RNS Number:7095D
Eclipse VCT 3 plc
26 May 2006
Eclipse VCT 3 plc
26 May 2006
Unaudited interim results for the period to 28 February 2006
Financial Summary
Period to 28 February 2006
Net assets #12,311,000
Net asset value per share 94.9p
Revenue return after tax #16,000
Revenue return per share* 0.2p
Total loss per share* (0.2)p
*Based on a weighted average of 6,540,148 shares in issue during the period.
Eclipse VCT 3 plc ('Eclipse 3' or 'Fund') is a Venture Capital Trust ('VCT') and
is managed by Octopus Asset Management Limited ('Octopus' or 'Manager').
Eclipse 3 was launched in August 2005 and had raised over #29.1 million (#28.1
million net of expenses), through an offer for subscription by the time it
closed on 5 April 2006. It invests primarily in unquoted and AIM listed
companies and aims to deliver absolute returns on its investments.
For further information, please contact:
Simon Rogerson
Chief Executive
Octopus Asset Management
020 7710 2800
Chairman's Statement
I am pleased to present the first interim report to shareholders in Eclipse VCT
3 plc.
Fund Raising
I would like to thank all our shareholders for investing in Eclipse 3. The Fund
raised #29.1 million by its close on 5 April 2006 and was one of the largest VCT
funds raised in the 2005/06 tax year. Eclipse VCT 3 was launched in August 2005
in tandem with Eclipse VCT 4 and as a follow on to the successful Eclipse VCT
and Eclipse VCT 2 funds, which raised #49 million between them.
Eclipse 3 will co-invest with the three other Eclipse funds which are all
managed by the same investment team at Octopus. This means they 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.
Investment Portfolio
This interim report relates mainly to the fund raising period so few investments
were made. At 28 February 2006, Eclipse 3 had made eight investments totalling
#1.5 million in unquoted and AIM listed companies. At 30 April 2006 a further
four investments had been made bringing the total invested to #1.7 million
representing approximately 6% of the Fund (by net asset value). All of these
investments were made alongside the other Eclipse funds, on a pro-rata basis to
fund size at the time of investment approval, and in the case of investments in
AIM listed companies alongside other funds managed by Octopus.
The unquoted investments have been valued in accordance with British Venture
Capital Association ('BVCA') guidelines and are all held at cost. As set out in
the BVCA 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.
Of the twelve investments made to date, seven are AIM listed investments and
five are in unquoted companies. When fully invested, we expect the portfolio to
be spread across 20 to 30 investments and the total amount invested into any one
sector and any one company will, for diversification purposes, be limited to a
maximum of 20% and 10% of the Fund respectively. Further information on
portfolio holdings can be found in the Investment Manager's Review.
In accordance with the low risk approach adopted by Octopus, the balance of the
Fund's assets remain invested in money market securities.
Net Asset Value ('NAV') per share
The net assets of the Fund were #12.3 million at the end of the period under
review, equivalent to 94.9p per share.
It is too early in the investment cycle to make a meaningful comment on the
performance of the Fund to date but, as already noted, progress has been made in
developing the portfolio across a range of sectors.
Dividend
As the Fund is at an early stage of its investment cycle, dividends are derived
from the income earned from money market securities. In the medium-term, Octopus
aims to produce a regular tax-free income stream for shareholders and, as such,
will realise profits for distribution on holdings which Octopus believes have
reached a fair value.
Share Price and Buy-Back Facility
Eclipse 3 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 mid market share price of the Fund currently stands at 100p compared to the
NAV of 94.9p. In the period under review, Eclipse 3 repurchased 3,060 shares at
a price of 95p. 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 Asset Management on 020
7710 2800.
VCT Qualifying Status
As you may be aware, Eclipse 3 must be 70% invested in qualifying companies by
31 August 2008 in order to comply with VCT regulations. At 30 April 2006,
Eclipse 3 was approximately 6% invested (by net asset value) in qualifying
holdings, which is in line with our expectations at this early stage in the
Fund's life.
The Directors will continue to monitor the progress of the Fund in 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, the Directors expect
Eclipse 3 to meet the relevant conditions by its deadline of 31 August 2008.
Outlook
As with all VCT funds the challenge is for the Manager to see a good range of
quality investment opportunities so it can be suitably selective in the
investment decisions whilst meeting the investment target in order to comply
with the VCT regulations. The progress towards meeting these objectives in this
first period is encouraging. The investment team at Octopus continues to see a
steady pipeline of investment opportunities and expects a healthy investment
rate to continue in the current year.
R Gregory Melgaard
Chairman
26 May 2006
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.
Review of Investments
We are pleased with the progress made by the Fund since launch. Since the Fund
launch, twelve investments have been made totalling #1.7 million including four
transactions completed since the period end.
Of the twelve investments held by the Fund at 30 April 2006, seven were in AIM
listed companies and five were in unquoted companies. We expect that
approximately 20% of the Fund will be invested in AIM listed companies once
fully invested.
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.
In keeping with our patient and low risk approach, the remainder of the Fund is
invested in money market securities.
Qualifying Status
VCTs have three years to invest 70% of their money into qualifying companies.
At 30 April 2006, Eclipse 3 had invested approximately 6% of the Fund. This is
in line with our expectations at this stage of the Funds life.
Portfolio Activity
In the period to 28 February 2006 the Fund had made eight investments, all of
which are detailed later in this report.
Portfolio of Investments
Unrealised
Investment appreciation/ Carrying
at Cost depreciation Value
Unquoted investments #'000 #'000 #'000
James Harvard International Limited 245 - 245
The Capital Pub Company 2 plc 199 - 199
Red-M Group Limited 241 - 241
Smart First Limited 372 - 372
===== ===== =====
1,057 - 1,057
AIM-listed investments
Tanfield Group plc 150 (11) 139
Autoclenz Holdings plc 125 1
126
Healthcare Locums plc 100 12 112
Abcam plc 44 18 62
===== ===== =====
419 20 439
===== ===== =====
Total 1,476 20 1,496
===== ===== =====
Holdings as at 28 February
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.
Further information can be found at the company's website www.jamesharvard.com.
Investment date 30 November 2005
Equity held 2.5%
Cost #244,750
Valuation #244,750
Valuation basis Cost (New Investment)
First Audited financial information Will be available for the period to 31 December 2005
The Capital Pub Company 2 plc
The 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 sold a number of similar companies,
including the Firkin and the Slug and Lettuce chains of pubs.
In total, more than #10 million was initially raised for the company which is
developing a portfolio of freehold pubs in the Greater London area. These are
unbranded, un-themed and have no tie to a particular brewery. To date, seven
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 23 December 2005
Equity held 1.2%
Cost #199,500
Valuation #199,500
Valuation basis Cost (New Investment)
Audited financial information 30 September 2005
#'000
Sales 1,518
Profit before taxation 68
Retained profit 45
Net assets 10,500
Red-M Group Limited
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.
Further information can be found at the company's website, www.red-m.com.
Investment date 12 December 2005
Equity held 2.0%
Cost #240,625
Valuation #240,625
Valuation basis Cost (New Investment)
First audited financial information Will be available for the period to 31 October 2006
Smart First Ltd (trading as Perfect Pizza)
In February 2006, Eclipse 3 invested in Perfect Pizza, by participating in a #7
million Management Buy-In. Perfect Pizza is the third largest pizza delivery
business in the UK with 114 franchise 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.
Investment date 23 February 2006
Equity held 4.8%
Cost #372,000
Valuation #372,000
Valuation basis Cost (New Investment)
First audited financial information Will be available for the period to 31 March 2006
Tanfield Group plc
Tanfield supplies assembly and technical engineering services and owns Smith
Electric Vehicles, which manufactures zero emission vehicles for the dairy,
airport and delivery markets.
Further information can be found at the company's website www.tanfieldgroup.com.
Investment date 21 December 2005
Equity held 0.4%
Cost #150,000
Valuation #139,000
Valuation basis Bid price
First audited financial information 31 December 2005
#'000
Sales 22,431
Profit before taxation 2,000
Retained profit 1,694
Net assets 23,926
Autoclenz Holdings Plc
Autoclenz, founded in 1990, is the UK's leading provider of valeting services to
automotive retailers, auction houses, rental companies and car supermarkets. The
company has recently floated on AIM having previously been a subsidiary of Yule
Catto, the chemical company.
The fastest growing division of Autoclenz is REACT, a Home Office approved
specialist cleaning and decontaminating service. REACT carries out work on
behalf of the emergency services, prison service and local authorities.
Further information can be found at the company's web site www.autoclenz.co.uk.
Investment date 1 December 2005
Equity held 0.9%
Cost #125,000
Valuation #126,000
Valuation basis Bid Price
First audited financial information Will be available for the period to 31 December 2006
Abcam plc
Healthcare
Abcam is an internet based company focused on the development and distribution
of high quality antibodies to universities, research institutes and
pharmaceutical companies.
Investment date 31 October 2005
Equity held 0.1%
Cost #44,447
Valuation #62,500
Valuation basis Bid price
First audited financial information Will be available for the period to 31 June 2006
Healthcare Locums plc
Recruitment in healthcare industry
Healthcare Locums is a specialist player in the healthcare staffing market,
targeting the market for the supply of temporary doctors, GPs, social workers
and other healthcare professionals.
Investment date 17 November 2005
Equity held 0.3 %
Cost #100,000
Valuation #112,000
Valuation basis Bid price
Audited financial information 31 December 2005
#'000
Sales 43,839
Profit before taxation 1,628
Retained profit 1,142
Net assets 15,400
Recent Transactions
Since 28 February 2006 Eclipse 3 completed four further investments.
Ovum plc
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. Eclipse 3 invested #75,000 at flotation.
Invocas plc
Invocas is the leading provider of personal insolvency solutions in Scotland
with a 16% share of the Protected Trust Deed market. The company 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. Eclipse 3 invested #40,000 in the recent flotation.
Cohort plc
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. Eclipse 3 invested #67,500 in the
recent floatation.
Blanc Brasseries Holdings plc
In April 2006, Eclipse 3 invested #55,000 in a #6 million private placing by
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.
Outlook
The challenge for all venture capital funds is to attract a strong flow of good
quality investment opportunities.
At Octopus, we have spent a considerable amount of time and effort over the last
few years in establishing and developing our network of deal introducers. The
number and the quality of the investment opportunities we are currently seeing
is testament to this hard work and we are confident that we will build an
attractive portfolio of investments for Eclipse 3. With the four VCT funds
under the Eclipse banner we now have more flexibility from an investment
standpoint. For example, the Eclipse funds can invest up to #4 million per
company (i.e. four times the amount of a single VCT).
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
for the period to 28 February 2006
for the period to
28 February 2006
Revenue Capital Total
#'000 #'000 #'000
Unrealised gain on investments - 20 20
Income 92 - 92
Investment management fees (18) (52) (70)
Other expenses (54) - (54)
Return/(loss) on ordinary activities before 20 (32) (12)
tax
Tax on ordinary activities (4) 4 -
Return/(loss) on ordinary activities after 16 (28) (12)
tax
Return(loss) per share 0.2p (0.4)p (0.2)p
* 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 funds
Reconciliation of movements in shareholders' funds
for the period to
28 February 2006
#'000
Total losses recognised in period (12)
Repurchase of ordinary share capital (3)
Issue of redeemable non-voting preference shares (50)
Redemption of redeemable non-voting preference shares 50
Net proceeds of share issue 12,326
Shareholders' funds at 28 February 2006 12,311
Balance sheet
as at 28 February 2006
for the period to
28 February 2006
#'000 #'000
Fixed asset investments 1,496
Current assets
Debtors 49
Cash at bank 11,872
11,921
Creditors: amounts falling due within one year (1,110)
Net current assets 10,811
Net assets 12,311
Called up equity share capital 1,296
Share premium 11,030
Capital reserve : realised (48)
unrealised 20
Revenue reserve 13
Total equity shareholders' funds 12,311
Net asset value per share 94.9p
Cash flow statement
for the period to 28 February 2006
for the period to
28 February 2006
#'000 #'000
Net cash outflow from operating activities (51)
Financial investment :
Purchase of investments (1,476)
Net cash outflow from financial investment (1,476)
Financing :
Issue of own shares 12,723
Share issue expenses (397)
Repurchase of own shares (3)
Shares awaiting issue 1,076
Total financing 13,399
Increase in cash resources 11,872
Reconciliation of operating profit to net cash inflow from operating activities
for the period
to 28 February 2006
#'000
Loss on ordinary activities before tax (12)
Unrealised gain on investments (20)
(Increase) in debtors (49)
Increase in creditors 30
Net cash outflow from operating activities (51)
Notes to the interim results
1. Accounting policies
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.
Investments
The Company's investments have been designated as fair value through profit and
loss and accordingly the unrealised gain or loss resulting from the valuation of
investments is recognised in the income statement as required by FRS 26 "
Financial investments: Measurement".
Investments in AIM-listed companies are stated at bid price discounted where
necessary to reflect lack of liquidity.
Unlisted investments are stated at Directors' valuation following the guidelines
laid down by the British Venture Capital Association. The Directors' policy in
valuing unlisted investments is to carry them at cost except in the following
circumstances:
a) where a company's under performance against plan indicates a diminution
in the value of the investment a provision against cost is made as appropriate
in bands of 25%.
b) where a company is well established and profitable the shares may be
valued by applying a suitable price earnings ratio to the company's historic
post tax earnings. The ratio used is based on a comparable listed company or
sector but discounted by 25-50% to reflect marketability.
c) where a value is indicated by a material arms length transaction by a
third party in the shares of a company.
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 which are intended to be held to
maturity 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:
a) expenses incidental to the acquisition or disposal of an investment,
which are included within the cost of the investment or deducted from the
disposal proceeds as appropriate, and;
b) 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, except as
otherwise required by FRS 19.
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,
charged 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. The calculation of the revenue and capital return per share is based on
the return on ordinary activities after tax for the period and on 6,540,148
ordinary shares, being the weighted average number of shares in issue during the
period to 28 February 2006.
3. The calculation of net asset value per share is based on the net assets at
28 February 2006 and on 12,972,311 being the number of shares in issue at the
same date. It should be noted that the value of shares awaiting issue are
excluded from this calculation.
4. The unaudited interim results for the period ended 28 February 2006 do
not constitute statutory accounts under the meaning of section 240 of the
Companies ACT 1985 and have not been delivered to the Registrar of Companies
5. Copies of this statement are being sent to all shareholders. Copies are
available from the registered office of the Company at 8 Angel Court, London,
EC2R 7HP.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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