Unaudited Half-Yearly Report for the Six Months Ended 30 November
2007
Eclipse VCT plc
24 January 2008
Unaudited Half-Yearly Report for the Six Months Ended 30 November
2007
Financial Highlights
Six months to 30 Six months to 30 Year to 31 May
November 2007 November 2006 2007
Net assets �37,270,000 �35,232,000 �39,135,000
Net total return �(1,067,000) �5,564,000 �10,731,000
after tax
Net asset value per 118.9p 113.5p 126.1p
share
Cumulative dividends 10.70p 1.45p 6.70p
paid since launch
Eclipse VCT plc ("Eclipse", "Fund" or "Company") is a venture capital
trust ("VCT") which aims to provide shareholders with attractive
tax-free dividends and long-term capital growth.
Eclipse invests primarily in unquoted and AIM-quoted companies and
aims to deliver absolute returns on its investments. Eclipse was
launched in April 2004 and raised over �30.7 million (�29.7 million
net of expenses) through an offer for subscription. The Investment
Manager is Octopus Investments Limited ("Octopus" or "Manager").
Octopus subsequently raised a further �18.4 million in January 2005
with Eclipse VCT 2 plc, and a further �58.2 million in a twin fund,
Eclipse VCT 3 plc and Eclipse VCT 4 plc in April 2006. Eclipse
raised a further �940,000 from an additional fund raising round early
in November 2007.
Eclipse co-invests with the three other Eclipse funds which are all
managed by the same investment team at Octopus. This is viewed as a
benefit as it means Eclipse will not only be able to invest in a
wider range of opportunities but also in larger and more developed
companies than are typically available to a single VCT.
The table below shows the movement in NAV per share and lists the
dividends that have been paid since the launch of Eclipse:
Period Ended NAV Dividend NAV + cumulative dividends
30-Nov-04 96.0p - 96.0p
31-May-05 96.8p - 96.8p
30-Nov-05 94.2p 1.45p 95.7p
31-May-06 96.8p - 98.3p
30-Nov-06 113.5p 1.25p 116.2p
31-May-07 126.1p 4.00p 132.8p
30-Nov-07 118.9p 4.00p 129.6p
Chairman's Statement
I am pleased to present the interim results for the six months to 30
November 2007 which indicates continued progress by the Manager in
building and maintaining diversified investment portfolio in line
with the original investment objectives.
Results Review
In the six months to 30 November 2007, the Net Asset Value ("NAV")
per share decreased 5.7% to 118.9p. However, a 4.0p per share
dividend has been paid in the period and as such total return has
only fallen by 2.4%. The Manager crystallised a profit of nearly
�3.5 million in the period from the disposal, either wholly or
partially, of a number of investments. Consequently, the Board has
declared an interim dividend of 3.0p per share to be paid on 21 March
2008 to shareholders on the register on 29 February 2008. The total
return to shareholders, before payment of this dividend, is 29.9%.
This is before taking into account the 40% upfront tax relief
received by initial subscribers.
Investment Portfolio
During the period, eight new investments and several follow-on
investments were made totalling �4.7 million. The Fund reduced its
holding in Tanfield Group plc and Cello Group plc, realising a profit
of �560,000 and �15,000 respectively, and fully disposed of the
investment in Worthington Nicholls plc, crystallising a profit of
�355,000. Of particular significance was the Fund's investment in
Covion Limited. This was also sold during the period generating a
significant profit for the Fund, as it received more than 4 times the
original amount invested.
The reduction in NAV, not otherwise attributed to the payment of a
dividend, results from a decline in the value of the AIM portfolio
and some specific provisions against the unquoted investment
portfolio. These are discussed in the Manager's report.
Within the portfolio we also have a further �5.1 million of
unrealised profit on our investments. Further information on the
holdings in the portfolio can be found in the Investment Manager's
review.
Share Price
The Company's mid market share price currently stands at 99p compared
to the NAV of 118.9p. This slight discount of share price to NAV is
primarily due to the low level of secondary market activity in
Eclipse shares. In order to address the difference between the NAV
and share price, Octopus is working towards developing strategies to
increase liquidity in the market by stimulating trade in VCT shares
in the secondary market.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager
with advice on the ongoing compliance with HM Revenue & Customs rules
and regulations concerning VCTs. The Board has been advised that
Eclipse VCT plc is in compliance with the conditions laid down by HM
Revenue & Customs for maintaining approval as a VCT.
A key requirement is for 70% of the portfolio to be invested in
qualifying investments by the end of the third accounting period
following that in which new share capital was subscribed. As at 30
November 2007, 82% of the portfolio was invested in VCT qualifying
investments. In light of the current deal flow, the Board is
confident of maintaining the relevant criteria in the future.
Outlook
The Board's focus is to continue to generate capital growth. As the
fund becomes fully invested the challenge for the Manager will be the
realisation and timing of gains from a relatively illiquid portfolio
to support the development of an attractive tax-free dividend profile
whilst also releasing funds for new investment. It is encouraging
that we have already seen a healthy realised return from several
investments and the diversified nature of the portfolio should assist
the Manager in achieving its dividend objective. However, the
economic environment in the UK has become more uncertain over the
last six months and this may have an impact on the liquidity in the
markets, and as such, the volatility of company valuations in the
future.
Viscount Cobham
Chairman
23 January 2007
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.
Portfolio Review
During the period to November 2007 a further �4.7 million was
invested in eight new and several follow-on investments. This takes
the total currently invested by Eclipse in unquoted and AIM quoted
investments to nearly �24.6 million. The remaining funds are
invested in money market securities awaiting investment in suitable
qualifying opportunities.
Unquoted Investment Unrealised Carrying % equity % equity
investments at cost profit/(loss) value at held by held by
('�000) (�'000) 30 Eclipse other
November VCT funds
2007 managed by
(�'000) Octopus
Gyro 1,748 1,955 3,703 9.2% 7.0%
International
Limited
Plastics 1,492 1,034 2,526 11.5% 9.2%
Capital
Limited
Reading Room 1,000 829 1,829 26.7% 0.0%
Limited
Luther 1,000 720 1,720 17.5% 17.5%
Pendragon
Limited
TDX Group 400 1,009 1,409 5.5% 0.0%
Limited
CSL DualCom 982 67 1,049 13.1% 32.7%
Limited
Lilestone 1,034 - 1,034 12.8% 7.6%
Holdings
Limited
The Kendal 1,025 - 1,025 10.2% 5.7%
Group Limited
Perfect Pizza 1,000 - 1,000 13.2% 21.1%
Limited
The Grill 992 - 992 8.0% 43.6%
Group Limited
NPI Media 1,932 (1,004) 929 12.9% 37.1%
Group Limited
Adrenalin 910 - 910 11.0% 31.9%
Design Limited
T4 Holdings 804 - 804 9.0% 32.7%
Limited
Audio Visual 751 - 751 11.9% 33.1%
Machines
Limited
Capital Pubs 600 20 620 2.5% 5.7%
Company 2 plc
First Sports 1,000 (600) 400 20.0% 20.0%
Group Limited
Sweet Cred 545 - 545 4.2% 20.3%
Holdings
Limited
Promotion 346 - 346 4.3% 23.9%
Space Limited
Blanc 103 - 103 1.2% 2.1%
Brasseries
Holdings plc
Red-M Group 500 (500) - 3.6% 5.7%
Limited
Total unquoted 18,164 3,530 21,694
investments
AIM-quoted
investments
Tanfield Group 196 1,107 1,302 0.3% 2.3%
plc
Hexagon Human 719 117 836 2.8% 8.6%
Capital plc
Cello Group 687 130 817 1.8% 7.9%
plc
Zetar plc 245 403 648 1.0% 1.1%
InterQuest plc 343 185 528 2.1% 2.1%
CBG Group plc 383 124 507 2.0% 12.3%
Hasgrove plc 405 36 441 1.6% 6.4%
Augean plc 500 (203) 297 0.4% 4.2%
Cantono plc 420 (164) 256 1.4% 8.4%
Fountains plc 240 9 249 1.3% 2.6%
Northern Bear 299 (57) 244 1.2% 7.2%
plc
Vertu Motors 253 (9) 243 0.5% 2.7%
plc
Myhome plc 300 (75) 225 0.7% 5.6%
Healthcare 136 83 219 0.2% 0.6%
Locums plc
Pressure 165 50 215 1.0% 4.3%
Technologies
Autoclenz 338 (140) 197 2.6% 10.2%
Holdings plc
Brulines 148 7 155 0.5% 2.1%
Holdings plc
Cohort plc 102 35 137 0.2% 2.0%
Optimisa plc 143 (14) 129 0.7% 4.5%
Concateno plc 91 39 130 0.1% 0.4%
BBI Holdings 67 42 109 0.2% 2.2%
plc
Tissue Science 161 (106) 55 0.3% 0.3%
Laboratories
plc
Invocas plc 61 (17) 44 0.2% 1.1%
Total 6,402 1,581 7,983
AIM-quoted
investments
Total 24,566 5,111 29,677
investments
Review of Investments
At 30 November 2007, the Eclipse portfolio comprised investments in
20 unquoted and 23 AIM-quoted companies. The unquoted investments
are in ordinary shares with full voting rights as well as loan note
securities and a small number of preference shares. The AIM-quoted
investments are in ordinary shares also with full voting rights.
During the period, two investments were fully disposed of; Covion
Limited and Worthington Nicholls plc crystallising a total profit of
�2.9 million. Covion was particularly successful generating a 300%
return on investment for the Fund.
In addition, profits were taken in Tanfield Group plc of �560,000,
and at the period end, we held shares valued at �1.26 million
compared with an initial cost of �180,000. Finally, a small profit
was taken in Cello Group.
On a less positive note a provision has been made against the
investment in NPI Media Group Limited. Octopus considers this
provision of �1.0 million to be prudent, based on underperformance
against the investment plan. Further provisions have been made
against the investments in First Sports Group Limited and Red-M Group
which are considered prudent.
With regard to the AIM portfolio, it was a difficult period for small
quoted companies resulting in the FTSE AIM All-Share falling by 13.1%
over the six months to 30 November 2007. The AIM exposure of Eclipse
wasn't immune and also suffered, falling by a net �1.4 million in
value to 30 November 2007. Since the period end the AIM portfolio
has further suffered in the wake of recent volatility and lack of
liquidity in the AIM market, however the 23 AIM companies held within
Eclipse continue to perform in line with our expectations and we
remain confident that these investments will deliver value over the
medium term. As at 30 November 2007, the AIM portfolio had
contributed net realised and unrealised gains of nearly �3.8
million."
No further AIM investments have been completed since the period end
as market conditions have remained volatile. We have exited the
holding in BBI Holdings plc following an agreed bid for the company
at a 99.4% premium to the original book cost and we have taken
further profits in Cello Group plc.
A summary of the realisations in the period is shown below:
Realisations Initial Cost of investment Proceeds of Total
investment realised (�'000) investment profit
date (�'000) (�'000)
Covion Limited May-05 844 3,381 2,537
Tanfield Group May-05 70 630 560
plc
Worthington Jun-06 283 638 355
Nicholls plc
Cello Group plc Nov-04 65 80 15
1,262 4,729 3,467
New Investments
During the period, the Fund made eight new investments. These
investments are set-out below:
CBG Group plc (AIM listed)
Investment date: June 2007
Cost: �383,000
Valuation: �507,000
Based in Manchester, CBG Group plc is a corporate general insurance,
risk management and financial services intermediary. The company
offers a range of services principally in the area of Commercial
Insurance, Business Risk Management, Healthcare and Employee
Benefits. In addition it offers a Private Client solution to
individuals centred on wealth management and asset protection.
Pressure Technologies plc (AIM listed)
Investment date: July 2007
Cost: �165,000
Valuation: �214,500
Pressure Technologies is the holding company of Chesterfield Special
Cylinders ("CSC"). CSC designs, manufactures and offers testing and
refurbishment services for a range of speciality high pressure,
seamless steel gas cylinders for global energy and defence markets.
The business has been conducted under the "Chesterfield" brand which
is a long established name in the cylinders and specialised pressure
vessel market.
T4 Holdings Limited (Unquoted)
Investment date: July 2007
Cost: �804,390
Valuation: �804,390
T4 is based in London and, through subsidiaries Ad Barriers and Ad
Gates, is the leading provider of advertising solutions on railway
station gates and car park ticket equipment. T4 has a blue chip
advertising customer base including Visa, Fox (The Simpsons), M&S,
Bank of Scotland and Costa Coffee.
Northern Bear plc (AIM listed)
Investment date: August 2007
Cost: �299,425
Valuation: �243,670
Northern Bear is a building services group based in North East
England. It provides central strategic and financial functions for a
group of otherwise autonomous companies, each of which provides
products and/or services to the construction industry and house
builders. We expect the company to complete further acquisitions
over the next twelve months.
Cantono plc (AIM listed)
Investment date: August 2007
Cost: �420,000
Valuation: �256,200
Cantono is a provider of Managed IT Services and hosting solutions
for small to medium sized organisations. The typical client base
ranges from 100-1,000 users. Cantono provides a range of services
from individual applications to fully managed IT environments. The
services are backed by robust service level agreements, expert
technician, and a high level of customer service.
The Grill Group Limited
(Unquoted)
Investment date: September 2007
Cost: �992,000
Valuation: �992,000
The Grill Group has two restaurant brands: Smollenskys, with nine Bar
& Grill and Burgershack sites in London, and Le Frog Bistros with
eight restaurants in the Midlands and North West. The investment
strategy includes the operational turnaround of Smollenskys during
the first twelve months, followed by the roll-out of both restaurant
brands.
Optimisa plc (AIM listed)
Investment date: October 2007
Cost: �143,000
Valuation: �128,700
Optimisa provides market research and consultancy services. Recently
Optimisa completed the earnings enhancing acquisition of EQ Group, a
business operating in a very similar sector. Historically Optmisa and
EQ have competed for contracts and we expect the larger and more
diversified group to exploit a number of synergies and cross selling
opportunities. Optimisa which is currently capitalised at �18.2
million is expected to make a profit of �3.1 million on a turnover of
�23.8 million for the year to December 2008.
Myhome plc (AIM listed)
Investment date: November 2007
Cost: �299,992
Valuation: �224,994
Myhome is an acquisitive national franchise group, headquartered in
London. The group has become a market leader in the rapidly growing
sector of residential cleaning under the brand of Myhome, and has
extended its offering by rolling out other franchises including
electrical, plumbing and cleaning services. These include
Nicenstripy, which provides residential gardening services throughout
the year, Ferrum UK which operates a dry cleaning and laundry
business and PlumbXpress a plumbing and drainage business. In June
2006 the company acquired Ovenclean, the UK's leading domestic oven
cleaning franchise with a ten year growth history and over 165
franchisees. More recently Myhome completed the acquisition of
ChipsAway, a mobile service delivered to customers' homes and
offices, repairing scratches, chips and other minor damage to car
paintwork using proprietary technology. Myhome which is currently
capitalised at �29 million is expected to make a profit before tax of
�5.9 million on a turnover of �16.2 million for the year to 30
September 2008.
Recent Investments
Since the end of the period under review, we have completed 3 new
qualifying investments, and 1 follow-on investment. In addition
Plastics Capital, an unquoted investment, was floated successfully on
the AIM market allowing for the realisation of the Fund's loan notes:
The History Press Limited
In December 2007 Eclipse invested �1.1 million, as part of a �4
million investment by Octopus funds, into a new vehicle, set up to
acquire NPI through a restructuring process. In addition guarantees
totalling �1.9 million (Eclipse -
�529,000) were provided to support working capital facilities. NPI
had performed poorly since the initial investment and had been
particularly impacted by its printing operations. Through the
restructuring process, initiated by Octopus, The History Press only
acquired the publishing assets from NPI and we believe that this will
make a more robust and exciting investment for the future. Through
the new investment, Eclipse realised just under half its original
investment in NPI, the balance being written off. A considerable
amount of time has been put into this investment by Octopus, and this
has included the recruitment of a new management team.
Bruce Dunlop Associates
In December 2007, Eclipse invested �286,022 as part of an �5 million
investment by Octopus into Bruce Dunlop and Associates (BDA). BDA
provides a range of promotion and design services to broadcasters and
advertisers worldwide, facilitated by international offices in
London, Munich, Singapore, Sydney and Dubai.
As part of the deal, Eclipse has committed a further �193,340 of a �2
million funding line to help support the planned international
expansion and to make strategic acquisitions.
Tristar Worldwide Chauffeur Services Limited
In January 2008 Eclipse invested �330,596, as part of a �4.8 million
investment by Octopus funds in the management buy out of Tristar, the
UK's leading chauffeur business to airline and corporate customers.
Tristar enjoys a blue chip customer base including Virgin, Emirates,
Goldman Sachs and BP and has doubled the size of the business in the
last 4 years.
If you have any questions on any aspect of your investment, please
call one of the team on 020 7710 2800.
Income Statement
Six months to 30 Six months to 30 Year to 31 May 2007
November 2007 November 2006
Revenue Capital Total Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
Gain on - 856 856 - 1 1 - 2,545 2,545
disposal of
investments
held at fair
value
Unrealised - (1,798) (1,798) - 5,593 5,593 - 8,442 8,442
(loss)/gain
on fair value
of
investments
Income 521 - 521 538 - 538 981 - 981
Investment (115) (346) (461) (266) (355) (177) (530) (707)
management (89)
fees
Other (185) - (185) (213) - (213) (530) - (530)
expenses
Profit/(loss) 221 (1,288) (1,067) 236 5,328 5,564 274 10,457 10,731
on ordinary
activities
before tax
Taxation on - - - (45) 45 - - - -
profit on
ordinary
activities
Profit/(loss) 221 (1,288) (1,067) 191 5,373 5,564 274 10,457 10,731
on ordinary
activities
after tax
Revenue and 0.7p (4.2)p (3.5)p 0.6p 17.3p 17.9p 0.9p 33.6p 34.5p
capital
return/(loss)
per share -
basic and
diluted
* 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 interim
financial information
* 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
Six months ended Six months Year to 31
30 November 2007 ended 30 May 2007
November 2006
�'000 �'000 �'000
Shareholders' funds at 39,135 30,165 30,165
start of period
Profit/(loss) on ordinary (1,067) 5,564 10,731
activities after tax
Cancellation of own shares (440) (107) (130)
Issue of own shares (net of 908 - -
expenses)
Dividends paid (1,266) (390) (1,631)
Shareholders' funds at end 37,270 35,232 39,135
of period
Balance Sheet
As at 30 November As at 30 November As at 31 May
2007 2006 2007
�'000 �'000 �'000 �'000 �'000 �'000
Fixed asset 29,678 26,111 30,648
investments
Current assets:
Investments - money 7,594 8,224 7,773
market securities
Debtors 147 583 547
Cash at bank 402 392 409
8,143 9,199 8,729
Creditors: amounts (551) (78) (242)
falling due within
one year
Net current assets 7,592 9,121 8,487
Net assets 37,270 35,232 39,135
Called up equity 3,134 3,105 3,103
share capital
Special 25,536 26,409 25,145
distributable
reserve
Capital redemption 69 25 27
reserve
Revaluation Reserve 4,993 6,380 9,292
Profit and loss 3,538 (687) 1,568
account
Total equity 37,270 35,232 39,135
shareholders' funds
Net asset value per 118.9p 113.5p 126.1p
share
Cash flow statement
Six months to Six months to
30 November 30 November Year to 31
2007 2006 May 2007
�'000 �'000 �'000
Net cash inflow/(outflow) from
operating activities 585 (230) (279)
Financial investment :
Purchase of investments (4,701) (5,730) (9,235)
Sale of investments 4,730 258 4,682
Management of liquid resources
:
Decrease in money market
securities 179 5,434 5,845
Dividends paid (1,266) (390) (1,631)
Financing :
Issue of own shares 907 - -
Repurchase of own shares (441) (107) (130)
(Decrease)/increase in cash
resources (7) (765) (748)
Reconciliation of net cash flow to movement in liquid resources
Six months to 30 Six months to 30 Year to 31
November 2007 November 2006 May 2007
�'000 �'000 �'000
Decrease in liquid
resources (186) (6,198) (6,632)
Opening net liquid
resources 8,182 14,814 14,814
Net cash at 30
November/31 May 7,996 8,616 8,182
Reconciliation of operating profit before taxation to cash flow from
operating activities
Six months to Six months to
30 November 30 November Year to 31
2007 2006 May 2007
�'000 �'000 �'000
(Loss)/profit on ordinary
activities before tax (1,067) 5,564 10,731
Profit on disposal of fixed
asset investments (856) - (2,584)
Profit/(loss) on disposal of
current asset investments - (1) 39
Decrease/(increase) in debtors 401 (135) (99)
Increase in creditors 309 33 197
Unrealised loss/(gain) on
fixed asset investments 1,798 (5,593) (8,563)
Unrealised loss on current
asset investments - (98) -
Inflow/(outflow) from
operating activities 585 (230) (279)
Notes to the Interim Financial Statements
1. Basis of preparation
The unaudited interim results which cover the six months to 30
November 2007 have been prepared in accordance with applicable
accounting standards in the United Kingdom, to include an Income
Statement, Reconciliation of Movements in Shareholders' Funds,
Balance Sheet and Cash Flow Statement.
2. Publication of non-statutory accounts
The unaudited interim results for the six months ended 30 November
2007 and 30 November 2006 do not constitute statutory accounts within
the meaning of Section 240 of the Companies Act 1985 and have not
been delivered to the Registrar of Companies. The comparative
figures for the year ended 31 May 2007 have been extracted from the
audited financial statements for that year, which have been delivered
to the Registrar of Companies. The independent auditor's report on
those financial statements under Section 235 of the Companies Act
1985 was unqualified.
3. Earnings per share
The calculation of the revenue and capital return/(loss) per share is
based on the return/(loss) on ordinary activities after tax for the
period and on 30,905,032 shares (31 May 2007: 31,095,648 shares and
30 November 2006: 31,152,062 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. Net asset value per share
The calculation of net asset value per share is based on the net
assets at 30 November 2007 and on 31,339,684 shares being the number
of shares in issue at the same date (31 May 2007: 31,024,872 and 30
November 2006: 31,047,165).
5. Dividends
The interim dividend of 3.0p per share for the six months ending 30
November 2007 will be paid on 21 March 2008 to shareholders on
register at the close of business on 29 February 2008.
6. During the six months ended 30 November 2007 the
Company issued 734,199 shares at a price of 129.7p per share. The
Company bought back 419,387 shares at 105.0p per share during the
same period.
7. Copies of this statement are being sent to all
shareholders. Copies are also available from the registered office of
the Company at 8 Angel Court, London, EC2R 7HP.
ENDS
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