Octopus Eclipse VCT 2 plc
Half-Yearly Results
30 September 2009
Octopus Eclipse VCT 2 plc, managed by Octopus Investments Limited,
today announces the Half-Yearly results for the six months ended 31
July 2009.
These results were approved by the Board of Directors on 29 September
2009.
You may view the Half-Yearly Report in full at
www.octopusinvestments.com by navigating to the VCT Meetings &
Reports under the 'Services' section.
Financial Summary
Six months to Year to
Six months to 31 July 2008 31 January
31 July 2008 2009
Net assets (£'000s) 13,171 17,426 13,444
Net profit/(loss) after tax
(£'000s) 101 (2,631) (5,694)
Net asset value per share
("NAV") 71.5p 92.20p 72.90p
Cumulative dividends since
launch - paid and proposed 16.5p 13.25p 15.25p
Octopus Eclipse VCT 2 plc ("Eclipse 2", "Company" or "Fund") is a
venture capital trust ("VCT") which aims to provide shareholders with
attractive tax-free dividends and long-term capital growth, by
investing in a diverse portfolio of unquoted and AIM-quoted
companies. The Company is managed by Octopus Investments Limited
("Octopus" or "Manager").
Eclipse 2 was launched in January 2005 and raised over £18.4 million
(£17.7 million net of expenses) through an offer for subscription.
The Company co-invests with other funds managed by Octopus. This
allows Eclipse 2 to invest in a wider range of opportunities and in
larger and more developed companies than are typically available to a
single VCT.
The table below shows the movement in NAV and lists the dividends
that have been paid since the launch of Eclipse 2:
Dividends paid
Period Ended NAV in period NAV + cumulative dividends
31 July 2005 94.90p - 94.90p
31 January 2006 95.00p - 95.00p
31 July 2006 95.20p 1.25p 96.45p
31 January 2007 115.90p - 117.15p
31 July 2007 121.90p 1.00p 124.15p
31 January 2008 110.70p 3.00p 115.95p
31 July 2008 92.20p 5.00p 102.45p
31 January 2009 72.90p 3.00p 86.15p
31 July 2009 71.50p 2.00p 86.75p
Chairman's Statement
I am pleased to report the Half-year report for the period ended 31
July 2009 for Octopus Eclipse VCT 2 plc.
Results
During the period to 31 July 2009, the total return (being NAV plus
cumulative dividends paid) has increased from 86.2p to 86.8p, an
increase of 0.7%. Following the decline in net asset value in the
last financial year we have seen some stability return to financial
markets and this is reflected in the performance in the first half of
the year. As previously anticipated, there have been no new
realisations in the period and the movement in NAV reflects some
small valuation uplifts in the listed and unlisted portfolios.
Portfolio
As it stands, the Fund is invested in 17 unquoted and 15 AIM-quoted
companies and is almost fully invested. The focus remains on the
existing portfolio, which will continue to be supported where
appropriate, and no new additions to the portfolio are envisaged in
the near future. By value, 64.1% of the Company's net assets are in
unquoted investments, 14.2% in AIM-quoted investments and 20.5% of
the Company's net assets are currently in cash or cash equivalents.
Unquoted
Although our current portfolio companies undoubtedly still face tough
trading conditions, they are all taking sensible steps and cutting
costs to protect their profit margins. However credit conditions
remain tight and consequently there have been a number of follow-on
investments in support of portfolio companies, namely Bruce Dunlop
(£18,000), First Sports Group (£30,000), The History Press
(£165,000), Lilestone Holdings (£49,000), Promotion space (£64,000)
and SweetCred (£81,000). One of the key advantages we have over many
listed funds is that the Manager has a board seat on the majority of
our portfolio companies. This allows the Manager to keep a close eye
on trading and take action where needed.
Despite the tough economic environment, a number of our portfolio
companies continue to show encouraging progress, most notably CSL
Dualcom, Audio Visual Machines, Hydrobolt, Kendal and Promotion
Space. Overall there has been an uplift in the valuation of the
unquoted portfolio of £124,000 during the period, with individual
movements set out in the table on page 5.
On another note, Covion, which we exited during the year ended
January 2008, provided the Eclipse 2 with an earn-out of £47,000 in
the period.
AIM-quoted
The AIM market has staged a recovery since the market lows reached in
March 2009, however it still remains approximately 50% below the
highs achieved during 2007. Although investor interest in the
smaller AIM companies remains scarce, the market has started to
recognise those businesses that have successfully navigated the
prevailing economic conditions and continued to grow profitably.
Once investor appetite for risk returns, we expect share prices of
small companies to respond and the valuation discount to the FTSE
All-Share to narrow further.
As at 31 July 2009 the AIM element of the portfolio consisted of 15
holdings totalling £1,875,000 by value and this accounted for 14.2%
of the investment portfolio. There were no new investments during
the period, however we exited two stocks. We made the decision to
sell Optimisa during the period, realising a loss of £81,000, as we
feared the trading environment for the company was going to
deteriorate further. We also exited Concateno, which received a bid
approach from US quoted Inverness Medical in July. This realised a
gain of £22,000.
Principal Risks and Uncertainties
The principal risks and uncertainties are set out in note 6 of the
Notes to the Half-Yearly Report on page 11.
Dividend and Dividend Policy
It is your Board's policy to strive to maintain a regular dividend
flow where possible and this primarily relies on the level of
profitable realisations and available cash reserves. In the current
economic climate achieving full valuations for our investments on
exit can be challenging. We therefore continue to place priority on
maintaining a suitable quantum of cash reserves. Taking these
factors into account, for the period ended 31 July 2009, the Board
has declared an interim dividend of 1.25p per share. This dividend
will be paid to shareholder on 30 October 2009, who are on the
register on 9 October 2009.
Outlook
Despite the recent improvement in stock markets we remain cautious
about the wider economic environment and the impact this may have on
portfolio companies. This could be reflected directly through trading
or indirectly through the availability of credit. We also need to
ensure that where appropriate, portfolio companies have sufficient
resources to take advantage of the opportunities that will present
themselves. For this reason we will continue to maintain our strategy
of seeking to keep an appropriate level of liquidity in the Fund to
provide support for the portfolio going forward.
Marc Vlessing
Chairman
29 September 2009
Investment Portfolio
Change in %
Valuation equity
in the % held by
Carrying period equity all
Unrealised value at (£'000) held by funds
Unquoted Investment profit 31 July Eclipse managed
Qualifying at cost /(loss) 2009 2 by
Investments Sector (£'000) (£'000) (£'000) Octopus
The History Publishing 1,323 - 1,323 - 9.7% 60.0%
Press
Limited
Luther Media & Marketing 1,000 318 1,318 318 18.8% 37.6%
Pendragon Services
Limited
CSL DualCom Technology & 589 470 1,059 119 7.3% 45.8%
Limited Telecommunications
Promotion Media & Marketing 719 - 719 - 5.2% 41.5%
Space Services
Limited
First Sports General Retailers 1,240 (585) 655 - 18.5% 40.0%
Group
Limited
The Kendal Consumer Products 576 31 607 31 5.7% 15.9%
Group
Limited
Audio Visual Technology & 454 - 454 - 6.9% 43.1%
Machines Telecommunications
Limited
Sweet Cred Consumer Products 845 (420) 425 - 6.3% 45.0%
Holdings
Limited
Tristar Transport Services 446 (46) 400 (46) 4.5% 30.0%
Worldwide
Limited
Perfect Leisure & Hotels 800 (400) 400 - 10.5% 34.3%
Pizza
Limited
T4 Holdings Media & Marketing 711 (385) 326 (52) 7.3% 41.7%
Limited Services
Hydrobolt Manufacturing 258 - 258 - 3.0% 43.5%
Limited
Convivial Leisure & Hotels 350 (100) 250 (23) 2.1% 8.2%
London Pubs
Plc
Lilestone Consumer Products 861 (737) 124 (184) 6.9% 24.0%
Holdings
Limited
Bruce Dunlop Media & Marketing 190 (83) 107 (54) 1.6% 30.0%
& Associates Services
Limited
Blanc Leisure & Hotels 62 (46) 16 15 0.7% 3.3%
Brasseries
Limited
Red-M Group Technology & 300 (300) - -
Limited Telecommunications
Total unquoted qualifying
investments 10,724 (2,283) 8,441 124
AIM-quoted
Qualifying
Investments
Healthcare Recruitment 150 396 546 153 0.3% 2.4%
Locums plc
Plastics Engineering 1,067 (800) 267 (21) 4.0% 18.6%
Capital plc
Pressure Engineering 135 (5) 130 (63) 0.8% 11.5%
Technologies
plc
Interquest Recruitment 171 (43) 128 34 1.0% 5.9%
plc
CBG Group Financial Services 310 (185) 125 (160) 1.4% 19.3%
plc
Hasgrove plc Media & Marketing 200 (83) 117 (12) 0.7% 11.4%
Services
Cohort plc Engineering 85 31 116 21 0.2% 3.2%
Vertu Motors General Retailers 150 (50) 100 71 0.3% 8.9%
plc
Tanfield Engineering 120 (46) 74 36 0.0% 0.6%
Group plc
Brulines Support services 92 (21) 71 (15) 0.3% 8.4%
(Holdings)
plc
Hexagon Recruitment 431 (362) 69 (34) 1.4% 14.3%
Human
Capital plc
Northern Construction & 200 (135) 65 (12) 0.7% 6.7%
Bear plc Materials
Autoclenz Support Services 206 (157) 49 25 1.6% 12.8%
plc
Invocas plc Financial Services 50 (40) 10 (3) 0.2% 1.2%
Cantono plc Technology & 300 (300) - (4) 0.1% 0.9%
Telecommunications
Total AIM-quoted qualifying
investments 3,667 (1,800) 1,867 16
Non-qualifying unquoted
investments 1 - 1 -
Non-qualifying AIM-quoted
investments 21 (13) 8 1
Total non-qualifying
investments 22 (13) 9 1
Money market
securities 3,156 (548) 2,608 35
Cash at bank 96 - 96 -
Total
investments 17,665 (4,644) 13,021 176
Net current
assets 150
Total net
assets 13,171
Responsibility Statement of the Directors in respect of the
Half-Yearly Report
We confirm that to the best of our knowledge:
* the half-yearly financial statements have been prepared in
accordance with the statement "Half-Yearly Financial Reports"
issued by the UK Accounting Standards Board;
* the half-yearly report includes a fair review of the information
required by the Financial Services Authority Disclosure and
Transparency Rules, being:
* an indication of the important events that have occurred
during the first six months of the financial year and their
impact on the condensed set of financial statements.
* a description of the principal risks and uncertainties for the
remaining six months of the year; and
* a description of related party transactions that have taken
place in the first six months of the current financial year,
that may have materially affected the financial position or
performance of the Company during that period and any changes
in the related party transactions described in the last annual
report that could do so.
On behalf of the Board
Marc Vlessing
Chairman
29 September 2009
Income Statement
Six months to 31 July Six months to 31 July
2009 2008 Year to 31 January 2009
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gain/(loss)
on disposal
of fixed
asset
investments - 74 74 - - - - (1,644) (1,644)
Gain on
disposal of
current asset
investments - - - - - - - 11 11
Gain/(loss)
on valuation
of fixed
asset
investments - 141 141 - (2,470) (2,470) - (3,868) (3,868)
Gain/(loss)
on valuation
of current
asset
investments - 35 35 - (16) (16) - (139) (139)
Income 132 - 132 239 - 239 537 - 537
Investment
management
fees (33) (100) (133) (64) (192) (256) (119) (359) (478)
VAT
management
fee rebate - - - 42 128 170
Other
expenses (148) - (148) (128) - (128) (283) - (283)
(Loss)/profit
on ordinary
activities
before tax (49) 150 101 47 (2,678) (2,631) 177 (5,871) (5,694)
Taxation on
profit on
ordinary
activities - - - - - - - - -
(Loss)/profit
on ordinary
activities
after tax (49) 150 101 47 (2,678) (2,631) 177 (5,871) (5,694)
Earnings per
share - basic
and diluted (0.3)p 0.8p 0.5p 0.3p (14.0)p (13.7)p 0.9p (31.0)p (30.1)p
* The 'Total' column of this statement is the profit and loss
account of the Company; the supplementary revenue return and
capital return columns have been prepared under guidance
published by the Association of Investment Companies.
* all revenue and capital items in the above statement derive from
continuing operations
* the accompanying notes are an integral part of the half-yearly
report
* The Company has no recognised gains or losses other than those
disclosed in the income statement.
Reconciliation of Movements in Shareholders' Funds
Six months Six months
ended 31 July ended 31 July Year to 31
2009 2008 January 2009
£'000 £'000 £'000
Shareholders' funds at start
of period 13,444 20,928 20,928
Profit/(loss) on ordinary
activities after tax 101 (2,631) (5,694)
Net proceeds of share issue 51 468 487
Cancellation of own shares (55) (387) (744)
Dividends paid (370) (952) (1,533)
Shareholders' funds at end
of period 13,171 17,426 13,444
Balance Sheet
As at 31 July As at 31 July As at 31
2009 2008 January 2009
£'000 £'000 £'000 £'000 £'000 £'000
Fixed asset investments 10,317 12,817 10,117
Current assets:
Money market securities 2,608 4,610 3,156
Debtors 272 45 187
Cash at bank 96 107 130
2,969 4,762 3,473
Creditors: amounts
falling due within one
year (122) (153) (146)
Net current assets 2,854 4,609 3,327
Net assets 13,171 17,426 13,444
Called up equity share
capital 1,842 1,891 1,844
Share premium 853 808 808
Special distributable
reserve 14,974 15,386 13,112
Capital redemption
reserve 101 45 92
Capital reserve -
Realised (461) - 1,436
- Unrealised (4,188) (2,935) (4,039)
Revenue reserve 50 2,231 191
Total equity
shareholders' funds 13,171 17,426 13,444
Net asset value per share 71.5p 92.2p 72.9p
Cash flow statement
Six months
to Six months to Year to 31
31 July 2009 31 July 2008 January 2009
£'000 £'000 £'000
Net cash (outflow)/inflow
from operating activities (259) 242 180
Financial investment :
Purchase of fixed asset
investments (407) (1,071) (1,411)
Disposal of fixed asset
investments 423 8 8
Management of liquid
resources:
Purchase of current asset
investments (271) (1,330) (3,136)
Sale of current asset
investments 854 - 5,779
Dividends (370) (952) (1,533)
Financing :
Issue of own shares 53 487 490
Share issue expenses (2) (19) (3)
Cancellation of own shares (55) (387) (744)
Decrease in cash at bank (34) (3,022) (370)
Reconciliation of Net Cash Flow to Movement in Net Funds
Six months to Six months to Year to 31
31 July 2009 31 July 2008 January 2009
£'000 £'000 £'000
Decrease in cash at bank (34) (3,022) (370)
(Decrease)/increase in cash
equivalents (548) 1,315 (2,768)
Opening net cash resources 3,286 6,424 6,424
Net cash resources at end of
period 2,704 4,717 3,286
Reconciliation of Profit before Taxation to Cash Flow from Operating
Activities
Six months
to 31 July Six months to Year to 31
2009 31 July 2008 January 2009
£'000 £'000 £'000
Profit/(loss) on ordinary
activities before tax 101 (2,631) (5,694)
(Gain)/loss on disposal of
fixed asset investments (74) - 1,644
Gain on disposal of current
asset investments - - (11)
(Gain)/loss on valuation of
fixed asset investments (141) 2,470 3,868
(Gain)/loss on valuation of
current asset investment (35) 16 139
(Increase)/decrease in debtors (78) 830 688
Decrease in creditors (32) (443) (454)
Net cash (outflow)/inflow from
operating activities (259) 242 180
Notes to the Half-Yearly Report
1. Basis of preparation
The unaudited half-yearly results which cover the six months to 31
July 2009 have been prepared in accordance with the Accounting
Standard Board's (ASB) statement on half-yearly financial reports
(July 2007) and adopting the accounting policies set out in the
statutory accounts of the Company for the year ended 31 January 2009,
which were prepared under UK GAAP and in accordance with the
Statement of Recommended Practice for Investment Companies issued by
the Association of Investment Companies in January 2009.
2. Publication of non-statutory accounts
The unaudited half-yearly results for the six months ended 31 July
2009 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 January 2009 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. This half-yearly report has not been reviewed by the
Company's auditor.
3. Earnings per share
The earnings per share at 31 July 2009 is calculated on the basis of
18,473,994 (31 January 2009: 18,932,260 and 31 July 2008: 19,191,116)
shares, being the weighted average number of shares in issue during
the year.
There are no potentially dilutive capital instruments in issue and,
therefore, no diluted return per share figures are relevant. The
basic and diluted earnings per share are therefore identical.
4. Net asset value per share
The net asset value per share is based on net assets as at 31 July
2009 divided by 18,424,677 (31 January 2009: 18,442,669 and 31 July
2008: 18,569,454) shares in issue at that date.
5. Dividends
The interim dividend of 1.25 pence per share for the six months
ending 31 July 2009 will be paid on 30 October 2009, to those
shareholders on the register on 9 October 2009. This will be paid
from Capital reserves.
A final dividend, for the year ending 31 January 2009, of 2.0 pence
per share was paid on 25 June 2009 to shareholders on the register on
29 May 2009. This was paid with 0.5p from revenue reserves and 1.5p
from capital reserves.
6. Principal Risks and Uncertainties
The Company's assets consist of equity and fixed-rate interest
investments, cash and liquid resources. Its principal risks are
therefore market risk, credit risk and liquidity risk. Other risks
faced by the Company include economic, loss of approval as a VCT,
investment and strategic, regulatory, reputational, operational and
financial risks. These risks, and the way in which they are managed,
are described in more detail in the Company's Annual Report and
Accounts for the year ended 31 January 2009. The Company's principal
risks and uncertainties have not changed materially since the date of
that report.
7. Related Party Transactions
Octopus acts as the investment manager of the Company. Under the
management agreement, Octopus receives a fee of 2.0 per cent per
annum of the net assets of the Company for the investment management
services. During the period, the Company incurred management fees of
£133,000 (31 January 2009: £478,000 and 31 July 2008: £256,000)
payable to Octopus. At the period end there was £Nil (31 January
2008: Nil and 31 July 2008: Nil) outstanding to Octopus.
Furthermore, Octopus Investments Limited provides administration and
company secretarial services to the Company. Octopus Investments
Limited receives a fee of 0.3 per cent per annum of net assets of the
Company for administration services and £10,000 per annum for company
secretarial services.
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, and will also be
available to view on the Investment Manager's website at
www.octopusinvestments.com.
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