TIDMDP3F
Downing THREE VCT plc
LEI: 2138008V2JDU2K6ZHF80
Half-Yearly Report
for the six months ended 30 June 2020
Performance summary
30 Jun 31 Mar 31 Dec 30 Jun
'F' Share pool 2020 2020 2019 2019
Pence Pence Pence Pence
Net asset value per 'F' Share 18.5 21.3 24.5 30.3
Cumulative distributions per 'F' Share 72.0 72.0 72.0 67.0
------ ------ ------ ------
Total return per 'F' Share 90.5 93.3 96.5 97.3
====== ====== ====== ======
30 Jun 31 Mar 31 Dec 30 Jun
'H' Share pool 2020 2020 2019 2019
Pence Pence Pence Pence
Net asset value per 'H' Share 23.3 22.3 33.2 43.5
Cumulative distributions per 'H' Share 35.0 35.0 35.0 30.0
------ ------ ------ ------
Total return per 'H' Share 58.3 57.3 68.2 73.5
====== ====== ====== ======
30 Jun 31 Mar
'J' Share pool 2020 2020 31 Dec 2019 30 Jun 2019
Pence Pence Pence Pence
Net asset value per 'J' Share 37.6 43.8 50.3 68.3
Cumulative distributions per
'J' Share 7.5 5.0 5.0 2.5
------ ------ ----------- -----------
Total return per 'J' Share 45.1 48.8 55.3 70.8
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Forthcoming dividends
'H' Shares 'J' Shares
Interim 2020 -- Payable 27 November 2020 4.5p 10.0p
CHAIRMAN'S STATEMENT
Introduction
I present the Half-Yearly Report for the six months ended 30 June 2020.
As Shareholders will be aware, a number of the Company's portfolio
businesses have faced some significant challenges over the last couple
of years. With significant exposure to the hospitality sector, the
coronavirus pandemic has unfortunately further impacted a number of the
portfolio companies
The Company has three share pools, two of which are in process of
realising investments and one which is preparing to start the
realisation process.
A brief summary of each share pool is provided below.
Net asset values and overview
'F' Share pool
The 'F' Share pool launched in 2012 and is currently in its realisation
phase. Exits from a number of investments have been effectively put on
hold as a result of the ongoing pandemic, however the Manager is still
working on a number of possible divestments in order to return funds to
Shareholders.
At 30 June 2020, the net asset value ("NAV") for a holding of one 'F'
Share was 18.5p, a decrease of 6.0p (24.5%) over the period. Total
Return (NAV plus dividends paid to date) is now 90.5p, compared to the
original cost, net of income tax relief, of 70p per share.
The 'F' Share pool still holds nine investments, with plans resuming for
exits from each of them.
The task of exiting from the remaining investments is dependent on third
parties and it is therefore difficult to accurately estimate when this
process will complete. A number of investments in the portfolio are in
industries that have been severely impacted by the effective lockdown in
the UK, and as a result have suffered delays in the divestment timeline.
The Investment Manager notes that it is currently unclear when further
exits will be achieved, although are seeking opportunities where
possible. The Manager anticipates that the next major distribution will
be paid in 2021.
'H' Share pool
The 'H' Share pool was launched in 2014 and the process of returning
funds to investors was scheduled to commence in 2020, however as a
result of the effective lockdown there have been a number of hurdles
which have arisen and have unfortunately delayed this process.
At 30 June 2020, the net asset value ("NAV") for a holding of one 'H'
Share was 23.3p which represents a net decrease of 9.9p (29.8%) over the
period. Total Return (NAV plus dividends paid to date) is now 58.3p,
compared to the initial NAV, before income tax relief, of 100.0p (or
original cost, net of income tax relief, which was typically between
70.0p and 75.0p, depending on costs). In view of the poor performance,
as reported previously, the Board has agreed with the Investment Manager
such that no further management fees will be paid in respect of the H
Share pool.
In line with the dividend policy, the Board is proposing to pay a
dividend of 4.5p per 'H' Share on 27 November 2020, to Shareholders on
the register at the close of business on 6 November 2020.
'J' Share pool
The 'J' Share pool raised funds in 2015 and completed its initial
investment phase in 2019. At 30 June 2020, the pool held 13 investments
with a total value of GBP2.5 million.
At 30 June 2020, the net asset value ("NAV") for a holding of one 'J'
Share was 37.6p which represents a net decrease of 10.2p (20.3%) over
the period after adjusting for the dividends paid out of 2.5p. Total
Return (NAV plus dividends paid to date) is now 45.1p, compared to the
initial NAV, before income tax relief, of 100.0p (or original cost, net
of income tax relief, of 70.0p and 75.0p, depending on costs).
The Board acknowledges that overall performance of the 'J' Share pool is
very poor. As noted previously, the Board has reached agreement with the
Investment Manager such that no further management fees will be paid in
respect of the J Share pool.
In line with the dividend policy, the Board is proposing to pay a final
dividend of 10.0p per 'J' Share on 27 November 2020, to Shareholders on
the register at the close of business on 6 November 2020.
Dividends
In line with the Company's stated policies, interim dividends will be
paid as follows:
'H' Shares 4.5p per share
'J' Shares 10.0p per share
Each of the above dividends will be paid on 27 November 2020, to
Shareholders on the register at 6 November 2020.
Share buybacks
The Company is now unlikely to make any further purchases of any of its
shares as the process of returning funds to all groups of shareholders
is progressing.
No share buybacks in respect of any share class were undertaken during
the period.
Outlook
The further losses of value on all pools since the valuation at 31 March
2020 are extremely disappointing. Although there is the possibility of
recoveries in value, the recent increase in coronavirus infections in
the UK may further harm the sectors in which many of the portfolio
companies operate and could result in further losses.
The Board has given consideration to the best way forward from this
position. The Board does not consider that a change of manager at this
stage is practical or would be in the best interest of shareholders, but
believes that continuing to work closely with the existing manager to
ensure everything is done to recover value is the best route.
The Board does not expect to raise any new funds for the Company in
future and so is now considering putting proposals to Shareholders for
the Company to take advantage of the VCT winding up regulations which
involves entering into a members' voluntary liquidation. This will
allow the company to reduce its running cost while it realises the
investments across all share pools. The Board intends to prepare
proposals for shareholder approval in the coming months.
Michael Robinson
Chairman
30 September 2020
INVESTMENT MANAGER'S REPORT
'F' SHARE POOL
As at 30 June 2020, the 'F' Share pool held nine investments. Focus for
the 'F' Share pool remains on the realisation of its investments and
maximising Shareholder returns which has been delayed due to the ongoing
coronavirus pandemic.
Net asset value, results and dividend
At 30 June 2020, the net asset value ("NAV") for a holding of one 'F'
Share was 18.5p, an decrease of 6.0p (24.5%) over the period. Total
Return (NAV plus dividends paid to date) is now 90.5p.
The loss on ordinary activities for the 'F' Shares, after taxation was
GBP639,000 for the period, comprising a revenue loss of GBP30,000 and a
capital loss of GBP609,000.
'F' Share pool -- Portfolio valuation
The period to 30 June 2020 has seen a number of unforeseen developments
which has impacted the 'F' Share portfolio. The portfolio companies are
heavily exposed to the effective lockdown in the UK economy, resulting
in an unrealised loss of GBP609,000.
The most significant decreases in valuation were in respect of Pearce
and Saunders Limited and Downing Pub EIS ONE Limited which both operate
in the pub and hospitality industry.
Pearce and Saunders Limited, the owner of freehold pubs in south east
London, was decreased by GBP457,000 to reflect the forced closure of the
site and the wider economic impact of COVID-19.
Downing Pub EIS ONE Limited, which acquired the holdings of two other
pub companies in 2017, was decreased in value by GBP134,000 following
the collapse of the proposed management buy out that was due to complete
in March 2020.
The Investment Manager has supported both of the above investee
companies during this difficult time as well as ensuring the businesses
have taken advantage of the Government support that has been made
available.
There were a small number of valuation increases in the period. The most
notable being a GBP42,000 increase in value to Fresh Green Power Limited,
the domestic rooftop solar company, which was increased due to improved
operating performance over the period.
Realisation plans
A number of the investment companies within the portfolio had proposed
exit plans in place which have now been effectively paused or have
collapsed as a result of the ongoing pandemic and have forced the
Investment Manager to seek other opportunities to exit.
Despite the divestment timeline suffering, the Investment Manager is
hopeful that there are reasonable prospects for completion from a small
number of the investee companies across the remainder of the year if
conditions improve, although shareholders should note it is currently
unclear when and if these will be achieved. The exact timing will be
dependent on third parties and a number of external factors.
Outlook
Valuations of investments within the 'F' Share pool have been impacted
as a result of the ongoing coronavirus pandemic. The pool is exposed to
a number of the sectors which have suffered heavily from the effective
lockdown in the UK. Focus for the Investment Manager remains on the exit
of the final nine investments in the portfolio as well as continuing to
support all investee companies during this difficult period.
Downing LLP
30 September 2020
SUMMARY OF INVESTMENT PORTFOLIO
'F' SHARE POOL
as at 30 June 2020
Unrealised % of
gain/(loss) Portfolio by
Cost Valuation in period value
GBP'000 GBP'000 GBP'000
VCT qualifying and partially
qualifying investments
Downing Pub EIS ONE Limited 490 522 (134) 26.7%
Fresh Green Power Limited 189 273 42 14.0%
Atlantic Dogstar Limited 200 179 (79) 9.2%
Pearce and Saunders Limited 497 93 (457) 4.7%
Green Energy Production UK
Limited 100 64 10 3.3%
Apex Energy Limited 1,000 26 9 1.3%
Non-qualifying investments
Baron House Developments LLP 481 673 - 34.4%
London City Shopping Centre
Limited 66 - - 0.0%
Pearce and Saunders DevCo
Limited 44 - - 0.0%
3,067 1,830 (609) 93.6%
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Cash at bank and in hand 126 6.4%
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Total 1,956 100.0%
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SUMMARY OF INVESTMENT MOVEMENTS
'F' SHARE POOL
as at 30 June 2020
Market Gain Total
value at Disposal against realised
Disposals Cost 01/01/20 proceeds cost gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Pearce and Saunders DevCo
Limited 2 2 2 - -
2 2 2 - -
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INVESTMENT MANAGER'S REPORT
'H' SHARE POOL
The 'H' Share pool raised funds in 2014 and the task of building the
initial VCT qualifying portfolio is complete. During the period, the
share pool suffered some further provisions in respect of its
investments within the leisure and hospitality industry which have been
severely impacted by the ongoing coronavirus pandemic.
Investment activity
During the period a partial exit was successfully completed from Pearce
and Saunders Limited, the owner of freehold pubs in south east London.
Proceeds of GBP230,000 were generated, which represented an uplift over
cost of GBP172,000.
'H' Share pool -- Portfolio valuation
The period to 30 June 2020 has seen a number of disappointing valuation
movements, resulting in an unrealised loss of GBP1.7 million.
A significant portion of the unrealised loss for the period related to
three investments which have been severely impacted by the effective
lockdown within the UK and its resulting consequences. Further details
on each is noted below.
Atlantic Dogstar Limited, owns a group of London pubs. As a result of
the lockdown restrictions, the two London pubs were forced to close and
the planned management buy out that was due to complete in March 2020
collapsed, leading to a reduction in value of GBP394,000.
The investments in Quadrate Spa Limited and Quadrate Catering Limited,
which own and operate a health club business and a top floor restaurant
in The Cube complex in Birmingham were both written down to nil,
generating a combined loss of GBP1.1 million.
A sale and leaseback transaction was due to complete in February 2020.
However as a result of the coronavirus pandemic, both companies are not
operational following government-imposed lockdown measures and the offer
has been withdrawn. We continue to monitor the situation and are
assisting management where possible.
Realisation plans
Prior to the unforeseen coronavirus pandemic, there were a number of
realisation plans in place for the exit of several portfolio companies.
As a result of the ongoing situation, these plans have either collapsed
or have been delayed. It is currently unclear when further exits will be
achieved, although the manager is seeking opportunities where possible.
Net asset value and results
At 30 June 2020, the net asset value per 'H' Share was 23.3p, a net
decrease of 9.9p (29.8%) over the period. Total Return (NAV plus
dividends paid to date) is now 58.3p. The loss on ordinary activities
for the 'H' Shares, after taxation, for the period was GBP1.3 million,
comprising a revenue profit of GBP217,000 and a capital loss of GBP1.5
million.
The Company will pay an interim dividend of 4.5p per 'H' Share, on 27
November 2020 to Shareholders on the register at 6 November 2020.
Outlook
Regrettably, the coronavirus pandemic has further hit investment
valuations during the period to 30 June 2020, with a large number of
portfolio companies within the leisure and hospitality sectors being
impacted most severely. We will continue to assist and support each
investee company within the portfolio as much as possible, seeking to
position them as well as we can to facilitate an exit when feasible.
Downing LLP
30 September 2020
SUMMARY OF INVESTMENT PORTFOLIO
'H' SHARE POOL
as at 30 June 2020
Unrealised % of
gain/(loss) portfolio by
Cost Valuation in period value
GBP'000 GBP'000 GBP'000
VCT qualifying investments
Altantic Dogstar Limited 1,000 898 (394) 32.5%
SF Renewables (Solar) Limited 281 243 (10) 8.8%
Hermes Wood Pellets Limited 1,500 228 - 8.2%
Rockhopper Renewables Limited 492 185 (61) 6.7%
Indigo Generation Limited 613 149 (66) 5.4%
Pearce and Saunders Limited 136 136 - 4.9%
Ironhide Generation Limited 613 134 (80) 4.9%
Zora Energy Renewables
Limited 1,000 65 (25) 2.4%
Apex Energy Limited 1,300 33 11 1.2%
Quadrate Catering Limited 850 - (701) 0.0%
Non-qualifying investments
Quadrate Spa Limited 850 - (392) 0.0%
8,635 2,071 (1,718) 75.0%
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Cash at bank and in hand 693 25.0%
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Total 2,764 100%
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SUMMARY OF INVESTMENT MOVEMENTS
'H' SHARE POOL
as at 30 June 2020
Gain Total
Market value Disposal against realised
Disposals Cost at 01/01/20 proceeds cost gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Pearce and Saunders
Limited 58 58 230 172 172
58 58 230 172 172
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INVESTMENT MANAGER'S REPORT
'J' SHARE POOL
At the period end, the 'J' Share pool held 13 investments across a range
of industries. It is disappointing to have to report that several
investee companies have suffered further setbacks which have required
significant provisions for the six months to 30 June 2020
'J' Share pool -- Portfolio valuation
As noted in the year end accounts, the portfolio faced a number of
challenges in the first few months of 2020, leading to an unrealised
loss of GBP932,000 as at 30 June 2020.
A significant portion of the unrealised loss for the period related to
three investments. Further details on each is noted below.
The most notable provision is in respect of Garthcliff Shipping Limited,
which owns a feeder container vessel that is chartered to third parties
to transport containers to and from ports. Following a period of reduced
demand for container vessels as worldwide economies suffered as a result
of the coronavirus pandemic, a buyer for the vessel has been sought and
the value has been reduced by GBP322,000 in line with anticipated exit
proceeds.
Pilgrim Trading Limited, the operator of two children's nurseries in
London, were closed from March 2020 as a result of the Government
imposed lockdown, leading to a provision of GBP218,000 to reflect the
forced closure of the sites and the wider impact of COVID-19.
Exclusive Events Venues Limited, the operator of an exclusive use
wedding venue in Chester, England, completed refurbishment in February
2020. In line with government imposed measures, the venue was forced to
postpone events, resulting in a provision of GBP157,000.
We continue to work closely and support each of the portfolio companies,
ensuring that they have benefited from the Government aid that is
available and take sensible decisions as they deal with these
extraordinary circumstances.
Realisation plans
As a result of the unforeseen coronavirus pandemic, several of the
realisation plans that were in place have either collapsed or have been
delayed. It is currently unclear when further exits will be achieved,
although the manager is seeking opportunities where possible.
Net asset value, results and dividend
At 30 June 2020, the net asset value per 'J' Share was 37.6p, a net
decrease of 10.2p (20.3%) over the period, after adding back dividends
paid in the period of 2.5p. Total return (NAV plus dividends paid to
date) is 45.1p. The loss on ordinary activities for the 'J' Share pool,
after taxation, was GBP1.1 million for the period, comprising a revenue
loss of GBP158,000 and a capital loss of GBP932,000.
The Company will pay an interim dividend of 10.0p per 'J' Share on 27
November 2020, to Shareholders on the register at 6 November 2020.
Outlook
The falls in value experienced by the 'J' Share pool during the year are
extremely disappointing. Businesses in the leisure, hospitality and
children's nurseries sectors have clearly suffered heavily from the
lockdown and provisions have been required as a result. We continue to
dedicate substantial resources to supporting the investee companies
through these difficult and unprecedented times as we look to continue
the process of realising investments and return funds to investors.
Downing LLP
30 September 2020
SUMMARY OF INVESTMENT PORTFOLIO
'J' SHARE POOL
as at 30 June 2020
Unrealised % of
(loss)/gain portfolio
Cost Valuation in period by value
GBP'000 GBP'000 GBP'000
VCT qualifying investments
Pilgrim Trading Limited 1,297 1,079 (218) 27.0%
Exclusive Events Venues Limited 500 343 (157) 8.6%
SF Renewables (Solar) Limited 281 243 (10) 6.1%
Rockhopper Renewables Limited 492 185 (61) 4.6%
Indigo Generation Limited 613 149 (66) 3.7%
Ironhide Generation Limited 613 135 (80) 3.4%
Garthcliff Shipping Limited 400 78 (322) 2.0%
Zora Energy Renewables Limited 300 20 (7) 0.5%
Ormsborough Limited 1,000 - - 0.0%
Jito Trading Limited 1,000 - - 0.0%
Yamuna Renewables Limited 800 - - 0.0%
Non-qualifying investments
Fenkle Street LLP 287 306 (11) 7.7%
London City Shopping Centre
Limited 15 - - 0.0%
7,598 2,538 (932) 63.6%
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Cash at bank and in hand 1,454 36.4%
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Total 3,992 100%
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UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2020
30 Jun 31 Dec
30 Jun 2020 2019 2019
'F' Shares 'H' Shares 'J' Shares Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Unquoted investments 1,830 2,071 2,538 6,439 13,118 9,758
Current assets
Debtors 93 460 6 559 588 678
Cash at bank and in hand 126 693 1,454 2,273 2,949 2,193
------------ ------------ ----------- -------- -------- -------
219 1,153 1,460 2,832 3,537 2,871
Creditors: amounts falling due within
one year (41) (105) 14 (132) (250) (164)
------------ ------------ ----------- -------- -------- -------
Net current assets 178 1,048 1,474 2,700 3,287 2,707
Net assets 2,008 3,119 4,012 9,139 16,405 12,465
============ ============ =========== ======== ======== =======
Capital and reserves
Called up share capital 11 13 11 35 35 35
Capital redemption reserve 149 - - 149 149 149
Special reserve 3,903 9,077 10,741 23,721 24,714 23,726
Share premium account - - - - - -
Revaluation reserve (1,379) (6,565) (2,247) (10,191) (7,007) (6,932)
Capital reserve -- realised (1,099) - (3,349) (4,448) (1,300) (4,447)
Revenue reserve 423 594 (1,144) (127) (186) (66)
------------ ------------ ----------- -------- -------- -------
Total equity shareholders' funds 2,008 3,119 4,012 9,139 16,405 12,465
============ ============ =========== ======== ======== =======
Basic and diluted net asset value per:
'F' Share 18.5p 30.3p 24.5p
'H' Share 23.3p 43.5p 33.2p
'J' Share 37.6p 68.3p 50.3p
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2020
Called up Capital Share Capital
share redemption Special premium Revaluation reserve Revenue
capital reserve reserve reserve reserve - realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2019 35 149 25,206 - (4,748) (1,029) (187) 19,426
Total
comprehensive
income - - - - (4,888) 220 121 (4,547)
Realisation of
impaired
valuations - - - - 2,881 (2,881) - -
Transactions with
owners
Transfer between
reserves - - (1,480) - (177) 1,657 - -
Dividend paid - - - - - (2,414) - (2,414)
--------- ------------- -------- -------- ----------- ----------- -------- -------
At 31 December
2019 35 149 23,726 - (6,932) (4,447) (66) 12,465
Total
comprehensive
income - - - - (3,259) 172 29 (3,058)
Transactions with
owners
Purchase of own
shares - - - - - - - -
Transfer between
reserves - - (5) - - 5 - -
Dividend paid - - - - - (178) (90) (268)
At 30 June 2020 35 149 23,721 - (10,191) (4,448) (127) 9,139
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INCOME STATEMENT
for the six months ended 30 June 2020
Company Total
Six months ended Six months ended Year ended
30 Jun 2020 30 Jun 2019 31 Dec 2019
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 866 - 866 296 16 312 670
Gains/(losses)
on investments
- realised - 172 172 - 88 88 204
- unrealised - (3,259) (3,259) - (2,189) (2,189) (4,888)
866 (3,087) (2,221) 296 (2,085) (1,789) (4,014)
Investment
management
fees (19) - (19) (180) - (180) (307)
Other expenses (797) - (797) (129) - (129) (250)
Return/(loss)
on ordinary
activities
before
taxation 50 (3,087) (3,037) (13) (2,085) (2,098) (4,571)
Tax on total
comprehensive
income and
ordinary
activities (21) - (21) 14 - 14 24
Return/(loss)
attributable
to equity
shareholders 29 (3,087) (3,058) 1 (2,085) (2,084) (4,547)
======= ======= ======= ======= ======= ======== ============
Return per 'F'
Share (0.3p) (5.6p) (5.9p) 0.1p 1.9p 2.0p 1.0p
Return per 'H'
Share 1.6p (11.5p) (9.9p) 0.1p (2.8p) (2.7p) (8.0p)
Return per 'J'
Share (1.5p) (8.7p) (10.2p) (0.2p) (17.9p) (18.1p) (33.6p)
INCOME STATEMENT (analysed by Share pool)
for the six months ended 30 June 2020
Six months ended Six months ended Year ended
'F' Shares 30 Jun 2020 30 Jun 2019 31 Dec 2019
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 111 - 111 75 - 75 105
Gains/(losses)
on investments
- realised - - - - - - 110
- unrealised - (609) (609) - 201 201 (10)
111 (609) (498) 75 201 276 205
Investment
management
fees (19) - (19) (24) - (24) (49)
Other expenses (117) - (117) (27) - (27) (52)
Return/(loss)
on ordinary
activities
before
taxation (25) (609) (634) 24 201 225 104
Tax on total
comprehensive
income and
ordinary
activities (5) - (5) (17) - (17) 10
Return
attributable
to equity
shareholders (30) (609) (639) 7 201 208 114
======= ======= ======= ======= ======= ======= ============
INCOME STATEMENT (analysed by Share pool)
for the six months ended 30 June 2020
Six months ended Six months ended Year ended
'H' Shares 30 Jun 2020 30 Jun 2019 31 Dec 2019
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 671 - 671 134 - 134 382
Gains/(losses)
on investments
- realised - 172 172 - 88 88 88
- unrealised - (1,718) (1,718) - (463) (463) (1,293)
671 (1,546) (875) 134 (375) (241) (823)
Investment
management
fees - - - (76) - (76) (131)
Other expenses (403) - (403) (46) - (46) (91)
Return/(loss)
on ordinary
activities
before
taxation 268 (1,546) (1,278) 12 (375) (363) (1,045)
Tax on total
comprehensive
income and
ordinary
activities (51) - (51) (1) - (1) (28)
Return/(loss)
attributable
to equity
shareholders 217 (1,546) (1,329) 11 (375) (364) (1,073)
======= ======= ======= ======= ======= ======= ============
INCOME STATEMENT (analysed by Share pool)
for the six months ended 30 June 2020
Six months ended Six months ended Year ended
'J' Shares 30 Jun 2020 30 Jun 2019 31 Dec 2019
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 84 - 84 87 16 103 183
(Losses)/gains
on investments
- realised - - - - - - 5
- unrealised - (932) (932) - (1,927) (1,927) (3,584)
84 (932) (848) 87 (1,911) (1,824) (3,396)
Investment
management
fees - - - (80) - (80) (127)
Other expenses (277) - (277) (56) - (56) (107)
Loss on
ordinary
activities
before
taxation (193) (932) (1,125) (49) (1,911) (1,960) (3,630)
Tax on total
comprehensive
income and
ordinary
activities 35 - 35 32 - 32 42
Loss
attributable
to equity
shareholders (158) (932) (1,090) (17) (1,911) (1,928) (3,588)
======= ======= ======= ======= ======= ======= ============
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2020
30 Jun 31 Dec
30 Jun 2020 2019 2019
'F' 'H'
Shares Shares 'J' Shares Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net cash
(outflow)/inflow from
operating activities (57) 230 (57) 116 204 147
Cash flows from
investing activities
Purchase of
investments - - - - - -
Sale of investments 2 230 - 232 1,920 2,698
-------- -------- ----------- ------- ------- -------
Net cash inflow from
investing activities 2 230 - 232 1,920 2,698
-------- -------- ----------- ------- ------- -------
Net cash
(outflow)/inflow
before financing
activities (55) 460 (57) 348 2,124 2,845
Cash flows from
financing activities
Purchase of own
shares - - - - - -
Equity dividends paid - - (268) (268) (937) (2,414)
Net cash outflow from
financing - - (268) (268) (937) (2,414)
-------- -------- ----------- -------
(Decrease)/increase in
cash (55) 460 (325) 80 1,187 431
======== ======== =========== ======= ======= =======
NOTES TO THE UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 June 2020
30 Jun 31 Dec
30 Jun 2020 2019 2019
'F' 'H' 'J'
Shares Shares Shares Total Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash (outflow)/inflow from operating activities and
returns on investments
Return/(loss) on ordinary activities before taxation (634) (1,278) (1,125) (3,037) (2,098) (4,571)
Corporation tax paid - - - - 29 (17)
(Gains)/losses on investments 609 1,546 932 3,087 2,101 4,684
(Increase)/decrease in other debtors (24) (9) 153 120 190 102
(Decrease)/increase in other creditors (8) (29) (17) (54) (18) (51)
Net cash (outflow)/inflow from operating activities (57) 230 (57) 116 204 147
======= ======= ======= ======= ======= =======
Analysis of net funds
Beginning of period 181 233 1,779 2,193 1,762 1,762
Net cash (outflow)/inflow (55) 460 (325) 80 1,187 431
------- ------- ------- ------- ------- -------
End of period 126 693 1,454 2,273 2,949 2,193
======= ======= ======= ======= ======= =======
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. General information
Downing THREE VCT plc ("the Company") is a venture capital trust
established under the legislation introduced in the Finance Act 1995 and
is domiciled in the United Kingdom and incorporated in England and
Wales.
2. Accounting policies - Basis of accounting
The unaudited half-yearly results cover the six months to 30 June 2020
and have been prepared in accordance with the Statement of Recommended
Practice "Financial Statements of Investment Trust Companies and Venture
Capital Trusts" issued in February 2018 ("AIC SORP") and in accordance
with the accounting policies set out in the statutory accounts for the
year ended 31 December 2019, which were prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom
accounting standards and applicable law), including Financial Reporting
Standard 102, the financial reporting standard applicable in the UK and
Republic of Ireland ("FRS 102").
3. All revenue and capital items in the Income Statement derive from
continuing operations.
4. The Company has only one class of business and derives its income
from investments made in shares, securities and bank deposits.
5. The comparative figures are in respect of the six-month period ended
30 June 2019 and the year ended 31 December 2019 respectively.
6. Dividends
Year
ended
Six months ended 31 Dec
30 June 2020 2019
Per share Revenue Capital Total Total
Paid in period pence GBP'000 GBP'000 GBP'000 GBP'000
'F' Shares
Y/E Dec 2019 Interim 5.0p - - - 541
- - - 541
======= ======= ======= =======
'H' Shares
Y/E Dec 2019 Interim 5.0p - - - 670
Y/E Dec 2018 Final 5.0p - - - 669
------- ------- ------- -------
- - - 1,339
======= ======= ======= =======
'J' Shares
Y/E Dec 2019 Interim 2.5p 90 178 268 -
Y/E Dec 2019 Interim 2.5p - - - 267
Y/E Dec 2018 Final 2.5p - - - 267
------- ------- ------- -------
90 178 268 534
======= ======= ======= =======
7. Basic and diluted return per share
Weighted average
number of shares in Revenue Capital
issue return/(loss) return/(loss)
Per
GBP'000 Per share GBP'000 share
'F' Shares 10,821,660 (30) (0.3p) (609) (5.6p)
'H' Shares 13,389,758 217 1.6p (1,546) (11.5p)
'J' Shares 10,675,533 (158) (1.5p) (932) (8.7p)
--------- ---------
29 (3,087)
========= =========
8. Net asset value per share
Shares in issue Net asset value
GBP'000 Per Share
'F' Shares 10,821,660 2,008 18.5p
'H' Shares 13,389,758 3,119 23.3p
'J' Shares 10,675,533 4,012 37.6p
---------
9,139
=========
9. Reserves
Period ended Year ended
30 June 31 Dec
2020 2019
GBP'000 GBP'000
Capital redemption reserve 149 149
Special reserve 23,721 23,726
Revaluation reserve (10,191) (6,932)
Capital reserve - realised (4,448) (4,447)
Revenue reserve (127) (66)
9,104 12,430
============ ==========
The Special reserve, Capital reserve - realised and Revenue reserve are
all distributable reserves. The Revaluation reserve includes losses of
GBP10,558,000 which are included in the calculation of distributable
reserves. Total distributable reserves are GBP8,588,000 (31 Dec 2019:
GBP11,400,000).
10. The fair value of investments is determined using the detailed
accounting policy set out in the statutory accounts for the year ended
31 December 2019.
The Company has categorised its financial instruments using the fair
value hierarchy as follows:
Level 1 Reflects financial instruments quoted in an active market;
Level 2 Reflects financial instruments that have prices that are
observable either directly or indirectly; and
Level 3 Reflects financial instruments that use valuation techniques
that are not based on
observable market data (unquoted equity investments and loan note
investments).
Period Year
ended ended
Level 30 June Level Level Level 31 Dec
1 Level 2 Level 3 2020 1 2 3 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Loan
notes - - 1,943 1,943 - - 2,494 2,494
Unquoted
equity - - 4,496 4,496 - - 7,264 7,264
- - 6,439 6,439 - - 9,758 9,758
======= ========= ========= ======== ======= ======= ======= =========
11. The unaudited condensed financial statements set out herein do not
constitute statutory accounts within the meaning of Section 434 of the
Companies Act 2006 and have not been delivered to the Registrar of
Companies. The figures for the year ended 31 December 2019 have been
extracted from the financial statements for that year, which have been
delivered to the Registrar of Companies; the Auditor's report on those
financial statements was unqualified.
12. The Directors confirm that, to the best of their knowledge, the
half-yearly financial statements have been prepared in accordance with
the "Statement: Half-Yearly Financial Reports" issued by the UK
Accounting Standards Board as well as in accordance with FRS 104 Interim
Financial Reporting and the half-yearly financial report includes a fair
review of the information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period, and any
changes in the related party transactions described in the last annual
report that could do so.
13. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required,
in the Company's half-yearly results, to report on principal risks and
uncertainties facing the Company over the remainder of the financial
year. The impact of the coronavirus pandemic has created heightened
uncertainty but has not changed the nature of these risks.
The Board concluded that the key risks facing the Company over the
remainder of the financial period are as follows:
i) Compliance risk of failure to maintain approval as a VCT; and
ii) Investment risk associated with investing in small and immature
businesses.
The Company's compliance with the VCT regulations is continually
monitored by the Manager, who reports regularly to the Board on the
current position. The Company has also reappointed Philip Hare &
Associates LLP to provide regular reviews and advice in this area.
In order to make VCT qualifying investments, the Company has to invest
in small businesses which are often immature. The impact of the
coronavirus pandemic has been significant on some portfolio companies
and, in many cases, the VCT regulations restrict the Company from making
further investment into these businesses, so the Manager seeks to
provide whatever other support they can to these businesses, including
encouraging them to take advantage of government support that may be
available. The Company also has a limited period in which it must invest
the majority of its funds. The Manager follows a rigorous process in
vetting and carefully structuring new investments, including taking a
charge over the assets of the business wherever possible and, after an
investment is made, closely monitoring the business. The Board is
satisfied that these approaches provide satisfactory management of the
key risks.
14. Going concern
The Directors have reviewed the Company's financial resources at the
period end and conclude that the Company is well placed to manage its
business risks despite the current economic outlook and impact of the
COVID-19 pandemic that is still being experienced.
The Board confirms that it is satisfied that the Company has adequate
resources to continue in business for the foreseeable future. For this
reason, the Board believes that the Company continues to be a going
concern and that it is appropriate to apply the going concern basis in
preparing the financial statements.
15. Copies of the unaudited half-yearly report will be sent to
Shareholders shortly. Further copies can be obtained from the Company's
registered office or will be available for download from
www.downing.co.uk.
(END) Dow Jones Newswires
September 30, 2020 13:15 ET (17:15 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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