (44) (157) (1,261) (1,462) 3,282 81
------- ------- ------- ------- ------- -------
End of period 162 204 2,308 2,674 7,337 4,136
======= ======= ======= ======= ======= =======
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1.General information
Downing TWO 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 2020
and have been prepared in accordance with the Statement of Recommended
Practice "Financial Statements of Investment Trust Companies and Venture
Capital Trusts" issued in February 2018 ("AIC SORP") and in accordance
with the accounting policies set out in the statutory accounts for the
year ended 31 December 2019, 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 2019 and the year ended 31 December 2019 respectively.
6. Dividends
Six months ended Year to
30 June 2020 31 Dec 2019
Per share Revenue Capital Total Total
Paid in
period pence GBP'000 GBP'000 GBP'000 GBP'000
'F' Shares
Y/E Dec 2019
Interim 5.0p - - - 541
- - - 541
========= ======= ======= ============
'G' Shares
Y/E Dec 2019
Interim 2.0p 200 306 506
Y/E Dec 2019
Interim 14.0p - - - 3,539
200 306 506 3,539
========= ======= ======= ============
'K' Shares
Y/E Dec 2019
Interim 7.5p - 1,179 1,179 -
--------- ------- ------- ------------
- 1,179 1,179 -
========= ======= ======= ============
No dividends have been paid or declared in respect of the 'K' Shares.
7. Basic and diluted return per share
Weighted average
number of Revenue Capital
shares in issue return/(loss) return/(loss)
GBP'000 Per share GBP'000 Per share
'F' Shares 10,810,859 (32) (0.3p) (609) (5.6p)
'G' Shares 25,281,571 344 1.4p (3,393) (13.4p)
'K' Shares 15,718,154 (186) (1.2p) (2,027) (12.9p)
------- -------
126 (6,029)
======= =======
8. Net asset value per share
Shares in issue Net asset value
Per
GBP'000 share
'F' Shares 10,810,859 2,032 18.8p
'G' Shares 25,281,571 8,614 34.1p
'K' Shares 15,718,154 5,751 36.6p
---------
16,397
=========
9. Reserves
Period ended Year ended
30 Jun 2020 31 Dec 2019
GBP'000 GBP'000
Capital redemption reserve 149 149
Special reserve 33,606 34,938
Revaluation reserve (10,787) (4,585)
Capital reserve - realised (7,085) (7,105)
Revenue reserve 462 536
16,345 23,933
============ ============
The Special reserve, Capital reserve - realised and Revenue reserve are
all distributable reserves. The Revaluation reserve includes losses of
GBP11,616,000 which are included in the calculation of distributable
reserves. Total distributable reserves are GBP15,367,000 (31 Dec 2019:
GBP21,453,000).
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 2019.
The Company has categorised its financial instruments using the fair
value hierarchy as follows:
Level 1 Reflects financial instruments quoted in an active market;
Level 2 Reflects financial instruments that have prices that are
observable either directly or indirectly; and
Level 3 Reflects financial instruments that use valuation techniques
that are not based on observable market data (unquoted equity
investments and loan note investments).
Period
ended Year
30 June Level Level ended
Level 1 Level 2 Level 3 2020 1 2 Level 3 31 Dec 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Loan
notes - - 4,512 4,512 - - 5,424 5,424
Unquoted
equity - - 8,008 8,008 - - 13,357 13,357
- - 12,520 12,520 - - 18,781 18,781
========= ========= ========= ======== ========= ======= ========= ============
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 2019 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 impact of the coronavirus pandemic has created heightened
uncertainty but has not changed the nature of these risks.
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. The impact of the
coronavirus pandemic has been significant on some portfolio companies
and, in many cases, the VCT regulations restrict the Company from making
further investment into these businesses, so the Manager seeks to
provide whatever other support they can to these businesses, including
encouraging them to take advantage of government support that may be
available. The Company also has a limited period in which it must invest
the majority of its funds. The Manager follows a rigorous process in
vetting and carefully structuring new investments, including taking a
charge over the assets of the business wherever possible and, after an
investment is made, closely monitoring the business. The Board is
satisfied that 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 despite the current economic outlook and impact of the
COVID-19 pandemic that is still being experienced
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.
(END) Dow Jones Newswires
September 30, 2020 13:14 ET (17:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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