24th Feb 2005 07:00
Eclipse VCT plc24 February 2005 ECLIPSE VCT PLC Unaudited interim results for the period ended 30 November 2004 Financial highlights 30 November 2004 • Net assets £23,682,000• Net asset value per share 95.9p• Revenue return after tax £195,000• Revenue return per share* 1.4p• Total return per share* 1.6p *Based on weighted average of 13,629,300 shares in issue during the period For further information, please contact: Simon RogersonOctopus Asset Management 020 7255 7961 Chairman's Statement I am pleased to present my first interim report to shareholders. I am delightedwith the positive feedback we have received over the launch period and wouldlike to thank all of our shareholders for their support. Fund Launch Eclipse was the most successful VCT launched in 2004 (by funds raised), raisingover £23 million as at 30 November 2004. Since then, the Company has continuedto raise further funds and closed at the end of January 2005, having raisedalmost £31 million. I am pleased that this success was reflected not only in the level of fundsraised but also in the fact that our peers voted Eclipse the "New VentureCapital Fund of the Year 2004" in the recent Investor AllStars Awards. It was decided to close the fund below the initial target of £40 million. Thiswas to enable the Manager to launch a follow-on fund this tax year - Eclipse 2 -so that the Manager is able to invest £2 million per company (the £1 millionmaximum per VCT), thereby enabling Eclipse to participate in later-stage andlarger companies. Net Asset Value per share ("NAV") The period under review covers the launch of the Company so few investments weremade. As at 30 November 2004, Eclipse had made two investments in qualifying companiesrepresenting just over 3% of the Company by NAV. These two investments were bothtrading at a premium to initial cost at the end of the period. The NAV had increased from 95p at launch to 95.9p, which largely reflectsinterest earned on the funds raised. In accordance with our risk averseapproach, this uninvested cash will remain in money market deposits, earninginterest on behalf of investors, until we identify suitable investmentopportunities. Dividend Eclipse's stated policy is to maximise dividend distributions to itsshareholders. One of the benefits of the VCT structure is that these dividendscan be paid out tax-free. The first dividend is expected to be paid in respect of the financial periodending 31 May 2005. This will be declared in August 2005 and paid in October2005. Initially, dividends will be paid from interest earned on money marketdeposits and income from portfolio companies. Later on, dividends will be paidout of the proceeds from the sale of investments. Chairman's Statement (continued) 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. Eclipse has a share buy-back facility, proposing to buy-back shares at no morethan a 10% discount to the prevailing NAV. This should assist the marketabilityof the shares and help prevent the shares from trading at a wide discount toNAV. In the period under review, the Company repurchased 8,311 shares at a price of95p. Shareholders should note that if they sell their shares within three yearsof the original purchase they forfeit any income tax relief obtained. If youneed to sell your shares, please contact Octopus Asset Management on 020 72557960. VCT Qualifying Status As you may be aware, Eclipse must be 70% invested in qualifying companies by 31May 2007 in order to comply with VCT regulations. As at 30 November 2004, the Company had invested just over 3% in qualifyingcompanies and as at 22 February this figure had risen to 10%. The Directors will continue to monitor the Company's progress towards meetingthe Inland Revenue's conditions for VCT approval and have retained GrantThornton UK LLP, one of the UK's leading firms of accountants, to advise in thisarea. In light of the current deal flow, we are confident that Eclipse willcomfortably meet the relevant conditions by its deadline of 31 May 2007. Outlook Most of the fundamentals for the UK economy remain favourable. The prospect ofhigher interest rates seems to have receded and inflation and unemploymentremain low, providing a positive environment in which to invest in UK smallercompanies. There remain, however, some concerns about the general level of consumer debt,which may have a dampening effect on the UK economy. The managers are consciousof this factor and will continue to be rigorous in their approach to assessingcompanies. The managers continue to see a healthy pipeline of investment opportunities andanticipate making several additional investments in the forthcoming months. Chris LytteltonChairman22 February 2005 Investment Manager's Review Personal Service At Octopus, we pride ourselves not only on our team's track record but also onour personalised customer service. We believe in open communication and ourregular 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 7255 7960. Introduction We are delighted with the success of the Company launch. As at 31 January 2005,the Company had raised almost £31 million, making it the most successful VCTlaunched in 2004 (by funds raised). Team Owing to the Company's success, we have continued to add to the team and haverecruited two further members, Joseph Bergin and Andrew Cavaghan. Joseph has over ten years of venture capital experience at 3i, both in the UKand Europe, and has an excellent track record in making investments and takingthem to exit. Joseph will focus on identifying investment opportunities andmanaging portfolio companies in the North of England. Andrew used to manage a generalist venture capital fund on behalf of GLE, wherehe also had primary responsibility for deal origination. Investments The portfolio of investments within the Company will comprise a number of AIMlisted and unquoted investments. Approximately 20% of the Company will beinvested in AIM listed companies. Once we have made an investment, we take an active approach in monitoring itsperformance. This includes regular meetings with management teams and, in thecase of most unquoted investments, attending board meetings of the relevantcompany's directors. As the period under review relates to the Company's launch, we had only made twoinvestments as at 30 November 2004, totalling £990,000. fountains plc fountains, established in 1957, is an existing support services company listedon AIM. fountains is involved in vegetation management, specifically forestryservices, grounds maintenance and landscaping for local authorities and utilitycompanies across the UK. The company is profitable, cash generative and dividendpaying. Our investment of £240,000 was part of a £5 million fund raising toallow the company to make further acquisitions within the sector. Post our investment, fountains reported a 20% increase in profit before tax of£1.44 million on sales of £36.1 million for the year to 30 September 2004. Thecompany continues to trade in line with our expectations, and we expect that anumber of acquisitions will be completed later in 2005. Cello Group plc Cello is a marketing services company, focusing on market research and directmarketing in the healthcare and charity sectors. Eclipse invested £750,000 aspart of a larger £15 million AIM fund raising to finance the acquisition ofthree smaller, profitable marketing businesses. The management teams of thesethree businesses have all been heavily incentivised to continue to grow theirrespective businesses and the Cello management team has significant experienceof building similar companies through acquisition. Our investment in Cello Group is trading at a premium to the original cost. Investment Manager's Review (continued) Since the end of the period under review, we have completed a further 4investments. Augean Augean was floated on AIM in September 2004 to acquire and manage businesses inthe UK waste management sector. Eclipse invested £500,000 as part of a £100million fund raising in November 2004. Augean was established by David Williams,who was previously Chairman of Waste Recycling Plc, a highly successful companywithin the same industry. The funds raised are being used to acquire twocompanies, Atlantic Waste Holdings and Zero Waste Holdings, which own twolandfill sites licensed to receive all categories of hazardous waste, togetherwith associated activities. We're confident that the quality of the team, combined with the attractivecommercial and legislative drivers, make this an exciting investmentopportunity. The shares are trading at a significant premium to the originalcost. TDX TDX is an unquoted company established by a strong management team to addressthe consumer debt management market in the UK. Eclipse invested as part of alarger but undisclosed fund raising by the company to support its growth plans.This company is at an earlier stage in its development than we would typicallyconsider but we believe the potential upside is significant. Matt Cooper, a director of Eclipse and Chairman of Octopus has joined the Boardof TDX and we retain additional observer rights. Gyro International Ltd Octopus has led and arranged a £3 million fund raising to support a partial MBOof Gyro and provide additional funding to support growth. In the last financialyear the Gyro Group of companies had revenues of approximately £12 million andhad significant profits. Eclipse invested £1 million for a minority stake andarranged a syndicate of three other VCTs to provide the balance of £2 million. Gyro was founded in 1991 and has established offices in London, Geneva,Stockholm, Amsterdam, New York and San Francisco and has recently opened inDublin. A Hamburg office is expected to open shortly as a result of increasinglevels of business activity in Germany. The company provides an integrated suite of marketing services including brandstrategy, direct marketing, on and off-line advertising, media planning, webmarketing and event management. Gyro's single focus is the technology and financial services sectors and it isknown for providing innovative solutions for clients, who benefit from highreturns on investment. Gyro's clients include Sony, Sun Microsystems, Oracle,Deutsche Bank, American Express and Orange. The Capital Pubs Company 2 Ltd ("CPC2") CPC2 is the latest pub investment vehicle set up by David Bruce, who has a longand successful track record in the brewing and leisure industry. Eclipseinvested £400,000 on 31 January 2005 as part of a £10 million placing. To datemore than £6 million has been raised, and the Company, formed in January 2004,has acquired three pubs. Outlook The challenge for all venture capital funds is to attract a strong flow of goodinvestment opportunities. At Octopus, we have spent a considerable amount of time and effort over the lastfew years in establishing and developing our network of deal introducers. Thenumber and the quality of the investment opportunities we are currently seeingis testament to this hard work and we are confident that we will build anattractive portfolio of investments for Eclipse. If you have any questions on any aspect of your investment, please call one ofthe team on 020 7255 7960. Simon RogersonChief Executive Statement of Total Return (incorporating the Revenue Account)For the period ended 30 November 2004 Revenue Capital Total £'000 £'000 £'000 Unrealised gains on investments - 137 137 Income 298 - 298 Investment management fees (39) (119) (158)Other expenses (63) - (63) ------ ------ ------Return on ordinary activities before tax 196 18 214Tax - - - ------ ------ ------Return on ordinary activities after tax 196 18 214Dividends - - - ------ ------ ------Transfer to reserves 196 18 214 ====== ====== ======Return per share 1.4p 0.2p 1.6p ====== ====== ====== Balance Sheet as at30 November 2004 £'000 £'000 Fixed asset investments 1,127Current assetsInvestments 22,170Debtors 72Cash 1,049 --------- 23,291 Creditors (amounts falling due within one year) (22) ---------Net current assets 23,269 ---------Net assets 24,396 =========Share capital 2,471Share premium 21,005Shares awaiting issue 713Capital redemption reserve 1Capital reserve (unrealised) 18Revenue reserve 188 ---------Total equity shareholders' funds 24,396 =========Net asset value per share 95.9p ========= Cash Flow Statement For the period ended 30 November 2004 30-Nov-04 30-Nov-04 £'000 £'000 Net cash inflow from operating activities 28 Financial investment (purchase of investments) (990)Net cash outflow from financial investment (990) Management of liquid resources (Increase in cash deposits) (22,170) Financing:Issue of own shares 24,272Share issue expenses (796)Purchase of own shares (8)Shares awaiting issue 713Total financing 24,181 ---------Increase in cash resources 1,049 ========= Reconciliation of operating profit to net cash inflow from operating 30-Nov-04activities £'000Profit on ordinary activities before tax 196Increase in debtors (72)Increase in creditors 22Management fees charged to capital account (118) -------Net cash inflow from operating activities 28 ======= Notes to the interim results 1. Investment portfolio as at 30 November 2004 Cost Valuation £'000 £'000fountains plc 240 272Cello Group plc 750 855 ------- -------Total 990 1,127 ======= ======= 2. 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. Notes to the interim results (continued) 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 unaudited interim statement for the period ended 30 November 2004 does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The first financial statements of the Company will be those for the financial period ending 31 May 2005, which will be delivered to the Registrar of Companies in due course. 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. 3. The calculation of the revenue and capital return per share is based on the return on ordinary activities after tax for the period and on 13,629,300 ordinary shares, being the weighted average number of shares in issue during the period from 25 May 2004 to 30 November 2004. 4. The calculation of net asset value per share is based on the net assets at 30 November 2004 and on 24,704,107 being the number of shares in issue at the same date. It should be noted that the value of shares awaiting issue are excluded from this calculation. 5. Copies of this statement are being sent to all shareholders. Copies are available to the public at the registered office of the Company at 14 Dover Street, London, W1S 4LW. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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