TIDMDDV1
DOWNING ONE VCT PLC
LEI: 213800R88MRC4Y3OIW86
24 June 2021
Final Results
Financial Summary
Unaudited Audited Audited
31 May 31 Mar 31 Mar
2021 2021 2020
Pence Pence Pence
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Net asset value per share ("NAV") 60.20 58.20 57.6
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Cumulative dividends paid since 12 November 2013 38.75 38.75 35.5
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Total Return
(net asset value plus cumulative dividends paid per
share) 98.95 96.95 93.1
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Dividends in respect of financial year
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Interim dividend per share 1.25 2.0
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Proposed final dividend per share 1.25 2.0
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2.50 4.0
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Chairman's Statement
I present the Company's Annual Report for the year ended 31
March 2021. This has been an unprecedented year, which began right
at the start of the pandemic and the first coronavirus lockdown.
Since then there have been many shifts in the government-imposed
restrictions and finally we now seem to be moving towards the
economy fully reopening.
Many of the businesses in the Company's portfolio have been able
to adapt reasonably well to the conditions and may be coming out of
the pandemic as stronger businesses than they were before. The
Company does however hold investments in some sectors which have
been heavily hit by the shutdown, most significantly within the
hospitality sector, where recovery of value is unsurprisingly
expected to take some time.
Net asset value and results
As at 31 March 2021, the net asset value per share ("NAV") stood
at 58.2p, an increase of 3.85p (6.7%) after adding back dividends
of 3.25p per share which were paid during the year.
The Income Statement shows a gain attributable to equity
shareholders for the year of GBP6.2 million comprising a revenue
loss of GBP616,000 and a capital gain of GBP6.8 million.
Investment portfolio
Over the year to 31 March 2021, the Investment Adviser was able
to develop a very strong pipeline of investment opportunities. As a
result, the Company made a significant number of new investments.
27 new and follow on investments were completed, totalling GBP21.4
million. In line with current VCT regulations, all 27 investments
were growth investments, with GBP1.5 million invested into quoted
growth businesses and GBP19.9 million invested into unquoted growth
businesses, which tend to be younger businesses with a high
risk/reward ration. Of the 27 investments made during the period,
17 of these were into new businesses and 10 were follow on
investments.
At the year end, the Company held a portfolio of 98 active
investments. Of these, 32 are either quoted on AIM or other UK
exchanges and have a value of GBP24.6 million (28% of the
portfolio, excluding cash). The 40 unquoted growth investments have
a value of GBP37.5 million and represent 42% of the portfolio and
the 26 unquoted yield focused investments have a value of GBP27.1
million and represent 30% of the portfolio.
The year under review saw total unrealised gains of GBP7.6
million.
The core strategy of the team managing the quoted investments is
to take influential stakes in quoted companies and work closely
with them as they develop. This, along with improving market
sentiment, has helped to deliver a good recovery over the year,
giving rise to unrealised gains of GBP6.4 million.
The unquoted growth portfolio, which is now the focus of the
majority of new investment activity, comprises of many investments
in young and immature businesses.
In some cases, the severity and duration of the pandemic had
been very detrimental to prospects. However, the Manager has been a
very active investor during the latter part of the year, backing
businesses where their resilience to the impact of the pandemic
could be fully assessed before investing. Overall unrealised gains
for the year were GBP719,000.
The unquoted yield-focused portfolio is the area most disrupted
by the pandemic, with significant exposure to hospitality
businesses and care homes. Generally, the hospitality businesses
have fared as well as could be expected considering that most
venues were closed for large parts of the year. The care homes
businesses adapted to the conditions well and avoided any major
problems. Following the release of some provisions made in the
prior year, the yield focussed portfolio produced unrealised gains
of GBP512,000 over the year.
Further details on the investment activity are included in the
Investment Adviser's Reports below.
Dividends
Downing ONE has a policy of seeking to pay annual dividends of
at least 4% of net assets per annum. In the past the Company has
sometimes been able to exceed the base target. However, in view of
the fact that the portfolio has not produced any significant
realised gains in the year and other considerations, the Board
believes it is appropriate to set the dividend level at close to
the base target level this year.
The Board is proposing to pay a final dividend of 1.25p per
share on 27 August 2021, subject to Shareholder approval at the
forthcoming AGM, to Shareholders on the register at 30 July 2021.
This will bring total dividends in respect of the year ended 31
March 2021 to 2.5p per share (2020: 4.0p), equivalent to 4.3% based
on opening NAV.
Shareholders are reminded that the Company operates a Dividend
Reinvestment Scheme for those investors that wish to reinvest their
dividends and obtain further income tax relief on the reinvested
dividend. A Dividend Reinvestment Form is available on Downing's
website or further information can be obtained by contacting
Downing.
Directorate
In February 2021 Chris Allner was appointed as a non-executive
director of the Company. Chris is a partner of Downing LLP, the
Investment Adviser, with extensive experience in the unquoted
ventures sector and currently chairs Downing's Investment
Committee. The Board believes that the synergies between the Board
and its Investment Adviser will be further enhanced as a result of
the appointment. For the avoidance of doubt, Chris will not be
remunerated as a director by the VCT.
The Board has reviewed its composition and believes that the
four directors between them have a good range of relevant skill
sets which positions the Board well to oversee the Company's
activities. The Board will, however, continue to consider whether
any further board changes would benefit the Company in the future
as the Company's portfolio continues to shift its focus away from
the legacy investments.
Responsible investment
The Board notes the Investment Adviser, Downing LLP's,
commitment to being a "Responsible Investor". Downing LLP place
Environmental, Social and Governance (ESG) criteria at the
forefront of their business and investment activities in line with
best practice and in order to enhance returns for their VCT's
investors.
Further detail on the Investment Adviser's approach to
responsible investment including the key principles and their
screening approach can be found within the annual report.
Share buybacks
The Company continues to operate a policy of buying in its own
shares that become available in the market at a 5% discount to NAV
(subject to liquidity and regulatory restrictions).
During the year, the Company purchased and subsequently
cancelled 3,401,061 shares at an average price of54.6p per
share.
The Company retains Panmure Gordon as its corporate broker to
assist in operating the share buyback process and ensuring that the
quoted spread on the Company's shares remains at a reasonable
level.
VCT Qualification
At 31 March 2021, qualifying investments represented 83.5% of
total investments (including cash). The Board expects that the
minimum VCT qualification level of 80% will continue to be
maintained for the foreseeable future.
Annual General Meeting ("AGM")
With social distancing restrictions expected to be relaxed, we
are planning to hold a usual physical AGM this year. The AGM will
be held at Downing LLP, 6th floor, St. Magnus House, 3 Lower Thames
Street, London, EC3R 6HD at 10:15 a.m. on 10 August 2021.
If you intend to attend the AGM, please also notify us by email
to d1agm@downing.co.uk in case there are any changes to
arrangements that need to be communicated at short notice.
Three items of special business are proposed at the AGM:
- one in respect of the authority to buy back shares as noted
above and
- two in respect of the authority to allot shares.
The authority to allot shares provides the Board with the
opportunity to consider raising further funds without having to
necessarily incur the expense of seeking separate approval via a
shareholder circular. Any further fundraising decisions will take
account of the level of uninvested funds and the rate of
investment.
Fundraising
The Company launched a new offer for subscription on 11
September 2020. To date the offer has raised GBP13.1 million and
the offer has now been extended to 31 August 2021. With the new
funds from the current offer, the Company has sufficient cash
reserves to provide continued support to existing portfolio
companies.
The Board is monitoring the flow of new investment opportunities
from the investment adviser and may consider a smaller
non-prospectus offer for subscription for the next VCT fundraising
season.
Outlook
It has been reassuring to see the recovery in the quoted
portfolio over the year, and the Board takes comfort from the fact
the quoted team believes there are good prospects for further
growth.
The yield focussed portfolio was heavily impacted by the
pandemic but has now stabilised and the gradual return to more
normal conditions may allow some recovery of capital value,
although this is expected to be a slow process.
The unquoted growth portfolio now represents the largest
proportion of the Company's investments by value and will continue
to grow as new investments are made within the current VCT
regulations. Some of older investments in this category which are
developing well, along with many of the newer investments made over
the last year, have created a portfolio which, we believe, now has
the potential to drive the Company's growth over the coming
years.
The Board acknowledges that the overall performance of the
Company in recent years has been disappointing. Downing's
investment advisory team has developed significantly over this time
and is now able access a strong and broad pipeline of attractive
investment opportunities, which has resulted in a significant
number of new additions to the portfolio. With these new
investments, plus a number of earlier investments that are now
progressing well and a promising quoted portfolio, we believe that
the Company is now better placed to deliver improved performance in
the medium term.
I look forward to updating Shareholders in the half year report
for the period end 30 September 2021.
Chris Kay
Chairman
Investment Adviser's Report - Overview
Introduction
We present a review of the investment portfolio and activity
over the last financial year. Our review is split into three parts
comprising:
- this overview,
- a detailed report on the unquoted investments, and
- a report on the quoted investments.
Portfolio Overview
At 31 March 2021, the Company held a portfolio with a value of
GBP89.2 million comprising 98 quoted and unquoted companies, across
a diverse range of sectors in both the growth and yield-focused
categories. Investment valuations at the year-end have been
significantly impacted by the coronavirus pandemic and lockdown,
although we have also seen a number of companies act decisively
resulting in an overall unrealised gain. Further detail is included
below.
The Company has been an active investor over the year with
GBP21.4 million deployed into 17 new and 10 existing investments.
All of the 27 new investments made were growth investments, with
six being quoted growth investments and the remaining 21
investments made within the unquoted growth portfolio.
As noted in prior years, the composition of the portfolio
continues to shift towards one that is predominantly invested in
growth investments, particularly unquoted growth investments, in
line with current VCT regulations. As illustrated, the unquoted
growth investments have notably been growing in size year on
year.
As at the end of year, the unquoted growth investments made up
42% (2020: 29%) of the entire portfolio (excluding cash), with
quoted growth representing 28% (2020: 28%) and unquoted yield
focused making up the remaining 30% (2020: 43%) of the investment
portfolio.
As a result of the significant level of new investment activity
this year, the proportion of the portfolio in new investments has
increased, as illustrated below. This is expected to continue as we
make new growth investments going forward and exit from the
maturing portfolio.
With the newer investments tending now to be in younger unquoted
growth businesses, this does however mean that, as a result, the
associated risk level also increases. However, the potential
rewards from such investments are also much greater and the success
of these investments will in due course deliver future returns for
the Company.
Portfolio Performance
The performance of the portfolio over the year has produced an
unrealised gain of GBP7.6 million (2020: losses GBP20.8 million),
with the unquoted portfolio generating an unrealised gain of GBP1.2
million and the quoted portfolio generating an unrealised gain of
GBP6.4 million.
At the start of the pandemic the Company made provisions against
the valuations of many of the portfolio companies to allow for the
significant uncertainty created by the impact of the virus and
national lockdowns.
Despite the UK remaining in an effective lockdown for the
majority of the accounting year and the associated impacts on
businesses in the portfolio, the portfolio has recovered some of
the losses suffered in the prior year as highlighted above as some
investee companies have been able to modify their plans to operate
successfully in the challenging conditions.
As demonstrated the quoted portfolio has seen the most
significant recovery, with unrealised gains in the portfolio over
the year totalling GBP6.4 million. GBP719,000 of unrealised gains
have also been recorded in the unquoted growth portfolio and
GBP512,000 unrealised gains have been recognised in the unquoted
yield focused portfolio due in part to the reduction of provisions
suffered in the prior year. Despite these positives, there were
still a small number of write downs in the year as some businesses
have ultimately been unable to weather the unprecedented storm and
have been written down to nil. With many of the unquoted yield
focused investments trading within the hospitality sector, the
majority have been forced to close or significantly reduce
operations throughout the extended lockdown.
Further details on individual movements within the portfolio can
be found within the unquoted and quoted manager reports below.
At the year end, approximately 70% of the investment portfolio
is valued at or above cost, with the remainder being valued at less
than cost. The losses suffered have been heightened by the
coronavirus pandemic, however with regards to the newer unquoted
growth portfolio of investments, it is not unexpected to suffer
some losses at a relatively early stage as the vulnerable
businesses tend to become more apparent before the stronger
businesses prove themselves.
The largest unrealised gains in the quoted portfolio related to
Downing Strategic Micro-Cap Investment Trust plc (GBP1.6 million),
Anpario plc (GBP1.4 million) and Universe Group plc (GBP567,000).
An analysis of the unrealised gains and losses are detailed further
within the report on quoted investments below.
Within the unquoted portfolio, the largest unrealised gain was
in respect of one of the newer growth investments, Trinny London
Limited (GBP1.5 million), as well as one of the older yield-focused
investments, Downing Care Homes Holdings Limited (GBP1.4 million).
These gains were partially offset by unrealised losses, most
notably to Lignia Wood Company Limited (GBP1.2 million) and Avid
Technology Group Limited (GBP1.0 million), that both form part of
the unquoted growth portfolio.
Realised losses (over carrying value brought forward) in the
period totalled GBP195,000, with the most notable contributor being
unquoted growth company ADC Biotechnology Limited (loss of
GBP291,000) following its exit at the year end. However, it should
be noted that there is also an element of deferred consideration
due on the exit from ADC Biotechnology which is contingent on
certain events taking place. The most notable gain in the period
related to quoted company Inland Homes plc which generated a gain
over value of GBP69,000 following the partial exit during the
year.
Further details on these and other movements can be found within
the quoted and unquoted Investment Adviser Reports.
Income split
As demonstrated over the past three years income to the Company
has gradually decreased as the Company exits more of the older
yield focussed investments which loan interest up to the VCT.
As at the 31 March 2021, the Company received income of GBP1.3
million (2020: GBP2.2 million). Of this total, the quoted growth
dividends have remained relatively consistent over the prior
periods, totalling GBP357,000 at the end of 31 March 2021. The
receipts from the yield focussed investments for the year fell to
GBP754,000 (2020: GBP1.4 million), driven in part by the exit of
these investments as noted above, as well as the significant level
of provisions required against the outstanding interest balances
and their recoverability.
As the portfolio continues to shift away from yield focused
investments to more growth investments, we expect the income
generation to continue to reduce and replaced by capital
generation.
Portfolio Composition
With a significant number of new investments made in the year to
31 March 2021, the diversification of the portfolio continues.
As at the year end, the main sector in which the Company is
invested into is the Software and Computer Services sector,
following GBP8.9 million further investment made during the year,
with the sector now representing approximately 20% of the
investment portfolio. The most notable new investments into this
sector were StorageOS Inc (GBP3.0 million) and Parsable Inc (GBP1.5
million), with further details on these as well as all new
investments noted in the unquoted investment adviser's report
further below.
Exposure to the leisure sector, which includes pub companies,
has continued to fall from 10% to 7%, whereas, in addition to the
Software and Computer Services sector (noted above), there have
also been a large increase to the manufacturing sector, following a
significant new investment into Carbice Corporation (GBP3.0
million) resulting in the sector now making up 4% of the overall
portfolio.
At the period end, the Company held GBP10.7 million in cash,
which we expect to deploy into supporting the existing portfolio as
well any new investment opportunities that may arise.
Net asset value and results
The net asset value per Share ("NAV") at 31 March 2021 stood at
58.2p, compared to the NAV at 31 March 2020 of 57.6p. Total Return
(NAV plus cumulative dividends paid since the merger in 2013) is
96.95p, compared to the Total Return at 31 March 2020 of 93.1p.
The gain on ordinary activities after taxation for the year was
GBP6.2 million (2020: loss of GBP23.8 million), comprising a
revenue loss of GBP616,000 (2020: GBP2.1 million) and a capital
gain of GBP6.8 million (2020: loss of GBP21.7 million).
Outlook
The year to 31 March 2021 has been one of the most challenging
periods for the Company, with several portfolio companies suffering
the effects of the coronavirus pandemic.
However, it is promising to see a portion of the unrealised
investment losses previously incurred now recovering following
decisive action from the portfolio companies, in order to position
themselves more robustly for any further impact.
There have however been further setbacks in a small number of
the portfolio companies that have proved vulnerable to the
pandemic, although following the recent significant number of new
investments made, we believe there shall be good prospects in the
portfolio that can continue to drive improved performance.
Downing LLP
Investment Adviser's Report -- Unquoted Portfolio
We present a review of the unquoted investment portfolio for the
year ended 31 March 2021.
At 31 March 2021, the unquoted portfolio of 66 investments was
valued at GBP64.6 million. 40 of these with a value of GBP37.5
million are unquoted growth companies and 26 are unquoted yield
focused companies with a value of GBP27.1m.
Unquoted Growth
Investment activity
During the period, the Company has completed the highest rate of
investment over one financial year under the current VCT
regulations and has invested a total of GBP19.9 million in unquoted
growth companies, comprising 12 new opportunities and nine
follow-on investments.
The 12 new investments were as follows: -
Carbice Corporation (GBP3.0 million) is a nanotechnology company
developing technologies to dissipate heat from electronic devices
such as phones and satellites that improve performance and
safety.
StorageOS Inc (GBP3.0 million) is an emerging leader in cloud
native storage management. Its patent protected software allows its
customer to take advantage of the cloud from the beginning of the
software development lifecycle.
Cornelis Networks Inc (GBP2.1 million) a spin out from Intel
Corporation provides purpose-built interconnects focused on
high-performance computing, data analytics and artificial
intelligence. The Company's technology allows the processing of
huge volume of calculations at high speed.
Parsable Inc (GBP1.5 million) is a leading provider of software
to manufacturing industries. Its Connected Worker platform helps
improve safety, quality and productivity by connecting and
empowering frontline workers to optimise processes and execute work
more quickly, reducing waste and improving safety.
Glisser Limited (GBP1.3 million) is an award-winning event
hosting platform for virtual and in-person events. The Company's
software extends event attendance and engagement through the
combination of on-line and physical events.
Ayar Labs Inc (GBP1.3 million) has developed components for high
performance computing and data centre applications to deliver
better bandwidth, better power, and better latency
Maestro Media Limited (GBP1.0 million) has developed an online
streaming platform in collaboration with the BBC, that offers
consumers personal and insightful lessons from leading creative
talents such as David Walliams, Gary Barlow and Malorie
Blackman.
Genincode UK Limited (GBP600,000) uses Artificial Intelligence
to combine genetic and clinical data to risk assess patients and
provide healthcare practitioners with clinical information to
evaluate and predict the onset of cardiovascular disease.
Vivacity Labs Limited (GBP500,000) provides Artificial
Intelligence enabled sensors to monitor and control traffic flows
thereby reducing journey times, congestion and pollution.
Trinny London Limited (GBP443,000) is an e-commerce-based
premium beauty and cosmetics brand launched by Trinny Woodall.
Cambridge Respiratory Innovations Limited (GBP250,000) has
developed a patent-protected ultra-high sensitivity handheld
capnometer to provide actionable insights at the point of care for
the diagnosis, monitoring and management of cardiorespiratory
conditions.
MIP Diagnostics Limited (GBP150,000) is a manufacturer of
polymer based synthetic antibodies that provide a viable
alternative to antibodies for diagnostic immunoassays which are
used across a variety of sectors including diagnostics, sensors,
food testing and reagent purification.
Follow on investments totalling GBP4.7 million were made into
nine companies, most notably Hummingbird Technologies Limited
(GBP1.75 million), Empiribox Limited (GBP935,000) and
FundingXchange Limited (GBP525,000).
Details of the investment realisations during the year are set
out below. Total proceeds of GBP1.7 million were generated from
unquoted growth companies, producing a loss over holding value of
GBP236,000.
The largest realisation in the period related to BridgeU
Corporation, an educational technology business, that was sold
during the period, generating proceeds of GBP462,000, resulting in
a gain over holding value of GBP48,000.
Empiribox Limited is the provider of equipment and training to
primary schools across the UK. During the year the existing
convertible loan note was converted into further qualifying equity,
resulting in a loss over cost of GBP325,000.
Portfolio valuation
The unquoted growth portfolio faced a difficult 12 months for
relatively young companies as a result of the unparalleled
coronavirus pandemic. However, as a result of management actions
and continued support from the investment adviser the performance
overall for the year was positive, with an uplift in value of
GBP719,000. The most significant movements are noted below:
Trinny London Limited, the e-commerce-based beauty and cosmetics
brand, has been uplifted by GBP1.5 million at the period end as a
result of the company performing ahead of budget.
E-Fundamentals (Group) Limited, a Software as a Service (SaaS)
analytics company, was uplifted in value by GBP1.1 million
following strong revenue growth in both the UK and US markets.
Virtual Class Limited, trading as Third Space Learning, has been
increased in value by GBP1.0 million reflecting recent improvements
in financial performance driven by increased demand for remote
teaching solutions.
Imagen Limited, the developer of a cloud-based enterprise video
platform, continues to have a strong revenue pipeline and has
performed ahead of budget. As a result, the value has been uplifted
by GBP828,000 at the year end.
Xupes Limited, an online retailer of pre-owned luxury goods
including designer watches and handbags was previously written down
to nil following uncertainty over its future. However, a sales
process is currently underway, and the value has been uplifted in
line with expected exit proceeds.
As noted above, there were some setbacks to a small number of
the more vulnerable businesses within the portfolio, which has
offset the unrealised gains recognised at the period end.
Lignia Wood Company, a producer of modified sustainable wood,
which is amongst other applications used in yacht building,
suffered the largest write down in the period. Since the start of
the pandemic, Lignia suffered a significant reduction in demand. We
are now unlikely to support a further investment in the company and
it may ultimately fail. As a result, the company has been written
down in full to nil, which has resulted in an unrealised loss of
GBP1.2 million this year.
Avid Technology Group Limited, a manufacturer of electrified
ancillary equipment for internal combustion engines, has suffered
significant delays to a planned sale of the company due to economic
uncertainty, and therefore has been written down by GBP1.0 million
to nil.
Unquoted Yield Focused
Investment activity
During the period, the Company made no new investments into this
portfolio, however it generated total proceeds of GBP444,000 from
disposals, producing a disappointing loss of GBP1.2 million over
cost. Details of the realisations in the year are set out
below.
The largest realisation related to Pearce and Saunders Limited,
a freehold pub business who redeemed part of their loan notes
during the period, receiving proceeds of GBP440,000.
Quadrate Spa Limited, which owns and operates a health club in
The Cube complex in Birmingham has sold the non-qualifying element
of its investment which was previously written down to nil
following the collapse of a planned sale and leaseback transaction.
This has resulted in a loss over cost of GBP1.5 million.
Portfolio valuation
The unquoted yield focused portfolio experienced a mixed year
with the overall unrealised movement producing an unrealised gain
of GBP512,000. The most significant movements are as follows:
Downing Care Homes Holdings Limited, which owns four specialist
care homes, generated the largest unrealised gain over the period
of GBP1.4 million. This was largely due to the effective control of
the virus, so that there was only a limited impact on staff and
residents. As a consequence, a provision against the valuation of
the group (taken in March 2020) was released resulting in the
increase in value.
The next largest unrealised gain in the period related to
Kimbolton Lodge Limited, the care home in Bedford which was valued
up by GBP151,000 in the year on the back of stronger than expected
trading.
Despite these positives in the portfolio, some of the investee
companies were unable to avoid the disruptive effects caused by the
coronavirus pandemic.
Pearce and Saunders Limited, a freehold pub business has
suffered the largest setback in the yield focussed portfolio. As a
result of the ongoing pandemic and the prolonged lockdown
restrictions imposed on the hospitality sector in the UK, the
investment has been written down by GBP729,000 to reflect the
closure of the site for the majority of the period as well as the
anticipated impact on future revenue and profits.
Indigo Generation Limited and Ironhide Generation Limited are
both developing solar farms on adjacent land in India. As at the
year-end both companies have been written down in full by
GBP291,000 each. The principal factor for the decrease is due to
the reduction in the current and future prices that are anticipated
to be achieved from the sale of electricity produced by the sites.
The Adviser continues to support the companies, however given
prevailing energy prices there is no material prospect of any
recovery in the value of the equity.
Conclusion and outlook
The year to 31 March 2021 has been one of the most difficult
following the extraordinary situation experienced throughout the
world which has severely impacted the UK and Worldwide
economies.
In spite of this we have seen businesses in the portfolio
quickly adapt to move forward as well as seeing a number of new
opportunities arise which has led to a significant level of
additions in the year. We feel that the unquoted portfolio is well
diversified and take encouragement with the unrealised gains
recognised at the year end and the recovery of some of the losses
suffered in the prior year.
We continue to remain optimistic that the underlying businesses
within the portfolio can improve performance and shall continue to
assist management teams along their journey.
Downing LLP
Investment Adviser's Report - Quoted Growth Portfolio
Investment activity
At 31 March 2021 the quoted portfolio was valued at GBP24.6
million comprising 32 active investments.
The financial year to 31 March 2021 was a very challenging
period. The impact of the Covid-19 pandemic wreaked havoc globally,
with markets in March 2020 crashing to their lowest levels since
the Global Financial Crisis. Against a very difficult backdrop, it
is encouraging to report that the quoted portfolio made positive
progress in the six months from the halfway point of the accounting
year. Of the 32 listed holdings, all made gains other than three
which returned minor losses.
The quoted portfolio saw some change during the period, with new
investments made into five qualifying securities. The Company made
purchases in Deepmatter Group Plc, Feedback Plc, Oncimmune Holdings
Plc, One Media IP Group and Pelatro Plc were added to the quoted
portfolio. There were partial sales in Angle Plc, Vianet Group Plc
and the Downing UK Micro-Cap Growth Fund as the fund was wound
down. There were full exits made in Inland Homes Plc and Science in
Sport Plc.
Overall, the quoted portfolio produced unrealised gains of
GBP6.4 million. The most notable movements in the portfolio over
the period are discussed below.
Portfolio Movements
The main positive contributor to performance was the Downing
Strategic Micro-Cap Investment Trust (DSM), which increased the
value of the portfolio by GBP1.6 million. In its results for the
year ended 28 February 2021 the board highlighted that the Company
is a focused portfolio of actively managed investments with clear
catalysts in place, with the majority of the holdings now all in
either late stage turnaround or growth phase. During the period,
the NAV increased by 26% and there was a 22% increase in the share
price. The board reported that the portfolio is at 43% discount to
the manager's base case intrinsic value and a return of positive
sentiment to UK small company value could further enhance this. The
investee companies are all well financed and should benefit from
the end of lockdown and a return to more normalised trading
conditions. Importantly, post its reporting period end, there was a
significant return of capital, interest, and redemption premium,
reducing the exposure to the turnaround of Real Good Food Plc
(subject to shareholder approval by Real Good Food plc).
The Managers are focused, alongside strong management teams, on
the catalysts in the portfolio which has now matured into a
collection of well-run and relevant businesses. The sentiment
towards value is improving, and there is now more of a focus on UK
small cap which has been out of favour with investors for many
years. There is a strong work in progress list of potential new
investments which will be executed in the short term.
Anpario Plc is an independent manufacturer of natural
sustainable animal feed additives for animal health, nutrition and
biosecurity. The group is the second largest holding in the quoted
portfolio and contributed GBP1.5 million of unrealised gains in the
period. The group announced its full year results for the twelve
months to 31 December 2020, and highlighted a 5% increase in
revenue, a 9% increase in gross profit, and 22% increase in profit
before tax. Operationally, there was strong performance helped by
quick implementation of Covid-19 response plans. This was alongside
growth in sales growth in the Americas, Europe, and China,
particularly through the company's own subsidiaries. The board
reported that these results reflect the group's best operating
performance to date, notwithstanding that 2020 was an extremely
challenging year. The resilience of Anpario's systems and operating
procedures have meant that the company was able to operate as near
normal as possible, ensuring customers did not experience
disruption in supply. The current financial year has started well,
building on momentum from 2020. The global sales team is supporting
customers and the group is continuing online customer meetings,
technical training and business development effectively.
Universe Group Plc, a developer and supplier of retail
management solutions, payment, and loyalty systems, also made a
positive contribution to the portfolio, delivering an unrealised
gain of GBP567,000. In its results for the year ended 31 December
2020, the group reported that while total revenues decreased
compared to the same period the year prior, this decrease reflected
the Covid-19 down-turn in customer fuel retailing activities, with
recovery expected in 2021. The board stated that as 2020 unfolded,
Universe took all the necessary steps to sustain its customers,
employees and operations, in what was a very unpredictable
environment.
It closed the year with a business which, by delivering
commendable financial results, has proven its value to the
marketplace in the toughest of times. The group won new, multi-year
contracts with key payment clients and was awarded a major contract
extension for a loyalty customer. There was a delay in the rollout
of a payments project for a substantial grocery customer and the
slowdown of some early-stage engagement in its latest generation of
retail management solutions. However, the board believes this
slowdown will reverse as the UK recovers from the pandemic
restrictions and convenience retailers regain their management
bandwidth to install more advanced, insightful software that the
group's latest offerings provide.
There were three small losses in the portfolio in the period.
Pelatro Plc was a negative contributor, reducing the value of the
portfolio by GBP59,000. Pelatro, a precision marketing software
specialist, announced its results for the year ended 31 December
2020. Financial highlights included a reduction in revenue to $4.02
million (2019: $6.67 million) as result of switch of focus to
recurring revenue, which increased to 71% of revenue (2019: 44%).
An equity placing raised $2.6 million to invest in the business. It
has a strong balance sheet with gross cash as at 31 December 2020
$1.81 million, up from $1.10 million in 2019. Despite the
challenges ahead, the board is positive in its outlook, citing its
substantial order book and current contracted revenue visibility
for FY21 of $6.0 million, of which $5.2 million is recurring. The
board believes that the company ended 2020 in a much stronger
position, with a substantial order book and good visibility over
revenues for the coming year. The start of the second phase of its
journey into the mobile advertising space is particularly exciting
as an area complementary to its existing operations. It is
confident in meeting customers' requirements, growing the business
and meeting financial expectations for the year. Post reporting
period end, the group announced new contract wins which will
further help visibility for 2021.
Pittards Plc was also negative contributor, reducing the value
of the portfolio by GBP11,000. Pittards is a specialist producer of
technically advanced leather and luxury leather goods for
retailers, manufacturers, and distributors. The group announced its
results for the year ended 31 December 2020 and reported that while
revenues were down for the full year, there had been a marked
improvement in the second half.
The board reported that the group entered 2021 stronger, with a
more diverse and flexible business, ready to take full advantage of
opportunities in its markets. It remains too early to judge how
strong the recovery will be, but on balance, management see more
reason to be positive that it can make further progress to build on
the momentum of the second half of last year, starting the year
with stronger demand from customers.
Outlook
Despite the challenges and disruption caused by the pandemic,
the Adviser is encouraged by the progress achieved by the quoted
portfolio, particularly over the last six months of the reporting
period. Improved sentiment towards UK assets following the
resolution of Brexit and the successful vaccine rollout should
provide a tailwind going forward. The Adviser has engaged with
management teams throughout the last year and is impressed with the
measures adopted to weather the crisis and survive post-pandemic.
Many are now leaner, fitted and better positioned to develop and
grow. Although the long term consequences of Covid-19 are still
unknown and undoubtably there will be further challenges ahead, the
Adviser remains cautiously optimistic that the quoted portfolio
contains a diversified range of quality companies with strong
balance sheets that will deliver long-term, sustained growth in
shareholder value.
Downing LLP
Review of Investments
Portfolio of investments
The following investments, all of which are incorporated in
England and Wales, were held at 31 March 2021:
Total value of
other funds
Valuation % of also managed
movement portfolio by Downing
Cost Valuation in year by value LLP (1)
GBP'000 GBP'000 GBP'000 GBP'000
Quoted growth
investments
----------------- ------- ---------- ---------- ---------- --------------
Tracsis plc* 1,443 4,932 424 4.9% 3,790
----------------- ------- ---------- ---------- ---------- --------------
Downing Strategic
Micro-Cap
Investment Trust
plc*** 5,197 3,816 1,590 3.8% 3,672
----------------- ------- ---------- ---------- ---------- --------------
Anpario plc* 1,448 3,402 1,484 3.4% 2,725
----------------- ------- ---------- ---------- ---------- --------------
Impact
Healthcare
REIT plc*** 1,518 1,631 329 1.6% 1,136
----------------- ------- ---------- ---------- ---------- --------------
Craneware plc* 353 1,573 182 1.6% 901
----------------- ------- ---------- ---------- ---------- --------------
Inland Homes
plc* 1,311 1,468 367 1.5% 2,262
----------------- ------- ---------- ---------- ---------- --------------
Universe Group
plc* 1,506 1,276 567 1.3% 706
----------------- ------- ---------- ---------- ---------- --------------
Cohort plc* 394 1,148 283 1.1% -
----------------- ------- ---------- ---------- ---------- --------------
Vianet Group plc* 756 693 126 0.7% -
----------------- ------- ---------- ---------- ---------- --------------
Angle plc* 570 627 243 0.6% -
----------------- ------- ---------- ---------- ---------- --------------
Immotion Group
plc* 500 607 330 0.6% -
----------------- ------- ---------- ---------- ---------- --------------
Pittards plc* 1,350 495 (11) 0.5% 299
----------------- ------- ---------- ---------- ---------- --------------
Deepmatter
Group plc* 350 467 117 0.5% -
----------------- ------- ---------- ---------- ---------- --------------
Brooks
Macdonald
Group plc* 257 362 111 0.4% 1,676
----------------- ------- ---------- ---------- ---------- --------------
Feedback plc* 250 300 50 0.3% -
----------------- ------- ---------- ---------- ---------- --------------
Oncimmune
Holdings plc* 278 299 20 0.3% -
----------------- ------- ---------- ---------- ---------- --------------
SysGroup plc* 377 238 69 0.2% 950
----------------- ------- ---------- ---------- ---------- --------------
Pelatro plc* 290 231 (59) 0.2% -
----------------- ------- ---------- ---------- ---------- --------------
Pennant
International
Group plc* 335 188 23 0.2% -
----------------- ------- ---------- ---------- ---------- --------------
One Media Group
IP plc* 175 175 - 0.2% -
----------------- ------- ---------- ---------- ---------- --------------
Frontier IP
Group plc* 30 162 25 0.2% -
----------------- ------- ---------- ---------- ---------- --------------
Norman
Broadbent
plc* 906 151 - 0.1% 542
----------------- ------- ---------- ---------- ---------- --------------
Bonhill Group
plc* 1,000 150 75 0.1% 1,238
----------------- ------- ---------- ---------- ---------- --------------
Dillistone
Group plc* 411 74 14 0.1% -
----------------- ------- ---------- ---------- ---------- --------------
Pressure
Technologies
plc* 249 58 - 0.1% -
----------------- ------- ---------- ---------- ---------- --------------
Fireangel
Safety
Technology
Group plc* 545 49 6 0.0% 3,118
----------------- ------- ---------- ---------- ---------- --------------
MI Downing UK
Micro-Cap
Growth
Fund*** 7 6 1 0.0% 477
----------------- ------- ---------- ---------- ---------- --------------
Wheelsure
Holdings
plc** 48 4 4 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
AIQ Limited - 2 (4) 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Golden Rock
Global plc*** - 1 - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Flowgroup plc* 207 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
ACHP plc* 61 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
22,122 24,585 6,366 24.5% 23,492
------------------------- ---------- ---------- ---------- --------------
Unquoted growth
investments
----------------- ------- ---------- ---------- ---------- --------------
Carbice
Corporation 3,020 2,830 (190) 2.8% 1,564
----------------- ------- ---------- ---------- ---------- --------------
StorageOS Inc 2,970 2,787 (183) 2.8% 1,226
----------------- ------- ---------- ---------- ---------- --------------
E-Fundamentals
(Group)
Limited 1,342 2,408 1,067 2.4% 3,353
----------------- ------- ---------- ---------- ---------- --------------
Hummingbird
Technologies
Limited 2,250 2,253 85 2.3% 2,164
----------------- ------- ---------- ---------- ---------- --------------
Virtual Class
Limited 1,164 1,974 1,042 2.0% 2,711
----------------- ------- ---------- ---------- ---------- --------------
Cornelis Networks
Inc 2,102 1,961 (141) 2.0% 2,397
----------------- ------- ---------- ---------- ---------- --------------
Trinny London
Limited 443 1,935 1,492 1.9% 11,109
----------------- ------- ---------- ---------- ---------- --------------
Imagen Limited 1,000 1,828 828 1.8% 3,657
----------------- ------- ---------- ---------- ---------- --------------
Rated People
Limited 1,282 1,584 301 1.6% 3,484
----------------- ------- ---------- ---------- ---------- --------------
StreetHub Limited 1,366 1,431 14 1.4% 4,283
----------------- ------- ---------- ---------- ---------- --------------
Parsable Inc 1,532 1,357 (175) 1.3% 1,912
----------------- ------- ---------- ---------- ---------- --------------
Glisser Limited 1,300 1,300 - 1.3% 3,838
----------------- ------- ---------- ---------- ---------- --------------
Ayar Labs Inc 1,280 1,235 (45) 1.2% 1,671
Curo Compensation
Limited 1,663 1,095 (47) 1.1% 167
FundingXchange
Limited 1,050 1,050 - 1.1% 2,450
Firefly Learning
Limited 1,047 1,047 - 1.0% 2,271
Ecstase Limited 1,000 1,000 - 1.0% 2,081
Maestro Media
Limited 1,000 1,000 - 1.0% 3,057
----------------- ------- ---------- ---------- ---------- --------------
Limitless
Technology
Limited 757 920 118 0.9% 2,897
----------------- ------- ---------- ---------- ---------- --------------
Hackajob Limited 784 784 - 0.8% 784
----------------- ------- ---------- ---------- ---------- --------------
Masters of Pie
Limited 667 667 - 0.7% 2,304
----------------- ------- ---------- ---------- ---------- --------------
Empiribox
Holdings
Limited 1,813 607 (327) 0.6% 422
----------------- ------- ---------- ---------- ---------- --------------
Genincode UK
Limited 600 600 - 0.6% 900
----------------- ------- ---------- ---------- ---------- --------------
JRNI Limited 525 525 - 0.5% 2,815
----------------- ------- ---------- ---------- ---------- --------------
Vivacity Labs
Limited 500 500 - 0.5% 1,786
----------------- ------- ---------- ---------- ---------- --------------
Xupes Limited 2,250 459 459 0.5% 291
----------------- ------- ---------- ---------- ---------- --------------
Lineten Limited 750 392 (358) 0.4% 392
----------------- ------- ---------- ---------- ---------- --------------
Exonar Limited 550 379 (171) 0.4% 743
----------------- ------- ---------- ---------- ---------- --------------
Cambridge Touch
Technologies
Limited 459 361 - 0.4% 1,749
----------------- ------- ---------- ---------- ---------- --------------
Channel Mum
Limited 675 278 (197) 0.3% 278
----------------- ------- ---------- ---------- ---------- --------------
FVRVS Limited 250 250 - 0.3% 1,814
----------------- ------- ---------- ---------- ---------- --------------
Cambridge
Respiratory
Innovations
Limited 250 250 - 0.3% 1,042
----------------- ------- ---------- ---------- ---------- --------------
Upp Technologies
Group Limited 1,077 242 (566) 0.2% 242
----------------- ------- ---------- ---------- ---------- --------------
MIP Diagnostics
Limited 150 150 - 0.2% 717
----------------- ------- ---------- ---------- ---------- --------------
Ludorum plc 177 7 - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Avid Technology
Group Limited 1,833 - (1,037) 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Lignia Wood
Company Limited 1,778 - (1,250) 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Glownet Limited 741 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Live Better With
Limited 990 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Resource Reserve
Recovery
Limited 6 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
44,393 37,446 719 37.6% 72,571
----------------- ------- ---------- ---------- ---------- --------------
Unquoted yield
focused
investments
----------------- ------- ---------- ---------- ---------- --------------
Doneloans Limited 5,000 5,717 227 5.7% -
----------------- ------- ---------- ---------- ---------- --------------
Downing Care
Homes Holdings
Limited 3,880 5,526 1,409 5.5% -
----------------- ------- ---------- ---------- ---------- --------------
Baron House
Developments
LLP 2,695 3,234 - 3.2% 2,466
----------------- ------- ---------- ---------- ---------- --------------
Harrogate Street
LLP 1,400 2,057 - 2.1% -
----------------- ------- ---------- ---------- ---------- --------------
Pilgrim Trading
Limited 2,594 2,054 (67) 2.1% 1,381
----------------- ------- ---------- ---------- ---------- --------------
Cadbury House
Holdings
Limited 3,081 1,801 52 1.8% 791
----------------- ------- ---------- ---------- ---------- --------------
Data Centre
Response
Limited 557 1,316 8 1.3% -
----------------- ------- ---------- ---------- ---------- --------------
Nomansland Biogas
Limited 1,300 1,300 - 1.3% 901
----------------- ------- ---------- ---------- ---------- --------------
Kimbolton Lodge
Limited 664 966 151 1.0% -
----------------- ------- ---------- ---------- ---------- --------------
Fenkle Street LLP 346 872 (28) 0.9% 1,730
----------------- ------- ---------- ---------- ---------- --------------
Downing Pub EIS
ONE Limited 490 568 20 0.6% 6,622
----------------- ------- ---------- ---------- ---------- --------------
Fresh Green Power
Limited 378 564 102 0.6% 842
----------------- ------- ---------- ---------- ---------- --------------
Pearce & Saunders
Limited 1,210 338 (729) 0.3% 430
----------------- ------- ---------- ---------- ---------- --------------
SF Renewables
(Solar) Limited 422 318 (23) 0.3% 5,113
----------------- ------- ---------- ---------- ---------- --------------
Rockhopper
Renewables
Limited 738 278 (54) 0.3% 1,436
----------------- ------- ---------- ---------- ---------- --------------
Green Energy
Production UK
Limited 200 133 26 0.1% 200
----------------- ------- ---------- ---------- ---------- --------------
Pearce & Saunders
DevCo Limited 84 84 - 0.1% 106
----------------- ------- ---------- ---------- ---------- --------------
Yamuna Renewables
Limited 2,500 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Jito Trading
Limited 2,500 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Quadrate Catering
Limited 1,500 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Indigo Generation
Limited 920 - (291) 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Ironhide
Generation
Limited 920 - (291) 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Top Ten Holdings
plc 399 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
Quadrate Spa
Limited 372 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
The Thames Club
Limited 175 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
London City
Shopping Centre
Limited 110 - - 0.0% -
----------------- ------- ---------- ---------- ---------- --------------
34,435 27,126 512 27.2% 22,018
----------------- ------- ---------- ---------- ---------- --------------
Total investments 100,950 89,157 7,597 89.3% 118,081
----------------- ------- ---------- ---------- ---------- --------------
Cash at bank and
in hand 10,738 10.7%
----------------- ------- ---------- ---------- ---------- --------------
99,895 100.0%
----------------- ------- ---------- ---------- ---------- --------------
The Company also holds investments in Golden Rock Global plc and
Mining, Minerals & Metals plc (which does not show in the
previous table). These investments were acquired in prior periods
at negligible value as a result of reorganisations of other
investments and continued to be valued at the same level.
All venture capital investments are unquoted unless otherwise
stated.
* Quoted on AIM
** Quoted on the Aquis Stock Exchange Growth Market
*** Quoted on the Main Market of the London Stock Exchange
(1) Other self-managed and discretionary managed funds also
managed by Downing LLP as Investment Manager or Adviser (excluding
Downing ONE VCT plc) as at 31 March 2021:
- Downing TWO VCT plc
- Downing THREE VCT plc
- Downing FOUR VCT plc
- MI Downing UK Micro-Cap Growth Fund
- MI Downing Monthly Income Fund
- Downing Strategic Micro-Cap Investment Trust plc
- Downing AIM Estate Planning Service and Downing AIM NISA
- VT Downing Unique Opportunities Fund
- Downing Renewables EIS
- Downing Indian Solar EIS
- Downing Ventures EIS
- Downing Pub EIS
- Downing EIS
Investment movements for the year ended 31 March 2021
Additions
GBP'000
------------------------------------------ -------
Quoted growth investments
------------------------------------------ -------
Deepmatter Group plc 350
------------------------------------------ -------
Pelatro plc 290
------------------------------------------ -------
Oncimmune Holdings plc 278
------------------------------------------ -------
Feedback plc 250
------------------------------------------ -------
Immotion Group plc 200
------------------------------------------ -------
One Media Group IP plc 175
------------------------------------------ -------
1,543
------------------------------------------ -------
Unquoted growth investments
------------------------------------------ -------
Carbice Corporation 3,020
------------------------------------------ -------
StorageOS Inc 2,970
------------------------------------------ -------
Cornelis Networks Inc 2,102
------------------------------------------ -------
Hummingbird Technologies Limited 1,750
------------------------------------------ -------
Parsable Inc 1,532
------------------------------------------ -------
Glisser Limited 1,300
------------------------------------------ -------
Ayar Labs Inc 1,280
------------------------------------------ -------
Maestro Media Limited 1,000
------------------------------------------ -------
Empiribox Holdings Limited 935
------------------------------------------ -------
Genincode UK Limited 600
------------------------------------------ -------
FundingXchange Limited 525
------------------------------------------ -------
Vivacity Labs Limited 500
------------------------------------------ -------
Channel Mum Limited 475
------------------------------------------ -------
Trinny London Limited 443
------------------------------------------ -------
StreetHub Limited 316
------------------------------------------ -------
Virtual Class Limited 250
------------------------------------------ -------
Cambridge Respiratory Innovations Limited 250
------------------------------------------ -------
Curo Compensation Limited 245
------------------------------------------ -------
ADC Biotechnology Limited 167
------------------------------------------ -------
MIP Diagnostics Limited 150
------------------------------------------ -------
Exonar Limited 50
------------------------------------------ -------
19,860
------------------------------------------ -------
21,403
------------------------------------------ -------
Disposals
Profit/ Realised
Value at (loss) vs gain/
Cost 01/04/20* Proceeds cost (loss)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---------- ---------------- -------- --------- --------
Quoted growth investments
------------------------- ---------- ---------------- -------- --------- --------
Inland Homes plc 216 181 250 34 69
------------------------- ---------- ---------------- -------- --------- --------
Angle plc 108 82 103 (5) 21
------------------------- ---------- ---------------- -------- --------- --------
MI Downing UK Micro-Cap
Growth Fund 43 24 32 (11) 8
------------------------- ---------- ---------------- -------- --------- --------
Redhall Group plc 500 - - (500) -
------------------------- ---------- ---------------- -------- --------- --------
Flowgroup plc 178 - - (178) -
------------------------- ---------- ---------------- -------- --------- --------
Vianet plc 196 166 139 (57) (27)
------------------------- ---------- ---------------- -------- --------- --------
Science in Sport plc 1,239 611 581 (658) (30)
------------------------- ---------- ---------------- -------- --------- --------
2,480 1,064 1,105 (1,375) 41
------------------------- ---------- ---------------- -------- --------- --------
Unquoted growth investments (including loan note
redemptions)
------------------------------------------------------- -------- --------- --------
BridgeU Corporation 810 414 462 (348) 48
------------------------- ---------- ---------------- -------- --------- --------
FCT No.1 Limited 228 298 305 77 7
------------------------- ---------- ---------------- -------- --------- --------
Empiribox Holdings
Limited 650 325 325 (325) -
------------------------- ---------- ---------------- -------- --------- --------
Channel Mum Limited 300 300 300 - -
------------------------- ---------- ---------------- -------- --------- --------
ADC Biotechnology Limited 588 588 297 (291) (291)
------------------------- ---------- ---------------- -------- --------- --------
2,576 1,925 1,689 (887) (236)
------------------------- ---------- ---------------- -------- --------- --------
Unquoted yield focused investments (including loan
note redemptions)
------------------------------------------------------- -------- --------- --------
Pearce & Saunders Limited 110 440 440 330 -
------------------------- ---------- ---------------- -------- --------- --------
Pearce & Saunders DevCo
Limited 4 4 4 - -
------------------------- ---------- ---------------- -------- --------- --------
Quadrate Spa Limited 1,500 - - (1,500) -
------------------------- ---------- ---------------- -------- --------- --------
1,614 444 444 (1,170) -
------------------------- ---------- ---------------- -------- --------- --------
6,670 3,433 3,238 (3,432) (195)
------------------------- ---------- ---------------- -------- --------- --------
* Adjusted for purchases in the year where applicable
Directors' responsibilities statement
The Directors are responsible for preparing the Strategic
Report, the Report of the Directors, the Directors' Remuneration
Report, the separate Corporate Governance Statement and the
financial statements in accordance with applicable law and
regulations. They are also responsible for ensuring that the annual
report includes information required by the Listing Rules of the
Financial Conduct Authority.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements 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). Under
company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period.
In preparing these financial statements, the Directors are
required to:
- select suitable accounting policies and then apply them
consistently;
- make judgments and accounting estimates that are reasonable
and prudent;
- state whether the financial statements have been prepared in
accordance with applicable UK Accounting Standards, subject to any
material departures disclosed and explained in the financial
statements;
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
- prepare a Directors' Report, Strategic Report and Directors'
Remuneration Report which comply with the requirements of the
Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions, and to disclose with reasonable accuracy at any time
the financial position of the Company and to enable them to ensure
that the financial statements comply with the Companies Act
2006.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
In addition, each of the Directors considers that the Annual
Report, taken as a whole, is fair, balanced and understandable and
provides the information necessary to assess the Company's
position, performance, business model and strategy.
Income Statement for the year ended 31 March 2021
Year ended 31 March 2021 Year ended 31 March 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------- ------- ------- -------- -------- --------
Income 1,333 - 1,333 2,118 100 2,218
----------------- ------- ------- ------- -------- -------- --------
Gains/(losses) on
investments - 7,402 7,402 - (21,094) (21,094)
----------------- ------- ------- ------- -------- -------- --------
1,333 7,402 8,735 2,118 (20,994) (18,876)
---------------- ------- ------- ------- -------- -------- --------
Investment
management
fees (817) (817) (1,634) (970) (970) (1,940)
----------------- ------- ------- ------- -------- -------- --------
Other expenses (900) - (900) (3,000) - (3,000)
----------------- ------- ------- ------- -------- -------- --------
Return/(loss)
on ordinary
activities
before tax (384) 6,585 6,201 (1,852) (21,964) (23,816)
----------------- ------- ------- ------- -------- -------- --------
Tax on total
comprehensive
income and
ordinary
activities (232) 232 - (257) 257 -
----------------- ------- ------- ------- -------- -------- --------
Return/(loss)
attributable
to equity
shareholders (616) 6,817 6,201 (2,109) (21,707) (23,816)
----------------- ------- ------- ------- -------- -------- --------
Basic and
diluted
return/(loss)
per share (0.4) 4.4 4.0 (1.6) (16.1) (17.7)
----------------- ------- ------- ------- -------- -------- --------
The total column within the Income Statement represents the
Statement of Total Comprehensive Income of the Company prepared in
accordance with Financial Reporting Standards ("FRS 102"). There
are no other items of comprehensive income. The supplementary
revenue and capital return columns are prepared in accordance with
the Statement of Recommended Practice issued in November 2014 and
updated in October 2019 by the Association of Investment Companies
("AIC SORP").
Statement of Changes in Equity for the year ended 31 March
2021
Funds
held in
respect
Called Capital Share of shares Capital
up Share redemption premium not yet Special reserve Revaluation Revenue
Capital reserve account allotted reserve realised reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
For the year ended 31 March 2020
-------------------------------------- -------- ---------- -------- --------- ----------- -------- --------
At 1 April
2019 1,334 1,597 45,515 114 52,526 - 1,343 2,121 104,550
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Total
comprehensive
income - - - - - (917) (20,790) (2,109) (23,816)
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Realisation of
revaluations
from previous
years* - - - - - 2,488 (2,488) - -
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Realisation of
impaired
valuations - - - - - (13,431) 13,431 - -
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Transfer
between
reserves* - - - - (16,499) 16,499 - - -
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Transactions
with owners
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Dividends
paid - - - - - (4,639) - (886) (5,525)
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Utilised in
share
issue - - - (114) - - - - (114)
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Unallotted
shares - - - 5,775 - - - - 5,775
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Issue of new
shares 124 - 9,188 - - - - - 9,312
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Share issue
costs - - - - (151) - - - (151)
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Purchase of
own
shares** (18) 18 - - (1,289) - - - (1,289)
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
At 31 March
2020 1,440 1,615 54,703 5,775 34,587 - (8,504) (874) 88,742
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
For the year ended 31 March 2021
-------------------------------------- -------- ---------- -------- --------- ----------- -------- --------
At 1 April
2020 1,440 1,615 54,703 5,775 34,587 - (8,504) (874) 88,742
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Total
comprehensive
income - - - - - (780) 7,597 (616) 6,201
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Realisation of
revaluations
from previous
years* - - - - - (1,735) 1,735 - -
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Realisation of
impaired
valuations - - - - - (5,581) 5,581 - -
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Transfer
between
reserves* - - - - (12,197) 12,197 - - -
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Transactions
with owners
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Dividends
paid - - - - - (4,101) - (1,039) (5,140)
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Utilised in
share
issue - - - (5,775) - - - - (5,775)
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Unallotted
shares - - - 7,545 - - - - 7,545
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Issue of new
shares 205 - 11,727 - - - - - 11,932
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Share issue
costs - - - - (286) - - - (286)
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
Purchase of
own
shares** (34) 34 - - (1,866) - - - (1,866)
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
At 31 March
2021 1,611 1,649 66,430 7,545 20,238 - 6,409 (2,529) 101,353
-------------- --------- ----------- -------- ---------- -------- --------- ----------- -------- --------
* A transfer of GBP1,735,000 representing previously recognised
unrealised losses on disposal of investments during the year ended
31 March 2021 (2020: gains GBP2,488,000) has been made from the
Revaluation reserve to the Capital Reserve-realised. A transfer of
GBP12.2 million representing realised gains on disposal of
investments, less net investment impairments and the excess of
capital expenses over capital income and capital dividends in the
year (2020: GBP16.5 million) has been made from the Special reserve
to the Capital Reserve -- realised.
** These shares were subsequently cancelled.
Balance Sheet
as at 31 March 2021
2021 2020
GBP'000 GBP'000
--------------------------------------------------- ------- -------
Fixed assets
--------------------------------------------------- ------- -------
Investments 89,157 63,590
----------------------------------------------------- ------- -------
Current assets
--------------------------------------------------- ------- -------
Debtors 2,001 1,944
----------------------------------------------------- ------- -------
Cash at bank and in hand 10,738 23,471
----------------------------------------------------- ------- -------
12,739 25,415
--------------------------------------------------- ------- -------
Creditors: amounts falling due within one year (543) (263)
----------------------------------------------------- ------- -------
Net current assets 12,196 25,152
----------------------------------------------------- ------- -------
Net assets 101,353 88,742
----------------------------------------------------- ------- -------
Capital and reserves
--------------------------------------------------- ------- -------
Called up share capital 1,611 1,440
----------------------------------------------------- ------- -------
Capital redemption reserve 1,649 1,615
----------------------------------------------------- ------- -------
Share premium account 66,430 54,703
----------------------------------------------------- ------- -------
Funds held in respect of shares not yet allotted 7,545 5,775
----------------------------------------------------- ------- -------
Special reserve 20,238 34,587
----------------------------------------------------- ------- -------
Revaluation reserve 6,409 (8,504)
----------------------------------------------------- ------- -------
Revenue reserve (2,529) (874)
----------------------------------------------------- ------- -------
Total equity shareholders' funds 101,353 88,742
----------------------------------------------------- ------- -------
Basic and diluted net asset value per share 58.2p 57.6p
----------------------------------------------------- ------- -------
The financial statements were approved and authorised for issue
by the Board of Directors on 24 June 2021 and were signed on its
behalf by:
Chris Kay
Chairman
Company number: 3150868
Cash Flow Statement for the year ended 31 March 2021
2021 2020
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Cash flow from operating activities
-------------------------------------------------- -------- --------
Gain/(loss) on ordinary activities after taxation 6,201 (23,816)
--------------------------------------------------- -------- --------
(Gain)/loss on investments (7,402) 21,094
--------------------------------------------------- -------- --------
(Increase)/decrease in debtors (57) 1,284
--------------------------------------------------- -------- --------
Increase/(decrease) in creditors 25 (28)
--------------------------------------------------- -------- --------
Net cash generated from operating activities (1,233) (1,466)
--------------------------------------------------- -------- --------
Cash flow from investing activities
-------------------------------------------------- -------- --------
Purchase of investments (21,403) (11,197)
--------------------------------------------------- -------- --------
Proceeds from disposal of investments 3,238 10,997
--------------------------------------------------- -------- --------
Net cash (outflow) from investing activities (18,165) (200)
--------------------------------------------------- -------- --------
Cash flows from financing activities
-------------------------------------------------- -------- --------
Proceeds from share issue 11,933 9,312
--------------------------------------------------- -------- --------
Funds held in respect of shares not yet allotted 1,770 5,661
--------------------------------------------------- -------- --------
Share issue costs (286) (151)
--------------------------------------------------- -------- --------
Purchase of own shares (1,612) (1,382)
--------------------------------------------------- -------- --------
Equity dividends paid (5,140) (5,525)
--------------------------------------------------- -------- --------
Net cash inflow from financing activities 6,665 7,915
--------------------------------------------------- -------- --------
(Decrease)/increase in cash (12,733) 6,249
--------------------------------------------------- -------- --------
Net movement in cash
-------------------------------------------------- -------- --------
Beginning of year 23,471 17,222
--------------------------------------------------- -------- --------
Net cash (outflow)/inflow (12,733) 6,249
--------------------------------------------------- -------- --------
End of year 10,738 23,471
--------------------------------------------------- -------- --------
Notes to the Accounts for the year ended 31 March 2021
1. General information
Downing ONE 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, and its registered office is St. Magnus House, 3
Lower Thames Street, London EC3R 6HD.
2. Accounting policies
Basis of accounting
The Company has prepared its financial statements in accordance
with the Financial Reporting Standard 102 ("FRS 102") and in
accordance with the Statement of Recommended Practice "Financial
Statements of Investment Trust Companies" issued November 2014 and
updated in October 2019 ("SORP").
The financial statements are presented in Sterling (GBP) and
rounded to thousands.
Going concern
After reviewing the Company's forecasts and projections, the
Directors have a reasonable expectation that the major cash
outflows of the Company (most notably investments, share buybacks
and dividends) are within the Company's control and therefore the
Company has sufficient cash to meet its expenses and liabilities
when they fall due. The impact of COVID-19 has been considered.
More detail on these considerations can be found within the
Corporate Governance report. As such, the Board confirms that the
Company has adequate resources to continues in operational
existence for at least 12 months from the date of approval of the
financial statements. The Company therefore continues to adopt the
going concern basis in preparing its financial statements as noted
further within the Corporate Governance Report.
Presentation of income statement
In order to better reflect the activities of a Venture Capital
Trust and in accordance with guidance issued by the Association of
Investment Companies ("AIC"), supplementary information which
analyses the income statement between items of a revenue and
capital nature has been presented alongside the income statement.
The net revenue is the measure the Directors believe appropriate in
assessing the Company's compliance with certain requirements set
out in Part 6 of the Income Tax Act 2007.
Investments
Venture capital investments are designated as "fair value
through profit or loss" assets due to investments being managed and
their performance evaluated on a fair value basis. A financial
asset is designated within this category if it is both acquired and
managed on a fair value basis, with a view to selling after a
period of time, in accordance with the Company's documented
investment policy.
Investments quoted on recognised stock markets are measured
using bid prices.
The valuation methodologies for unquoted instruments (comprising
equity and loan notes), used by the IPEV to ascertain the fair
value of an investment, are as follows:
- Calibration to the price of recent investment;
- Multiples;
- Net assets;
- Discounted cash flows or earnings (of the underlying
business);
- Discounted cash flows (from the investment); and
- Industry valuation benchmarks.
The methodology applied takes account of the nature, facts and
circumstances of the individual investment and uses reasonable
data, market inputs, assumptions and estimates in order to
ascertain fair value, as explained in the investment accounting
policy above. Where an investee company has gone into receivership,
liquidation or administration and there is little likelihood of a
recovery, the loss on the investment, although not physically
disposed of, is treated as being realised.
Gains and losses arising from changes in fair value are included
in the income statement as a capital item.
It is not the Company's policy to exercise significant influence
or joint control over investee companies. Therefore, the results of
these companies are not incorporated into the Income Statement,
except to the extent of any income accrued. This is in accordance
with the SORP and FRS 102 sections 14 and 15 that do not require
portfolio investments to be accounted for using the equity method
of accounting.
Calibration to price of recent investment requires a level of
judgment to be applied in assessing and reviewing any additional
information available since the last investment date. The Board and
Adviser consider a range of factors in order to determine if there
is any indication of decline in value or evidence of increase in
value since the recent investment date. If no such indications are
noted the price of the recent investment will be used as the fair
value for the investment.
Examples of signals which could indicate a movement in value
are: -
- Changes in results against budget or in expectations of
achievement of technical milestones patents/testing/ regulatory
approvals)
- Significant changes in the market of the products or in the
economic environment in which it operates
- Significant changes in the performance of comparable
companies
- Internal matters such as fraud, litigation or management
structure.
In respect of disclosures required by the SORP for the 10
largest investments held by the Company, the most recent publicly
available accounts information, either as filed at Companies House,
or announced to the London Stock Exchange, is disclosed. In the
case of unlisted investments, this may be abbreviated information
only.
Judgements in applying accounting policies and key sources of
estimation uncertainty
The key estimates in the financial statements is the
determination of the fair value of the unquoted investments by the
Directors as it impacts the valuation of the unquoted investments
at the balance sheet date.
Of the Company's assets measured at fair value, it is possible
to determine their fair values within a reasonable range of
estimates. The fair value of an investment upon acquisition is
deemed to be cost. Thereafter, investments are measured at fair
value in accordance with FRS 102 sections 11 and 12, together with
the International Private Equity and Venture Capital Valuation
Guidelines ("IPEV").
Income
Dividend income from investments is recognised when the
shareholders' right to receive payment has been established,
normally the ex-dividend date.
Loan stock interest is accrued on a time apportioned basis, by
reference to the principal outstanding and at the effective
interest rate applicable and only where there is reasonable
certainty of collection.
Distributions from investments in limited liability partnerships
("LLPs") are recognised as they are paid to the Company. Where such
items are considered capital in nature they are recognised as
capital profits.
Expenses
All expenses are accounted for on an accrual's basis. In respect
of the analysis between revenue and capital items presented within
the income statement, all expenses have been presented as revenue
items, except as follows:
- Expenses which are incidental to the acquisition of an
investment are deducted from the Capital Account.
- Expenses which are incidental to the disposal of an investment
are deducted from the disposal proceeds of the investment.
- Expenses are split and presented partly as capital items where
a connection with the maintenance or enhancement of the value of
the investments held can be demonstrated. Investment management
fees are allocated 50% to revenue and 50% to capital, in order to
reflect the Directors' expected long-term view of the nature of the
investment returns of the Company.
Taxation
The tax effects on different items in the Income Statement are
allocated between capital and revenue on the same basis as the
particular item to which they relate, using the Company's effective
rate of tax for the accounting period.
Due to the Company's status as a Venture Capital Trust and the
continued intention to meet the conditions required to comply with
Part 6 of the Income Tax Act 2007, no provision for taxation is
required in respect of any realised or unrealised appreciation of
the Company's investments.
Deferred taxation is not discounted and is provided in full on
timing differences that result in an obligation at the balance
sheet date to pay more tax, or a right to pay less tax, at a future
date, at rates expected to apply when the obligations or rights
crystallise based on tax rates and law enacted or substantively
enacted at the balance sheet date. Timing differences arise from
the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are
included in the accounts. Deferred tax assets are only recognised
if it is expected that future taxable profits will be available to
utilise such assets and are recognised on a non-discounted
basis.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held
at call with banks with an original maturity of three months or
less.
Other debtors and other creditors
Other debtors (including accrued income) and other creditors are
included within the accounts at amortised cost.
Share issue costs
Share issue costs have been deducted from the special reserve
account.
Segmental reporting
The Company only has one class of business and one market.
Dividends payable
Dividends payable are recognised as distributions in the
financial statements when the Company's liability to make payment
has been established, normally the record date.
Funds held in respect of shares not yet allotted
Cash received in respect of applications for new shares that
have not yet been allotted is shown as "Funds held in respect of
shares not yet allotted" and recorded on the Balance Sheet and
Statement of Changes in Equity.
3. Basic and diluted return per share
2021 2020
GBP'000 GBP'000
----------------------------------------------- ----------- -----------
Return per share based on:
----------------------------------------------- ----------- -----------
Net revenue (loss) for the financial year (616) (2,109)
----------------------------------------------- ----------- -----------
Net capital gain/(loss) for the financial year 6,817 (21,707)
----------------------------------------------- ----------- -----------
Total gain/(loss) for the financial year 6,201 (23,816)
----------------------------------------------- ----------- -----------
Weighted average number of shares in issue 156,403,594 134,726,743
----------------------------------------------- ----------- -----------
As the Company has not issued any convertible securities or
share options, there is no dilutive effect on return per share. The
return per share disclosed therefore represents both the basic and
diluted return per share.
4. Principal Risks
The Company's investment activities expose the Company to a
number of risks associated with financial instruments and the
sectors in which the Company invests. The principal financial risks
arising from the Company's operations are:
- Investment risks;
- Credit risk; and
- Liquidity risk.
The Board regularly reviews these risks and the policies in
place for managing them. There have been no significant changes to
the nature of the risks that the Company is exposed to over the
year and there have also been no significant changes to the
policies for managing those risks during the year.
The risk management policies used by the Company in respect of
the principal financial risks and a review of the financial
instruments held at the year-end, are provided below.
Investment risks
As a VCT, the Company is exposed to investment risks in the form
of potential losses and gains that may arise on the investments it
holds, in accordance with its investment policy. The management of
these investment risks is a fundamental part of the investment
activities undertaken by the Investment Adviser and overseen by the
Board. The Investment Adviser monitors investments through regular
contact with management of investee companies, regular review of
management accounts and other financial information and attendance
at investee company board meetings. This enables the Investment
Adviser to manage the investment risk in respect of individual
investments. Investment risk is also mitigated by holding a
diversified portfolio spread across various business sectors and
asset classes.
The key investment risks to which the Company is exposed
are:
- Investment price risk;
- Interest rate risk; and
- Foreign currency exposure risk
The Company has undertaken sensitivity analysis on its financial
instruments, split into the relevant component parts, taking into
consideration the economic climate at the time of review, in order
to ascertain the appropriate risk allocation.
Investment price risk
Investment price risk arises from uncertainty about the future
prices and valuations of financial instruments held in accordance
with the Company's investment objectives. It represents the
potential loss that the Company might suffer through investment
price movements in respect of quoted investments and also changes
in the fair value of unquoted investments that it holds.
Interest rate risk
The Company accepts exposure to interest rate risk on
floating-rate financial assets through the effect of changes in
prevailing interest rates. The Company receives interest on its
cash deposits at a rate agreed with its bankers. Investments in
loan stock and fixed interest securities attract interest
predominately at fixed rates. A summary of the interest rate
profile of the Company's investments is shown below.
Interest rate profile of financial assets and financial
liabilities
There are three levels of interest which are attributable to the
financial instruments as follows:
- "Fixed rate" assets represent investments with predetermined
yield targets and comprise fixed interest and loan note
investments.
- "Floating rate" assets predominantly bear interest at rates
linked to the Bank of England base rate and comprise cash at
bank.
- "No interest rate" assets do not attract interest and comprise
equity investments, non-interest-bearing convertible loan notes,
loans and receivables (excluding cash at bank) and other financial
liabilities.
The Company monitors the level of income received from fixed,
floating and non interest rate assets and, if appropriate, may make
adjustments to the allocation between the categories, in
particular, should this be required to ensure compliance with the
VCT regulations.
In March 2020, The Bank of England base rate decreased from
0.75% per annum to 0.1% per annum. Any potential change in the base
rate at the current level would not have a material impact on the
net assets and total return of the Company.
Foreign currency exposure risk
The Company has exposure to foreign currency risk through its
investments in companies whose valuation is denominated and who
report in USD. This has resulted in an unrealised foreign exchange
loss of GBP735,000 (2020: nil) during the year. Due to the
relatively low exposure to companies denominated in foreign
currencies, the Board considers foreign currency risk to be at an
acceptable level and does not seek to mitigate such exposure as
this could restrict the net returns from the foreign currency
investments.
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument is unable to discharge a commitment to the Company made
under that instrument. The Company is exposed to credit risk
through its holdings of loan stock in investee companies,
investments in fixed interest securities, cash deposits and
debtors.
The Investment Adviser manages credit risk in respect of loan
notes with a similar approach as described under investment risks
above. In addition, with the exception of new investments, credit
risk is mitigated by registering floating charges, covering the
full par value of the loan stock in the form of fixed and floating
charges over the assets of the investee companies. The strength of
this security in each case is dependent on the nature of the
investee company's business and its identifiable assets. The level
of security is a key means of managing credit risk. Similarly, the
management of credit risk associated with interest, dividends and
other receivables is covered within the investment management
procedures.
Cash is mainly held at Royal Bank of Scotland plc, with a
balance also maintained at Bank of Scotland plc, both of which are
A-rated financial institutions. Consequently, the Directors
consider that the credit risk associated with cash deposits is
low.
There has been limited changes in fair value during the year
that can be directly attributable to changes in credit risk.
As at 31 March 2021, of the loan stock classified as "past due",
GBP1,931,000 relates to the principal of loan notes where, although
the principal remains within the term, the investee company is not
fully servicing the interest obligations under the loan note and is
in arrears. Notwithstanding the arrears of interest, the Directors
do not consider that the loan note itself has been impaired or the
maturity of the principal has altered.
As at 31 March 2021, of the loan stock classified as "past due",
GBP7,328,000 relates to the principal of loan notes where the
principal has passed its maturity date. As at the balance sheet
date, the extent to which the principal is past its maturity date,
GBP5.0 million falls within the banding of nil to 2 years past due
and GBP2.3 million is 3 to 5 years past due. Notwithstanding this
information, the Directors do not consider the loan notes to be
impaired at the current time or that maturity dates of the
principal have altered.
As at 31 March 2020, of the loan stock classified as "past due",
GBP1,103,000 related to the principal of loan notes where, although
the principal remained within term, the investee company was not
fully servicing the interest obligations under the loan note and
was in arrears. Notwithstanding the arrears of interest, the
Directors did not consider that the loan note itself had been
impaired or the maturity of the principal had altered.
As at 31 March 2020, of the loan stock classified as "past due",
GBP7,420,000 related to the principal of loan notes where the
principal had passed its maturity date. As at 31 March 2020, the
extent to which the principal is past its maturity date, GBP5.5
million falls within the banding of nil to 2 years past due and
GBP1.9 million is 3 to 5 years past due. Notwithstanding this
information, the Directors did not consider the loan notes to be
impaired at 31 March 2020 or that maturity dates of the principal
had altered.
Liquidity risk
Liquidity risk is the risk that the Company encounters
difficulties in meeting obligations associated with its financial
liabilities. Liquidity risk may also arise from either the
inability to sell financial instruments when required at their fair
values or from the inability to generate cash inflows as required.
The Company normally has a relatively low level of creditors (2021:
GBP543,000, 2020: GBP263,000) and has no borrowings. Most of the
quoted investments held by the Company are considered to be readily
realisable. The Company always holds sufficient levels of funds as
cash and readily realisable investments in order to meet expenses
and other cash outflows as they arise. For these reasons the Board
believes that the Company's exposure to liquidity risk is
minimal.
The Company's liquidity risk is managed by the Investment
Adviser in line with guidance agreed with the Board and is reviewed
by the Board at regular intervals.
5. Related party transactions
Fees payable during the year to the Directors and their interest
in shares of the Company are disclosed within the Directors'
Remuneration Report. There were no amounts outstanding and due to
the Directors as at 31 March 2021 (2020: nil).
Further related party transactions include Investment Management
and Administration fees payable to Downing LLP. In addition,
Downing LLP was also paid promoter fees in connection with the
fundraising offer that is currently open, which totalled GBP206,000
for the year ended 31 March 2021 (2020: GBP102,000).
The Company also has an agreement to pay an ongoing trail fee
annually to Downing LLP, in connection with funds raised under
original offers for subscription out of which Downing LLP has an
obligation to pay trail commission to intermediaries. During the
year to 31 March 2021, GBP172,000 (2020: GBP243,000) was paid to
Downing LLP.
ANNOUNCEMENT BASED ON AUDITED ACCOUNTS
The financial information set out in this announcement does not
constitute the Company's statutory financial statements in
accordance with section 434 Companies Act 2006 for the year ended
31 March 2021, but has been extracted from the statutory financial
statements for the year ended 31 March 2021 which were approved by
the Board of Directors on 24 June 2021 and will be delivered to the
Registrar of Companies. The Independent Auditor's Report on those
financial statements was unqualified and did not contain any
emphasis of matter nor statements under s 498(2) and (3) of the
Companies Act 2006.
The statutory accounts for the year ended 31 March 2020 have
been delivered to the Registrar of Companies and received an
Independent Auditors report which was unqualified and did not
contain any emphasis of matter nor statements under s 498(2) and
(3) of the Companies Act 2006.
A copy of the full annual report and financial statements for
the year ended 31 March 2021 will be printed and posted to
shareholders shortly. Copies will also be available to the public
at the registered office of the Company at St. Magnus House, 3
Lower Thames Street, London EC3R 6HD and will be available for
download from and www.downing.co.uk
(END) Dow Jones Newswires
June 24, 2021 12:46 ET (16:46 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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