RNS Number:1777Q
Eclipse VCT plc
17 August 2005
Eclipse VCT plc
Preliminary results for the period ended 31 May 2005
Financial Summary
for the period ended 31 May 2005
31 May 2005
Net assets #29,911,000
Net revenue after tax #495,000
Revenue return per share* 2.43p
Net asset value per share 95.6p
Total return per share* 3.23p
Dividend 1.45p
*based on a weighted average of 20,396,980 shares in issue in the period.
Eclipse VCT plc is a Venture Capital Trust and is managed by Octopus Asset
Management Limited ("Octopus"). Eclipse was launched in April 2004 and raised
over #30.7million (#29.7million net of expenses) through an offer for
subscription. It invests primarily in unquoted and AIM listed companies and
aims to deliver absolute returns on its investments.
Chairman's Statement
I am pleased to present the first annual report to shareholders in Eclipse VCT.
As a team we are delighted with the positive feedback we have received from our
investors over the last year, both in relation to the successful fund raising
and the regular communication relating to the progress of the fund. The
recognition we received in Eclipse being voted by our peers as the "New Venture
Capital Fund of the Year 2004" in the Investor AllStars Awards was very pleasing
and a fine reflection on the team at Octopus.
I would like to thank all of our shareholders for investing in Eclipse VCT and
for their continued support.
Net Asset Value per share ('NAV')
As at 31 May 2005, Eclipse had a portfolio of 12 investments in AIM listed and
unquoted companies, representing 22% of the fund by net asset value. Of these,
7 are AIM listed companies, which had shown an average net gain to 31 May 2005
of 16.5%. Eclipse had also invested in 5 unquoted investments, which, in
accordance with valuation guidelines issued by the British Venture Capital
Association, are each held at cost, being within 12 months of the initial
investment date. Your Board is pleased with the progress made by the Octopus
team in finding suitable investment opportunities and carrying out the rigorous
analysis necessary to develop a strong portfolio of investee companies.
The pre-dividend NAV per share has increased from an initial level of 95p to
95.6p since the fund was launched. This means that since launch the fund has
increased by 2.3% before taking into account the initial 40% income tax relief
available to shareholders in the year of investment.
In accordance with Eclipse's risk averse approach, the balance of Eclipse's
assets remain invested in money market securities.
Dividends
In line with our commitment to maximise tax-free dividends to shareholders, the
Directors propose a dividend of 1.45p per share to be paid on 30 September 2005
to shareholders on the register on 9 September 2005.
The fund is at an early stage in its investment cycle and dividends are largely
derived from interest earned on money market securities. In the medium term we
aim to produce a regular tax-free income stream for shareholders and, as such,
we will realise profits, for distribution, on holdings where we believe they
have reached a fair value.
Share Price and Buy-Back Facility
The Company's mid-market share price currently stands at 100p and, as is normal
with a VCT in its early stages, there have been very few transactions. We will
be asking shareholders at the annual general meeting to renew the Board's powers
to purchase shares in the market for cancellation. Eclipse has a share buy-back
facility, committing to buy-back shares at no more than a 10% discount to the
prevailing NAV. This should assist the marketability of the shares and help
prevent the shares from trading at a wide discount to NAV.
In the period under review, the Company repurchased 28,411 shares at 95p.
Shareholders should note that if they sell their shares within three years of
original purchase they forfeit any tax relief obtained. If you need to sell
your shares please contact Octopus Asset Management on 020 7710 2800.
VCT qualifying status
I am pleased to report that 22% of the fund was invested in qualifying companies
as at 31 May 2005, slightly ahead of expectations.
The Directors will continue to monitor the Company's progress towards meeting
the Inland Revenue's conditions for VCT approval and have appointed
PricewaterhouseCoopers UK LLP to advise in this area.
Outlook
Most of the fundamentals of the UK economy remain relatively benign, with
inflation and unemployment levels remaining low but high levels of consumer debt
causing some concerns. However, the growth in consumer spending has flattened
and it now seems unlikely that interest rates will rise in the short-term.
The investment managers continue to see a healthy pipeline of qualifying
unquoted and AIM companies raising funds at reasonable valuations and anticipate
making several additional investments in the forthcoming months.
Christopher Lyttelton,
Chairman
15 August 2005
Investment Manager's Review
Personal Service
At Octopus, we pride ourselves not only on our team's strong track record but
also on our personalised customer service. We believe in open communication and
our regular investment updates are designed to keep you involved and informed.
If you have any questions about this review, or if it would help to speak to one
of the fund managers, please do not hesitate to contact us on 020 7710 2800.
Introduction
We're pleased with the performance of the Fund so far. As at 31 May 2005, the
Net Asset Value ("NAV") had risen to 95.6p from the launch price of 95p. This
does not take into account the initial income tax relief available to investors
(i.e. a further #4,000 for every #10,000 invested).
Over the period to 31 May 2005, Eclipse completed investments into 12 qualifying
unquoted and AIM listed companies. The total committed to these investments was
#6.4 million.
Qualifying Status
As you're probably aware, VCTs have three years to invest 70% of their money
into qualifying companies. We're pleased to say that, as at 31 May 2005, Eclipse
was 22% invested in qualifying companies, slightly ahead of our expectations.
Review of Investments
At this early stage in the funds life we're pleased to report that
operationally, the portfolio companies are performing in-line with our
expectations. In line with the valuation guidelines issued by the British
Venture Capital Association all the unquoted investments are valued at cost as
they are less than 12 months old. The AIM listed companies are valued at the mid
price quoted on 31 May 2005 and show an aggregate 16% uplift on cost. The
following table shows the valuation of all holdings as at 31 May 2005.
Total Cost Value at* Performance
31 May 2005
Unlisted investments #'000 #'000
Gyro International Limited 1,000 1,000 0%
Reading Room Limited 1,000 1,000 0%
Covion Limited 844 844 0%
Capital Pub Company 2 plc 400 400 0%
TDX Group Limited 300 300 0%
Aim-listed investments
Cello Group plc 750 904 21%
Augean plc 500 600 20%
InterQuest plc 341 465 36%
Tanfield Group plc 500 463 (7)%
Zetar plc 238 320 35%
fountains plc 240 281 17%
Tissue Science Laboratories plc 246 245 0%
===== ===== =====
Total 6,359 6,822 7%
===== ===== =====
*Value for AIM listed investments is based on mid market price.
In keeping with our patient and low risk approach, the remainder of the Fund has
been earning interest on behalf of investors on the money market. There are
currently no non-qualifying investments.
Outlook
Since the end of the period, the fund has invested in two follow-on investments.
A small additional investment has been made in TDX alongside a new private
investor as this company continues to grow strongly. We also invested a further
#200,000 in The Capital Pubs Company 2 once we had good visibility on the
portfolio of public house assets being acquired. There is currently a strong
pipeline of investment oppurtunities and we expect to make a number of
additional investments over the coming months.
We expect to see a significant number of AIM opportunities and we will continue
to benefit from the research of other Octopus fund teams, particularly the
Phoenix VCT team which manages one of the best performing AIM VCTs. We will
remain very selective with the investments made in AIM companies and will favour
those companies with significant revenues and profitability.
VCT Qualifying Investments
Ten Largest Holdings
Gyro International Limited London
Brand Communications agency
Gyro is one of the UK's leading integrated B2B brand communications agencies,
specialising in the technology and financial services sectors, and has offices
across Europe and in the US. The Company provides a range of services
including brand strategy, direct marketing, on and off-line advertising, media
planning, web marketing and event management. Octopus arranged and led a #3
million equity fund raising to finance the buy-out of one of the two original
founders and provide some additional working capital. Eclipse is the largest
investor and the syndicate included funds from three other VCT managers. The
equity syndicate holds a 27% stake in total.
Gyro has recently won two significant, multi-million dollar contracts with Avaya
and Sun Microsystems.
Date of Initial Investment February 2005
Cost (#'000s) 1,000
Valuation as at 31.05.05 (#'000s) 1,000
Valuation Basis: Recent transaction
First Audited Accounts: 31 October 2005
Equity held 9.0%
Reading Room Limited London
Web design agency
Reading Room is a leading web design agency with offices in London, Manchester
and Sydney. It provides online brand strategy, web design, content management
system development and usability testing. The business has targeted specific
sectors including professional service organisations, charities and the
Government. Customers include The Institute of Chartered Accountants, The Law
Society, Cancer Research UK and the Department of Trade and Industry. Reading
Room is considered an industry leader in the fields of accessibility and
usability which are of particular importance to their Governmental and
professional clients.
Eclipse invested #1 million to finance working capital and look for acquisition
opportunities.
Date of Initial Investment April 2005
Cost (#'000s) 1,000
Valuation as at 31.05.05 (#'000s) 1,000
Valuation Basis: Recent transaction
First Audited Accounts: 31 March 2005
Equity held 26.7%
Cello Group plc London
Marketing Services
Cello is a newly created UK marketing services group, which specialises in
market research, brand advertising, direct marketing and database management.
The Group was launched in November 2004 with a listing on AIM to raise #15
million to finance the simultaneous acquisition of the following three companies
which form the core of the Group.
-Insight- healthcare market research.
-Leith- brand advertising.
-Target- direct marketing and database management.
In December 2004, the Group acquired Navigator Responsive Advertising for a
total consideration of #4.6 million. Navigator is Scotland's leading direct
marketing agency with revenues of over #5 million.
Date of Initial Investment October 2004
Cost (#'000s) 750
Valuation as at 31.05.05 (#'000s) 904
Last audited accounts: 31 December 2004
Net assets: #33.5m
Profit before taxation:* #1.26m
Equity held 2.9%
*Trading over two months only
Covion Limited Berkshire
Facilities Management
Covion is a 'Total facilities management' business operating in the business
centre and industrial sectors (no public sector clients). Covion operates
long-term contracts through a model of partnering with their clients in the
joint management of the facilities. Services include cleaning, maintenance,
engineering, security, catering and IT. Approximately 75% of the services are
delivered directly by Covion staff and 25% are subcontracted.
Eclipse supported a management buy-out of Covion in an #8 million transaction.
The Eclipse investment was made alongside an investment from Eclipse VCT 2 and
funds managed by another VCT fund manager
Date of Initial Investment May 2005
Cost (#'000s) #844
Valuation as at 31.05.05 (#'000s) #844
Valuation basis: Recent transaction
First Audited Accounts: 31 December 2005
Equity held 10.1%
Augean plc London
Waste management
Augean was floated as a shell company in 2004 and undertook a #100 million fund
raising in December 2004 to make two acquisitions. As a result it now owns and
manages four landfill sites: two near Middlesbrough and two near Peterborough.
Recent legislative changes have expanded the definition of 'hazardous waste' to
include a broader spectrum of household waste, whilst also restricting the
number of operators. Augean currently operates two of only four hazardous
landfill sites in the UK. The share price has dropped back since 31 May 2005 as
results are expected to be below initial expectations but we do not believe that
this impacts on our medium-term strategic view of the business.
Eclipse invested as part of a #6 million VCT financing round, prior to the main
fund raising of #100 million from institutional clients.
Date of Initial Investment November 2004
Cost (#'000s) 500
Valuation as at 31.05.05 (#'000s) 600
Last interim accounts: 31 December 2004
Net assets: #112m
Profit before taxation: N/A
Equity held 0.46%
InterQuest plc London
IT recruitment
Interquest is a group of multi-branded IT recruitment businesses, each focused
on a specific niche. Founded in 2001, the group has grown through acquisition
and has four operating divisions: Genesis (financial institutions), Insight
(specifically technical skills), Interquest (UK) (retail and FMCG), SBS (central
and local Government). The individual divisions are operated autonomously but
supported at a group level. Revenue is generated through contract and permanent
placings.
Eclipse invested alongside other funds managed by Octopus and other fund
managers in a total #3.5 million funding round.
Date of Initial Investment May 2005
Cost (#'000s) 341
Valuation as at 31.05.05 (#'000s) 465
Last audited accounts: 31 December 2004
Net assets: #4.6m
Profit before taxation: #927,000
Equity held 2.5%
Tanfield Group plc County Durham
Manufacture of vehicle components and electric vehicles
There are two parts to the business. Tanfield Holdings is a specialist
engineering business which manufactures metal and decorated plastic components
under long-term contracts. It has a large client base including Caterpillar,
Bombardier, Vickers and Huntleigh Healthcare. The second part of the business is
Smiths Electrical Vehicles, which manufactures a range of electrical vehicles
such as milk floats and airport passenger and baggage vehicles. SEV also has a
division which manufactures electric aerial access platforms.
Eclipse invested #500,000 as part of a total fund raising of #5 million.
Date of Initial Investment May 2005
Cost (#'000s) 500
Valuation as at 31.05.05 (#'000s) 463
Last audited accounts: 31 December 2004
Net assets: #1m
Loss before taxation: #6m
Equity held 1.9%
The Capital Pubs Company 2 plc London
Public house owner and manager
The Company was incorporated in December 2003 to acquire and operate freehold or
long leasehold pubs in the Greater London area. The pubs are non-branded and
un-themed, catering for their own local markets.
Our initial investment was made at the end of the first fund raising at a price
of #1 per share, which raised #7.8 million. Since the period end the Eclipse
fund has invested a further #200,000 in the second fund raising which raised an
additional #4.5 million at a price of #1.05 per share. At the time of this
follow-on investment the company had acquired 5 public houses and had two more
close to completion.
Date of Initial Investment January 2005
Cost (#'000s) 400
Valuation as at 31.05.05 (#'000s) 400
Valuation basis: Recent transaction
First audited accounts: September 2005
Equity held 3.8%
Zetar plc London and Norfolk
Confectionary and snack food company
Zetar was a shell company floated on AIM in January 2005 to focus on
acquisitions in the confectionary and snack food markets. Management completed
their first acquisition, Kinnerton Group, in April 2005 , in a transaction
valued at up to #34 million. Kinnerton is a well established speciality
chocolate confectionary manufacturer with a particular focus on character
licensing e.g. Disney characters for Christmas, own label manufacturing for
major retailers and third party manufacturing for majors such as Cadburys and
Mars.
The Zetar management team is led by Ian Blackburn (CEO ), who was previously CEO
of Perkins Foods, and David Wiliams (Chairman) who is also Chairman of Augean.
Eclipse participated in a #9 million fund raising alongside investments from
other Octopus funds as well as other investors.
Date of Initial Investment April 2005
Cost (#'000s) 237
Valuation as at 31.05.05 (#'000s) 320
First audited accounts: April 2005
Equity held 1.7%
TDX Group plc London and Nottingham
Debt analysis and recovery
TDX acts as an intermediary to provide debt sale, recovery management and
support services to banks, credit card companies and utility companies. TDX work
for their customers to improve the net returns on their non-performing consumer
debt, with the specific objective of increasing returns by at least 15%. The
business has developed a proprietary technology platform and has a highly
sophisticated analytical and research driven approach. TDX combines this
'cerebral' approach with solid and extensive operational experience. This
combination of skills has proved to be appealing to the large creditors as the
UK market has historically been very traditional in its approach to debt
collection.
Eclipse provided growth capital alongside additional funds from other investors.
Since the period end Eclipse has invested a further #100,000 as part of a
#500,000 fund raising to support the continuing rapid growth. This investment
was made at a valuation in excess of our original value.
Date of Initial Investment December 2004
Cost (#'000s) 300
Valuation as at 31.05.05 (#'000s) 300
Valuation basis: Recent transaction
First audited accounts: 31 March 2005
Equity held 5.83%
Statement of total return
(incorporating the revenue account)
for the period ended 31 May 2005
Period to 31 May 2005
Revenue Capital Total
#'000 #'000 #'000
Unrealised gains on investments - 463 463
Income 901 - 901
Investment management fees (123) (370) (493)
Other expenses (168) - (168)
Return on ordinary activities before 610 93 703
tax
Tax (115) 70 (45)
Return on Ordinary activities after 495 163 658
tax
Dividends (453) - (453)
Transfer to reserves 42 163 205
Return per share 2.43p 0.80p 3.23p
Balance Sheet as at
31 May 2005
31 May 2005
#'000 #'000
Fixed asset investments 6,822
Current assets
Investments 23,299
Debtors 148
Cash at bank 167
23,614
Creditors: amounts falling due within one (525)
year
Net current assets 23,089
Net assets 29,911
Called up equity share capital 3,127
Share premium 26,603
Capital redemption reserve 3
Capital reserve realised (300)
Capital reserve unrealised 463
Revenue reserve 15
Total equity shareholders' funds 29,911
Net asset value per share 95.6p
Cash flow statement
for the period ending 31 May 2005
31 May 2005
#'000 #'000
Net cash inflow from operating activities 119
Financial investment :
Purchase of investments (6,359)
Net cash outflow from financial investment (6,359)
Management of liquid resources :
Increase in cash deposits (23,299)
Financing :
Issue of own shares 30,802
Share issue expenses (1,069)
Repurchase of own shares (27)
Total financing 29,706
Increase in cash resources 167
Notes to the preliminary results
1. Principal accounting policies
The following accounting policies have been applied consistently throughout the
period. Full details of principal accounting policies will be disclosed in the
Annual Report.
a) Basis of accounting
The financial statements have been prepared under the historical cost
convention, modified to include the revaluation of investments, in accordance
with applicable Accounting Standards in the United Kingdom and with the
Statement of Recommended Practice regarding the Financial Statements of
Investment Trust Companies.
b) Investments
Investments quoted on the AIM market are stated at mid-market prices.
All of the Company's activities are continuing.
In line with the expected long-term split of returns from the investment
portfolio of the Company, the Directors have charged 75% of the investment
management fee to the capital reserve.
The Company was incorporated on 16 March 2004 and commenced operations following
the allotment of shares on the achievement of its minimum subscription on 25 May
2004.
The above summary of results for the year ended 31 May 2005 does not constitute
statutory financial statements within the meaning of Section 240 of the
Companies Act 1985 and has not been delivered to the Registrar of Companies.
Statutory financial statements will be filed with the Registrar of Companies in
due course; the auditors' report on those financial statements under S235 of the
Companies Act 1985 is unqualified and does not contain a statement under S237(2)
or (3) of the Companies Act 1985.
The proposed final dividend for the period ended 31 May 2005, if approved by the
shareholders, will be paid on 30 September 2005 to shareholders on the register
at the close of business on 9 September 2005.
2. Reserves
Share Capital Capital Capital Revenue
premium redemption reserve reserve reserve
reserve realised unrealised
#'000 #'000 #'000 #'000 #'000
Premium on issue of ordinary shares 27,672
Shares issue expenses (1,069)
Share buy back 3 (27)
Management fee capitalised net of (300)
associated taxation
Net increase in unrealised 463
appreciation
Return on activities after tax 495
Dividends (453)
===== ===== ===== ===== =====
26,603 3 (300) 463 15
===== ===== ===== ===== =====
3. The revenue per share is based on profit from ordinary activities after
tax of #495,000 and on 20,396,980 shares, being the weighted average number of
shares in issue during the period.
There are no potentially dilutive capital instruments in issue and,
therefore, no diluted return per share figures are relevant
4. The calculation of net asset value per share as at 31 May 2005 is based
on the net assets of #29,911,000 and 31,268,780 ordinary shares in issue at that
date.
5. A copy of the full annual report and financial statements for the period
ended 31 May 2005 will be printed and posted to shareholders. Copies will also
be available to the public at the registered office of the company at 8 Angel
Court, London EC2R 7HP.
This announcement was approved by the Board on 15 August 2005.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GUUCARUPAGMQ
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