Half-yearly report

Downing Protected VCT V plc Half Yearly Report for the six months ended 31 May 2009 Performance summary 31 May 30 Nov 31 May 2009 2008 2008 pence pence pence Net asset value per Ordinary share 89.4 95.5 93.8 Cumulative distributions per Ordinary share 6.0 3.5 3.5 Total return per Ordinary share 95.4 99.0 97.3 CHAIRMAN'S STATEMENT I present my report for the six months ended 31 May 2009. The Company has now completed its investing phase and, in line with its objectives, is now seeking to realise its investments in order to return funds to Shareholders. The value of the Company's investments has generally been resilient despite the difficult economic climate. Most investments have maintained their value, although two provisions have been made as detailed below. Portfolio activity With the Company's investment portfolio already built, portfolio activity was very limited during the period. The Company's investment in Hoole Hall Country Club Limited underwent a reorganisation in December 2008, with the result that the Company now holds an investment in Hoole Hall Country Club Holdings Limited with a cost of £1.625 million. There was one other significant investment in the period, being a short-term loan stock investment in an existing investment, Future Films Production Services Limited, to provide funds for the company to take advantage of a new project. Valuations The Board has once again undertaken a valuation review of the Company investment portfolio. In most cases, progress has been satisfactory or to plan and the valuations have been agreed at levels equal to original cost. These valuations are generally supported by security that has been taken over assets owned by the investee companies. As I have mentioned on previous occasions, Vermont Developments Limited went into administration last year, leaving the Company seeking to recover value from the charge it had taken over a plot of development land in Salford. A recent indicative valuation of the development land suggests that the current market value may be very low. Accordingly, the Directors have reduced the carrying value to £50,000. The reduction is equivalent to 2.1p per share. The Investment Manager considers this valuation to be excessively low and believes that ultimately the Company will realise its investment at a higher value. Additionally, the Directors have made a provision against the investment in Richstone Contracting Limited. The Company has been building an apartment and hotel complex in south Devon, but recently building work was put on hold while the developer reviews the viability of the planned development in the current market conditions. In view of the current uncertainty about the project, the Board has made a provision of £570,000 against the total cost of £2.5 million. This provision is equivalent to 2.6p per share. Although it is disappointing to make these two provisions, the Board considers the overall performance of the portfolio to be satisfactory when viewed against the sharp change in the economy that has taken place since the investments were first made. Net Asset Value and results At 31 May 2009, the Net Asset Value per share ("NAV") of the Company stood at 89.4p, a decrease of 3.6p (3.8%) since the previous year end of 30 November 2008 (after adjusting for the 2.5p dividend paid during the period). The loss on ordinary activities after taxation for the period was £820,000, comprising a revenue profit of £200,000 and a capital loss of £1,020,000. Revenue profits are significantly lower than in previous periods as a result of the falls in interest rates. Share buybacks As I have stated previously, the Company is now in the process of seeking to exit from its investments to generate proceeds that can be distributed to Shareholders. This process is expected to take some time but will ultimately result in funds being returned to Shareholders without their suffering the discounts that typically arise with share buybacks. For this reason, the Board is reluctant to use the Company's liquid funds to undertake share buybacks. The Board does however note that there are occasionally forced sellers of shares and wishes to allow them the opportunity to sell their holdings, albeit at a higher discount to NAV than might have been expected. The Board intends to continue with its policy of buying in any shares that become available at a price equivalent to a 25% discount to the Company's most recently published NAV. The Board will regularly review this policy and make adjustments if it sees fit. Risk and uncertainties Under the Disclosure and Transparency Directive, the Board is required in the Company's half year results, to report on principal risks and uncertainties facing the Company over the remainder of the financial year. The Board has concluded that the key risks facing the Company over the remainder of the financial period are as follows: * investment risk associated with investing in small and immature businesses; and * failure to maintain approval as a VCT. In order to make VCT-qualifying investments, the Company has to invest in small businesses which are often immature. The Investment Manager follows a rigorous process in vetting and careful structuring of new investments, including taking a charge over the assets of the business wherever possible, and, after an investment is made, closely monitoring the business. The Board is satisfied that this approach reduces the investment risk as far as reasonably possible. The Company's compliance with the VCT regulations is continually monitored by the Administration Manager, who reports regularly to the Board on the current position. The Company also retains PricewaterhouseCoopers to provide regular reviews and advice in this area. The Board considers that this approach reduces the risk of a breach of the VCT regulations to a minimal level. Outlook It is clear that the economic climate creates a significantly greater challenge in achieving investment exits in a timely manner and at acceptable prices. During the investing stage it was expected that bank finance would be available to help fund investment realisations which is generally not currently the case. As a result, it is likely that some realisations will be achieved by different means than originally anticipated and others will take longer. The timing and amount of future dividends is difficult to estimate because it is highly dependent on when investment exits are achieved. However, the Investment Manager anticipates that a significant number of realisations will take place over the next six months. Accordingly, the Board is targeting the payment of a dividend in excess of 50p per share before the end of the first quarter of 2010. Shareholders should appreciate that this is not a forecast and the Board is not giving any guarantee that this can be achieved, but the Board believes it to be a realistic target. The Board remains confident that the objective of returning funds to Shareholders within approximately five years of the close of Company's offer for subscription as set out in the prospectus is achievable. Hugh Gillespie Chairman UNAUDITED SUMMARISED BALANCE SHEET as at 31 May 2009 31 May 2009 31 May 2008 30 Nov 2008 £'000 £'000 £'000 Fixed assets Investments 19,094 19,690 19,887 Current assets Debtors 117 225 166 Cash at bank and in hand 79 783 769 196 1,008 935 Creditors: amounts falling (256) (522) (267) due within one year Net assets less current 19,034 20,176 20,555 liabilities Creditors: amounts falling due (21) (21) (21) after more than one year Net assets 19,013 20,155 20,534 Capital and reserves Called up share capital 213 215 215 Capital redemption reserve 4 2 2 Special reserve 19,936 20,099 20,100 Capital reserve - realised (60) (50) (60) Capital reserve - unrealised (1,424) (500) (404) Revenue reserve 344 389 681 Equity shareholders' funds 19,013 20,155 20,534 Net asset value per share 89.4p 93.8p 95.5p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 31 May 31 May 30 Nov 2009 2008 2008 £'000 £'000 £'000 Opening shareholders' funds 20,534 20,856 20,856 Purchase of own shares (164) (5) (5) Dividends paid (538) (538) (538) Total recognised (loss)/gain (819) (158) 221 for the period Closing shareholders' funds 19,013 20,155 20,534 UNAUDITED INCOME STATEMENT for the six months ended 31 May 2009 Six months ended 31 May 2009 Revenue Capital Total £'000 £'000 £'000 Income 468 - 468 Losses on investments (1,020) (1,020) 468 (1,020) (552) Investment management fees (101) - (101) Other expenses (82) - (82) Return on ordinary activities before 285 (1,020) (735) taxation Taxation (85) - (85) Return attributable to equity 200 (1,020) (820) shareholders Return per share 0.9p (4.8p) (3.9p) Six months ended Year ended 31 May 2008 30 November 2008 Revenue Capital Total Total £'000 £'000 £'000 £'000 Income 638 - 638 1,235 Losses on investments - (469) (469) (383) 638 (469) 169 852 Investment management fees (103) - (103) (207) Other expenses (80) - (80) (161) Return on ordinary activities 455 (469) (14) 484 before taxation Taxation (144) - (144) (263) Return attributable to equity 311 (469) (158) 221 shareholders Return per share 1.4p (2.1p) (0.7p) (1.0p) A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement as noted above. UNAUDITED CASH FLOW STATEMENT for the six months ended 31 May 2009 31 May 31 May 30 Nov 2009 2008 2008 Note £'000 £'000 £'000 Cash inflow from operating activities 1 and returns on investments 372 645 1,126 Taxation Corporation tax paid (132) (143) (527) Capital expenditure Purchase of investments (1,853) (4,900) (7,771) Proceeds from disposal of 1,625 5,246 8,006 investments Net cash (outflow)/inflow from capital expenditure (228) 346 235 Equity dividends paid (538) (538) (538) Net cash inflow/(outflow) before (526) 310 296 financing Financing Purchase of own shares (164) (5) (5) Net cash outflow from financing (164) (5) (5) Increase/(decrease) in cash 2 (690) 305 291 Notes to the cash flow statement: 1. Cash inflow from operating activities and returns on investments Net loss before taxation (185) (14) 484 Losses on investments 450 469 686 Decrease in other debtors 70 99 159 Increase/(decrease) in other 37 91 (203) creditors Net cash inflow from operating 372 645 1,126 activities 2. Analysis of net funds Beginning of period 769 478 478 Net cash inflow/(outflow) (690) 305 291 End of period 79 783 769 SUMMARY OF INVESTMENT PORTFOLIO as at 31 May 2009 Unrealised % of gain/(loss) portfolio Cost Valuation in the period by value Venture Capital Investments £'000 £'000 £'000 £'000 VCT Qualifying Cadbury House Limited 3,000 3,000 - 15.6% Richstone Contracting Limited 2,542 1,972 (570) 10.3% West Tower Holdings Limited 1,750 1,750 - 9.1% Heyford Contracting (South) Ltd 1,650 1,650 - 8.6% Hoole Hall Country Club Ltd 1,625 1,625 - 8.5% The Really Fine Leisure 1,100 1,100 - 5.7% Heyford Contracting (North) Ltd 1,037 1,037 - 5.4% Hoole Hall Spa and Leisure Club Limited 1,000 1,000 - 5.2% Nu Nu plc 1,000 1,000 - 5.2% Future Films Production Services Limited 825 825 - 4.3% Liongold Contracting Limited 434 434 - 2.3% The Thames Club Limited 150 150 - 0.8% 16,113 15,543 (570) 81.0% Non VCT Qualifying Hoole Hall Hotel Ltd 1,250 1,250 - 6.5% Aminghurst Ltd 992 992 - 5.2% The Thames Club Limited 350 350 - 1.8% Heyford Homes Ltd 300 300 - 1.6% Sanguine Hospitality Ltd 243 243 - 1.3% Future Films Production Services Limited 225 225 - 1.2% Coastal Partnerships Ltd 75 75 - 0.4% Chapel Street Hotel (2008) Limited 63 63 - 0.3% Vermont Developments Ltd 904 50 (450) 0.3% Chapel Street Hotel Limited 3 3 - 0% 4,405 3,551 (450) 18.6% Total 20,518 19,094 (1,020) 99.6% Cash at Bank 79 0.4% Total investments 19,173 100.0% SUMMARY OF INVESTMENT MOVEMENTS for the six months ended 31 May 2009 Additions £'000 VCT Qualifying investments Hoole Hall Country Club Spa and leisure club and owner 1,625 Holdings Limited operator Non-Qualifying investments Future Films Production Film production and post-production 225 Services Limited services Chapel Street Hotel LLP Hotel development 3 1,853 Disposals Cost Proceeds Profit/(loss) £'000 £'000 £'000 VCT Qualifying investments Hoole Hall Country Club Limited 1,625 1,625 - 1,625 1,625 - NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 1. The unaudited half yearly financial results cover the six months to 31 May 2009 and have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 30 November 2008 which were prepared under UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" revised December 2005 ("SORP"). 2. All revenue and capital items in the Income Statement derive from continuing operations. 3. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits. 4. The comparative figures were in respect of the six-month period ended 31 May 2008 and the year ended 30 November 2008 respectively. 5. Return per share for the period has been calculated on 21,352,000 shares, being the weighted average number of shares in issue during the period. 6. Dividends paid 31 May 2009 31 May 30 Nov 2008 2008 Revenue Capital Total Total Total £'000 £'000 £'000 £'000 £'000 Paid in period/year 2008 Final 538 - 538 - - (2.5p paid 30 April 2009) 2007 Final - - - 538 538 (2.5p paid 25 April 2008) 538 - 538 538 538 7. Reserves Capital Capital Special reserve Capital redemption reserve - reserve - Revenue reserve realised unrealised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 At 30 November 2 20,100 (60) (404) 681 20,319 2008 Gains/(losses) - - - (1,020) - (1,020) on investments Dividends paid - - - - (538) (538) Share buybacks 2 (164) - - - (162) Retained - - - - 201 201 revenue Transfer - - - - - - At 31 May 2009 4 19,936 (60) (1,424) 344 18,800 The Special Reserve is available to the Company to enable the purchase of its own shares in the market without affecting its ability to pay capital distributions. The Special Reserve and Revenue Reserve are both distributable reserves. 8. The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 and have not been delivered to the Registrar of Companies. 9. The Directors confirm that, to the best of their knowledge, the half-yearly financial statements have been prepared in accordance with the "Statement: Half-Yearly Financial Reports" issued by the UK Accounting Standards Board and the half-yearly financial report includes a fair review of the information required by: DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so. 10. Copies of the half yearly report will be sent to shareholders shortly. Further copies can be obtained from the Company's Registered Office or can be downloaded from www.downing.co.uk. ---END OF MESSAGE--- This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.