RNS Number:8127I
Eclipse VCT plc
12 September 2006
Eclipse VCT plc
Preliminary results for the year ended 31 May 2006
Financial Summary
for the year ended 31 May 2006
31 May 2006 31 May 2005
(restated)**
* Net assets #30,165,000 #30,264,000
* Net asset value per share 96.8p 96.8p
* Revenue return after tax #442,000 #495,000
* Revenue return per share* 1.4p 2.4p
* Total return per share* 1.4p 2.7p
* Dividends paid 1.45p -
* Proposed dividend 1.25p 1.45p
* Cumulative dividends paid and proposed 2.70p -
* Based on a weighted average of 31,240,517 shares in issue during the period
(2005: 20,396,980).
**Comparative figures have been extracted from the statutory accounts for the
period ended 31 May 2005 and have been restated in accordance with FRS21 in
respect of declared dividends and FRS26 in respect of the valuation of quoted
investments and the treatment of investments as at fair value through profit and
loss as disclosed in note 1.
Eclipse VCT plc ('Eclipse' or 'Fund') is a Venture Capital Trust ('VCT') and the
investments are managed by Octopus Investments Limited formerly named Octopus
Asset Management Limited ('Octopus' or 'Manager'). Eclipse was launched in April
2004 and raised over #30.7 million (#29.7 million net of expenses) through an
offer for subscription. It invests primarily in unquoted and AIM-quoted
companies and aims to deliver absolute returns on its investments.
Chairman's Statement
I am pleased to present the final results for the year to 31 May 2006. This is
the second year of Eclipse and I am delighted to report on the progress made by
the fund manager, Octopus Investments, in building the investment portfolio.
Background
Eclipse was one of the most successful VCTs launched in 2004 by funds raised,
raising over #30 million by December 2004. Since then, the Manager has added a
number of experienced fund managers to its team of investment professionals and
has also launched three further Eclipse funds (Eclipse 2, 3 and 4), raising over
#76 million in aggregate. These successful fund launches should benefit
shareholders in Eclipse VCT as they will enable the Manager to invest up to #4
million per company (i.e. #1 million from each of the four VCTs). This will
allow the Manager to invest in more developed, lower-risk companies than typical
VCTs.
Net Asset Value per share ('NAV')
The NAV at 31 May 2006 was 96.8p. During the year to 31 May 2006, eighteen
further investments were made in unquoted and AIM-quoted companies, meaning that
at the end of the period under review, Eclipse had a portfolio of 28 investments
in qualifying companies, representing 50% of the Fund by net assets. The
unquoted companies have been valued in accordance with International Private
Equity and Venture Capital ('IPEVC') guidelines and, with the exception of three
investments which have increased in value, are all held at cost as this is
deemed to be the fair value of the investments held. As set out in the IPEVC
guidelines, valuations of unquoted investments are usually not changed for at
least twelve months from the date of investment unless the investee company has
performed significantly behind plan (in which case the investment is written
down in value), or we have participated in a follow-on fundraising for the
company. The investment in The Capital Pub Company 2 was written up at the time
of the interim results to reflect our participation in a follow-on fundraising
which occurred at a higher valuation than the original investment. We are also
pleased to report that our investments in Gyro Group and Covion, two of the
Fund's earlier investments, have also been written up in value to reflect the
strong performance of the underlying businesses.
The overall value of the portfolio of AIM investments was #4,267,000,
representing an increase of 9% compared with a cost of #3,923,000.
The Manager reports that it is pleased with the portfolio that has been created
and believes that a number of further investments should experience uplifts in
value in due course. Further information on portfolio holdings can be found in
the Manager's review.
Dividend
In line with our commitment to maximise tax-free dividends to shareholders, the
Directors propose a dividend of 1.25p per share to be paid on 6 November 2006
shareholders on the register on 13 October 2006.
The Fund is still at a comparatively early stage in its investment cycle and
dividends are largely derived from interest earned on the un-invested cash held
in money market securities. As the Fund makes investments the level of cash
declines, therefore reducing the distributable reserves in the period. This has
had the impact of reducing the proposed dividend for the year to 31 May 2006 by
0.2p. In the medium-term our aim is to produce a regular tax-free income stream
for shareholders. As such we will realise profits on holdings where we believe
they have reached fair value.
Share Price and Buy-Back Facility
Eclipse has a share buy-back facility, proposing 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.
The Fund's mid market share price currently stands at 80p compared to the NAV of
96.8p. This is primarily due to the small number of transactions which took
place when the Fund was in a closed period and, therefore, unable to utilise its
buy back facility.
In the period under review, Eclipse repurchased 99,715 shares at an average
price of 87p. Shareholders should note that if they sell their shares within
three years of the original purchase they forfeit any income tax relief
obtained. If you need to sell your shares, please contact Octopus on 020 7710
2800.
Non-executive Directors' fees
During the period a review of Directors' fees was undertaken, as a result of
this and the additional work required as the Fund matures, it has been proposed
that the Chairman and non-executive Directors' fees be increased to #17,500 and
#13,500 respectively.
While the Articles of Association allow the Directors to determine their
remuneration up to an aggregate limit of #75,000, your Board feel in order to
maintain the level of transparency with which the Fund has previously been
managed, approval of this increase should be put to a shareholder vote at the
Annual General Meeting.
VCT Qualifying Status
As you may be aware, Eclipse must be 70% invested in qualifying companies by 31
May 2007 in order to comply with VCT regulations. At 31 May 2006, Eclipse was
approximately 50% invested (by net assets) in qualifying holdings. Four further
investments have been made since the year end, which increases the investment
level to approximately 59%.
The Directors will continue to monitor the Fund's progress towards meeting HM
Revenue and Customs conditions for VCT approval and have retained
PricewaterhouseCoopers LLP, one of the UK's leading firms of accountants, to
advise in this area. In light of the current deal flow, we are confident that
Eclipse will meet the relevant conditions by its deadline of 31 May 2007.
Outlook
The challenge for all venture capital funds is to attract a strong flow of
attractive investment opportunities. The specific challenge for Eclipse VCT is
to ensure that it has invested 70% of the funds raised in VCT qualifying
companies by May 2007. I am pleased to say that the Fund is ahead of target in
this respect and expects to be nearer to 80% invested by this date.
The early signs from the portfolio are very encouraging and I expect to be able
to update you on specific progress in the coming months.
Viscount Cobham
Chairman
11 September
Investment Manager's Review
Personal Service
At Octopus, we pride ourselves not only on our team's track record but also on
our personalised customer service. We believe in open communication and our
regular 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 are pleased with the progress made by the Fund since launch. During the
twelve months to 31 May 2006 the Fund invested a further #7.5 million in
eighteen companies bringing the total invested by Eclipse VCT to almost #14
million. A further four investments have been made since the year end.
Qualifying Status
VCTs have three years to invest 70% of the money raised into qualifying
companies. We're pleased to report that, at 31 May 2006, two years through the
three year period, Eclipse was 50% invested (by net assets) in qualifying
companies. With the additional investments made since the end of the period,
the proportion of the Fund invested has increased to 59%.
Review of Investments
At 31 May 2006, the Eclipse portfolio comprised investments in 15 AIM-quoted and
13 unquoted companies. The remainder of the Fund has been invested in money
market securities.
Once we have made an investment, we take an active approach in monitoring its
performance. This includes regular meetings with management teams and, in the
case of most unquoted investments, attending board meetings of the portfolio
companies. We are keen to invest in additional rounds of funding in portfolio
companies, where we are familiar with the qualities of the management team and
where the performance has been closely monitored.
Portfolio Activity
During the year, the Fund made sixteen new and two follow-on investments. These
investments are discussed below.
Lilestone Holdings Ltd
Branded consumer goods
In September 2005, Eclipse invested #470,000 alongside other Octopus managed
funds and a syndicate of third party investors in the acquisition and funding of
Lilestone plc, the holding company for the Myla brand. Myla is a luxury brand
selling premium priced lingerie together with bedroom accessories to style and
fashion conscious women.
Belgravium Technologies plc
Information Technology
Eclipse invested #45,000 in the AIM flotation of Belgravium in October 2005.
Belgravium designs, develops and installs real time data capture systems aimed
at the logistics, fuel distribution and airline industries.
Abcam plc
Healthcare
Eclipse invested #89,000 in the AIM flotation of Abcam in October 2005. Abcam
is an internet based company focussed on the development and distribution of
high quality antibodies to universities, research institutes and pharmaceutical
companies.
Healthcare Locums plc
Recruitment in healthcare industry
In November 2005, Eclipse invested #300,000 in the AIM flotation of Healthcare
Locums ('HCL'). HCL is a specialist player in the healthcare staffing market,
targeting the niche markets for the supply of temporary doctors, GPs, social
workers and other healthcare professionals.
The Kendal Group Ltd
Branded consumer goods
Eclipse invested #1 million alongside Eclipse VCT 2 in a #1.6 million funding
round for The Kendal Group in November 2005. The majority of the funding is
being used to support the growth of the swim equipment, swimwear and active wear
brands, Zoggs and PureLime.
Plastics Capital Ltd
Niche plastics engineering business
In November 2005, Eclipse invested #1 million as part of an #11 million
transaction to support the acquisition of two companies by Plastics Capital.
Part of the funding was also provided from Eclipse VCT 2. Plastics Capital was
set up to build a group of niche plastics manufacturing companies, each with a
strong market position and good cash generation characteristics.
James Harvard International Ltd
Recruitment in the pharmaceutical and IT sectors
Eclipse invested #1 million in November 2005 in James Harvard. This was part of
a #2.5 million investment by Octopus managed funds to support an acquisition in
November 2005. James Harvard is one of the leading recruitment agencies in the
growing European clinical trials market.
Luther Pendragon Ltd
PR services
In November 2005, Eclipse invested #1 million as part of a #2 million investment
by Octopus managed funds in the management buy-out of Luther Pendragon. Luther
provides a fully integrated corporate public relations service specialising in '
issues management'.
Autoclenz Holdings plc
Valeting services to automotive retailers
In December 2005, Eclipse invested #337,500 in the AIM flotation of Autoclenz.
The company, founded in 1990, is the UK's leading provider of valeting services
to automotive retailers, auction houses, rental companies and car supermarkets.
Autoclenz floated on AIM in December 2005, having previously been a subsidiary
of Yule Catto, the chemical company.
Red-M Group Limited
Information Technology
Eclipse invested #500,000 in a #5.4 million funding round led by Pi Capital.
Red-M provides software products and services for the wireless market and
designs, deploys and manages wireless networks across the spectrum of
commercially used radio frequencies for blue chip clients. The company was
formed in April 2005 by the merger of Cellular Design Services, a wireless
consulting services provider, and Red-M Communications, a vendor of wireless
security probes and monitoring software.
Cohort plc
Business Services
Eclipse invested #101,000 in the AIM flotation of Cohort in February 2006.
Cohort was incorporated to acquire Systems Consultants Services ('SCS'), a UK
based company providing training support and equipment trials to the defence
sector. The market for technical services, outside of the recently privatised
Government agency Qinetiq, is largely fragmented but has been consolidating.
Cohort's strategy is to acquire complementary technical services companies and
position them alongside the fast-growing SCS business.
Ovum plc
Information Technology
In March 2006, Eclipse invested #112,000 in the AIM flotation of Ovum. Ovum is a
leading information, communication and technology research consultancy. The
company acts as a source of industry data, knowledge and expertise on the
commercial impact of technology, regulatory and market changes. This data is
packaged into detailed research documents and distributed through a range of
bespoke and tailored products. Current clients include IBM, BT, and Vodafone as
well as Government bodies such as the Department of Trade and Industry.
Perfect Pizza Limited
Pizza home delivery
In March 2006 Eclipse invested #1.1 million alongside the other Eclipse funds in
the #7 million management buy-in of Perfect Pizza from Papa Johns, the US parent
company. Perfect Pizza is the third largest home delivery pizza business in the
UK with 114 franchised stores.
Invocas plc
Insolvency practitioner
In March 2006 Eclipse invested #60,000 in the AIM flotation of Invocas. The
company is the leading provider of personal insolvency solutions in Scotland
with a 16% share of the Protected Trust Deed market. Invocas has been
profitable and cash generative for the past seven years. Demand in Scotland for
Protected Trust Deeds, which help individuals who are having difficulty
servicing their debt, grew by 14% in 2005 and is expected to grow by 20% in
2006.
Blanc Brasseries Holdings plc
Restaurant operator
Eclipse invested #103,000 in April 2006 in a #6 million private placement
funding round for Blanc Brasseries, which owns the Le Petit Blanc chain of
quality restaurants. The business was acquired from Loch Fyne Restaurants (LFR)
and will continue to be managed by the LFR management team, which successfully
built up this chain to around 30 restaurants.
BBI Holdings plc
Diagnostics
In May 2006, Eclipse invested #64,000 in BBI Holdings. BBI is an AIM-quoted
developer and manufacturer of diagnostic tests. The company derives income from
the manufacture and supply of gold colloids, bespoke product development for
third parties and the manufacture of diagnostic tests for industry partners. The
funding provided by Eclipse and other investors was used to fund the acquisition
of Alchemy Laboratories Ltd, a Dundee based company with operations in similar
fields to BBI.
Portfolio Valuation
At 31 May 2006, the Fund's portfolio comprised investments in 28 companies with
a total cost of #13.9 million and a carrying value of #14.9 million. The Fund
also held #14.8 million in money market securities awaiting investment in
qualifying holdings.
Investment Unrealised Carrying
appreciation/ Value
at Cost depreciation
Unquoted investments #'000 #'000 #'000
Gyro International Limited 1,000 370 1,370
Perfect Pizza Limited * 1,125 - 1,125
Covion Limited * 844 224 1,068
The Kendal Group Limited * 1,024 - 1,024
Plastics Capital Limited * 1,000 - 1,000
Reading Room Limited 1,000 - 1,000
James Harvard International Limited * 1,000 - 1,000
Luther Pendragon Limited * 1,000 - 1,000
Capital Pubs Company 2 plc * 600 20 620
Red-M Group Limited * 500 - 500
Lilestone Holdings Limited * 470 - 470
TDX Group limited 400 - 400
Blanc Brasseries Holdings plc * 104 - 104
10,067 614 10,681
AIM-quoted investments
Cello Group plc 750 165 915
The Tanfield Group plc * 500 138 638
Zetar plc 237 231 468
Augean plc 500 (90) 410
Autoclenz Holdings plc * 338 (23) 313
Healthcare Locums plc * 300 11 311
InterQuest plc * 341 (43) 298
Tissue Science Laboratories plc 246 (30) 216
fountains plc 240 (100) 140
Abcam plc * 89 40 129
Cohort plc * 101 15 116
Ovum plc * 112 (2) 110
Invocas plc * 60 36 96
BBI Holdings plc * 64 10 74
Belgravium plc * 45 (12) 33
3,923 344 4,267
13,990 958 14,948
* Investments held in these companies are managed by the Investment Manager on
behalf of the Company as well as further investments on behalf of other
connected parties. Further details are provided below.
Ten Largest Holdings
The Kendal Group Limited
The Kendal Group is the holding company for the Zoggs and PureLime brands.
Zoggs is a leading swim equipment and swimwear brand, founded in Australia and
well known for its swim goggles and flotation aids. It has recently introduced
swimwear to the range. Further information is available at www.zoggs.com
PureLime is a ladies fitness and active wear brand, originally from Denmark.
Further information is available at www.purelime.com
The company has a high proportion of sales through fitness centres and swimming
pool locations and is starting to gain distribution through retail outlets such
as Tesco and Early Learning Centre. The Zoggs brand has a significant presence
in Australia and plans to grow through licensing in other countries. Overall,
sales of the Zoggs brand grew by approximately 17% in 2005.
Further information can be found at the company's website,
www.thekendalgroup.com
Investment date 18 November 2005
Equity held 10.2%
Cost #1,024,456
Valuation #1,024,456
Valuation basis Cost (New Investment)
Dividends/Interest received during the year Nil
Last Audited Accounts December 2005
Net Assets #1,375,000
Loss before taxation #(727,000)
Gyro International Limited
Gyro, which was founded in 1991, provides an integrated suite of marketing
services including brand strategy, direct marketing, web marketing and event
management. The company focuses primarily on technology and financial services
companies, and clients include Sony, Sun Microsystems, Orange and Deutsche Bank.
Gyro has offices in London, Geneva, Stockholm, Amsterdam, New York and San
Francisco and has recently opened in Dublin and Hamburg. Revenues have grown
from #11 million in 2004 to more than #17 million in 2005 and Gyro was ranked
the number one B2B agency in the UK in 2005. Sales continue to grow strongly in
the current financial year.
The company has performed well since our investment and, based on strong trading
results, the carrying value has been increased.
Further information can be found at the company's website, www.gyrogroup.com.
Investment date 10 February 2005
Equity held 10.6%
Cost #1,000,000
Valuation #1,370,000
Valuation basis Earnings multiple
Dividends/Interest received during the year #11,000
Last Audited Accounts October 2005
Net Assets #21,000
Profit/(loss) before taxation: #707,000
Reading Room Limited
Reading Room designs, develops and maintains websites for its clients. The
company is known for its integrated approach to digital communications, media
and marketing and has a broad client base including GlaxoSmithKline, Ernst and
Young, and the trainline.com. Reading Room recently won a prestigious award for
the best charity website for Cancer Research UK to add to a long list of similar
awards.
Reading Room has offices in London, Manchester and Sydney and has increased its
staffing level from 53 to 87 since our investment.
Further information can be found at the company's website www.readingroom.com.
Investment date 7 April 2005
Equity held 26.7%
Cost #1,000,000
Valuation #1,000,000
Valuation basis Cost
Dividends/Interest received during the year #46,000
Last Audited Accounts April 2005
Net Assets #1,600,000
Profit/(loss) before taxation #80,000
Plastics Capital Limited
Plastics Capital was set up to build a group of niche plastics manufacturing
companies, each with a strong market position and good cash generation
characteristics. The group currently comprises three separate businesses with
factories located in Knaresborough, Leicester, Dartford and Poole with an
aggregate turnover in excess of #15 million.
The first company acquired was Bell Plastics, which manufactures plastic
mandrels for use in the manufacturing process for high pressure hoses. Our
funding was used to acquire Trimplex, a company that manufactures creasing
matrices for cardboard box manufacturing, and BNL, which manufactures plastic
bearing components.
Investment date 30 November 2005
Equity held 11.8%
Cost #1,000,000
Valuation #1,000,000
Valuation basis Cost (New Investment)
Dividends/Interest received during the year Nil
Last Audited Accounts March 2005
Net Assets #826,000
Profit/(loss) before taxation #68,000
James Harvard International Limited
James Harvard is one of the leading recruitment agencies in the growing, but
fragmented, European clinical trials market. The funds raised were used to
acquire EXCO, thereby extending the range of functional areas covered by James
Harvard as well as providing access to a broader range of clients. Since
completion of our investment, JHI has made a further modest acquisition, ASA
Medical, from Hotgroup.
Further information can be found at the company's website www.jamesharvard.com.
Investment date 30 November 2005
Equity held 10.9%
Cost #1,000,000
Valuation #1,000,000
Valuation basis Cost (New Investment)
Dividends/Interest received during the year #9,000
Last Audited Accounts December 2004
Net Assets #550,000
Profit/(loss) before taxation Not available
Luther Pendragon Limited
Luther provides a fully integrated corporate public relations service
specialising in 'issues management', which involves developing communications
strategies to combat any potential risks to a client's reputation or to
influence public perception to achieve a strategic goal. The company was
established in 1992 and has grown to 45 partners and staff. The company has a
range of public sector and blue chip private sector clients from a range of
industries.
Further information can be found at the company's website www.luther.co.uk.
Investment date 30 November 2005
Equity held 19.2%
Cost #1,000,000
Valuation #1,000,000
Valuation basis Cost (New Investment)
Dividends/Interest received during the year Nil
Last Audited Accounts December 2005
Net Assets #1,921,000
Profit/(loss) before taxation #702,000
Perfect Pizza Limited
Perfect Pizza is the third largest pizza delivery business in the UK with 114
franchised stores throughout the country. The home delivery pizza market is
expected to continue to be a growth area as a result of the long-term trend away
from home cooking.
Further information can be found at the company's website
www.perfectpizza.co.uk.
Investment date 8 March 2006
Equity held 15.4%
Cost #1,125,000
Valuation #1,125,000
Valuation basis Cost (New Investment)
Dividends/Interest received during the year #23,000
First audited financial information will be available for the period to 31 March
2006
Covion Limited
Covion provides a full range of support services, including cleaning, security
and maintenance work for clients such as LogicaCMG, Sara Lee and Anglian
Windows.
The company has annualised sales of more than #20 million, making it the fastest
growing business in the Thames Valley region in 2004 (source: BDO). Covion came
fourth in the Sunday Times Fast Track 100 (October 2005) and was rated the 39th
fastest growing in Europe. Two founder directors, David Steventon and Frank
Rodrigues, have also received an Entrepreneur of the Year award sponsored by
Ernst & Young.
Further information can be found at the company's website www.covion.co.uk.
Investment date 27 May 2005
Equity held 10.1%
Cost #844,083
Valuation #1,068,000
Valuation basis Earnings Multiple
Dividends/Interest received during the year Nil
Last Audited Accounts December 2004
Net Assets #728,000
Profit/(loss) before taxation #329,000
Cello Group plc
Cello Group was created as a vehicle to identify and acquire well-established
media services companies operating in niche markets. In October 2004, the
company's flotation on AIM raised #15 million in order to acquire three
businesses and provide working capital. Cello has subsequently made a number of
further acquisitions.
Further information can be found at the company's website www.cellogroup.co.uk.
Investment date 9 November 2004
Equity held 2.3%
Cost #750,000
Valuation #877,000
Valuation basis Bid price
Dividends/Interest received during the year Nil
Last Audited Accounts December 2004
Net Assets #33,500,000
Profit/(loss) before taxation #1,300,000
The Capital Pub Company 2 plc
Capital Pub Company 2 plc is the latest pub investment vehicle set up by David
Bruce, who has a long and successful track record in the brewing and leisure
industry. Bruce has set up and successfully sold a number of similar companies,
including the Firkin and Slug and Lettuce chains of pubs.
More than #16 million has been raised for the company which is developing a
portfolio of freehold public houses in the Greater London area. These are
unbranded, un-themed and have no tie to a particular brewery. To date, ten sites
have been acquired and more are in the pipeline.
Further information can be found at the company's website
www.capitalpubcompany2.com.
Investment date 31 January and 30 June 2005
Equity held 3.7%
Cost #599,500
Valuation #619,500
Valuation basis Latest round of finance
Dividends/Interest received during the year Nil
Last Audited Accounts September 2005
Net Assets #10,500,000
Profit/(loss) before taxation #68,000
Recent Transactions
Since the end of the period under review, we have completed 3 new and have one
follow-on investments:
CSL Dualcom Limited
Eclipse invested #857,000 alongside the other Eclipse funds to finance the #6
million management buy out of CSL Dualcom. CSL is a leading supplier of dual
path alarm signalling devices.
Worthington Nicholls Group plc
The Fund invested #500,000 in the AIM flotation in June 2006 of Worthington
Nicholls Group plc, the leading UK installer of air conditioning units in the
hotel, retail and leisure markets. The company, which supplies over 50% (by
number of rooms) of the 3* plus UK hotel market, is expected to achieve a profit
before tax of #3.6 million on turnover of #25.0 million for the year ending
September 2006.
First Sports Group Limited
In June 2006 Eclipse invested #1,000,000 alongside Eclipse VCT 2 in a #2 million
fundraising for First Sports Group ('FSG'). FSG provides and manages retail
solutions within sports and leisure clubs. The company's clients include
Esporta, Holmes Place and David Lloyd. As well as managing more than 20
pro-shops, FSG has developed a stand alone unmanned retail display unit, from
which customers can buy sports goods, paying at the club reception.
Lilestone Holdings Limited
A further investment of #313,000 was made in Lilestone, owner of the Myla brand,
as part of a #1.6 million funding round from current shareholders to support the
company's growth plans. The fundraising included an investment of #800,000 by
an overseas retail group. The investment was made at a small premium to the
valuation that was established in the first round.
Summary of investments made by other funds managed by Octopus Investments
Limited
It is a requirement that the Managers, disclose the full extent of its interest
in any investment which also is invested in by other funds managed by Octopus.
Details of these are shown below.
% equity held by Eclipse VCT % equity held by other funds
managed by Octopus
Abcam plc 0.15 0.46
Augean plc 0.42 1.15
Autoclenz Holdings plc 2.60 10.25
BBI Holdings plc 0.29 4.80
Belgravium plc 0.32 1.28
Blanc Brasseries Holdings plc 1.24 2.06
Capital Pubs Company 2 plc 3.70 4.50
Cello Group plc 2.25 3.86
Cohort plc 0.28 1.59
Covion Limited 10.10 5.20
fountains plc 1.29 2.62
Healthcare Locums plc 0.88 1.03
InterQuest plc 2.14 2.24
Invocas plc 0.19 1.07
James Harvard International 10.90 16.00
Limited
Luther Pendragon Limited 19.20 19.20
Ovum plc 0.49 2.77
Perfect Pizza Limited 15.40 9.10
Plastics Capital Limited 11.80 9.50
Red-M Group Limited 4.40 2.65
The Kendal Group Limited 10.22 5.86
The Tanfield Group plc 1.04 4.87
Tissue Science Laboratories 0.50 0.50
plc
Zetar plc 1.12 1.18
If you have any questions on any aspect of your investment, please call one of
the team on 020 7710 2800.
Simon Rogerson
Chief Executive
Income Statement
Year to 31 May 2006 Period to 31 May 2005
(restated)
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Unrealised gains on - 424 424 - 363 363
investments
Income 1,028 - 1,028 901 - 901
Investment (174) (524) (698) (123) (370) (493)
management fees
Other expenses (308) - (308) (168) - (168)
Return on ordinary 546 (100) 446 610 (7) 603
activities before
tax
Tax (104) 99 (5) (115) 70 (45)
Return on ordinary 442 (1) 441 495 63 558
activities after
tax
Basic and diluted 1.4p 0.0p 1.4p 2.4p 0.3p 2.7p
return per share
* The total column of this statement is the profit and loss account of the Company
* All revenue and capital items in the above statement derive from continuing operations
* The accompanying notes are an integral part of the financial statements.
* The Company has only one class of business and derives its income from investments made in shares
and securities and from bank and money market securities.
Reconciliation of movements in shareholders' funds
31 May 2006 31 May 2005
#'000 #'000
Equity shareholders' funds as at 1 June 2005 as previously reported 29,911 -
Prior year adjustment:
Adjustment in valuation of quoted investments to bid price (100) -
Proposed dividend not accounted for until declared and paid 453 -
As restated 30,264 -
Total gains and losses recognised in period 441 558
Shares purchased for cancellation (87) (27)
Net proceeds of share issue - 29,733
Dividends recognised in period (453) -
Shareholders' funds at 31 May 2006 30,165 30,264
The accompanying notes are an integral part of the preliminary announcement.
Balance Sheet
as at 31 May 2006 as at 31 May 2005
(restated)
#'000 #'000 #'000 #'000
Fixed asset investments 14,948 6,722
Current assets
Investments 13,657 23,299
Debtors 448 148
Cash at bank 1,157 167
15,262 23,614
Creditors: amounts falling due within (45) (72)
one year
Net current assets 15,217 23,542
Net assets 30,165 30,264
Called up equity share capital 3,117 3,127
Share premium - 26,603
Special distributable reserve 26,516 -
Capital redemption reserve 13 3
Capital reserve realised (725) (300)
Capital reserve unrealised 787 363
Revenue reserve 457 468
Total equity shareholders' funds 30,165 30,264
Net asset value per share 96.8p 96.8p
The accompanying notes are an integral part of the preliminary announcement.
Cash flow statement
Year to 31 May 2006
Year to 31 May
2005
(restated)*
#'000 #'000 #'000 #'000
Net cash (outflow)/inflow from operating (436) 119
activities
Financial investment :
Purchase of investments (7,631) (6,359)
Net cash outflow from financial investment (7,631) (6,359)
Management of liquid resources :
Decrease/(increase) in cash funds 9,642 (23,299)
Taxation (45)
Equity dividends paid (453) -
Financing :
Issue of own shares - 30,802
Share issue expenses - (1,069)
Repurchase of own shares (87) (27)
Total financing (87) 29,706
Increase in cash resources 990 167
The accompanying notes are an integral part of the preliminary announcement.
Notes to the preliminary announcement
1. Accounting policies
The Company is required to comply with a number of new UK Financial Reporting
Standards (FRSs) in presenting its financial statements for the year ended 31
May 2006. These standards have been introduced as part of the process of
converging UK standards with International Financial Reporting Standards (IFRS).
The financial information provided in the audited results for the period ended
31 May 2005 has been prepared on a consistent basis with the accounting policies
as disclosed in the Company's annual report and accounts for the period ended 31
May 2005 except for such changes as are required by the new FRSs. These changes
arise from the adoption of FRS21 "Events after the Balance Sheet Date" and FRS26
"Financial Instruments: Measurement". The adoption of FRS 25 "Financial
Instruments: Disclosure and Presentation" has only impacted upon the disclosures
within the financial statements and has had no impact upon the balances therein.
The adoption of FRS 20 "Share based payments", FRS 22 "Earnings per share",
FRS 23 "The effects of changes in foreign exchange rates", FRS 24 "Financial
reporting in hyper-inflationary economies" and FRS 28 "Corresponding amounts"
has not impacted upon the financial statements.
The nature and effect of these changes are explained below and the comparative
figures for the period ended 30 May 2005 have been restated accordingly.
Under FRS21, dividends to shareholders are accounted for in the period in which
they are declared and approved at the Annual General Meeting. Therefore, the
dividend of #453,000 that was shown as proposed in the 2005 Report and Accounts
has been added back to the profit and loss account and deducted from creditors
in the comparative figures for the period ended 31 May 2005, and has been
recognised as paid in the year to 31 May 2006.
Under FRS26, quoted investments are valued at bid price rather than mid-market
price. The effect of this is to decrease the valuations at which such
investments are stated in the balance sheet and to decrease the unrealised gains
on investments shown in the capital column of the income statement. This change
resulted in a reduction of #100,000 in the valuation of fixed asset investments
at 31 May 2005 and a corresponding decrease in the unrealised revaluation
reserve at those dates.
The Company invests in financial assets with a view to profiting from their
total return through income and capital growth. These investments are managed
and their performance is evaluated on a fair value basis in accordance with a
documented investment strategy. Accordingly as permitted by FRS 26, the
investments are designated as at fair value through profit and loss. Unrealised
gains or losses on valuation are recognised through the profit and loss account.
Basis of accounting
The Company is an investment company as defined in s266 of the Companies Act
1985. The financial statements have been prepared under the historical cost
convention, modified to include the revaluation of fixed asset investments, and
in accordance with applicable accounting standards in the UK and with the
Statement of Recommended Practice "Financial statements and investment trust
companies" issued in January 2003 and revised in December 2005.
Investments
Investments in AIM-listed companies are stated at bid prices. Previously the
valuation of these investments was based at middle market prices. The effect on
the comparative figures was a reduction in the net asset value of #100,000 at 31
May 2005. The comparative figures have been restated to reflect this change.
Unlisted investments are valued in accordance with the International Private
Equity and Venture Capital ("IPEVC") valuation guidelines. The company's
investments have been designated by the directors as being stated at fair value
through profit and loss ("FVTPL") for the purposes of FRS 26. In the case of
investments quoted on a recognised stock exchange, fair value is established by
reference to the closing bid price on the relevant date. In the case of
unquoted investments, fair value is established by using measurements of value
such as price of recent investment, earnings multiple and net assets; where no
reliable fair value can be estimated using such techniques, unquoted investments
are carried at cost subject to provision for impairment where necessary.
Realised surpluses and deficits on the disposal of investments are taken to
through the income statement to the realised capital reserve; unrealised
surpluses and deficits are taken through the income statement to the unrealised
capital reserve.
Current asset investments are shown at the lower of cost and net realisable
value.
Income
Investment income includes income tax withheld at source. Dividend income is
shown net of any related tax credit.
Dividends receivable are brought into account on the ex-dividend date. Fixed
returns on debt and money market securities are recognised on a time
apportionment basis so as to reflect the effective yield, provided there is no
reasonable doubt that payment will be received in due course.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
wholly to revenue with the exception of the investment management fee, which has
been charged 25% to the revenue account and 75% to the realised capital reserve
to reflect, in the Directors' opinion, the expected long term split of returns
in the form of income and capital gains respectively from the investment
portfolio.
Taxation
Corporation tax payable is provided on taxable profits at the current rate. The
tax effect of different items of income/gain and expenditure/loss is allocated
between capital and revenue on the same basis as the particular item to which it
relates, using the Company's effective rate of tax for the accounting period.
Deferred tax is recognised, without discounting, in respect of all timing
differences between the treatment of certain items for taxation and accounting
purposes which have arisen but not reversed by the balance sheet date.
Capital reserve - realised
The following are accounted for in this reserve:
a) gains and losses on the realisation of investments;
b) realised exchange differences of a capital nature;
c) expenses and finance costs, together with the related
taxation effect, charges to this reserve in accordance with the above policies;
d) realised gains and losses on transactions undertaken to
hedge an exposure of a capital nature.
Capital reserve - unrealised
The following are accounted for in this reserve:
a) increases and decreases in the valuation of investments
held at the year end;
b) unrealised exchange differences of a capital nature;
c) unrealised gains and losses on transactions undertaken to
hedge an exposure of a capital nature.
Cash and liquid resources
Cash, for the purposes of the cash flow statement, comprises cash in hand and
deposits repayable on demand, less overdrafts payable on demand. Liquid
resources are current asset investments which are disposable without curtailing
or disrupting the business and are either readily convertible into known amounts
of cash at or close to their carrying values or traded in an active market.
Liquid resources comprise term deposits of less than one year (other than cash),
government securities and investments in money market managed funds.
2. Return per share
The revenue return per share is based on profit from ordinary activities after
tax of #442,000 (2005:#495,000) and on 31,240,517 (2005: 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.
3. Reserves
Share Special Capital Capital Capital Revenue
premium distributable redemption reserve reserve reserve
Reserve reserve realised unrealised
#'000 #'000 #'000 #'000 #'000 #'000
Balance as previously reported 31 May 2005 26,603 - 3 (300) 463 15
Adjustments as per FRS 21 and 26 - - - - (100) 453
As restated 26,603 - 3 (300) 363 468
Cancellation of share premium account (26,603) 26,603 - - - -
Share buy back - (87) 10 - - -
Management fee capitalised net of - - (425) - -
associated -
taxation
Net increase in unrealised appreciation - - - - 424 -
Return on activities after tax - - - - - 442
Dividends - - - - - (453)
- 26,516 13 (725) 787 457
The Special Distributable Reserve was created on 8 December 2005 following the
cancellation of the Share Premium account in accordance with the High Court
Approval obtained on 7 December 2005. The Special Distributable Reserve allows
the Company to fund the buy-back of its ordinary shares and is a distributable
reserve.
4. Dividends
31 May 2006 31 May 2005
#'000 #'000
Dividend paid in the current year relating to the previous period 453 -
Proposed final dividend 1.25p per share (2005: 1.45 p per share) 390 453
5. Net asset value per share
The calculation of net asset value per share as at 31 May 2006 is based on net
assets of #30,165,000 (2005: #30,264,000) divided by the 31,169,065 (2005:
31,268,780 ordinary shares in issue at that date.
6. Financial instruments
Management of risk
As a Venture Capital Trust, the Company's objective is to provide shareholders
with an attractive income and capital return by investing in accordance with the
Company's investment strategy.
The Company's financial instruments may comprise:
- shares and securities in UK companies
- cash, liquid resources and short term debtors
and creditors that arise from the
Company's operations.
The Company has no derivative financial instruments and has no financial assets
or liabilities for which hedge accounting has been used. Fixed assets are valued
at fair value as determined by the Directors on the basis set out in the
accounting policies. The fair value of certain unlisted investment has been
calculated by reference to a multiples earning model which examines the price/
earnings ratio. In determining these valuations, the industry sector ratios
have been used, adjusted as necessary to take into account the associated risks
on an individual investment basis.
At 30 May 2006 the fair value of the financial assets designated as fair value
through profit and loss was #28,605,000 (2005: #30,021,000). During the course
of the current year, there has been an unrealised appreciation of #424,000
(2005: #363,000) which has been credited to the unrealised capital reserve. The
designation of the financial assets as at fair value through profit and loss is
in accordance with the documented strategy of the Company.
The main risks arising from the Company's financial instruments are fluctuations
in market price for quoted investments and fluctuations in valuations, including
the issue of the going concern, for unquoted investments.
Market price risk
Market price risk arises mainly from the uncertainty about future prices of
financial instruments used in the Company's operations. It represents the
potential loss the Company might suffer through holding market positions by way
of price movements. The potential risk is continuously monitored by the
investment manager and reported on a regular basis to the board.
Liquidity risk
The funds raised since incorporation are currently used to fund the Company's
primary objective of investing in venture capital opportunities which accord
with its investment strategy. Some 46% of these funds had been utilised in this
investment process at 31 May 2006 and the remaining funds were primarily
represented by cash and liquid resources shown as current asset investments in
the balance sheet.
Interest rate risk
The Company finances its operations through share capital raised and retained
profits including both realised and unrealised capital profits. At the period
end and throughout the period, the Company had no liabilities that were subject
to interest rate risk and had no borrowing facilities. The Company's financial
assets are invested in short term money market funds (typically of one to three
months duration) at fixed rates. The weighted average interest rate on such
funds was approximately 4.4% during the period.
Credit risk
The company's principal financial asset is cash deposits. The credit risk
associated with these cash deposits is limited as the counterparties have high
credit ratings assigned by international credit-rating agencies.
Fair values of financial assets and liabilities
There was no material difference between the fair values of financial assets and
liabilities and their book values at the balance sheet date.
7. Related party transactions
Matt Cooper, a non-executive Director of Eclipse VCT plc, is a Director of
Octopus. Eclipse VCT plc has employed Octopus throughout the period as
investment managers. Eclipse VCT plc has paid Octopus #698,000 in the period as
a management fee and there is #nil outstanding at the balance sheet date. The
management fee is payable quarterly in advance and is based on 2.0% of the net
asset value calculated at annual intervals as at 31 May. Octopus also provides
accounting and administrative services to the Company, payable quarterly in
advance for a fee of 0.3% of the net asset value calculated at annual intervals
as at 31 May. During the period #105,000 was paid to Octopus and there is #nil
outstanding at the balance sheet date, for the accounting and administrative
services.
In addition, Octopus is entitled to an annual performance related incentive fee
in the event that performance criteria in relation to the increase in net
assets, after adding back distributions, are exceeded. No performance fee is
payable until after 31 May 2007.
8. The above summary of results for the year ended 31 May 2006 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.
9. The proposed final dividend for the period ended 31 May 2006, if approved by
the shareholders, will be paid on 6 November 2006 to shareholders on the
register at the close of business on 13 October 2006.
10. A copy of the full annual report and financial statements for the year ended
31 May 2006 will be printed and posted to shareholders. Copies will also be
available to the public at the registered office of 8 Angel Court, London EC2R
7HP.
This announcement was approved by the Board on 11 September 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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