Half-year report
Downing FOUR VCT
plc LEI:
21380035MV1VRYEXPR95 Half-Yearly
Report for the six months ended 30 September
202113 December 2021
|
Unaudited |
Audited |
Unaudited |
|
30September2021 |
31March2021 |
30September2020 |
|
pence |
pence |
pence |
|
|
|
|
Ventures Share pool |
|
|
|
Net Asset Value per Ventures Share |
68.50 |
67.2 |
61.2 |
Cumulative distributions |
5.25 |
2.5 |
2.5 |
Total Return per Ventures Share |
73.75 |
69.7 |
63.7 |
|
|
|
|
Healthcare Share pool |
|
|
|
Net Asset Value per Healthcare Share |
88.70 |
68.5 |
65.2 |
Cumulative distributions |
5.25 |
2.5 |
2.5 |
Total Return per Healthcare Share |
93.95 |
71.0 |
67.7 |
|
|
|
|
DSO D Share pool |
|
|
|
Net Asset Value per DSO D Share |
10.2 |
10.2 |
10.7 |
Cumulative distributions |
94.5 |
94.5 |
94.5 |
Adjusted for Performance Incentive estimate1 |
(0.3) |
(0.5) |
(1.2) |
Total Return per DSO D Share |
104.4 |
104.2 |
104.0 |
|
|
|
|
DP67 Share pool |
|
|
|
Net Asset Value per DP67 Share |
19.5 |
18.4 |
18.4 |
Cumulative distributions (since original launch) |
67.8 |
67.8 |
67.8 |
Total Return per DP67 Share |
87.3 |
86.2 |
86.2 |
- Based on Total Return to
Shareholders at 30 September 2021, a Performance Incentive is
expected to become due to management. The Performance Incentive has
been estimated at 0.3p per DSO D Share. No provision has been
included in the accounts as the conditions of the Performance
Incentive fee have not yet been met.
Chairman’s Statement
Introduction
I am pleased to present the Company’s Half-Yearly Report for the
six months ended 30 September 2021.
This has been a busy period for your Company, with a new
evergreen share class created, another share class renamed and a
new offer for subscription launched. We were also pleased to
welcome three new board members and saw good progress made by some
of the evergreen portfolio companies.
FundraisingIn August, the
Company published a shareholder circular seeking approval for
various resolutions in connection with the launch of a new
fundraising. A new evergreen share class, focussing on AIM-quoted
investments, was proposed, as well as a change of name for the
Generalist Share class to become the Ventures
Share Class to better describe the focus of its activities. A
general meeting took place on 21 September 2021 at which all
resolutions were passed.
The new offer for subscription was launched at the same time,
seeking to raise up to £10M in each of the Ventures, Healthcare and
AIM share classes, with an overallotment facility of up to £15M for
each share class.
The Board believes that the Company offers an attractive
proposition for VCT investors, as there are signs that some of the
earlier investments in the Ventures and Healthcare portfolio are
starting to mature and the AIM market is also providing good
opportunities for investment.
Full details of the offer can be found on the Downing
website:
downing.co.uk/investor/products/vct
No shares have yet been allotted under this offer and therefore
the AIM Share class does not feature in this Half-Yearly Report. We
expect the Annual Report for the year ended 31 March 2022 to be the
first report to cover the AIM Share class.
Evergreen Share pool
reviewVentures Share
pool (formerly Generalist)During the
period, the Ventures Share pool made one follow-on investment of
£125,000, and there was an IPO which involved the conversion of
loan notes into equity.
The Ventures Share pool Total Return stood at 73.75p as at 30
September 2021. This is an increase of 4.05p or 6.0% over the
period, after adjusting for the dividend of 2.75p per Ventures
Share, paid on 24 September 2021.
The NAV increase for the period predominantly results from
several valuation uplifts within the Venture Capital Portfolio,
including the IPO of Arecor Therapeutics plc (“Arecor”), which is
discussed in more detail in the Investment Manager’s Reports for
the Ventures and Healthcare Share pools.
Within the Ventures Liquidity Portfolio, there was a further
redemption from MI Downing UK Micro-Cap Growth Fund, which is in
the process of winding up. Downing Strategic Micro-Cap Investment
Trust performed well over the period, increasing in value by over
6%, and there have been further positive updates.
A more detailed review of the Ventures Share pool is included in
the Ventures Investment Manager’s Report. A review of the Liquidity
Investments is included below.
Healthcare Share poolDuring the
period, the Healthcare Share pool invested £1.2 million in four VCT
Qualifying companies, three of which were existing companies in the
Healthcare Share pool’s Venture Capital Portfolio. There were also
two IPOs during the period, which are discussed in more detail in
the Investment Manager’s Report.
As at 30 September 2021, the Healthcare Share pool Total Return
stood at 93.95p. This is an increase of 22.95p or 33.5% over the
period, after adjusting for the dividend of 2.75p per Healthcare
Share, paid on 24 September 2021.
The NAV increase for the period is largely attributable to the
AIM IPOs of two portfolio companies: Arecor and GENinCode. Based on
their quoted share prices as at 30 September 2021, Arecor and
GENinCode generated unrealised valuation gains totalling £3.5
million for the period. The remaining investments in the Healthcare
Venture Capital Portfolio generated unrealised valuation gains of
£1.1 million for the period.
As with the Ventures Share pool, the Healthcare Share pool
received a further redemption from MI Downing UK Micro-Cap Growth
Fund, which is in the process of winding up. Downing Strategic
Micro-Cap Investment Trust also performed well over the period, as
noted above, increasing in value by over 6%.
A more detailed review of the Healthcare Share pool is included
in the Investment Manager’s Report. A review of the Liquidity
Investments is included below.
Planned Exit Share
poolsDSO D Share poolThe DSO D Share pool
holds four remaining investments. At the period end, the net asset
value per share (“NAV”), net of the estimated performance incentive
fee, stood at 9.9p. Total Return at 30 September 2021 stood at
104.4p per share, an increase of 0.2p since 31 March 2021.
After the half-year date, the Manager achieved exits from the
DSO D Share pool’s two renewable energy investments at proceeds
slightly exceeding their valuations as at 30 September 2021. As a
result of these exits, the Company is in a position to declare a
dividend to DSO D Shareholders, which I will come on to
mention.
The Manager is also progressing plans to exit from the two
businesses with exposure to the hospitality sector, Pearce and
Saunders Limited and Pearce and Saunders DevCo Limited. It is
expected that these two investments will exit in 2022.
A more detailed review of the DSO D Share pool is included in
the Investment Manager’s Report.
DP67 Share poolThe DP67 Share
pool also holds four remaining investments. At the period end, the
net asset value (“NAV”) per Share stood at 19.5p. Total Return at
30 September 2021 stood at 87.3p per share, an increase of 1.1p per
share since 31 March 2021.
The DP67 Share pool has significant exposure to the hospitality
sector and it has not been possible to significantly progress exits
from these businesses yet, as they are only just starting to
re-establish trading records following the disruption of the
pandemic. However, with the UK economy continuing to open up and
lockdown restrictions looking to be behind us, the Manager is now
targeting an exit by the end of 2022.
A more detailed review of the DP67 Share pool is included in the
Investment Manager’s Report.
DividendsOn 24 September 2021,
the Company paid dividends in respect of the year ended 31 March
2021, of 2.75p per Ventures Share and 2.75p per Healthcare Share.
This brings the total dividends paid to date on each of the
Ventures and Healthcare Share pools, to 5.25p each.
Following the exits from Fresh Green Power and Green Energy
Production, after the half-year date, the DSO D Share pool is now
in a position to declare a 7.5p dividend to DSO D Shareholders, to
be paid on 28 January 2022, to Shareholders on the register as at 7
January 2022.
For both the DSO D and DP67 Share pools, the next dividends will
be declared once further realisations have taken place.
Board reorganisationWith much
of the Company’s activity now focussed on the evergreen share pools
which invest in young growth businesses, a review of the board
composition was undertaken, to ensure it was well aligned with the
Company’s needs going forward.
A formal process took place with an external recruitment
consultant to identify suitable candidates with experience relevant
to areas in which the Company now actively invests. Full
consideration was given to board diversity as part of this process;
however, the primary criteria was to identify the candidates best
placed to make a meaningful contribution to the Company in its
investing activities.
Ultimately two candidates from this process were invited to join
the board and were appointed as non-executive directors on 8
September 2021.
Steven Clarke has 30 years’ experience of
investing in technology and data businesses including 21 years as a
private equity investor with 3i, August Equity and ICG. Steven now
supports founders through fundraising, international growth and
exit as an investing non-executive director usually alongside a
growth equity fund. Steven is also chair of the investment
committee for Bethnal Green Ventures, a Tech for Good impact
investor.
Dr Andrew Mackintosh has had a distinguished
career in industry and investment as a former CEO of FTSE 250
company, Oxford Instruments, before later leading the creation of
the Royal Society Enterprise Fund, a pioneering initiative in
bringing together scientific expertise and early-stage investment.
He was a Board Member of the Intellectual Property Office and a
trustee of the Design Council and is currently chairman of Sphere
Fluidics Limited, a high-growth biotechnology tools company. He is
also chairman of UKI2S, a government-backed venture capital fund
supporting companies from the UK’s scientific research base.
Andrew has a longstanding interest in enhancing the
commercialisation and wider economic impact of UK research and is
the author of a report (‘The Mackintosh Report’) commissioned by HM
Treasury and published in April 2021.
In addition to the above, in order to enhance the operational
relationship between the Board and the Manager, Chris
Allner, partner of Downing LLP, also joined the board on 8
September 2021 as a non-executive director. No remuneration will be
paid by the Company in respect of his role.
Chris has 35 years of venture capital and private equity
experience, previously as head of private equity at Octopus
Investments. Prior to this, he was a director at Beringea and
Bridgepoint with previous experience at 3i and Charterhouse. Chris
has transacted over 50 investments and has sat on the boards of a
number of unquoted and quoted portfolio companies across a variety
of commercial sectors.
Alongside the above appointments, Russell Catley stepped down as
a non-executive director of the Company on 8 September 2021.
Russell joined the Company’s board following the merger with three
other VCTs in 2015. We thank Russell for his valuable contributions
throughout his tenure and will miss his sage and intelligent
advice. We wish him all the very best in his future activities.
I believe we now have a board of directors with a broad range of
skills and experience that is well suited to oversee the Company
during the next years of its life.
Share buybacksThe Company
operates a general policy of buying in Shares from its Evergreen
Share pools that become available in the market, subject to
regulatory and liquidity factors. Any such purchases are undertaken
at a price approximately equal to NAV (i.e. at a nil discount).
As the planned exit share classes are in the process of
returning funds to Shareholders, the Company no longer operates a
share buyback policy in respect of the DSO D and DP67 Share
classes.
During the six-month period ended 30 September 2021, the Company
repurchased 15,924 Ventures Shares and 16,990 Healthcare Shares, at
average prices of 67.2p and 81.6p per share, respectively.
If you wish to sell or buy Shares in the Company, Panmure Gordon
can supply details of closed periods etc.
OutlookThe Board is very
encouraged by the progress made by the Healthcare share pool in
recent months where two of the portfolio companies have started to
demonstrate their potential in successfully completing IPOs. There
are also signs within the Ventures share pool of the stronger
investments starting to make headway. Both share pools suffered
some setbacks in their early years. This is not an unexpected
feature of investing in a portfolio of young businesses where
investments may take time to prove their worth. This performance
was also compounded by the impact of the coronavirus pandemic. With
many of the businesses in these portfolios now several years into
their life and having dealt with challenging conditions, we believe
there are good prospects for improved overall performance going
forward.
The new offer for subscription should ensure that the Company
has funds available to allow the evergreen share classes to take
advantage of attractive new investment opportunities which the
Investment Manager is seeing, including extending into the area of
AIM-quoted companies with the new AIM Share class.
For the planned exit share pools, the ongoing delays in exiting
the investments are disappointing but somewhat expected given the
sectors in which these shares classes are invested and the impact
of the pandemic. The Board is satisfied that the Manager’s strategy
in working towards exits while seeking to achieve optimal values is
sensible. We hope to see progress in completing the task of
realising the investments over the next 12 months.
I look forward to updating all Shareholders in my statement with
the Annual Report, which we expect to publish in July 2022.
Sir Aubrey Brocklebank Bt.
Chairman
Investment Manager’s Report - Ventures
Share Pool
i. OverviewIntroductionWe
present a review of the investment portfolio and activity for the
Ventures Share pool over the six-month period to 30 September
2021.
This Investment Manager’s Report is split into two sections
comprising this overview and a review of the Venture Capital
Portfolio. Where the Ventures Share pool has invested alongside the
Healthcare Share pool, further valuation commentary can be found
within the Investment Manager’s Report for the Healthcare Share
pool.
A separate report on the portfolio of Liquidity Investments is
included below.
Net Asset Value and resultsAs at 30 September
2021, the NAV of a Ventures Share stood at 68.5p, an increase of
4.05p from 31 March 2021, after adding back the dividend of 2.75p
which was paid during the period.
The return on ordinary activities for the Ventures Share pool
for the period was £1.97 million, comprising a revenue loss of
£253,000 and a capital gain of £2.2
million.
Whilst there has been further recovery in the NAV since 31 March
2021, the Total Return to Shareholders as at 30 September 2021, of
73.75p, continues to be considered an underperformance against our
expectations for the Ventures Share pool.
Portfolio OverviewAs at 30
September 2021, the Ventures Share pool held a portfolio of 36
Venture Capital investments and two Liquidity investments, with a
total carrying value of £30.8 million.
Portfolio PerformanceOverall,
there were ten valuation increases in the Venture Capital
Portfolio, totalling £4.4 million, which more than offset the eight
valuation reductions, totalling £2.2 million. The net valuation
increase across the Venture Capital Portfolio was therefore £2.2
million as at 30 September 2021.
The carrying values of the Liquidity Investments have been
adjusted to reflect their quoted prices as at 30 September 2021.
This resulted in a valuation uplift of £180,000 for the half-year
period. Liquidity Investments are discussed in more detail
below.
ii. Venture Capital Portfolio
Investment activityDuring the
period, £125,000 was invested in one existing business in the
Venture Capital Portfolio. There was also one conversion within the
portfolio, of loan notes into equity.
Follow-on Venture Capital
investmentsFVRVS Limited, trading as
Fundamental VR, provides surgery simulation software forenterprise
clients and hospitals. The Ventures Share pool invested an
additional £125,000 in the business, alongside a further £250,000
from the Healthcare Share pool.
On 3 June 2021 Arecor Therapeutics plc
(“Arecor”) undertook a successful IPO on AIM. As
part of the IPO, the Ventures Share pool’s existing loan note
holding was converted into ordinary shares.
Portfolio valuationDuring the period, the
Venture Capital portfolio of the Ventures Share pool was increased
in value by a total of £2.2 million, following a number of positive
developments.
E-Fundamentals (Group) Limited, a Software as a
Service (SaaS) analytics company, which has developed and
commercialised a SaaS analytics tool, has continued to grow its
customer base, both in the UK and in the US, resulting in a
valuation uplift of £1.3 million as at 30 September 2021.
Hackajob Limited, the owner of a marketplace
platform for hiring technical talent, has progressed well during
the period, with recurring revenues continuing to grow. The
valuation was uplifted by £697,000 as at 30 September 2021 as a
result.
The valuation of Arecor was uplifted by
£634,000 as at 30 September 2021. Further valuation commentary can
be found below.
Imagen Limited, the developer of a cloud-based
enterprise video platform, has grown its revenues significantly
from the time of the Ventures Share pool’s investment. In line with
this continued growth, the investment in the business was uplifted
by £524,000 as at 30 September 2021.
Ayar Labs, Inc., the developer
of components for high performance computing and data centre
applications, was uplifted in valuation by £465,000 as at 30
September 2021, including the impact of foreign exchange. This
revaluation is the result of a calibration to the price set under a
recent funding round.
Trinny London Limited, the e-commerce-based
beauty and cosmetics brand launched by Trinny Woodall, has
continued its strong performance, and was uplifted in value by
£283,000 as at 30 September 2021.
Xupes Limited, a pre-owned luxury goods
retailer specialising in designer watches, handbags and jewellery,
was sold during October 2021, returning £675,000 to the Ventures
Share pool. The valuation as at 30 September 2021 has been uplifted
by £384,000 to reflect the sales proceeds achieved.
The Ventures Share pool’s investment in FVRVS
Limited (trading as Fundamental VR) was
uplifted by £64,000 as at 30 September 2021. Please see below for
further valuation commentary.
Streethub Limited (trading as
Trouva), an online marketplace for a curated range
of homeware and lifestyle products, has been reduced in value by
£503,000, as a result of the business trading behind budget.
Hummingbird Technologies Limited, the owner of
an advanced crop analytics platform that is powered by machine
learning and aerial imagery, was reduced in value by £482,000 as at
30 September 2021, on the back of a downgrade in revenue
forecasts.
Empiribox Holdings Limited, a creator of
practical resources for effective science lessons, was revalued to
£nil as at 30 September 2021. The coronavirus pandemic added to the
group’s existing challenges and ultimately led to its failure. The
business is now in liquidation and it is disappointing to report
that no value recovery is expected.
FundingXchange Limited, an SME
funding platform and B2B technology provider which enables online
lending, was subject to a valuation reduction of £264,000 as at 30
September 2021, as forecasted revenue performance is yet to
materialise.
Exonar Limited, a developer of software
solutions which help ensure compliance with data-centric
regulations and imperatives, was reduced in value by £177,000 as at
30 September 2021. This is the result of a calibration to the price
set under a recent funding round.
Destiny Pharma plc, which is listed on AIM, was
reduced in value by £165,000 as at 30 September 2021. Please see
below for further valuation commentary.
Lineten Limited, the owner of
an aggregator platform for on-demand and same day delivery, was
subject to a valuation reduction of £157,000 as at 30 September
2021. The business has progressed slowly and is revenue performance
is behind Downing’s investment case.
The small valuation movements in respect of Virtual
Class Limited (trading as Third Space Learning),
Cornelis Networks, Inc.,
Parsable, Inc. and
Carbice Corporation, offset one
another for the half-year period, resulting in a net movement of
£nil.
OutlookAfter some early setbacks in the
Liquidity and Venture Capital portfolios, we are now starting to
see improved performance from the Ventures Share class, driven by a
number of valuation uplifts. It is reassuring that most of the
portfolio companies have weathered the pandemic and many may now be
better placed than they were beforehand.
Our role over the remainder of the year will focus on continued
support of the existing portfolio companies in the Venture Capital
Portfolio, as well as looking to add new investments to this
portfolio as the proceeds of the current fundraising become
available.
Downing LLP
Review of Investments – Ventures
Share PoolThe following investments were
held at 30 September 2021:
|
Cost as at30 September2021 |
Valuation as at 30 September
2021 |
Valuationmovementin period |
% ofportfolio |
Portfolio of investments |
£’000 |
£’000 |
£’000 |
|
Venture Capital investments |
|
|
|
|
E-Fundamentals (Group) Limited |
1,342 |
3,668 |
1,260 |
11.0% |
Imagen Limited |
1,000 |
2,352 |
524 |
7.0% |
Virtual Class Limited (t/a Third Space Learning) |
1,053 |
1,816 |
(60) |
5.4% |
Rated People Limited |
1,282 |
1,584 |
- |
4.8% |
Hackajob Limited |
784 |
1,481 |
697 |
4.4% |
Cornelis Networks, Inc. |
1,402 |
1,337 |
30 |
4.0% |
Trinny London Limited |
219 |
1,240 |
283 |
3.7% |
Ayar Labs, Inc. |
764 |
1,191 |
465 |
3.6% |
Arecor Therapeutics plc^ |
418 |
1,052 |
634 |
3.2% |
Firefly Learning Limited |
1,047 |
1,047 |
- |
3.1% |
Ecstase Limited (t/a ADAY) |
1,000 |
1,000 |
- |
3.0% |
Limitless Technology Limited |
757 |
920 |
- |
2.8% |
FundingXchange Limited |
1,050 |
786 |
(264) |
2.4% |
Streethub Limited (t/a Trouva) |
1,208 |
770 |
(503) |
2.3% |
Congenica Limited |
734 |
746 |
- |
2.2% |
Parsable, Inc. |
766 |
694 |
16 |
2.1% |
Xupes Limited |
933 |
675 |
384 |
2.0% |
Masters of Pie Limited |
667 |
667 |
- |
2.0% |
Carbice Corporation |
656 |
623 |
14 |
1.9% |
JRNI Limited |
525 |
525 |
- |
1.6% |
Maverick Pubs (Holdings) Limited |
1,000 |
450 |
- |
1.3% |
FVRVS Limited (t/a Fundamental VR) |
375 |
439 |
64 |
1.3% |
Fenkle Street LLP* |
301 |
388 |
- |
1.2% |
Destiny Pharma plc^ |
500 |
364 |
(165) |
1.1% |
Cambridge Touch Technologies Limited |
459 |
361 |
- |
1.1% |
Channel Mum Limited |
675 |
278 |
- |
0.8% |
Hummingbird Technologies Limited |
750 |
271 |
(482) |
0.8% |
Upp Technologies Group Limited (previously Volo Commerce) |
1,077 |
242 |
- |
0.7% |
Exonar Limited |
550 |
202 |
(177) |
0.6% |
MIP Diagnostics Limited |
200 |
200 |
- |
0.6% |
Lineten Limited |
400 |
52 |
(157) |
0.2% |
Empiribox Holdings Limited |
1,563 |
- |
(405) |
0.0% |
Lignia Wood Company Limited |
1,778 |
- |
- |
0.0% |
Live Better With Limited |
1,211 |
- |
- |
0.0% |
Ormsborough Limited |
900 |
- |
- |
0.0% |
|
29,346 |
27,421 |
2,158 |
82.2% |
Liquidity investments |
|
|
|
|
Downing Strategic Micro-Cap Investment Trust plc*^ |
4,269 |
3,333 |
196 |
10.0% |
MI Downing UK Micro-Cap Growth Fund* |
123 |
76 |
(16) |
0.2% |
|
4,392 |
3,409 |
180 |
10.2% |
|
33,738 |
30,830 |
2,338 |
92.4% |
Cash at bank and in hand |
|
2,517 |
|
7.6% |
Total investments |
|
33,347 |
|
100.0% |
All Venture Capital investments are incorporated in England and
Wales.*non-qualifying
investment ^listed
and traded on the London Stock Exchange
Investment movements for the
period ended 30
September 2021
|
Cost |
Additions |
£’000 |
Venture Capital investments |
|
Arecor Therapeutics plc** |
422 |
FVRVS Limited |
125 |
|
547 |
|
Cost |
Valuation at 01/04/21* |
Proceeds |
Lossvs. cost |
Realised gain |
Disposals |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Venture Capital investments |
|
|
|
|
|
Glownet Limited |
741 |
- |
- |
(741) |
- |
Arecor Limited** |
418 |
418 |
418 |
- |
- |
Liquidity investments |
|
|
|
|
|
MI Downing UK Micro-Cap Growth Fund* |
369 |
270 |
301 |
(68) |
31 |
|
1,528 |
688 |
719 |
(809) |
31 |
*non-qualifying investment**includes Loan Note conversion and
share for share exchange
Investment Manager’s Report- Healthcare Share
Pool
i. OverviewIntroductionWe
present a review of the investment portfolio and activity for the
Healthcare Share pool over the six-month period to 30 September
2021.
This Investment Manager’s Report is split into two sections
comprising this overview and a review of Venture Capital
Portfolio.
A separate report on the portfolio of Liquidity Investments is
included below.
Net Asset Value and resultsAs at 30 September
2021, the NAV of a Healthcare share stood at 88.70p, an increase of
22.95p from 31 March 2021, after adding back the dividend of 2.75p
which was paid during the period.
The return on ordinary activities for the Healthcare Share pool
for the period was £4.5 million, comprising a revenue loss of
£132,000 and a capital gain of £4.6 million.
The Total Return to Healthcare Shareholders, as at 30 September
2021, was 93.95p.
Portfolio OverviewAs at 30 September 2021, the
Healthcare Share pool held a portfolio of 13 Venture Capital
investments and two Liquidity investments, with a combined value of
£15.4 million.
The valuation movements during the period are discussed in more
detail in the following sections of this Investment Manager’s
Report.
Portfolio PerformanceThere were a number of
valuation movements in the Venture Capital Portfolio during the
period, resulting in a net valuation increase of £4.7 million.
The carrying values of the Liquidity Investments have been
adjusted to reflect their quoted prices as at 30 September 2021.
This resulted in a valuation uplift of £29,000 for the period.
Liquidity Investments are discussed in more detail below.
ii. Venture Capital
PortfolioInvestment activityDuring the
period, a total of £1.2 million was invested in four VCT Qualifying
companies, three of which were existing businesses within the
Venture Capital Portfolio. There were also two IPOs on AIM, one of
which involved the conversion of loan notes into equity.
New Venture Capital
investmentsDiA Imaging Analysis
Limited
(“DiA”)
(£415,000) is a leading provider of advanced
AI-based solutions for ultrasound analysis. The additional capital
will enable DiA to expand its portfolio of FDA-cleared and
CE-marked AI-based ultrasound solutions that enable clinicians to
identify clinical abnormalities with speed and accuracy.
Follow-on Venture Capital
investmentsGENinCode plc
(“GENinCode”) develops products and technology
that helps patients and healthcare practitioners to assess and
predict the onset of cardiovascular disease, thrombosis, and the
diagnosis of Familial Hypercholesterolemia. As part of the
Company’s IPO on 22 July 2021, the Healthcare Share pool made a
follow-on investment of £302,000 in the business.
FVRVS Limited, trading as Fundamental
VR, provides surgery simulation software for enterprise
clients and hospitals. The Healthcare Share pool invested an
additional £250,000 in the business, alongside a further £125,000
from the Ventures Share pool.
The Electrospinning Company Limited is a
supplier and manufacturer of clinical-grade biomaterials, which can
be used to act as a synthetic scaffold for implantation within body
tissue to promote repair post trauma or surgery. During the period
the Healthcare Share pool invested a further £200,000 in the
business.
On 3 June 2021 Arecor Therapeutics plc
(“Arecor”) undertook a successful IPO on AIM (see
portfolio valuation commentary). As part of the IPO, the Healthcare
Share pool’s existing loan note holding was converted into ordinary
shares.
Portfolio valuationAs at 30 September 2021, the
Venture Capital portfolio of the Healthcare Share pool was
increased in value by a total of £4.7 million.
Since its IPO, Arecor has made several positive
updates on the progress of its products, which have bolstered its
share price. As at 30 September, the market capitalisation of
Arecor was £116 million. With the valuation now being based on the
quoted bid price, the valuation of the Healthcare Share pool’s
investment in the group was uplifted by £2.3 million as at 30
September 2021.
GENinCode successfully admitted its shares to
trading on AIM on 22 July 2021, taking the market capitalisation of
the company to approximately £42 million at that date. The
company’s quoted share price has been relatively flat since
September 2021, as a result of limited news flow from the company,
although a number of positive developments were announced alongside
the interim results, released on 16 September 2021. In line with
the quoted bid price as at 30 September 2021, the Healthcare Share
pool’s holding in GENinCode was increased by £1.2 million.
Adaptix Limited is a developer of a flat panel
X-ray source which seeks to improve the accuracy and mobility of 3D
imaging. The company’s technology will make portable, low radiation
dose 3D imaging more accessible and lower cost than systems
currently available on the market. The valuation of the company has
been uplifted, as a result of a recalibration of the valuation in
line with a recent funding round. The uplift in the carrying value
of the Healthcare Share pool’s investment, as at 30 September 2021,
was £758,000.
Open Bionics Limited is an award-winning
designer, manufacturer and supplier of bionic limbs. The company
uses 3D printing and scanning technology to produce custom-made
prosthetics at a lower manufacturing cost relative to existing
technologies. The valuation of the business has been uplifted in
accordance with an external valuation. The resulting uplift for the
Healthcare Share pool was £378,000 as at 30 September 2021.
The valuation of FVRVS Limited (trading as
Fundamental VR) has been increased as a result of
a calibration to the most recent funding round. The valuation
uplift for the Healthcare Share pool was £129,000 as at 30
September 2021.
The carrying value of the Healthcare Share pool’s investment in
The Electrospinning Company Limited was increased
by £124,000 as at 30 September 2021. This is reflective of a
calibration to the company’s recent funding round, in which the
Healthcare Share pool partook.
Destiny Pharma plc, which is listed on AIM, was
reduced in value by £248,000 as at 30 September 2021. The business
continues to progress with its clinical pipeline and trials,
however the quoted share price has fallen on the back of limited
trading volumes. We continue to believe that there will be
long-term appreciation in the share price, as key milestones
continue to be achieved.
DiA Imaging Analysis Limited
(“DiA”) was reduced in
value by £4,000 as at 30 September 2021, to reflect the movement in
the exchange rate in the US Dollar/Sterling exchange rate, between
the date of investment and the half-year date.
It is disappointing to report that we continue to anticipate no
recovery of value from Live Better
With Limited, a developer of a
healthcare website aiming to help people with long term medical
conditions.
OutlookThe two IPOs that took place in the
period are reassuring signs of the quality of the companies in the
Venture Capital Portfolio. These companies are now starting to
drive the overall performance of the Healthcare Share pool in the
right direction.
Over the remainder of the year, we will continue to focus on
supporting the existing companies in the Venture Capital Portfolio,
whilst also looking to further add to this portfolio in deploying
existing and new fundraising proceeds. The healthcare sector is
generating a good level of attractive dealflow and there is strong
market sentiment towards these businesses, as we have observed with
Arecor and GENinCode.
Downing LLP
Review of Investments – Healthcare Share
Pool
The following investments were held at 30 September 2021:
|
Costas at 30 September2021 |
Valuation as at 30
September 2021 |
ValuationMovementin period |
% ofportfolio |
Portfolio of
investments |
£’000 |
£’000 |
£’000 |
|
Venture Capital investments |
|
|
|
|
Arecor Therapeutics plc^ |
1,533 |
3,859 |
2,326 |
22.1% |
GENinCode plc^ |
1,202 |
2,419 |
1,217 |
13.8% |
Adaptix Limited |
1,056 |
1,843 |
758 |
10.5% |
Open Bionics Limited |
1,000 |
1,378 |
378 |
7.9% |
Congenica Limited |
1,184 |
1,215 |
- |
6.9% |
FVRVS Limited (t/a Fundamental VR) |
750 |
879 |
129 |
5.1% |
Future Health Works Limited (t/a MyRecovery) |
528 |
556 |
- |
3.2% |
Destiny Pharma plc^ |
750 |
545 |
(248) |
3.1% |
The Electrospinning Company Limited |
478 |
544 |
124 |
3.1% |
Invizius Limited |
500 |
500 |
- |
2.9% |
DiA Imaging Analysis Limited |
415 |
419 |
4 |
2.4% |
Cambridge Respiratory Innovations Limited |
400 |
400 |
- |
2.3% |
MIP Diagnostics Limited |
200 |
200 |
- |
1.1% |
Live Better With Limited |
1,106 |
- |
- |
0.0% |
|
11,102 |
14,757 |
4,688 |
84.4% |
Liquidity Investments |
|
|
|
|
Downing Strategic Micro-Cap Investment Trust plc*^ |
729 |
569 |
34 |
3.3% |
MI Downing UK Micro-Cap Growth Fund* |
40 |
24 |
(5) |
0.1% |
|
769 |
593 |
29 |
3.4% |
|
11,871 |
15,350 |
4,717 |
87.8% |
Cash at bank and in hand |
|
2,137 |
|
12.2% |
Total investments |
|
17,487 |
|
100.0% |
*non-qualifying investment^listed and traded on the London Stock
Exchange
Investment movements for the
period ended 30
September 2021
|
Cost |
Additions |
£’000 |
Venture Capital investments |
|
Arecor Therapeutics plc** |
1,547 |
GENinCode plc |
1,202 |
DiA Imaging Analysis Limited |
415 |
FVRVS Limited (t/a Fundamental VR) |
250 |
The Electrospinning Company Limited |
200 |
|
3,614 |
|
Cost |
Valuation at 01/04/21* |
Proceeds |
Lossvs. cost |
Realised gain |
Disposals |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Venture Capital investments |
|
|
|
|
|
Arecor Limited** |
1,533 |
1,533 |
1,533 |
- |
- |
GENinCode plc |
900 |
900 |
900 |
- |
- |
Liquidity investments |
|
|
|
|
|
MI Downing UK Micro-Cap Growth Fund* |
116 |
86 |
96 |
(20) |
10 |
|
2,549 |
2,519 |
2,529 |
(20) |
10 |
*non-qualifying investment**includes Loan Note conversion and
share for share exchange
Investment Manager’s Report- Liquidity
Investments
i. IntroductionWe present a review
of the portfolios of Liquidity Investments, held by the Ventures
and Healthcare Share pools, over the six-month period to 30
September 2021. As at 30 September, both Share pools had holdings
in Downing Strategic Micro-Cap Investment Trust plc (‘DSM’), which
performed well during the half-year period, as well as a small
residual holding in MI Downing UK Micro-Cap Growth Fund, which is
in the process of winding-up.
The carrying values of the Liquidity Investments
have been adjusted to reflect their quoted prices as at 30
September 2021. This resulted in uplifts of £180,000 and £29,000
for the Ventures and Healthcare Share pools, respectively, for the
half-year period.
ii. Downing Strategic Micro-Cap Investment
Trust plcThe values of the Ventures and Healthcare Share
pool holdings in Downing Strategic Micro-Cap Investment Trust plc
(“DSM”) increased in value by £196,000 and £34,000 during the
period. As at 30 September 2021, DSM’s mid-market share price
traded at a discount to NAV of 16.89%, representing unrealised
value in the company’s share price. The Managers of DSM also
believe that the trust’s portfolio also has a level of intrinsic
value which is yet to be recognised by the market. They have been
uncharacteristically bullish on the prospects for the portfolio
throughout 2021, believing that the prospects for DSM investments
are healthy and capable of delivering earnings and cash flows which
should ultimately be better than the pre-Covid period.
DSM holdings are now typically more efficient, better managed,
and should be able to achieve better returns on invested capital
than at initial investment. The Managers believe that the portfolio
is as well positioned as it can be.
iii. MI Downing UK Micro-Cap Growth
Fund Ventures and Healthcare Shareholders will be aware of
the small residual investments in Downing Micro-Cap Growth Fund
(“DMCG”). Since 19th February 2021, the ACD has been working with
the investment manager Downing LLP to dispose of and liquidate all
assets of the Fund with the intention of returning monies to
investors at the earliest opportunity. The second round of capital
distributions were made in June 2021, returning proceeds of
£301,000 to the Ventures Share pool and £96,000 to the Healthcare
Share pool, realising gains of £31,000 and £10,000 respectively,
over the valuations as at 31 March 2021. Over 100% of the
suspension price has now been returned to shareholders, with a
small residual distribution expected in the coming months.
As at 30 September 2021, the Ventures Share pool’s residual
holding in DMCG was reduced in value by £16,000, and the Healthcare
Share pool’s holding by £5,000.
Downing LLP
Investment Manager’s Report DSO D Share
Pool
IntroductionThe process of
realising the investments and returning funds to Shareholders
remains the focus of the DSO D Share pool, although this has been
subject to significant delays as a result of the coronavirus
pandemic.
Net Asset Value and resultsThe
Net Asset Value (“NAV”) per DSO D Share at 30 September 2021, net
of the estimated performance incentive fee, stood at 9.9p, an
increase of 0.2p over the period. Whilst the reported NAV (prior to
the deduction of the performance fee estimate) reduced by 1.3p
during the period, the estimated performance incentive fee, which
is expected to become due to partners and staff of Downing LLP,
also reduced during the period.
Total Return, net of the estimated performance fee, stands at
104.2p per share compared to initial cost to Shareholders, net of
income tax relief, of 70.0p per Share. We consider this to be
satisfactory performance when compared to the initial NAV of
100p.
The loss on ordinary activities after taxation for the period
was £1,000, comprising a revenue loss of £8,000 and a capital gain
of £7,000.
Whilst it is unfortunate to report further delays in the
realisation process, the NAV of the DSO Share pool has, to date,
not been adversely impacted by the effects of the coronavirus
pandemic. However, we continue to experience delays in exiting from
the DSO D Share pool’s investments in Pearce and Saunders and
Pearce and Saunders DevCo Limited. Plans are in place to exit from
these companies and we hope to have completed this process by the
summer of 2022.
Venture Capital investments As
at 31 March 2021, the DSO D Share Pool held four Venture Capital
investments with a total value of £455,000.
Portfolio activityWe are pleased to report
that, after the half-year date, the DSO D Share pool exited from
its two renewable energy investments.
Fresh Green Power Limited, the owner of solar
panels on the rooftops of domestic properties in the UK, was exited
after the half-year date. The carrying value of the investment was
adjusted at 30 September 2021 to bring it in line with the proceeds
received by the DSO D Share pool.
Green Energy Production UK Limited owns a
portfolio of commercial solar panels on the rooftops of chicken
sheds in Lincolnshire. The DSO D Share pool’s investment in the
company has now been exited. The carrying value of this investment
was also adjusted at 30 September, in line with the proceeds
received shortly after the half-year date.
Portfolio valuationDuring the year, the
carrying value of the portfolio of Venture Capital investments held
by the DSO D Share pool was increased by £10,000.
As DSO D Shareholders will be aware Pearce and Saunders
Limited has been heavily impacted by the restrictions and
forced closures brought about by the coronavirus pandemic. However,
as restrictions have been lifted the business has been able to
trade more effectively, leading to an increase in valuation of
£17,000 as at 30 September 2021.
Finally, Pearce and Saunders DevCo Limited was
reduced in value by £3,000 as at 30 September 2021.
DividendsAs Fresh Green Power
and Green Energy Production have now been exited, the DSO D Share
pool is in a position to declare a 7.5p dividend to DSO D
Shareholders, to be paid on 28 January 2022, to Shareholders on the
register as at 7 January 2022. This takes total dividends paid to
102.0p per DSO D Share, on a net investment of 70.0p.
Outlook The focus for the DSO D
Share pool continues to be on realising the remaining investments.
A further distribution will be paid once the final realisations
have taken place.
Downing LLP
Review of investments - DSO D Share Pool
The following investments were held at 30 September 2021:
|
Costas at 30 September 2021 |
Valuationas at 30
September2021 |
ValuationMovementin period |
% ofportfolio |
Portfolio of investments |
£’000 |
£’000 |
£’000 |
|
Venture Capital investments |
|
|
|
|
Fresh Green Power Limited |
189 |
279 |
(3) |
37.0% |
Pearce and Saunders Limited |
275 |
94 |
17 |
12.5% |
Green Energy Production UK Limited |
100 |
66 |
(1) |
8.7% |
Pearce and Saunders DevCo Limited* |
19 |
16 |
(3) |
2.1% |
|
583 |
455 |
10 |
60.3% |
Cash at bank and in hand |
|
300 |
|
39.7% |
Total investments |
|
755 |
|
100.0% |
* non-qualifying investment
All Venture Capital investments are incorporated in England and
Wales.
There were no investment disposals during the period.
Investment Manager’s Report - DP67 Share
Pool
IntroductionThe process of
realising the investments and returning funds to DP67 Shareholders
remains the focus for this Share pool, although this has been
subject to substantial delays as a result of the coronavirus
pandemic.
Net Asset Value and resultsThe Net Asset Value
(“NAV”) per DP67 Share at 30 September 2021 stood at 19.5p, an
increase of 1.1p over the period. Total Return stands at 87.3p per
DP67 Share, compared to initial cost to Shareholders, net of income
tax relief, of 70.0p per Share. Compared to the initial NAV of
100p, we consider the Total Return of 87.3p to be underperformance
against the original expectations for the DP67 Share pool.
The return on ordinary activities after taxation for the period
was £114,000, comprising a revenue loss of £17,000 and a capital
gain of £131,000.
As Shareholders are aware, the DP67 portfolio has a high level
of exposure to the leisure and hospitality sector, which has been
heavily impacted by the coronavirus pandemic. It has not been
possible to seek to achieve good exit values for these businesses
during a period in which they have been unable to operate at a
level close to full capacity. We are encouraged by the trading that
has been possible following the gradual lifting of restrictions
throughout the UK, however we anticipate that it will still take
some time for exits to be achieved, as a good level of
post-pandemic trading activity will need to be demonstrated if the
sales values achieved are to represent the best value for
shareholders.
Venture Capital investments As
at 31 March 2021, the DP67 Share pool held a portfolio of five
Venture Capital investments, with a total value of £2.3
million.
Portfolio activityIt is disappointing to report
that there were no realisations during the period.
Portfolio valuationThe DP67 portfolio was
increased in value by a total of £138,000 during the period. This
uplift was wholly attributable to Gatewales
Limited. The company is a corporate member in
Fenkle Street LLP and is valued
based on a discounted cash flow basis. Unwinding of the discount
during the period resulted in the uplift stated.
The valuations of the remaining Venture Capital investments are
unchanged from those stated in the Annual Report to 31 March
2021.
OutlookThe focus for the DP67 Share pool
continues to be on realising the remaining investments. The delays
in the exit processes are frustrating, however we are hopeful that
these might now complete by Q4 2022. In the interim, we will
continue to work with management teams in order to maximise the
proceeds for the DP67 Share pool. Further dividends will be paid
once the final realisations have taken place.
Downing LLP
Review of Investments – DP67 Share Pool
The following investments were held at 30 September 2021:
|
Cost |
Valuation |
Valuationmovementin period |
% ofportfolio |
Portfolio of investments |
£’000 |
£’000 |
£’000 |
|
Venture Capital investments |
|
|
|
|
Cadbury House Holdings Limited |
1,409 |
791 |
- |
38.2% |
Fenkle Street LLP* |
405 |
727 |
- |
34.9% |
Gatewales Limited** |
343 |
747 |
138 |
25.5% |
Yamuna Renewables Limited |
400 |
- |
- |
0.0% |
London City Shopping Centre Limited* |
99 |
- |
- |
0.0% |
|
2,656 |
2,265 |
138 |
98.6% |
Cash at bank and in hand |
|
10 |
|
1.4% |
Total investments |
|
2,275 |
|
100.0% |
*non-qualifying
investment **partially
qualifying investment
All Venture Capital investments are incorporated in England and
Wales.
There were no investment disposals during the period.
Unaudited Income Statementfor the
six months ended
30 September
2021
|
Six months ended30 Sep 2021 |
Six months ended30 Sep 2020 |
|
Yearended31
Mar2021 |
|
|
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
£’000 |
Income |
43 |
2 |
45 |
234 |
2 |
236 |
|
268 |
Gains on investments |
- |
7,244 |
7,244 |
- |
762 |
762 |
|
4,816 |
|
43 |
7,246 |
7,289 |
234 |
764 |
998 |
|
5,084 |
Investment management fees |
(244) |
(244) |
(488) |
(196) |
(196) |
(392) |
|
(822) |
Other expenses |
(209) |
- |
(209) |
105 |
- |
105 |
|
(97) |
(Loss)/profit on ordinary activities before tax |
(410) |
7,002 |
6,592 |
143 |
568 |
711 |
|
4,165 |
Tax on total comprehensive income and ordinary activities |
- |
- |
- |
- |
- |
- |
|
(69) |
(Loss)/profit attributable to equity Shareholders, being total
comprehensive income for the period |
(410) |
7,002 |
6,592 |
143 |
568 |
711 |
|
4,096 |
|
|
|
|
|
|
|
|
|
Basic and diluted return per share: |
|
|
|
|
|
|
|
|
Ventures Share |
(0.5p) |
4.6p |
4.1p |
0.4p |
1.6p |
2.0p |
|
(1.8p) |
Healthcare Share |
(0.7p) |
23.7p |
23.0p |
(0.1p) |
(0.3p) |
(0.4p) |
|
(0.4p) |
DSO D Share |
(0.1p) |
0.1p |
0.0p |
- |
(1.3p) |
(1.3p) |
|
8.0p |
DP67 Share |
(0.2p) |
1.3p |
1.1p |
(0.1p) |
(0.3p) |
(0.4p) |
|
2.9p |
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.
Analysed by Share
poolfor the six months
ended 30 September
2021
|
Six months ended30 Sep
2021 |
|
Six months ended30 Sep
2020 |
|
Yearended31
Mar2021 |
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
Total |
Ventures Share pool |
£’000 |
£’000 |
£’000 |
|
£’000 |
£’000 |
£’000 |
|
£’000 |
Income |
35 |
1 |
36 |
|
195 |
2 |
197 |
|
232 |
Net gain on investments |
- |
2,369 |
2,369 |
|
- |
878 |
878 |
|
4,067 |
|
35 |
2,370 |
2,405 |
|
195 |
880 |
1,075 |
|
4,299 |
Investment management fees |
(152) |
(152) |
(304) |
|
(113) |
(113) |
(226) |
|
(514) |
Other expenses |
(136) |
- |
(136) |
|
90 |
- |
90 |
|
(25) |
(Loss)/profit on ordinary activities before tax |
(253) |
2,218 |
1,965 |
|
172 |
767 |
939 |
|
3,760 |
Tax on total comprehensive income and ordinary activities |
- |
- |
- |
|
- |
- |
- |
|
(39) |
(Loss)/profit attributable to equity Shareholders, being total
comprehensive income for the period |
(253) |
2,218 |
1,965 |
|
172 |
767 |
939 |
|
3,721 |
` |
Six months ended30 Sep
2021 |
|
Six months ended30 Sep
2020 |
|
Yearended31
Mar2021 |
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
Total |
Healthcare Share pool |
£’000 |
£’000 |
£’000 |
|
£’000 |
£’000 |
£’000 |
|
£’000 |
Income |
8 |
1 |
9 |
|
22 |
- |
22 |
|
36 |
Net gain on investments |
- |
4,727 |
4,727 |
|
- |
8 |
8 |
|
796 |
|
8 |
4,728 |
4,736 |
|
22 |
8 |
30 |
|
832 |
Investment management fees |
(82) |
(82) |
(164) |
|
(72) |
(72) |
(144) |
|
(268) |
Other expenses |
(58) |
- |
(58) |
|
29 |
- |
29 |
|
(15) |
(Loss)/profit on ordinary activities before tax |
(132) |
4,646 |
4,514 |
|
(21) |
(64) |
(85) |
|
549 |
Tax on total comprehensive income and ordinary activities |
- |
- |
- |
|
- |
- |
- |
|
- |
(Loss)/profit attributable to equity Shareholders, being total
comprehensive income for the period |
(132) |
4,646 |
4,514 |
|
(21) |
(64) |
(85) |
|
549 |
|
Six months ended30 Sep
2021 |
|
Six months ended30 Sep
2020 |
|
Yearended31
Mar2021 |
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
Total |
DSO D Share pool |
£’000 |
£’000 |
£’000 |
|
£’000 |
£’000 |
£’000 |
|
£’000 |
Income |
- |
- |
- |
|
7 |
- |
7 |
|
- |
Net gain/(loss) on investments |
- |
10 |
10 |
|
- |
(97) |
(97) |
|
(106) |
|
- |
10 |
10 |
|
7 |
(97) |
(90) |
|
(106) |
Investment management fees |
(3) |
(3) |
(6) |
|
(4) |
(4) |
(8) |
|
(12) |
Other expenses |
(5) |
- |
(5) |
|
(6) |
- |
(6) |
|
(25) |
(Loss)/profit on ordinary activities before tax |
(8) |
7 |
(1) |
|
(3) |
(101) |
(104) |
|
(143) |
Tax on total comprehensive income and ordinary activities |
- |
- |
- |
|
- |
- |
- |
|
- |
(Loss)/profit attributable to equity Shareholders, being total
comprehensive income for the period |
(8) |
7 |
(1) |
|
(3) |
(101) |
(104) |
|
(143) |
|
Six months ended30 Sep 2021 |
|
Six months ended30 Sep 2020 |
|
Yearended31
Mar2021 |
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
Total |
DP67 Share pool |
£’000 |
£’000 |
£’000 |
|
£’000 |
£’000 |
£’000 |
|
£’000 |
Income |
- |
- |
- |
|
10 |
- |
10 |
|
- |
Net gain/(loss) on investments |
- |
138 |
138 |
|
- |
(27) |
(27) |
|
59 |
|
- |
138 |
138 |
|
10 |
(27) |
(17) |
|
59 |
Investment management fees |
(7) |
(7) |
(14) |
|
(7) |
(7) |
(14) |
|
(28) |
Other expenses |
(10) |
- |
(10) |
|
(8) |
- |
(8) |
|
(32) |
(Loss)/profit on ordinary activities before tax |
(17) |
131 |
114 |
|
(5) |
(34) |
(39) |
|
(1) |
Tax on total comprehensive income and ordinary activities |
- |
- |
- |
|
- |
- |
- |
|
(30) |
(Loss)/profit attributable to equity Shareholders, being total
comprehensive income for the period |
(17) |
131 |
114 |
|
(5) |
(34) |
(39) |
|
(31) |
Unaudited Balance Sheet
as at 30 September
2021
|
As at 30
September2021 |
|
As at 30
September2020 |
|
As at
31March2021 |
|
£’000 |
|
£’000 |
|
£’000 |
Fixed assets |
|
|
|
|
|
Investments |
48,900 |
|
42,281 |
|
40,743 |
Current assets |
|
|
|
|
|
Debtors |
393 |
|
375 |
|
701 |
Cash at bank and in hand |
4,964 |
|
1,309 |
|
6,986 |
|
5,357 |
|
1,684 |
|
7,867 |
Creditors: amounts falling due within one
year |
(644) |
|
(556) |
|
(381) |
Net current assets |
4,713 |
|
1,128 |
|
7,306 |
Net assets |
53,613 |
|
43,409 |
|
48,049 |
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
Called up Share capital |
103 |
|
100 |
|
102 |
Capital redemption reserve |
58 |
|
58 |
|
58 |
Special reserve |
27,547 |
|
37,377 |
|
29,417 |
Share premium account |
20,919 |
|
18,930 |
|
20,010 |
Funds held in respect of Shares not yet allotted |
194 |
|
68 |
|
241 |
Revaluation reserve |
5,804 |
|
(12,610) |
|
(1,143) |
Capital reserve – realised |
3,166 |
|
2,803 |
|
3,132 |
Revenue reserve |
(4,178) |
|
(3,317) |
|
(3,768) |
Total equity Shareholders’ funds |
53,613 |
|
43,409 |
|
48,049 |
|
|
|
|
|
|
Basic and diluted Net Asset Value per Share: |
|
|
|
|
|
Ventures Share |
68.5p |
|
61.2p |
|
10.2p |
Healthcare Share |
88.7p |
|
65.2p |
|
18.4p |
DSO D Share |
10.2p |
|
10.7p |
|
67.2p |
DP67 Share |
19.5p |
|
18.4p |
|
68.5p |
Analysed by Share pool
as at 30 September
2021
|
As at 30
September2021 |
|
As at 30
September2020 |
|
As at 31March2021 |
Ventures Share pool |
£’000 |
|
£’000 |
|
£’000 |
Fixed assets |
|
|
|
|
|
Investments |
30,830 |
|
30,976 |
|
28,633 |
Current assets |
|
|
|
|
|
Debtors |
198 |
|
240 |
|
464 |
Cash at bank and in hand |
2,517 |
|
79 |
|
3,141 |
|
2,715 |
|
319 |
|
3,605 |
Creditors: amounts falling due within one
year |
(404) |
|
(3,070) |
|
(238) |
Net current assets |
2,311 |
|
(2,751) |
|
3,367 |
Net assets |
33,141 |
|
28,225 |
|
32,000 |
Capital and reserves |
|
|
|
|
|
Called up share capital |
60 |
|
57 |
|
59 |
Capital redemption reserve |
58 |
|
58 |
|
58 |
Special reserve |
18,997 |
|
26,082 |
|
20,195 |
Share premium account |
14,551 |
|
13,180 |
|
14,009 |
Funds held in respect of shares not yet allotted |
189 |
|
61 |
|
222 |
Revaluation reserve |
1,237 |
|
(9,322) |
|
(814) |
Capital reserve – realised |
878 |
|
426 |
|
847 |
Revenue reserve |
(2,829) |
|
(2,317) |
|
(2,576) |
Total equity Shareholders’ funds |
33,141 |
|
28,225 |
|
32,000 |
|
As at
30September2021 |
|
As at
30September2020 |
|
As at
31March2021 |
Healthcare Share pool |
£’000 |
|
£’000 |
|
£’000 |
Fixed assets |
|
|
|
|
|
Investments |
15,350 |
|
8,806 |
|
9,538 |
Current assets |
|
|
|
|
|
Debtors |
194 |
|
2,882 |
|
254 |
Cash at bank and in hand |
2,137 |
|
890 |
|
3,491 |
|
2,331 |
|
3,772 |
|
3,745 |
Creditors: amounts falling due within one
year |
(187) |
|
(291) |
|
(99) |
Net current assets |
2,144 |
|
3,481 |
|
3,646 |
Net assets |
17,494 |
|
12,287 |
|
13,184 |
Capital and reserves |
|
|
|
|
|
Called up share capital |
24 |
|
24 |
|
24 |
Special reserve |
7,987 |
|
10,323 |
|
8,656 |
Share premium account |
6,368 |
|
5,750 |
|
6,001 |
Funds held in respect of shares not yet allotted |
5 |
|
7 |
|
19 |
Revaluation reserve |
(4,587) |
|
(2,640) |
|
(161) |
Capital reserve – realised |
(474) |
|
- |
|
(84) |
Revenue reserve |
(1,403) |
|
(1,177) |
|
(1,271) |
Total equity Shareholders’ funds |
17,494 |
|
12,287 |
|
13,184 |
|
As at
30September2021 |
|
As at 30
September2020 |
|
As at
31March2021 |
DSO D Share pool |
£’000 |
|
£’000 |
|
£’000 |
Fixed assets |
|
|
|
|
|
Investments |
455 |
|
458 |
|
445 |
Current assets |
|
|
|
|
|
Debtors |
65 |
|
82 |
|
29 |
Cash at bank and in hand |
300 |
|
312 |
|
344 |
|
365 |
|
394 |
|
373 |
Creditors: amounts falling due within one
year |
(20) |
|
(12) |
|
(17) |
Net current assets |
345 |
|
382 |
|
356 |
Net assets |
800 |
|
840 |
|
801 |
Capital and reserves |
|
|
|
|
|
Called up share capital |
8 |
|
8 |
|
8 |
Special reserve |
963 |
|
972 |
|
966 |
Revaluation reserve |
(128) |
|
(132) |
|
(138) |
Capital reserve – realised |
(37) |
|
(37) |
|
(37) |
Revenue reserve |
(6) |
|
29 |
|
2 |
Total equity Shareholders’ funds |
800 |
|
840 |
|
801 |
|
As at
30September2021 |
|
As at 30
September2020 |
|
As at
31March2021 |
DP67 Share pool |
£’000 |
|
£’000 |
|
£’000 |
Fixed assets |
|
|
|
|
|
Investments |
2,265 |
|
2,041 |
|
2,127 |
Current assets |
|
|
|
|
|
Debtors |
1 |
|
53 |
|
1 |
Cash at bank and in hand |
10 |
|
28 |
|
10 |
|
11 |
|
81 |
|
11 |
Creditors: amounts falling due within one
year |
(98) |
|
(65) |
|
(74) |
Net current assets |
(87) |
|
16 |
|
63 |
Net assets |
2,178 |
|
2,057 |
|
2,064 |
Capital and reserves |
|
|
|
|
|
Called up share capital |
11 |
|
11 |
|
11 |
Special reserve |
(400) |
|
- |
|
(400) |
Revaluation reserve |
108 |
|
(516) |
|
(30) |
Capital reserve – realised |
2,399 |
|
2,414 |
|
2,406 |
Revenue reserve |
60 |
|
148 |
|
77 |
Total equity Shareholders’ funds |
2,178 |
|
2,057 |
|
2,064 |
Statement of Changes
in Equity
for the six months ended
30 September
2021
|
Sharecapital
Calledup |
CapitalRedemptionreserve |
Specialreserve |
Sharepremiumaccount |
Funds held in respectof
Shares not yet
allotted |
RevaluationReserve (Note
9) |
Capitalreserve -
realised |
Revenuereserve |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
At 31 March 2020 |
98 |
58 |
39,433 |
17,971 |
535 |
(13,302) |
2,483 |
(3,451) |
43,825 |
Total comprehensiveincome |
- |
- |
- |
- |
- |
4,158 |
249 |
(311) |
4,096 |
Transfer between reserves* |
- |
- |
(10,016) |
- |
- |
8,001 |
2,021 |
(6) |
- |
Unallotted Shares |
- |
- |
- |
- |
(294) |
- |
- |
- |
(294) |
Transactions with owners |
|
|
|
|
|
|
|
|
|
Dividend paid |
- |
- |
- |
- |
- |
- |
(1,621) |
- |
(1,621) |
Cancellation of shares |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Purchase of own shares |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Issue of shares |
4 |
- |
- |
2,097 |
- |
- |
- |
- |
2,101 |
Share issue costs |
- |
- |
- |
(58) |
- |
- |
- |
- |
(58) |
At 31 March 2021 |
102 |
58 |
29,417 |
20,010 |
241 |
(1,143) |
3,132 |
(3,768) |
48,049 |
Total comprehensive income |
- |
- |
- |
- |
- |
7,203 |
(202) |
(410) |
6,591 |
Transfer between reserves* |
- |
- |
(1,845) |
- |
- |
(256) |
2,101 |
- |
- |
Unallotted Shares |
- |
- |
- |
- |
(47) |
- |
- |
- |
(47) |
Transactions with owners |
|
|
|
|
|
|
|
|
|
Dividend paid |
- |
- |
- |
- |
- |
- |
(1,865) |
- |
(1,865) |
Cancellation of Shares |
- |
- |
- |
- |
- |
- |
- |
- |
- |
Purchase of own shares |
- |
- |
(25) |
- |
- |
- |
- |
- |
(25) |
Issue of shares |
1 |
- |
- |
933 |
- |
- |
- |
- |
934 |
Share issue costs |
- |
- |
- |
(24) |
- |
- |
- |
- |
(24) |
At 30 Sept 2021 |
103 |
58 |
27,547 |
20,919 |
194 |
5,804 |
3,166 |
(4,178) |
53,613 |
* A transfer of (£256,000) (2021: £8,001,000)
representing previously recognised realised gains and losses on
disposal of investments during the period has been made between the
Revaluation Reserve and the Capital reserve - realised. A transfer
of £1,845,000 (2021: £10,022,000) representing the total of:
realised losses on the disposal of investments, cumulative
impairment losses, capital expenses and capital dividends in the
period, has been made between the Capital Reserve - realised and
the Special reserve. A transfer of £nil (2021: £6,000),
representing the balance on the Revenue reserve relating to
previously cancelled share classes, has been made from the revenue
reserve to the Special reserve.
Unaudited Statement of Cash
Flowsfor the six months ended 30 September
2021
|
DSO DSharepool |
DP67Sharepool |
VenturesShare pool |
Healthcare Share pool |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Cash flows from operating activities |
|
|
|
|
|
(Loss)/return on ordinary activities before taxation |
(1) |
114 |
1,965 |
4,514 |
6,592 |
Gains on investments |
(10) |
(138) |
(2,369) |
(4,728) |
(7,245) |
Increase in creditors |
3 |
24 |
164 |
88 |
214 |
(Increase)/decrease in debtors |
(36) |
- |
269 |
59 |
357 |
Net cash (outflow)/inflow from operating
activities |
(44) |
- |
29 |
(67) |
(82) |
Corporation tax paid |
- |
- |
- |
- |
- |
Net cash generated from operating activities |
(44) |
- |
29 |
(67) |
(82) |
Cash flow from investing activities |
|
|
|
|
|
Purchase of investments |
- |
- |
(547) |
(3,614) |
(4,161) |
Proceeds from disposal of investments |
- |
- |
719 |
2,529 |
3,248 |
Net cash
inflow/(outflow)
from investing activities |
- |
- |
172 |
(1,085) |
(913) |
Net cash (outflow)/inflow
before financing |
(44) |
- |
201 |
(1,152) |
(995) |
Cash flows from financing activities |
|
|
|
|
|
Issue of share capital |
- |
- |
(11) |
(14) |
(25) |
Issue of share capital |
- |
- |
556 |
378 |
934 |
Cost of issue of share capital |
- |
- |
(14) |
(10) |
(24) |
Funds held in respect of shares not yet allotted |
- |
- |
(33) |
(14) |
(47) |
Equity dividends paid |
- |
- |
(1,323) |
(542) |
(1,865) |
Net cash outflow from financing activities |
- |
- |
(825) |
(202) |
(1,027) |
|
|
|
|
|
|
Net change in cash |
(44) |
- |
(624) |
(1,354) |
(2,022) |
Cash and cash equivalents at start of the
year |
344 |
10 |
3,141 |
3,491 |
6,986 |
Cash and cash equivalents at end of the year |
300 |
10 |
2,517 |
2,137 |
4,964 |
|
|
|
|
|
|
Cash and cash equivalents comprise |
|
|
|
|
|
Cash at bank and in hand |
300 |
10 |
2,517 |
2,137 |
4,964 |
Total cash and cash equivalents |
300 |
10 |
2,517 |
2,137 |
4,964 |
Unaudited Statement of Cash Flows
for the six months ended 30 September
2020
|
DSO DSharepool |
DP67Sharepool |
VenturesShare pool |
Healthcare Share pool |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Cash flows from operating activities |
|
|
|
|
|
(loss)/return on ordinary activities before taxation |
(104) |
(39) |
939 |
(85) |
711 |
Losses/(gains) on investments |
97 |
27 |
(878) |
(8) |
(762) |
(Decrease)/increase in creditors |
(22) |
(18) |
2,804 |
(128) |
2,636 |
(Increase)/decrease in debtors |
(32) |
(4) |
202 |
(2,875) |
(2,709) |
Net cash (outflow)/inflow from operating
activities |
(61) |
(34) |
3,067 |
(3,096) |
(124) |
Corporation tax paid |
- |
- |
- |
- |
- |
Net cash generated from operating activities |
(61) |
(34) |
3,067 |
(3,096) |
(124) |
Cash flow from investing activities |
|
|
|
|
|
Purchase of investments |
- |
- |
(6,163) |
(1,639) |
(7,802) |
Proceeds from disposal of investments |
101 |
- |
650 |
- |
751 |
Net cash inflow/(outflow) from investing
activities |
101 |
- |
(5,513) |
(1,639) |
(7,051) |
Net cash inflow/(outflow) before financing |
40 |
(34) |
(2,446) |
(4,735) |
(7,175) |
Cash flows from financing activities |
|
|
|
|
|
Issue of share capital |
- |
- |
705 |
295 |
1,000 |
Cost of issue of share capital |
- |
- |
(29) |
(10) |
(39) |
Funds held in respect of shares not yet allotted |
- |
- |
(351) |
(119) |
(470) |
Equity dividends paid |
- |
- |
(1,150) |
(471) |
(1,621) |
Net cash outflow from financing activities |
- |
- |
(825) |
(305) |
(1,130) |
|
|
|
|
|
|
Net change in cash |
40 |
(34) |
(3,271) |
(5,040) |
(8,305) |
Cash and cash equivalents at start of the
year |
272 |
62 |
3,350 |
5,930 |
9,614 |
Cash and cash equivalents at end of the year |
312 |
28 |
79 |
890 |
1,309 |
|
|
|
|
|
|
Cash and cash equivalents comprise |
|
|
|
|
|
Cash at bank and in hand |
312 |
28 |
79 |
890 |
1,309 |
Total cash and cash equivalents |
312 |
28 |
79 |
890 |
1,309 |
Notes to the Unaudited Financial
Statements
1. General
InformationDowning FOUR VCT plc (“the Company”) is a
Venture Capital Trust established under the legislation introduced
in the Finance Act 1995 and is domiciled in the United Kingdom and
incorporated in England and Wales.
2. Basis of
accountingThe unaudited half-yearly financial results
cover the six months to 30 September 2021 and have been prepared in
accordance with the accounting policies set out in the statutory
accounts for the year ended 31 March 2021, which were prepared in
accordance with the Financial Reporting Standard 102 (“FRS 102”)
and the Statement of Recommended Practice “Financial Statements of
Investment Trust Companies” issued in October 2019 (“SORP”).
3. The Company has only one class of
business and derives its income from investments made in shares,
securities and bank deposits.4. The
comparative figures are in respect of the six months ended 30
September 2020 and the year ended 31 March 2021
respectively.5. Net Asset Value per
share at the period end has been calculated on the number of shares
in issue at the period end as follows:
Ventures Shares* |
48,107,209 |
Healthcare Shares* |
19,710,375 |
DSO D Shares |
7,867,247 |
DP67 Shares |
11,192,136 |
*Excludes Management Shares
6. Return per share for the period
has been calculated on the average number of shares in issue in the
period as follows:
Ventures Shares* |
47,737,573 |
Healthcare Shares* |
19,573,094 |
DSO D Shares |
7,867,247 |
DP67 Shares |
11,192,136 |
*Excludes Management Shares
7. The unaudited financial
statements set out herein do not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006 and
have not been delivered to the Registrar of
Companies.8. Dividends
|
Six months ended 30 September 2021 |
|
Pence per Share |
|
Revenue£’000 |
Capital£’000 |
Total£’000 |
Ventures Shares |
|
|
|
|
|
Paid |
|
|
|
|
|
Final (year ended 31 March 2021) |
2.75 |
|
- |
1,323 |
1,323 |
Healthcare Shares |
|
|
|
|
|
Paid |
|
|
|
|
|
Final (year ended 31 March 2021) |
2.75 |
|
- |
542 |
542 |
9. Reserves
|
30 Sep 2021 |
30 Sep 2020 |
31 Mar 2021 |
|
£’000 |
£’000 |
£’000 |
Capital redemption reserve |
58 |
58 |
58 |
Special reserve |
27,547 |
37,377 |
29,417 |
Share premium account |
20,919 |
18,930 |
20,010 |
Revaluation reserve |
5,804 |
(12,610) |
(1,143) |
Capital reserve – realised |
3,166 |
2,803 |
3,132 |
Revenue reserve |
(4,178) |
(3,317) |
(3,768) |
Funds held in respect of shares not yet allotted |
194 |
68 |
241 |
|
53,510 |
43,309 |
47,947 |
The Revenue reserve, Special reserve and Capital
reserve - realised are distributable reserves and are reduced by
revaluation losses of £11.8 million. Distributable reserves at 30
September 2021 were £14.6 million.
10. Fixed assets
– investments
|
Liquidity investments |
Quoted VC investments |
Unquoted VC investments |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
Opening cost at 1 April 2021 |
5,646 |
1,250 |
42,374 |
49,270 |
Unrealised (losses)/gains at 1 April 2021 |
(1,497) |
72 |
548 |
(877) |
Unrealised foreign exchange losses at 1 April 2021 |
- |
- |
(266) |
(266) |
Impairment losses at 1 April 2021 |
- |
- |
(7,384) |
(7,384) |
Opening fair value at 1 April 2021 |
4,149 |
1,322 |
35,272 |
40,743 |
Movements in the year: |
|
|
|
|
Purchased at cost |
- |
3,171 |
990 |
4,161 |
Disposals - proceeds |
(397) |
(2,851) |
- |
(3,248) |
- realised gains on
disposals |
41 |
- |
- |
41 |
Unrealised foreign exchange gains |
- |
- |
79 |
79 |
Unrealised gains in the Income Statement |
209 |
3,764 |
3,151 |
7,124 |
Transfers between investment categories |
- |
2,833 |
(2,833) |
- |
Closing value at 30 Sept 2021 |
4,002 |
8,239 |
36,659 |
48,900 |
Closing cost at 30 Sept 2021 |
5,161 |
4,403 |
39,790 |
49,354 |
Unrealised (losses)/gains at 30 Sept 2021 |
(1,159) |
3,836 |
3,313 |
5,990 |
Unrealised foreign exchange losses at 30 Sept 2021 |
- |
- |
(187) |
(187) |
Impairment losses at 30 Sept 2021 |
- |
- |
(6,257) |
(6,257) |
Closing value at 30 Sept 2021 |
4,002 |
8,239 |
36,659 |
48,900 |
The fair value of investments is determined
using the detailed accounting policy as shown in the audited
financial statements for the year ended 31 March 2021. The Company
has categorised its financial instruments using the fair value
hierarchy as follows:
Level
1 Reflects financial
instruments quoted in an active market (quoted companies,
investment funds and fixed interest bonds);Level
2 Reflects financial
instruments that have prices that are observable either directly or
indirectly; andLevel
3 Reflects financial
instruments that use valuation techniques that are not based on
observable market data (investments in unquoted shares and loan
note investments).
|
Level 1 |
Level 2 |
Level 3 |
30 Sept 2021 |
|
Level 1 |
Level 2 |
Level 3 |
31 Mar 2021 |
|
£’000 |
£’000 |
£’000 |
£’000 |
|
£’000 |
£’000 |
£’000 |
£’000 |
Liquidity investments |
4,002 |
- |
- |
4,002 |
|
4,149 |
- |
- |
4,149 |
Quoted equity |
8,239 |
- |
- |
8,239 |
|
1,322 |
- |
- |
1,322 |
Unquoted loan notes |
- |
- |
3,667 |
3,667 |
|
- |
- |
3,667 |
3,667 |
Unquoted equity |
- |
- |
32,992 |
32,992 |
|
- |
- |
31,605 |
31,605 |
|
12,241 |
- |
36,659 |
48,900 |
|
5,471 |
- |
35,272 |
40,743 |
11. Risk and
uncertaintiesUnder the Disclosure and Transparency
Directive, the Board is required in the Company’s half-year results
to report on the 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:
(i) compliance risk of failure
to maintain approval as a
VCT;(ii) market, liquidity and
counterparty risk associated with Public Equity investments;
and(iii) investment risk
associated with investing in small and immature businesses.
The Company’s compliance with the VCT
regulations is continually monitored by the Manager, who reports
regularly to the Board on the current position. The Company also
retains Philip Hare & Associates LLP (“Philip Hare”) to provide
regular reviews and advice in this area. Philip Hare has confirmed
that all relevant tests have been complied with for the period
under review. The Board considers that this approach reduces the
risk of a breach of the VCT regulations.
With this approach, the Board believes that
these risks are reduced.
In order to make VCT qualifying investments, the
Company has to invest in small businesses which are often immature.
It also has a limited period in which it must invest the majority
of its funds into VCT qualifying investments. The Manager follows a
rigorous process in vetting and carefully structuring new
investments, including taking a charge over the assets of the
business wherever possible and, after an investment is made,
closely monitoring the business.
12. Going
concern
The Directors have reviewed the Company’s financial resources at
the period end and conclude that the Company is well placed to
manage its business risks.
The Board confirms that it is satisfied that the
Company has adequate resources to continue in business for the
foreseeable future. For this reason, the Board believes that the
Company continues to be a going concern and that it is appropriate
to apply the going concern basis in preparing the financial
statements.
13. The Directors confirm that, to
the best of their knowledge, the Half-Yearly Report has been
prepared in accordance with the “Statement: Half-Yearly Financial
Reports” issued by the UK Accounting Standards Board as well as in
accordance with FRS 104 Interim Financial Reporting and the
half-yearly financial report includes a fair review of the
information required by:
-
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.
14. Copies of the Half-Yearly Report
will be sent to Shareholders shortly. Further copies can be
obtained from the Company’s registered office or downloaded from
www.downing.co.uk
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