Half-yearly report
Apollo VCT 2 plc
Interim Results
26 September 2008
Apollo VCT 2 plc, managed by Octopus Investments Limited, today
announces the Half-Yearly results for the six months ended 31 July
2008.
These results were approved by the Board of Directors on 25 September
2008.
You may view the Half-Yearly Report in full at
www.octopusinvestments.com and navigating to the VCT Annual and
Interim Reports under the 'Learn More' section.
About Apollo VCT 2 plc
Apollo VCT 2 plc ("Company" or "Fund") is a venture capital trust
("VCT") and is managed by Octopus Investments Limited ("Octopus").
The Fund was launched in May 2006 and, together with Apollo VCT 1
plc, raised �17.6 million in aggregate (�16.8 million net of
expenses) through an offer ("the Offer") for subscription by the time
it closed on 5 April 2007. The objective of the Fund is to invest in
a diversified portfolio of UK smaller companies, mostly in the form
of mezzanine debt.
Financial Highlights
Six months Year to
Six months to to 31 January
Ordinary shares 31 July 2008 31 July 2007 2008
Net assets (�'000s) 8,223 8,355 8,355
Net revenue return after tax
(�'000s) 49 33 102
Net total (loss)/return after
tax (�'000s) (66) 19 52
Net asset value per share
("NAV") 93.2p 94.4p 94.7p
Dividend per share - paid and
proposed since launch 1.25p - 0.75p
Chairman's Statement
I am pleased to present the interim results for the six months to 31
July 2008.
Results Review
Over the six months to 31 July 2008, the performance of the Fund was
stable. On page 8 of this report you will note that the Revenue
items in the Profit & Loss Account showed a small surplus of income
from cash investments over expenses. This has enabled the Board to
declare a dividend of 0.5p per share, which will be paid on 31
October 2008 to shareholders who are on the register on 3 October
2008. Capital items in the Profit and Loss Account, comprising a
small unrealised loss reported by the Fund's cash managers and
capitalised investment management fees, resulted in a fall in the NAV
of the Fund over the period from 94.7p to 93.2p per share.
Investment Portfolio
During the period the Fund made one new investment into Hydrobolt
Limited. All four companies in the portfolio are trading profitably.
As there are no significant changes in their circumstances since
investment date, they will be held at cost throughout the first year
of investment. While the Manager seeks further qualifying
investments, Goldman Sachs International, the Fund's cash manager,
has invested the Fund's proceeds in a range of cash-based securities.
Further information on the portfolio holdings is available in the
Investment Manager's review.
VCT Status
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 31
July 2008, over 25.2% of the portfolio (according to HM Revenue &
Customs rules and regulations) was invested in VCT qualifying
investments, in line with our expectations at this early stage of the
Fund's life. In light of the current deal flow, the Board is
confident of achieving the required investment level.
Share Price
The Company's mid market share price currently stands at 89.0p
compared to the NAV of 93.2p. Octopus is working towards developing
strategies to increase liquidity in the market by stimulating trade
in VCT shares in the secondary market.
Outlook
As economic conditions have deteriorated the flow of investment
opportunities matching the Fund's investment criteria and risk
profile has reduced. This might be because company managers have
been required to focus on their existing businesses rather than on
acquisitions. Similarly to the housing market, it might also reflect
limited availability of bank finance and the need for vendors to
adjust their price expectations. The Manager of the Fund has taken a
suitably cautious approach in anticipation of an improved flow of
investment opportunities on favourable terms as markets stabilise.
Your Board monitors the development of Octopus Investments closely.
In this context I am pleased to report that Octopus continues to gain
assets under management and industry recognition. More importantly,
Octopus is maintaining a focus on investments meeting the Fund's
investment criteria and has developed a successful team to manage
this business called Octopus Intermediate Capital.
Andrew Boyle
Chairman
25 September 2008
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 0800 316 2347.
Review of Investments
As mentioned in the Chairman's Statement, one new investment,
totalling �197,000, was made during the period into Hydrobolt
Limited. Whilst Octopus seeks suitable qualifying investments, the
remaining proceeds raised have been managed by our cash managers,
Goldman Sachs International, and invested in a range of money market
securities.
Investment Strategy
The Fund is being invested on the basis of taking lower risk than a
typical VCT and a higher risk than a typical bank. In the finance
sector this is often called intermediate capital or mezzanine
finance. The manner of the reduced risk will vary across the
investments. In the four main investments to date risk has been
reduced by investing in well managed, successful, profitable, strong
recurring cashflow businesses with the majority of the investment
being in the form of a secured loan which, in the unlikely event of
the business failing, ranks ahead of the investment of other equity
investors. Typically the Fund will receive its return from interest
paid on its secured loan notes, as well as the return on the equity
it holds when the company is sold. The investment strategy is to
derive sufficient return from secured loan notes to achieve the
Fund's aims and use any equity portion to boost returns.
Investment Portfolio
During the period, the Fund made one new investment. The details of
all the investments in the portfolio are set-out below.
Funeral Services Partnership Limited
Investment date: October 2007
Cost: �875,000
(ordinary shares and loan notes)
Valuation: �875,000
Valuation basis: Cost
Equity held: 2.0% 'B shares' (6.8% 'B
shares' held by all funds managed by Octopus)
Last audited accounts: N/A
Funeral Services Partnership is an independent funeral services group
made up of funeral parlours and their associated services. It
currently owns 14 funeral parlours and a stonemasons and is
continuing to grow via acquisition.
BDA International Limited
Investment date: December 2007
Cost: �500,000
(ordinary shares and loan notes)
Valuation: �500,000
Valuation basis: Cost
Equity held: 0.9% 'A shares' (33.3% 'A
shares' held by all funds managed by Octopus)
Last audited accounts: June 2007
Profit before interest & tax: �1.1 million
Net assets: �2.8 million
BDA provides promotion and design services to broadcasters and
advertisers worldwide and also creates brand films and internal
communications for leading UK corporations, including Hallmark,
Barclays, Discovery and Sony. The company operates from offices in
London, Munich, Dubai, Singapore and Sydney. Revenues have grown
against prior year and the management team has been strengthened by
the appointment of a new Chairman, introduced by Octopus. The
company has recently made a small acquisition of Jago Design Limited.
Jago has a strong international reputation for set design,
particularly in news sets and there is the potential for cross
marketing BDA/Jago services to the respective broadcaster client
basis.
Tristar Worldwide Limited
Investment date: January 2008
Cost: �500,000
(ordinary shares and loan notes)
Valuation: �500,000
Valuation basis: Cost
Equity held: 1.3% 'A shares' (35.0% 'A
shares' held by all funds managed by Octopus)
Last audited accounts: May 2007
Profit before interest & tax: �1.7 million
Net assets: �3.4 million
Tristar is one of the world's leading chauffeur companies, carrying
over 400,000 passengers for 400 clients in 2007 alone. The business
operates in 44 countries with its own vehicles in the UK and a
rapidly expanding service in the US. It has a blue chip customer base
which includes Virgin, Emirates, BP, Shell and Unilever. In the year
to May 2008, the business achieved EBITA before deal costs of �2.2m,
36% up on prior year.
Hydrobolt Limited
Investment date: April 2008
Cost: �196,868
(ordinary shares and loan notes)
Valuation: �196,868
Valuation basis: Cost
Equity held: 0.9% 'A shares' (48.1% 'A
shares' held by all funds managed by Octopus)
Last audited accounts: N/A
The Group manufactures and distributes specialty fasteners for use in
hostile environments such as oil & gas exploration and production as
well as power. The Group, founded in 1991, currently comprises two
companies - Hydrobolt Limited, which manufactures custom-made bolts
to order and Studbolt Manufacturing Limited, founded in 2003, which
stocks and distributes standard-sized petrochemical grade fasteners.
Recent Transactions
Since the end of the period under review, no further investments have
been made.
Simon Rogerson
Chief Executive
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has
been approved by, the Directors. The Directors confirm that to the
best of their knowledge the half-yearly financial report has been
prepared in accordance with the Disclosure and Transparency rules and
in accordance with applicable accounting standards, and includes a
fair review of the information required by DTR 4.2.7R of the
Disclosure and Transparency rules, being an indication of important
events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial
statements.
Principal Risks and Uncertainties
The Company's assets consist of equity and fixed 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 Venture
Capital Trust, 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 2008. The
Company's principal risks and uncertainties have not changed
materially since the date of that report.
Related Party Transactions
Octopus Investments Limited acts as the investment manager of the
Company. Octopus also provides the provision of secretarial and
administrative services to the Company. Under the management
agreement, the Octopus receives a fee of 2.0 per cent per annum of
the net assets of the Company for the investment management
services. This is described in more detail under Note 17 in the
Annual Report and Accounts for the year ended 31 January 2008.
During the period, the Company incurred management fees of �98,000,
including VAT at the applicable rate, payable to Octopus. At the
period end there was �nil outstanding to Octopus.
Profit and Loss Account
Six months to 31 July Six months to 31 July Year to 31 January
2008 2007 2008
Revenue Capital Total Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
Gain on
disposal of
investments of
current asset
investments - - - - 10 10 - 22 22
(Loss)/gain on
valuation of
current asset
investments - (42) (42) - 35 35 - 60 60
Income 180 - 180 126 - 126 305 - 305
Investment
management fees (24) (73) (97) (20) (59) (79) (44) (132) (176)
Other expenses (107) - (107) (73) - (73) (159) - (159)
Profit/(loss)
on ordinary
activities
before tax 49 (115) (66) 33 (14) 19 102 (50) 52
Taxation on
profit on
ordinary
activities - - - - - - - - -
Profit/(loss)
on ordinary
activities
after tax 49 (115) (66) 33 (14) 19 102 (50) 52
Earnings/(loss)
per share -
basic and
diluted 0.6p (1.3)p (0.7)p 0.6p (0.3)p 0.3p 1.3p (0.6)p 0.7p
* 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
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
The Company has no recognised gains or losses other than the results
for the period as set out above.
Reconciliation of Movements in Shareholders' Funds
Six months Six months
ended 31 July ended 31 July Year to 31
2008 2007 January 2008
�'000 �'000 �'000
Shareholders' funds at start
of period 8,355 2,889 2,889
(Loss)/profit for the period (66) 19 52
Net proceeds of share issue - 5,447 5,447
Cancellation of own shares (66) - (33)
Dividends paid - - -
Shareholders' funds at end
of period 8,223 8,355 8,355
Balance Sheet
As at 31 July As at 31 July As at 31
2008 2007 January 2008
�'000 �'000 �'000 �'000 �'000 �'000
Fixed asset investments 2,072 - 1,875
Current assets:
Investments - money market
securities 6,001 8,242 6,437
Debtors 97 128 96
Cash at bank 76 9 9
6,174 8,379 6,542
Creditors: amounts falling
due within one year (23) (24) (62)
Net current assets 6,151 8,355 6,480
Net assets 8,223 8,355 8,355
Called up equity share
capital 882 885 882
Share premium account - 7,484 -
Special distributable
reserve 7,451 - 7,451
Capital redemption reserve 4 - 3
Capital reserve - realised (193) (58) (119)
Capital reserve - unrealised 18 35 60
Revenue Reserve 61 9 78
Total equity shareholders'
funds 8,223 8,355 8,355
Net asset value per share 93.2p 94.4p 94.7p
Cash flow statement
Six months
to
31 July Six months to Year to 31
2008 31 July 2007 January 2008
�'000 �'000 �'000
Net cash inflow/(outflow) from
operating activities 9 (7) 132
Financial investment :
Purchase of investments (196) - (1,875)
Sale of investments - - -
Management of liquid resources
:
Net sale/(purchase) of money
market securities 394 (5,383) (3,541)
Dividends paid (66) - -
Financing :
Issue of own shares - 5,734 5,734
Share issue expenses - (287) (287)
Capitalised management fees (73) (59) (132)
Repurchase of own shares - (33)
Increase/(decrease) in cash
resources 68 (2) (2)
Reconciliation of net cash flow to movement in liquid resources
Six months to Six months to Year to 31
31 July 2008 31 July 2007 January 2008
�'000 �'000 �'000
Increase/(decrease) in cash
resources 68 (2) (2)
(Decrease)/increase in
liquid resources (436) 5,428 3,623
Opening net cash resources 6,446 2,825 2,825
Net cash at 31 July/31
January 6,078 8,251 6,446
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 2008 2007 January 2008
�'000 �'000 �'000
(Loss)/profit on ordinary
activities before tax (66) 19 52
Capitalisation of management
fees 73 59 132
(Increase)/decrease in debtors (1) (22) 10
(Decrease)/increase in
creditors (39) (18) 20
Gain on realisation of
investments - (10) (22)
Loss/(gain) on valuation of
investments 42 (35) (60)
Inflow/(outflow) from
operating activities 9 (7) 132
Notes to the Interim Financial Statements
1. Basis of preparation
The unaudited interim results which cover the six months to 31 July
2008 have been prepared in accordance with applicable accounting
standards in the United Kingdom, to include a Profit and Loss
Account, 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 31 July 2008
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 2008 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 be reviewed by the
Company's auditor.
3. Earnings per share
The total (loss)/earnings per share at 31 July 2008 is based on a
(loss)/profit from ordinary activities after tax of �(66,000) and on
8,818,986 shares (31 January 2008: �52,000 and 8,000,351 shares and
31 July 2007: �19,000 and 7,143,563 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 2008 and on 8,818,986 shares being the number of
shares in issue at the same date (31 January 2008: 8,818,986 and 31
July 2007: 8,854,161).
5. Dividends
The interim dividend of 0.5 pence per share for the six months ending
31 July 2008 will be paid on 31 October 2008 to shareholders on
register at the close of business on 3 October 2008. A final
dividend of 0.75 pence per share, relating to the year ended 31
January 2008, was paid on 25 June 2008 to shareholders on the
register on 30 May 2008.
6. During the six months ended 31 July 2008 there were no
share issues and no buy-backs.
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, and will also be
available to view on the Investment Manager's website at
www.octopusinvestments.com.
- ---END OF MESSAGE---
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