Interims
Eclipse VCT 2 plc
Six Months Ended 31 July 2007
Financial Highlights
Six months to 31 Six months to 31 Year to 31
July 2007 July 2006 January 2007
Net assets �22,645,000 �17,684,000 �21,537,000
Net return after tax �1,309,000 �266,000 �4,119,000
Net asset value per 95.2p
share 121.9p 115.9p
Cumulative dividends 1.25p
since launch 2.25p 2.25p
Eclipse VCT 2 plc ("Eclipse 2", "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 2 invests primarily in unquoted and AIM-quoted companies and
aims to deliver absolute returns on its investments. Eclipse 2 was
launched in January 2005 and raised �18.4 million by the time the
offer closed in June 2005, to invest alongside Eclipse VCT plc, which
launched in April 2004 and raised �30.7 million. The Investment
Manager is Octopus Investments Limited ("Octopus" or "Manager").
Octopus has subsequently raised a further �58.2 million in a twin
fund, Eclipse VCT 3 plc and Eclipse VCT 4 plc.
Eclipse 2 co-invests with these three other Eclipse funds which are
all managed by the same investment team at Octopus. This means that
Eclipse 2 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 2:
Period Ended NAV Dividend NAV + cumulative dividends
31 July 2005 95.0p - 95.00p
31 January 2006 95.0p 1.25p 96.25p
31 July 2006 95.2p - 96.45p
31 January 2007 115.9p 1.00p 118.15p
31 July 2007 121.9p - 124.15p
Chairman's Statement
I am pleased to present the interim results for the six months to 31
July 2007 which indicates continued progress by the Manager in
building a diversified investment portfolio in line with the original
investment objectives.
Results Review
In the six months to 31 July 2007, the Net Asset Value ("NAV") per
share increased 5.2% to 121.9p. The Manager realised a profit of
over �1.9 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 3p per share to be paid on 14
November 2007 to shareholders on the register on 12 October 2007.
The total return to shareholders, before payment of this dividend, is
24.2%. This is before taking into account the 40% upfront tax relief
received by initial subscribers.
To enable distributions of capital profits to shareholders, the Board
took the decision to revoke the investment company status on 24 July
2007.
Investment Portfolio
During the period, six new investments and several follow-on
investments were made totalling nearly �2.5 million. The Fund reduced
its holding in Tanfield Group plc, realising a profit of �276,000,
and fully disposed of the investment in Worthington Nicholls plc,
crystallising a profit of �315,000. Of particular significance was
the Fund's investment in James Harvard International Limited. This
was also sold during the year generating a significant profit for the
Fund, as it received 2.3 times the original amount invested thus
representing a compound annual return of 98%.
Within the portfolio we also have a further �3.4 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 97p compared
to the NAV of 121.9p. This is primarily due to the low level of
secondary market activity in Eclipse 2 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
Eclipse 2 must be 70% invested in qualifying companies by 31 January
2008, and maintain this level on a day by day basis thereafter in
order to comply with VCT regulations. The Board continues to monitor
the Fund's progress towards meeting and maintaining 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.
At 31 July 2007, Eclipse 2 was 69.7% invested in qualifying holdings,
which is ahead of the target set by the Manager. In light of the
current deal flow we are confident that Eclipse 2 will meet the
relevant VCT regulations by its deadline of 31 January 2008. Since
the half year end the percentage of qualifying holdings has increased
to 73.3%.
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.
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
We are pleased to report substantial progress across the portfolio
over the last 6 months, generating a healthy uplift in the net assets
of the Company. During the period to July 2007 a further �2.5
million was invested in six new and several follow-on investments.
This takes the total invested by Eclipse 2 in unquoted and AIM quoted
investments to nearly �12.5 million since launch. The remaining
funds are invested in money market securities awaiting investment in
suitable qualifying opportunities.
% equity
Carrying held by
value at % equity other
Investment Unrealised 31 July held by funds
Unquoted at cost profit/(loss) 2007 Eclipse managed by
investments ('�000) (�'000) (�'000) 2 VCT Octopus
Luther
Pendragon
Limited 1,000 720 1,720 17.5% 17.5%
Plastics
Capital
Limited 800 479 1,279 9.2% 11.5%
Covion Limited 429 630 1,059 4.9% 9.6%
NPI Media
Group Limited 955 - 955 8.1% 41.9%
Perfect Pizza
Limited 800 - 800 10.5% 23.8%
Gyro
International
Limited 451 226 677 1.5% 16.1%
T4 Holdings
Limited 659 - 659 7.5% 31.9%
First Sports
Group Limited 985 (385) 600 18.5% 21.5%
CSL DualCom
Limited 582 - 582 6.4% 33.6%
Lilestone
Holdings
Limited 579 - 579 10.7% 18.0%
The Kendal
Group Limited 576 - 576 5.7% 10.2%
Adrenalin
Design Limited 550 - 550 6.7% 36.2%
Audio Visual
Machines
Limited 454 - 454 7.2% 37.8%
Sweet Cred
Holdings
Limited 410 - 410 3.1% 21.4%
The Capital
Pub Company 2
plc 350 - 350 1.2% 7.0%
Promotion
Space Limited 202 - 202 3.7% 23.5%
Red-M Group
Limited 300 (225) 75 2.2% 7.2%
Blanc
Brasseries
Holdings plc 62 - 62 0.7% 2.6%
Total unquoted
investments 10,143 1,446 11,589
AIM-quoted
investments
Tanfield Group
plc 172 1,233 1,405 0.2% 2.5%
Hexagon Human
Capital plc 431 149 580 1.7% 9.8%
CBG Group plc 310 53 363 1.6% 12.6%
InterQuest plc 171 171 342 1.0% 3.2%
Healthcare
Locums plc 150 117 267 0.3% 0.6%
Hasgrove plc 200 50 250 0.9% 7.9%
Pressure
Technologies
plc 135 44 179 0.8% 4.5%
Vertu Motors
plc 150 25 175 0.3% 2.9%
Autoclenz
Holdings plc 206 (41) 165 1.6% 11.2%
Brulines
(Holdings) plc 92 30 122 0.3% 2.3%
Cohort plc 85 32 117 0.2% 1.6%
Concateno plc 60 51 111 0.1% 0.7%
BBI Holdings
plc 53 42 95 0.1% 2.4%
Invocas plc 50 6 56 0.2% 1.1%
Total
AIM-quoted
investments 2,266 1,962 4,227
Total
investments 12,408 3,408 15,816
Review of Investments
At 31 July 2007, the Eclipse 2 portfolio comprised investments in 18
unquoted and 14 AIM-quoted companies. The unquoted investments are
in ordinary shares with full voting rights as well as loan note
securities. The AIM-quoted investments are in ordinary shares also
with full voting rights.
During the period, two investments were disposed of; James Harvard
International Limited and Worthington Nicholls plc crystallising a
total profit of �1.6 million. James Harvard was particularly
successful generating a 133% return for the Fund, equivalent to a
compound annual return of 98%.
In addition, profits were taken in Tanfield Group plc of �276,000,
and at the year end, we held shares valued at �1.4 million compared
with an initial cost of �172,000.
A summary of these realisations is shown below:
Cost of
Initial investment Proceeds of Total
investment realised investment profit
Realisations date (�'000) (�'000) (�'000)
James Harvard 30 November
International Limited 2005 1,000 2,331 1,331
Worthington Nicholls plc 12 June 2006 243 558 315
Tanfield Group plc 26 May 2005 40 316 276
1,283 3,205 1,922
New Investments
During the period, the Fund made six new investments. These
investments are set-out below:
Sweet Cred Limited
Investment date: March 2007
Cost: �410,000
Valuation: �410,000
Sweet Cred sells a wide range of products which combine sweets with
toys that are themed around the five cartoon characters in the Sweet
Cred gang. The range is sold through distribution partners in Europe,
the US and the Middle East. In the UK, distribution is through the
main wholesalers and retail distribution through the major multiple
retailers, motorway service stations and leading toyshop chains. In
March 2007 Octopus committed �5m to fund working capital relating to
the orders pipeline. �3m was drawn down at completion, with the
balance to be provided against achievement of milestones.
T4 Holdings Limited
Investment date: July 2007
Cost: �659,330
Valuation: �659,330
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.
Promotion Space Limited
Investment date: April 2007
Cost: �201,894
Valuation: �201,894
Promotion Space works directly with major brands who wish to access
consumers in shopping centres. It also works with shopping centres to
generate revenue by organising promotional activities. Octopus
provided �1.5m of funds to develop an organic Retail Merchandising
Unit (RMU) business within major shopping centres and also to follow
a buy and build strategy.
Pressure Technologies plc
Investment date: July 2007
Cost: �135,000
Valuation: �179,100
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.
CBG Group plc
Investment date: June 2007
Cost: �309,850
Valuation: �362,591
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.
Hexagon Human Capital plc
Investment date: February 2007
Cost: �431,000
Valuation: �579,892
Hexagon Human Capital plc is the UK's leading provider of interim
executive management and one of the UK's leading executive search
businesses. We originally invested in Hexagon in December 2006 to
finance the acquisition of BIE, the UK's largest interim management
firm, alongside �10m from Barclays Bank. The company subsequently
floated successfully on AIM in February 2007.
Recent Investments
Since the end of the period under review, we have completed three new
qualifying investments, and three follow-on investments:
Cantono plc
Eclipse 2 invested �300,000 in Cantono plc. 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.
Northern Bear plc
Eclipse 2 invested �200,100 in Northern Bear plc. 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.
NPI Media Group Limited
Eclipse 2 fund invested a further �174,000 as part of an additional
�1 million investment by funds managed by Octopus.
CSL DualCom Limited
Eclipse 2 has invested a further �75,000 as part of a �390,000 round
used to finance the purchase of shares from the original vendor of
the business.
Plastics Capital Limited
On 31 August 2007 Eclipse 2 invested �394,000 as part of a �3 million
fund raising to finance the acquisition of Channel, a manufacturer of
creasing matrix and leading competitor of existing subsidiary
Trimplex.
The Grill Group
Eclipse 2 invested �992,000 (as part of a total investment of �4
million from funds managed by Octopus) in The Grill Group. The 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.
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 31 July Six months to 31 July Year to 31 January
2007 2006 2007
Revenue Capital Total Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
Gain on
disposal of
investments
held at fair
value - 412 412 - - - - 414 414
Unrealised gain
on fair value
of investments - 1,096 1,096 - 276 276 - 3,804 3,804
Income 240 - 240 354 - 354 574 - 574
Investment
management fees (63) (188) (251) (51) (154) (205) (103) (312) (415)
Other expenses (188) - (188) (161) - (161) (258) - (258)
Profit/(loss)
on ordinary
activities
before tax (11) 1,320 1,309 142 122 264 213 3,906 4,119
Taxation on
profit on
ordinary
activities - - - (27) 29 2 (40) 40 -
Profit/(loss)
on ordinary
activities
after tax (11) 1,320 1,309 115 151 266 173 3,946 4,119
Earnings/(loss)
per share -
basic and
diluted (0.1)p 7.1p 7.0p 0.6p 0.8p 1.4p 0.9p 21.2p 22.2p
- - 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 this half-yearly
report
- - 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 Six months
ended 31 July ended 31 July Year to 31
2007 2006 January 2007
�'000 �'000 �'000
Shareholders' funds at start
of period 21,537 17,650 17,650
Profit for the period 1,309 266 4,119
Cancellation of own shares (15)
Dividends paid (186) (232) (232)
Shareholders' funds at end
of period 22,645 17,684 21,537
Balance Sheet
As at 31 July As at 31 July As at 31
2007 2006 January 2007
�'000 �'000 �'000 �'000 �'000 �'000
Fixed asset investments 15,816 9,024 15,504
Current assets:
Investments - money market
securities 6,757 6,973 4,785
Debtors 100 393 358
Cash at bank 13 1,358 912
6,870 8,724 6,055
Creditors: amounts falling
due within one year (41) (64) (22)
Net current assets 6,829 8,660 6,033
Total assets less current
liabilities 22,645 21,537
Net assets 22,645 17,684 21,537
Called up equity share
capital 1,857 1,858 1,858
Share premium account - 15,807 -
Special distributable
reserve 15,792 - 15,807
Capital redemption reserve 3 2 2
Capital reserve - realised 1,608 (328) (61)
-
unrealised 3,402 223 3,751
Profit and loss account (17) 122 180
Total equity shareholders'
funds 22,645 17,684 21,537
Net asset value per share 121.9p 95.2p 115.9p
Cash flow statement
Six months to Six months to Year to 31
31 July 2007 31 July 2006 January 2007
�'000 �'000 �'000
Net cash inflow/(outflow) (26)
from operating activities 282 (2)
Financial investment :
Purchase of investments (2,025) (3,104) (6,461)
Sale of investments 3,205 - 787
Management of liquid
resources :
Increase/(decrease) in money 2,365
market securities (1,972) 4,623
Dividends paid (186) (232) (232)
Financing :
Repurchase of own shares (15) - -
Management fees capitalised (188) (154) (312)
Increase/(decrease) in cash (1,151)
resources (899) (1,597)
Reconciliation of net cash flow to movement in liquid resources
Six months to Six months to Year to 31
31 July 2007 31 July 2006 January 2007
�'000 �'000 �'000
Increase/(decrease) in (3,586)
liquid resources 1,073 (6,220)
Opening net liquid resources 5,697 11,917 11,917
Net cash at 31 July/31 8,331
January 6,770 5,697
Reconciliation of operating profit before taxation to cash flow from
operating activities
Six months
Six months to to 31 July Year to 31
31 July 2007 2006 January 2007
�'000 �'000 �'000
Profit on ordinary activities
before tax 1,309 266 4,119
Profit on disposal of fixed
asset investments (414) - (414)
(Increase)/decrease in debtors 258 (204) (168)
Increase/(decrease) in
creditors 19 35 (9)
Unrealised (gain)/loss on fixed
asset investments (1,078) (277) (3,842)
Management fees capitalised 188 154 312
Inflow/(outflow) from operating
activities 282 (26) (2)
Notes to the Interim Financial Statements
1. Basis of preparation
The unaudited interim results which cover the six months to 31 July
2007 have been prepared in accordance with applicable accounting
standards in the United Kingdom, to include an Income Statement,
Statement of Changes in Equity, Balance Sheet and Cash Flow
Statement.
As a result of the Directors' decision during the year, to enable
distributions of capital profits to shareholders in due course,
investment company status was revoked on 24 July 2007.
2. Publication of non-statutory accounts
The unaudited interim results for the six months ended 31 July 2007
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.
3. Earnings per share
The earnings per share at 31 July 2007 is based on earnings from
ordinary activities after tax of �1,309,308 and on 18,580,785 shares
(31 January 2007: �3,885,747 and 18,584,648 shares and 31 July 2006:
�33,618 and 18,584,648 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 31 July 2007 and on 18,569,454 shares being the number of
shares in issue at the same date (31 January 2007: 18,584,648 and 31
July 2006: 18,584,648).
5. Dividends
The interim dividend of 3p per share for the six months ending 31
July 2007 will be paid on 14 November 2007 to shareholders on
register at the close of business on 12 October 2007.
6. Realised and unrealised gains and losses on fixed asset
investments shown within the reconciliation of operating profit
before taxation to cash flow from operating activities refers only to
those gains and losses on unquoted and AiM quoted investments.
Realised and unrealised gains and losses on money market security
investments are shown within the cash flow statement as part of the
increase or decrease in money market securities.
7. During the six months ended 31 July 2007 the Company
issued no ordinary shares. The Company bought back 15,194 shares at
97.0p per share during the same period.
8. 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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