17th Aug 2005 07:00
Eclipse VCT plc17 August 2005 Eclipse VCT plc Preliminary results for the period ended 31 May 2005 Financial Summaryfor the period ended 31 May 2005 31 May 2005Net assets £29,911,000Net revenue after tax £495,000Revenue return per share* 2.43pNet asset value per share 95.6pTotal return per share* 3.23pDividend 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 AssetManagement Limited ("Octopus"). Eclipse was launched in April 2004 and raisedover £30.7million (£29.7million net of expenses) through an offer forsubscription. It invests primarily in unquoted and AIM listed companies andaims 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 ourinvestors over the last year, both in relation to the successful fund raisingand the regular communication relating to the progress of the fund. Therecognition we received in Eclipse being voted by our peers as the "New VentureCapital Fund of the Year 2004" in the Investor AllStars Awards was very pleasingand a fine reflection on the team at Octopus. I would like to thank all of our shareholders for investing in Eclipse VCT andfor their continued support. Net Asset Value per share ('NAV') As at 31 May 2005, Eclipse had a portfolio of 12 investments in AIM listed andunquoted 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 2005of 16.5%. Eclipse had also invested in 5 unquoted investments, which, inaccordance with valuation guidelines issued by the British Venture CapitalAssociation, are each held at cost, being within 12 months of the initialinvestment date. Your Board is pleased with the progress made by the Octopusteam in finding suitable investment opportunities and carrying out the rigorousanalysis necessary to develop a strong portfolio of investee companies. The pre-dividend NAV per share has increased from an initial level of 95p to95.6p since the fund was launched. This means that since launch the fund hasincreased by 2.3% before taking into account the initial 40% income tax reliefavailable to shareholders in the year of investment. In accordance with Eclipse's risk averse approach, the balance of Eclipse'sassets remain invested in money market securities. Dividends In line with our commitment to maximise tax-free dividends to shareholders, theDirectors propose a dividend of 1.45p per share to be paid on 30 September 2005to shareholders on the register on 9 September 2005. The fund is at an early stage in its investment cycle and dividends are largelyderived from interest earned on money market securities. In the medium term weaim to produce a regular tax-free income stream for shareholders and, as such,we will realise profits, for distribution, on holdings where we believe theyhave reached a fair value. Share Price and Buy-Back Facility The Company's mid-market share price currently stands at 100p and, as is normalwith a VCT in its early stages, there have been very few transactions. We willbe asking shareholders at the annual general meeting to renew the Board's powersto purchase shares in the market for cancellation. Eclipse has a share buy-backfacility, committing to buy-back shares at no more than a 10% discount to theprevailing NAV. This should assist the marketability of the shares and helpprevent 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 oforiginal purchase they forfeit any tax relief obtained. If you need to sellyour 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 companiesas at 31 May 2005, slightly ahead of expectations. The Directors will continue to monitor the Company's progress towards meetingthe Inland Revenue's conditions for VCT approval and have appointedPricewaterhouseCoopers UK LLP to advise in this area. Outlook Most of the fundamentals of the UK economy remain relatively benign, withinflation and unemployment levels remaining low but high levels of consumer debtcausing some concerns. However, the growth in consumer spending has flattenedand it now seems unlikely that interest rates will rise in the short-term. The investment managers continue to see a healthy pipeline of qualifyingunquoted and AIM companies raising funds at reasonable valuations and anticipatemaking several additional investments in the forthcoming months. Christopher Lyttelton,Chairman15 August 2005 Investment Manager's Review Personal Service At Octopus, we pride ourselves not only on our team's strong track record butalso on our personalised customer service. We believe in open communication andour 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 oneof 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, theNet Asset Value ("NAV") had risen to 95.6p from the launch price of 95p. Thisdoes 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 qualifyingunquoted 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 moneyinto qualifying companies. We're pleased to say that, as at 31 May 2005, Eclipsewas 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 thatoperationally, the portfolio companies are performing in-line with ourexpectations. In line with the valuation guidelines issued by the BritishVenture Capital Association all the unquoted investments are valued at cost asthey are less than 12 months old. The AIM listed companies are valued at the midprice quoted on 31 May 2005 and show an aggregate 16% uplift on cost. Thefollowing table shows the valuation of all holdings as at 31 May 2005. Total Cost Value at* Performance 31 May 2005Unlisted investments £'000 £'000Gyro 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 investmentsCello 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 hasbeen earning interest on behalf of investors on the money market. There arecurrently 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 privateinvestor 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 theportfolio of public house assets being acquired. There is currently a strongpipeline of investment oppurtunities and we expect to make a number ofadditional investments over the coming months. We expect to see a significant number of AIM opportunities and we will continueto benefit from the research of other Octopus fund teams, particularly thePhoenix VCT team which manages one of the best performing AIM VCTs. We willremain very selective with the investments made in AIM companies and will favourthose companies with significant revenues and profitability. VCT Qualifying InvestmentsTen 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 officesacross Europe and in the US. The Company provides a range of servicesincluding brand strategy, direct marketing, on and off-line advertising, mediaplanning, web marketing and event management. Octopus arranged and led a £3million equity fund raising to finance the buy-out of one of the two originalfounders and provide some additional working capital. Eclipse is the largestinvestor and the syndicate included funds from three other VCT managers. Theequity syndicate holds a 27% stake in total. Gyro has recently won two significant, multi-million dollar contracts with Avayaand Sun Microsystems. Date of Initial Investment February 2005Cost (£'000s) 1,000Valuation as at 31.05.05 (£'000s) 1,000Valuation Basis: Recent transactionFirst Audited Accounts: 31 October 2005Equity held 9.0% Reading Room Limited London Web design agency Reading Room is a leading web design agency with offices in London, Manchesterand Sydney. It provides online brand strategy, web design, content managementsystem development and usability testing. The business has targeted specificsectors including professional service organisations, charities and theGovernment. Customers include The Institute of Chartered Accountants, The LawSociety, Cancer Research UK and the Department of Trade and Industry. ReadingRoom is considered an industry leader in the fields of accessibility andusability which are of particular importance to their Governmental andprofessional clients. Eclipse invested £1 million to finance working capital and look for acquisitionopportunities. Date of Initial Investment April 2005Cost (£'000s) 1,000Valuation as at 31.05.05 (£'000s) 1,000Valuation Basis: Recent transactionFirst Audited Accounts: 31 March 2005Equity held 26.7% Cello Group plc London Marketing Services Cello is a newly created UK marketing services group, which specialises inmarket research, brand advertising, direct marketing and database management.The Group was launched in November 2004 with a listing on AIM to raise £15million to finance the simultaneous acquisition of the following three companieswhich 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 atotal consideration of £4.6 million. Navigator is Scotland's leading directmarketing agency with revenues of over £5 million. Date of Initial Investment October 2004Cost (£'000s) 750Valuation as at 31.05.05 (£'000s) 904Last audited accounts: 31 December 2004Net assets: £33.5mProfit before taxation:* £1.26mEquity held 2.9%\* Trading over two months only Covion Limited Berkshire Facilities Management Covion is a 'Total facilities management' business operating in the businesscentre and industrial sectors (no public sector clients). Covion operateslong-term contracts through a model of partnering with their clients in thejoint management of the facilities. Services include cleaning, maintenance,engineering, security, catering and IT. Approximately 75% of the services aredelivered 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 andfunds managed by another VCT fund manager Date of Initial Investment May 2005Cost (£'000s) £844Valuation as at 31.05.05 (£'000s) £844Valuation basis: Recent transactionFirst Audited Accounts: 31 December 2005Equity held 10.1% Augean plc London Waste management Augean was floated as a shell company in 2004 and undertook a £100 million fundraising in December 2004 to make two acquisitions. As a result it now owns andmanages four landfill sites: two near Middlesbrough and two near Peterborough.Recent legislative changes have expanded the definition of 'hazardous waste' toinclude a broader spectrum of household waste, whilst also restricting thenumber of operators. Augean currently operates two of only four hazardouslandfill sites in the UK. The share price has dropped back since 31 May 2005 asresults are expected to be below initial expectations but we do not believe thatthis impacts on our medium-term strategic view of the business. Eclipse invested as part of a £6 million VCT financing round, prior to the mainfund raising of £100 million from institutional clients. Date of Initial Investment November 2004Cost (£'000s) 500Valuation as at 31.05.05 (£'000s) 600Last interim accounts: 31 December 2004Net assets: £112mProfit before taxation: N/AEquity held 0.46% InterQuest plc London IT recruitment Interquest is a group of multi-branded IT recruitment businesses, each focusedon a specific niche. Founded in 2001, the group has grown through acquisitionand has four operating divisions: Genesis (financial institutions), Insight(specifically technical skills), Interquest (UK) (retail and FMCG), SBS (centraland local Government). The individual divisions are operated autonomously butsupported at a group level. Revenue is generated through contract and permanentplacings. Eclipse invested alongside other funds managed by Octopus and other fundmanagers in a total £3.5 million funding round. Date of Initial Investment May 2005Cost (£'000s) 341Valuation as at 31.05.05 (£'000s) 465Last audited accounts: 31 December 2004Net assets: £4.6mProfit before taxation: £927,000Equity 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 specialistengineering business which manufactures metal and decorated plastic componentsunder long-term contracts. It has a large client base including Caterpillar,Bombardier, Vickers and Huntleigh Healthcare. The second part of the business isSmiths Electrical Vehicles, which manufactures a range of electrical vehiclessuch as milk floats and airport passenger and baggage vehicles. SEV also has adivision 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 2005Cost (£'000s) 500Valuation as at 31.05.05 (£'000s) 463Last audited accounts: 31 December 2004Net assets: £1mLoss before taxation: £6mEquity 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 orlong leasehold pubs in the Greater London area. The pubs are non-branded andun-themed, catering for their own local markets. Our initial investment was made at the end of the first fund raising at a priceof £1 per share, which raised £7.8 million. Since the period end the Eclipsefund has invested a further £200,000 in the second fund raising which raised anadditional £4.5 million at a price of £1.05 per share. At the time of thisfollow-on investment the company had acquired 5 public houses and had two moreclose to completion. Date of Initial Investment January 2005Cost (£'000s) 400Valuation as at 31.05.05 (£'000s) 400Valuation basis: Recent transactionFirst audited accounts: September 2005Equity 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 onacquisitions in the confectionary and snack food markets. Management completedtheir first acquisition, Kinnerton Group, in April 2005 , in a transactionvalued at up to £34 million. Kinnerton is a well established specialitychocolate confectionary manufacturer with a particular focus on characterlicensing e.g. Disney characters for Christmas, own label manufacturing formajor retailers and third party manufacturing for majors such as Cadburys andMars. The Zetar management team is led by Ian Blackburn (CEO ), who was previously CEOof Perkins Foods, and David Wiliams (Chairman) who is also Chairman of Augean. Eclipse participated in a £9 million fund raising alongside investments fromother Octopus funds as well as other investors. Date of Initial Investment April 2005Cost (£'000s) 237Valuation as at 31.05.05 (£'000s) 320First audited accounts: April 2005Equity held 1.7% TDX Group plc London and Nottingham Debt analysis and recovery TDX acts as an intermediary to provide debt sale, recovery management andsupport services to banks, credit card companies and utility companies. TDX workfor their customers to improve the net returns on their non-performing consumerdebt, with the specific objective of increasing returns by at least 15%. Thebusiness has developed a proprietary technology platform and has a highlysophisticated analytical and research driven approach. TDX combines this'cerebral' approach with solid and extensive operational experience. Thiscombination of skills has proved to be appealing to the large creditors as theUK market has historically been very traditional in its approach to debtcollection. 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 investmentwas made at a valuation in excess of our original value. Date of Initial Investment December 2004Cost (£'000s) 300Valuation as at 31.05.05 (£'000s) 300Valuation basis: Recent transactionFirst audited accounts: 31 March 2005Equity 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 703tax Tax (115) 70 (45) Return on Ordinary activities after 495 163 658taxDividends (453) - (453) Transfer to reserves 42 163 205 Return per share 2.43p 0.80p 3.23p Balance Sheet as at31 May 2005 31 May 2005 £'000 £'000 Fixed asset investments 6,822Current assetsInvestments 23,299Debtors 148Cash at bank 167 23,614Creditors: amounts falling due within one (525)yearNet current assets 23,089Net assets 29,911 Called up equity share capital 3,127Share premium 26,603Capital redemption reserve 3Capital reserve realised (300)Capital reserve unrealised 463Revenue reserve 15Total equity shareholders' funds 29,911 Net asset value per share 95.6p Cash flow statementfor 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 30,802Share 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 theperiod. Full details of principal accounting policies will be disclosed in theAnnual Report. a) Basis of accounting The financial statements have been prepared under the historical costconvention, modified to include the revaluation of investments, in accordancewith applicable Accounting Standards in the United Kingdom and with theStatement of Recommended Practice regarding the Financial Statements ofInvestment 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 investmentportfolio of the Company, the Directors have charged 75% of the investmentmanagement fee to the capital reserve. The Company was incorporated on 16 March 2004 and commenced operations followingthe allotment of shares on the achievement of its minimum subscription on 25 May2004. The above summary of results for the year ended 31 May 2005 does not constitutestatutory financial statements within the meaning of Section 240 of theCompanies Act 1985 and has not been delivered to the Registrar of Companies. Statutory financial statements will be filed with the Registrar of Companies indue course; the auditors' report on those financial statements under S235 of theCompanies 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 theshareholders, will be paid on 30 September 2005 to shareholders on the registerat 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 27,672Shares issue expenses (1,069)Share buy back 3 (27)Management fee capitalised net of (300)associated taxationNet increase in unrealised 463appreciationReturn on activities after tax 495Dividends (453) ===== ===== ===== ===== ===== 26,603 3 (300) 463 15 ===== ===== ===== ===== ===== 3. The revenue per share is based on profit from ordinary activities aftertax of £495,000 and on 20,396,980 shares, being the weighted average number ofshares 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 basedon the net assets of £29,911,000 and 31,268,780 ordinary shares in issue at thatdate. 5. A copy of the full annual report and financial statements for the periodended 31 May 2005 will be printed and posted to shareholders. Copies will alsobe available to the public at the registered office of the company at 8 AngelCourt, 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 ExchangeRelated Shares:
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