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Thursday, 31 August 2017

Foresight VCT PLC : Half-yearly report

Foresight VCT PLC    

Published: 18:06 CEST 31-08-2017 /GlobeNewswire /Source: Foresight VCT PLC / : FTV /ISIN: GB00B68K3716

Foresight VCT PLC : Half-yearly report

FORESIGHT VCT PLC

 

Financial Highlights

 

Ordinary Shares Fund

  • Diversified portfolio of 30 actively managed companies.
  • Total net assets £147.5 million.
  • Net Asset Value per Ordinary Share increased by 6.2% to 83.8p as at 30 June 2017 (31 December 2016: 83.6p), after payment of a 5.0p dividend made on 3 April 2017.
  • The portfolio has seen an uplift in valuation of £10.5 million in the last six months.
  • Three new investments, totalling £6.8 million made during the period.
  • A total of £39.9 million raised through the issue of shares and the offer was closed in March 2017, six weeks after launch.
  • In July 2017 the Company successfully exited Blackstar Amplification, Simulity Labs and The Bunker Secure Hosting, realising a total of £17.2 million compared to an investment cost of £8.0 million.
  • The board is pleased to declare an interim dividend for the year ending 31 December 2017 of 4.0p per Ordinary Share, to be paid on 29 September 2017.
  • Two further new investments made post period end, totalling £3.8 million.

 

 

Planned Exit Shares Fund

  • Following the sale of AlwaysON in January 2017 and Industrial Engineering Plastics in July 2017, the Fund has now realised all its investments.
  • An interim dividend for the year ended 31 December 2017 of 18.0p per Planned Exit Share was paid on 13 April 2017.
  • The total return for Shareholders is 82.7p (comprising 75.0p in dividends paid to date and 7.7p representing the remaining NAV at 30 June 2017).
  • The Board is in the process of "winding-down" the Fund and a final distribution will be made to shareholders prior to year end.

 

 

Infrastructure Shares Fund

  • Diversified portfolio of 11 infrastructure assets.
  • Total net assets £24.8 million.
  • Net Asset Value per Infrastructure Share increased by 3.9p to 85.6p as at 30 June 2017 (31 December 2016: 81.7p). The portfolio has seen an uplift in valuation of £1.2 million in the last six months.
  • Good progress has been made towards a full realisation of the portfolio and a final distribution will be made to shareholders prior to year end.

 

 


 

Chairman's Statement

 

I am pleased to present the Unaudited Half-Yearly Financial Report for Foresight VCT plc for the period ended 30 June 2017. The following statement is divided into three sections, dealing with the specific share class funds within the Company.

ORDINARY SHARES FUND

NET ASSET VALUE

During the period under review, the net assets of the Ordinary Shares Fund increased to £147.5 million as at 30 June 2017 from £107.0 million as at 31 December 2016. The net asset value ("NAV") per Ordinary Share as at 30 June 2017 was 83.8p, which, after taking account of the 5.0p per Ordinary Share dividend paid in April 2017, represents an increase of 6.2% on the NAV per Ordinary Share as at 31 December 2016 of 83.6p.

 

The Board is pleased with the increase in both the net assets and NAV per Ordinary Share achieved during the period under review and believes it demonstrates the positive impact of the strategy pursued over recent years to expand the size of the Fund and refocus its investment policy on growth-orientated businesses.

DIVIDENDS

The ability to maintain the payment of regular dividends is at the core of the strategy for the Fund. In line with this ambition, an interim dividend of 5.0p per Ordinary Share was paid on 3 April 2017 based on an ex-dividend date of 16 March 2017 and a record date of 17 March 2017.

Furthermore, the Board is pleased to announce that an interim dividend of 4.0p per Ordinary Share will be paid on 29 September 2017 with an ex-dividend date of 14 September 2017 and a record date of 15 September 2017. This additional interim dividend largely reflects the distribution of the profit on the sale of Simulity Labs, which took place in July this year and is described in more detail below. The Board is pleased that the Fund has been able to maintain its annual dividend payments at or above its target of 5.0p per Ordinary Share for the past six years and will endeavour to maintain this in the future, subject to achieving future profitable realisations.

INVESTMENT PERFORMANCE AND PORTFOLIO ACTIVITY

At the period end, the Fund held a diversified portfolio of 30 investments in UK businesses, across a range of different sectors. The Fund completed three new investments in the period under review and a further two new investments since the end of the period. The level of investment activity is encouraging and reflects the Manager's ongoing ability to source and transact growth capital investment into qualifying companies. The Board closely monitors the extent and nature of the pipeline of investment opportunities and expects that the Manager will be able to maintain the increase in the level of new investments over the coming year.

 

Details of these new portfolio companies can be found in the Manager's Report.

 

Since the end of June this year, the Fund has successfully exited three investments generating total disposal proceeds of £17.3 million compared to an original investment cost of £8.0 million and a combined book value at date of disposal of £11.6 million. Further details of each of these exits can be found in the Manager's Report. The sale of Simulity Labs is particularly pleasing as within a period from investment of just eight months, it resulted in a return of almost three times when generating disposal proceeds of £11.7 million on an original investment of £4 million.

 

KEY OBJECTIVES

The Board believes that it is in the best interests of Ordinary Shareholders for the Fund to continue to pursue its existing strategy, which includes the following four key objectives:

·  Increasing the net assets of the Ordinary Shares Fund to above £150 million

·  Paying an annual dividend to shareholders of at least 5.0p per Ordinary Share, while endeavouring to maintain, or increase, NAV per Ordinary Share

·  Completing a significant number of new and follow on qualifying investments every year

·  Offering a programme of regular share buy backs at a discount in the region of 10% to the prevailing NAV.

FUNDRAISING

In continuing pursuit of its aim to increase the net assets of the Fund to a level appropriate to sustain its other key objectives, the Board took the opportunity during the period to raise a total of £40 million in new capital. That this was achieved in just six weeks is a demonstration of the improving investor support for the Ordinary Shares Fund. On behalf of the Board, I would like to welcome all new shareholders and thank them together with existing shareholders for their support.

The Board appreciates that in order for the Fund to be able to achieve its objectives on an ongoing basis, the Manager will need to source and complete attractive new qualifying investment opportunities and this is currently being undertaken at a rate of in excess of £20 million per annum. As at 30 June 2017, the Ordinary Shares Fund held £63 million of cash available for investment. After allowing for a suitable cash margin to meet annual operating requirements, the Board and the Manager believe that the Fund is well positioned to take advantage of attractive investments being sourced across the UK by the Manager for at least the coming 24 months.

 

CHARGES AND PERFORMANCE INCENTIVE

The annual management fee on the Ordinary Shares Fund is an amount equal to 2.0% of net assets, excluding cash balances above £20 million which are charged at a reduced rate of 1%. This has produced an average annual charges ratio for the period ended 30 June 2017 of 2.1% of net assets, which is among the lower of its competitor VCTs.

As stated at the time of the merger with Foresight 2 VCT plc, the Board believes that a performance incentive scheme can help to incentivise the Manager to deliver above average value for shareholders. In addition, the Board believes it to be advantageous to align, as far as may be practical, the interests of the Manager with those of shareholders. New incentive and co-investment arrangements were approved by shareholders on 8 March 2017. These oblige the Manager and individual members of Foresight Group's private equity team to co-invest alongside the Ordinary Shares Fund, in order that they may become entitled to performance incentive payments, subject to the achievement of 'per investment' and 'fund as a whole' performance hurdles. Details of these arrangements can be found in the Annual Report to 31 December 2016.

BUYBACKS

Following the end of the period, in July 2017, the Company repurchased 1.4 million Ordinary Shares for cancellation at a discount of 10.1%. The Board and the Manager consider that the ability to offer to buy back Ordinary Shares at a target discount in the region of 10% is beneficial to shareholders in general, and is appropriate way to underpin the share price discount to NAV at which the Ordinary Shares trade.

 

OUTLOOK

This year has already proved to be a busy one for the Ordinary Shares Fund. The Board and the Manager are intent on continuing to build on the progress achieved to date. The Board is optimistic that the investments currently held within the Fund have the potential to grow further in the months ahead, and is encouraged by the new investment opportunities being sourced by the Manager. Provided the current level and quality of new investment is maintained, the Board believes that the Fund will be well positioned to meet its key objectives and to provide shareholders with regular dividends and maintained capital value in the future.

PLANNED EXIT SHARES FUND

NET ASSET VALUE AND PORTFOLIO PERFORMANCE

During the period under review, the net assets of the Planned Exit Shares Fund decreased to £882,000 as at 30 June 2017 from £2,949,000 as at 31 December 2016. The NAV per share as at 30 June 2017 was 7.7p which, after taking into account the interim dividend of 18.0p paid on 13 April 2017 (based on an ex-dividend date of 30 March 2017 and a record date of 31 March 2017), represents a decrease of 0.2p (0.8%) from the 25.9p NAV per share as at 31 December 2016.

At the period end, the Fund had cash and liquid resources of £114,000. The annual management fee is an amount equal to 1.0% of net assets and the average ongoing charges ratio for the period ended 30 June 2017 was 5.8% of net assets, representing the decrease in net assets as the fund is in realisation mode.

 

Following the sale of AlwaysON in January 2017 and Industrial Engineering Plastics in July 2017, the Fund has now sold all of its investments. Details of these sales can be found in the Manager's Report. The Fund now consists wholly of cash and rights to deferred consideration in relation to prior realisations.

 

The Board is in the process of making the final arrangements to turn the Fund fully into cash assets. Once this is completed, a final distribution will be paid and shareholders will be requested to approve arrangements to 'wind-down' the Fund. The final distribution is expected to be paid, and the wind-down of the Fund completed, before the year end alongside the wind-down arrangements for the Infrastructure Shares Fund referred to below. Further information will be provided to shareholders as the 'wind-down' arrangements progress.

ANTICIPATED OUTCOME OF THE FUND

The original objective of the Planned Exit Shares Fund was to provide investors with a return of 110p per share through a combination of dividends and share buybacks by the sixth anniversary of the closure of the original offer, which was June 2016. Currently, the total return (prior to ongoing costs and costs relating to the final distribution and the subsequent 'wind-down' of the Fund referred to above) for Shareholders is 82.7p (comprising 75.0p in dividends paid to date and 7.7p representing the remaining NAV as at 30 June 2017). The actual amount of the final distribution will be dependent on the ultimate proceeds received and the various costs referred to above.

The final outcome for investors in the Fund is very far from that anticipated at its inception. The reasons have been summarised in previous reports during the life of the Fund. Both the Board and the Manager recognise that the return will represent poor overall performance and regret that this is significantly behind the original target.

 

INFRASTRUCTURE SHARES FUND

NET ASSET VALUE AND PORTFOLIO PERFORMANCE

During the period under review, the net assets of the Infrastructure Shares Fund increased to £27.8 million as at 30 June 2017 from £26.6 million at 31 December 2016. The NAV per share was 85.6p as at 30 June 2017 compared to 81.7p per share at 31 December 2016, which represents an increase of 4.8% over the period. The majority of this increase in value relates to the asset life extensions of the Fund's three remaining solar assets, which were completed in March 2017.

At the period end, the Fund held cash and liquid resources of £3.2 million. The annual management fee is an amount equal to 1% of net assets and the ongoing charges ratio for the period was 1.3% of net assets.

FUTURE OF THE FUND

The Board wrote to Infrastructure Shareholders in April 2017 with a request for their expression of wishes as to whether they would like to realise their investment after the end of the initial five year holding period or continue with an investment by converting their holdings into Ordinary Shares. A total of 88.3% expressed their wish to realise their holdings and the Manager is making good progress in realising the portfolio, with exits expected later this year.

The total return as at 30 June 2017, before ongoing costs and the costs relating to realising investments, making the final distribution to shareholders and the subsequent 'wind-down' of the Fund referred to above, is 107.6p (comprising 22.0p in dividends paid to date and the current remaining NAV per Share of 85.6p as at 30 June 2017). A performance incentive fee payable to the Manager, totalling £422,000, has been recognised as at the period end, in accordance with the arrangements set out in the prospectus. The actual amount of the final performance incentive fee and total return to shareholders will very much depend on the sale negotiations, proceeds received and the various costs referred to above.

ANTICIPATED OUTCOME OF THE FUND

Once all investments have been realised and the Fund consists solely of cash assets, a final distribution will be paid and shareholders will be requested to approve arrangements to 'wind-down' the Fund. The final distribution is expected to be paid before the year end, following which the 'wind-down' of the Fund will be completed alongside the wind-down arrangements for the Planned Exit Shares Fund referred to above. Further information will be provided to shareholders as the 'wind-down' arrangements progress.

SHAREHOLDER INFORMATION AND COMMUNICATION

It is the intention of the Board that, as soon as practical, the Company should have a single class of share and become an Ordinary Shares Fund only with all investments in the Ordinary Shares Fund of a similar nature. The Board is anxious to provide good quality shareholder information and communication and would like to encourage shareholders to attend one or more of the regular Investor Forums hosted by the Manager. These events are held quarterly and the Manager will be in touch later this year with the date of the next forum.

 

 

 

John Gregory

Chairman

Telephone: 01296 682751

Email: j.greg@btconnect.com

31 August 2017

 

 

 


Manager's Report

 

ORDINARY SHARES FUND

Foresight Group has pursued a strategy of seeking growth and development capital investments for many years now, ahead of the changes to VCT regulation in 2015, having established a successful track record in this area. We were recently awarded 'VCT House of the Year 2016' at the Unquote awards, in recognition of investments made and the achievements of team members, and the Group as a whole, throughout 2016.

In addition to its established reputation as a VCT manager, we continue to develop a number of UK regional private equity funds supporting early stage businesses. The first two funds, which are based in Nottingham and Manchester, are already proving a useful source of attractive new investment leads for the Company.

 

Portfolio Summary

As at 30 June 2017 the portfolio of the Ordinary Shares Fund comprised 30 investments with a total cost of £63.1 million and a valuation of £83.2 million. The portfolio is diversified by sector, transaction type and maturity profile. Details of the ten largest investments by valuation, including an update on their performance, are provided on pages 12-16 of the Report.

 

NEW INVESTMENTS

During the period, the Ordinary Shares Fund completed new investments in Poundshop.com, the UK's largest online pound shop, Ollie Quinn, a designer and retailer of glasses and sunglasses and Fresh Relevance, an ecommerce marketing platform for online retailers, totalling £6.8 million. No follow-on investments were completed during the period.

 

In February 2017 the Ordinary Shares Fund completed a £1.7 million growth capital investment in Poundshop.com. Launched in February 2014, Poundshop.com is an online-only single price retailer, founded and chaired by Steve Smith, the founder of Poundland. The investment will fund the strategic growth of the company, including widening the product range and updating the website, IT systems and warehousing capacity.

 

In March 2017, a £3.0 million investment was completed in glasses designer and retailer Ollie Quinn, to fund the rollout of additional stores throughout the UK and Canada. Ollie Quinn is a branded retailer of prescription glasses, sunglasses and non-prescription polarised sunglasses, which has achieved rapid growth since inception in the UK in 2013. After a rebranding exercise earlier this year, eight new stores have opened since investment (four in the UK and four in Canada), bringing the total number to 19.

The third investment during the period, of £2.1 million, was completed in email marketing and web personalisation platform Fresh Relevance, in March 2017. Based in Southampton, Fresh Relevance is a high growth, marketing technology business with recurring revenue derived from its Software as a Service model. The company provides online retailers such as Mothercare, Toys"R"Us, Moss Bros and Space NK with bespoke customer experiences and marketing tools including triggered emails and web personalisation. The capital will be used to fund increased sales resource, launch a US office and introduce increased consultancy services, in order to drive average order values.

 

Following the end of the period, two further new investments were completed in Mowgli Street Food, a chain of authentic Indian restaurants, and Cinelabs International, a leading provider of film laboratory services.

 

The Ordinary Shares Fund has invested £1.6 million in Mowgli, a fast casual chain of restaurants serving Indian street food. Founded in 2014, this popular chain currently operates two sites in Liverpool and one in Manchester. Mowgli will use the investment to roll out a number of sites over the next three years with the first of these planned for Birmingham and Leeds later this year. The modern focus on healthy, light, flavoursome dishes differentiates Mowgli from traditional Indian restaurants, as does its provision of an extensive gluten-free, vegetarian and vegan offering using authentic recipes. This is the first investment alongside the Foresight Regional Investment LP, "FRIF", a £40 million institutional private equity fund. FRIF provided the replacement capital required in the transaction which, following the changes to VCT rules in 2015, VCTs are now unable to provide.

 

The Fund has invested £2.2 million in Cinelabs, which is the UK's only full service film laboratory, offering film processing, scanning, distribution, digitisation, restoration and archive management to clients in the media and entertainment industries such as the BFI, ITV and FIFA. The business will use the funds to invest in specialist equipment and to increase staff numbers, allowing it to expand its service offering and increase customer engagement.

 

PIPELINE

Foresight Group has a focused strategy for generating deal flow across the UK, combining meetings with advisors and professional service firms, attending and organising networking events and approaching businesses directly. We are deeply connected within the investment community and our efforts are producing positive results. The team typically analyses around 100 new investment opportunities each month, of which only a handful will be deemed of sufficient quality to require full evaluation for a potential investment. We are firmly established as a key player in the investment range of £1 million to £5 million and are acknowledged for our appetite to transact and support ambitious SME management teams. As at 30 June 2017, the Ordinary Shares Fund had current cash in hand of £63 million. This will be utilised for new and follow-on investments, as well as buybacks and ongoing running expenses.

EXITS AND REALISATIONS

Total proceeds of £424,011 were generated during the period. This was principally from the first tranche of deferred consideration received from the sale of O-Gen Acme Trek in 2016. A final loan repayment of £166,667 was made by Aquasium Technology, in which the Fund continues to hold an equity position. Aquasium manufactures, services and refurbishes electron beam welding equipment and vacuum furnaces. Proceeds also came from the sale of the Fund's remaining shares in AIM-listed ZOO Digital, which supplies software and services for authored content (such as DVD, Blu-ray discs and iTunes media) to media businesses and post-production firms.

During the period the Fund realised losses amounting to £2.3 million, which had already been provided for in full, following the liquidation of Abacuswood and The Skills Group and the disposal of AlwaysON Group.

 

Following the end of the reporting period, the Fund's positions in Simulity Labs, Blackstar Amplification and The Bunker Secure Hosting were successfully realised, generating total proceeds of £17.2 million compared to a cost of £8.0 million.

 

In July 2017 the Fund successfully completed the sale of Simulity Labs to ARM, the world's leading semiconductor IP company. The transaction generated proceeds of £11.7 million from an initial £4.0 million investment just eight months previously. Established in 2009, Simulity provides embedded communications software and related server systems for both SIM cards and embedded SIMs ('eSIMs'). The software allows IoT devices to connect securely to networks in order to collect and exchange data.

 

The Fund originally invested in Blackstar Amplification, an award-winning Northampton-based designer and manufacturer of innovative guitar amplifiers, in 2012. The funding provided growth capital and helped restructure the company's shareholder base. In addition, Foresight Group introduced Keith Pacey, former Executive Chairman and CEO of Maplin Electronics, as Chairman. Blackstar has expanded internationally and more than doubled turnover over the last four years, established itself as the number two amplifier brand in the UK and USA and broadened its product catalogue. The exit was facilitated by a management buyout, supported by the company's manufacturing and distribution partners and bank support, and generated return of approximately 2x the Fund's investment.

 

The Fund acquired its investment in The Bunker from Foresight 2 VCT plc as part of the merger in December 2015. Having first invested in May 2006, the Foresight VCTs have been longstanding shareholders in The Bunker, which builds, hosts and manages high security, high availability IT data centres, providing competitive data storage solutions. The growth capital provided by the Foresight VCTs was used to scale The Bunker's data storage facilities materially. The business has experienced a compound annual growth rate of over 14% of recurring revenues for the past three years with annual revenues growing to in excess of £9 million compared to £1.8 million at the time of investment, having built a strong reputation in the specialist FinTech space. The Bunker was acquired by Palatine Private Equity, generating an overall return of 2.44x over the life of the investment.

The current environment remains supportive of further exits across the portfolio. While exchange rates currently favour international buyers, we continue to witness strong appetite to acquire high quality UK companies from both domestic and international parties.

DISPOSALS IN THE PERIOD ENDED 30 JUNE 2017

 

 

Original Cost/ Take-On Value

Proceeds

Realised Gain/(loss)

Valuation at 31 December 2016

Company

Detail

(£)

(£)

(£)

(£)

Abacuswood Limited

Company dissolved

478,684

-

(478,684)^

-

AlwaysON Group Limited

Full disposal

1,473,271

-

(1,473,271)^

-

Aquasium Technology

Loan repayment

166,667

166,667

-

166,667

Limited

 

 

 

 

 

The Skills Group Limited (formerly AtFutsal)

Company dissolved

391,301

563

(390,738)^

-

ZOO Digital Group plc

Full disposal

40,307

57,675

17,368

53,742

Total disposals

 

2,550,230

224,905

(2,325,325)

220,409

 

In addition to the above, deferred consideration of £199,106 was received by the Fund from the sale of O-Gen

Acme Trek Limited.

^This loss refers to the transfer on disposal between unrealised and realised reserves and has no impact on NAV.

 

POST PERIOD END DISPOSALS

 

 

Original Cost/ Take-On Value

Proceeds

Realised Gain/(loss)

Valuation at 31 December 2016

Company

Detail

(£)

(£)

(£)

(£)

Blackstar Amplification

Full disposal

2,500,000

3,857,000

1,357,000

3,822,050

Holdings Limited

 

 

 

 

 

Simulity Labs Limited

Full disposal

4,000,000

11,668,659

7,668,659

4,000,000

The Bunker Secure Hosting

Full disposal

1,537,348

1,680,684

143,336

1,656,835

Limited

 

 

 

 

 

Total disposals

 

8,037,348

17,206,343

9,168,995

9,478,885

 

In addition to the above, deferred consideration of £24,003 was received by the Fund from the sale of Trilogy.

 

KEY PORTFOLIO DEVELOPMENTS

The Ordinary Shares Fund has benefitted from solid performance of the underlying portfolio with a total net valuation uplift of £10.5 million, driven primarily by the agreed sale of Simulity Labs at a value £7.7 million above cost. Material changes in valuation, defined as an increase or decrease of £500,000 or more since 31 December 2016, are detailed below. Where these companies do not feature in the Top Ten Investments section of the report, an update on underlying developments that have driven changes in value is provided below.

 

Company

Valuation Methodology

Valuation Change (£)

Simulity Labs Limited

Disposal proceeds

7,668,659

Thermotech Solutions Limited

Discounted earnings multiple

876,767

 

 

 

Ixaris Systems Limited

Discounted revenue multiple

690,943

Aerospace Tooling Holdings Limited

Discounted earnings multiple

532,735

 

 

 

Datapath Group Limited

Discounted earnings multiple

(555,910)

 

THERMOTECH SOLUTIONS

Thermotech, which designs, installs and maintains customised air conditioning and fire sprinkler systems, has performed well in 2017 to date, demonstrating positive EBITDA momentum. Following the acquisition of air conditioning supplier Oakwood a year ago, a number of sizeable new contracts have been won. The pipeline continues to grow and is the largest seen to date, comprising a mixture of retailers, restaurants, office developments and public sector clients.

IXARIS SYSTEMS

Ixaris operates EntroPay, a prepaid electronic payment service integrated with the Visa network. Foresight 2 VCT initially invested in 2006 and the investment was transferred to the Fund during the merger. Ixaris has traded ahead of budget in 2017 to date as EntroPay continues to perform well and has a strong sales pipeline in prospect. Investment continues in developing the solutions and platform business. The business is now trading profitably.

AEROSPACE TOOLING

Aerospace Tooling is a niche engineering company specialising in the refurbishment of high-value aerospace and industrial gas turbine components. Following weaker trading in 2016, the business has made solid progress this year, maintaining a stabilised cost structure and further diversifying its customer base to reduce reliance on its largest customer.

OUTLOOK

Although the recent UK election and commencement of the formal Brexit negotiations for the UK to leave the EU have resulted in a period of uncertainty, Foresight Group continues to see a strong dealflow and high level of activity, with a growing pipeline of interesting investment opportunities. We also continue to see solid interest from numerous potential acquirers for businesses in the portfolio and are optimistic these will crystallise into further realisations in the year ahead.

PLANNED EXIT SHARES FUND

Portfolio Summary

Following the sale of the final two companies, alwaysON in January 2017 and Industrial Engineering Plastics in July 2017, the Fund has now realised all of its portfolio investments. The Board is in the process of "winding-down" the Fund and a final distribution will be paid to Shareholders later this year. The total return for Shareholders is 82.7p (comprising 75.0p in dividends paid to date and 7.7p representing the remaining NAV at 30 June 2017).

DISPOSALS IN THE PERIOD ENDED 30 JUNE 2017

 

Company

Detail

Original Cost/ Take-On Value

(£)

Proceeds

(£)

Realised Gain/(loss)

(£)

Valuation at 31
December 2016

(£)

AlwaysON Group Limited

Full disposal

1,839,970

2,032,608

192,638

2,032,608

Total disposals

 

1,839,970

2,032,608

192,638

2,032,608

 

POST PERIOD END DISPOSALS

Company

Detail

Original Cost/ Take-On Value

(£)

Proceeds

(£)

Realised Gain/(loss)

(£)

Valuation at 31
December 2016

(£)

Industrial Engineering Plastics Limited

Full disposal

1,556,416

492,550

(1,063,866)

508,150

Total disposals

 

1,556,416

492,550

(1,063,866)

508,150

 

In addition to the above, deferred consideration of £57,328 was received by the Fund from the sale of Trilogy.

 

ALWAYSON

alwaysON provides data backup services, connectivity and Microsoft's Skype for Business collaboration software to SMEs and larger enterprises. Given the company's cash constraints, a decision was made to seek an exit rather than fund further losses. Despite challenging trading conditions the sale was completed in January 2017, generating proceeds of £2.0 million against an investment cost of £1.8 million.

 

INDUSTRIAL ENGINEERING PLASTICS

Industrial Engineering Plastics ("IEP") is a plastics distributor and fabricator, supplying a wide range of industries with ventilation and pipe fittings, plastic welding rods, hygienic wall cladding, plastic tanks and sheets. Considering some of the structural challenges within IEP's markets, we pursued multiple conversations with potential trade acquirers. As a result, we received two acquisition offers early in 2017 before agreeing an offer with one of IEP's competitors at a price marginally below the most recent valuation, albeit at a loss against the original investment of £1.6 million.

 

INFRASTRUCTURE SHARES FUND

 

Portfolio Summary

As at 30 June 2017 the Fund's portfolio comprised 11 infrastructure investments with a total cost of £22.1 million and a valuation of £24.8 million. The strategy of the Infrastructure Shares Fund is to invest in infrastructure assets including secondary Private Finance Initiatives ("PFI") assets and solar infrastructure. Details of the investments are provided on pages 18-19 of the Report.

 

KEY PORTFOLIO DEVELOPMENTS

During the period, the value of the portfolio increased by £1.2 million, driven primarily by asset life extensions of the Fund's three remaining solar portfolio companies, which were completed in March 2017.

 

The discounted cash flow methodology used to value the Fund's solar portfolio assumes a 25-year asset life. This is based on the market standard lease length for the properties and the initial planning consents. However, according to independent technical advisers, the effective commercial operating life of the solar panels could be as long as 40 years. The grid connection agreements do not have a specified expiry date.

 

The assets have favourable options to extend the leases for between 10 and 25 additional years and we have has therefore extended the planning permissions for the solar assets to enable the options to be exercised. This increases the likely operating periods for the assets from 25 years to 35 years. The valuation of the three solar assets has therefore increased by a total £1.1 million.

 

REALISATION

We are currently conducting a marketing and third party valuation process for the 11 assets held in the Fund with the aim of securing a sale before the end of September 2017. It is currently expected that the likely sale price will result in a NAV per share of 85.6p. However, the ability to sell all or part of the portfolio is not guaranteed and the timing and price is not certain. The final distribution to shareholders will be dependent on the proceeds received less any costs related to the sales process and the process of "winding-down" the Fund.

 

COMPANY

Following the "wind-down" of the Planned Exit Shares Fund and the Infrastructure Shares Fund referred to above, expected to be completed before the end of the year, the Company will only have one class of share, the Ordinary Shares. The Company will, therefore, solely constitute the Ordinary Shares Fund going forward.

 

 

 

Russell Healey

Head of Private Equity

Foresight Group

31 August 2017

Unaudited Half-Yearly Results and Responsibility Statements

 

Principal Risks and Uncertainties

 

The principal risks faced by the Company are as follows:

  • Performance;
  • Regulatory;
  • Operational; and
  • Financial.

 

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Accounts for the year ended 31 December 2016. A detailed explanation can be found on page 25 of the Annual Report and Accounts which is available on Foresight's website www.foresightgroup.eu or by writing to Foresight Group at The Shard, 32 London Bridge Street, London, SE1 9SG.

 

In the view of the Board, there have been no changes to the fundamental nature of these risks since the previous report and these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the six months under review.

 

Directors' Responsibility Statement:

 

The Disclosure and Transparency Rules ('DTR') of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Report and financial statements.

The Directors confirm to the best of their knowledge that:

  1. the summarised set of financial statements has been prepared in accordance with FRS 104;
  2. the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year);
  3. the summarised set of financial statements gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.2.4R; and
  4. the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

GOING CONCERN

The Company's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report of the Annual Report. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the Chairman's Statement, Strategic Report and Notes to the Accounts of the 31 December 2016 Annual Report. In addition, the Annual Report includes the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.

The Company has considerable financial resources together with investments and income generated therefrom across a variety of industries and sectors. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully.

The Directors have reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

The Half-Yearly Financial Report has not been audited nor reviewed by the auditors.

On behalf of the Board

John Gregory

Chairman

31 August 2017

 

 

 

Unaudited Non-Statutory Analysis of the Share Classes

 

Income Statements

for the six months ended 30 June 2017

 

Ordinary Shares Fund

Revenue  Capital  Total

  £'000  £'000  £'000

Realised losses/(gains) on investments

-

(2,126)

(2,126)

Investment holding gains/(losses)

-

12,606

12,606

Income

328

-

328

Investment management fees

(322)

(966)

(1,288)

Other expenses

(281)

-

(281)

(Loss)/return on ordinary
activities before taxation

(275)

9,514

9,239

Taxation

-

-

-

(Loss)/return on ordinary activities after taxation

(275)

9,514

9,239

(Loss)/return per share

(0.2)p

6.1p

5.9p

 

 

Planned Exit Shares Fund

Revenue  Capital  Total

Infrastructure Shares Fund

Revenue  Capital  Total

£'000

£'000

£'000

£'000

£'000

£'000

-

193

193

-

-

-

-

(168)

(168)

-

1,246

1,246

4

-

4

688

-

688

(5)

(14)

(19)

(33)

(521)*

(554)*

(16)

-

(16)

(71)

-

(71)

(17)

11

(6)

584

725

1,309

-

-

-

(37)

37

-

(17)

11

(6)

547

762

1,309

(0.2)p

0.1p

(0.1)p

1.7p

2.3p

4.0p

 

 

 

 

*Includes £422,000 accrued performance incentive fee.

 

Balance Sheets

at 30 June 2017

 

Ordinary Shares

Fund

£'000

Planned Exit Shares

Fund

£'000

Infrastructure

Shares Fund

£'000

Fixed assets

 

 

 

Investments held at fair value through profit or loss

83,155

493

24,771

Current assets

 

 

 

Debtors

984

290

284

Money market securities and other deposits

59,431

-

-

Cash

3,981

113

3,210

 

64,396

403

3,494

Creditors

 

 

 

Amounts falling due within one year

(104)

(14)

(462)

Net current assets

64,292

389

3,032

Net assets

147,447

882

27,803

Capital and reserves

 

 

 

Called-up share capital

1,761

114

324

Share premium account

96,504

-

-

Capital redemption reserve

431

3

1

Distributable reserve

35,220

1,722

26,447

Capital reserve

(6,862)

(183)

(1,600)

Revaluation reserve

20,393

(774)

2,631

Equity shareholders' funds

 

147,447

882

27,803

 

 

 

 

Number of shares in issue

 

176,051,960

 

11,404,314

 

32,495,246

 

 

Net asset value per share

 

 

83.8p

 

 

7.7p

 

 

85.6p

 

 

At 30 June 2017 there was an inter-share debtor/creditor of £2,000 which has been eliminated on aggregation.


 

Reconciliations of Movements in Shareholders' Funds

for the six months ended 30 June 2017

 

 

 

Called-up

Share

Capital

 

 

 

 

 

share

premium

redemption

Distributable

Capital

Revaluation

 

 

capital

account

reserve

reserve

reserve

reserve

Total

Ordinary Shares Fund

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

As at 1 January 2017

1,280

96,071

431

5,247

(3,770)

7,787

107,046

Share issues in the period

481

40,892

-

-

-

-

41,373

Expenses in relation to share issues

-

(1,683)

-

-

-

-

(1,683)

Cancellation of share premium

-

(38,776)

-

38,776

-

-

-

Realised losses on disposal of investments

-

-

-

-

(2,126)

-

(2,126)

Investment holding gains

-

-

-

-

-

12,606

12,606

Dividends paid

-

-

-

(8,528)

-

-

(8,528)

Management fees charged to capital

-

-

-

-

(966)

-

(966)

Revenue loss for the period

-

-

-

(275)

-

-

(275)

As at 30 June 2017

1,761

96,504

431

35,220

(6,862)

20,393

147,447

 

 

Called-up

Share

Capital

 

 

 

 

 

share

premium

redemption

Distributable

Capital

Revaluation

 

 

capital

account

reserve

reserve

reserve

reserve

Total

Planned Exit Shares Fund

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

As at 1 January 2017

114

2,095

3

1,705

(362)

(606)

2,949

Trail commission in relation to prior year share issues

-

(8)

-

-

-

-

(8)

Cancellation of share premium

-

(2,087)

-

2,087

-

-

-

Realised gains on disposal of investments

-

-

-

-

193

-

193

Investment holding losses

-

-

-

-

-

(168)

(168)

Dividends paid

-

-

-

(2,053)

-

-

(2,053)

Management fees charged to capital

-

-

-

-

(14)

-

(14)

Revenue loss for the period

-

-

-

(17)

-

-

(17)

As at 30 June 2017

114

-

3

1,722

(183)

(774)

882

 

 

Called-up

Share

Capital

 

 

 

 

 

share

premium

redemption

Distributable

Capital

Revaluation

 

 

capital

account

reserve

reserve

reserve

reserve

Total

Infrastructure Shares Fund

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

As at 1 January 2017

324

14,375

1

11,591

(1,116)

1,385

26,560

Trail commission in relation to prior year share issues

-

(33)

-

(33)

-

-

(66)

Cancellation of share premium

-

(14,342)

-

14,342

-

-

-

Investment holding gains

-

-

-

-

-

1,246

1,246

Management fees charged to capital

-

-

-

-

(521)

-

(521)

Tax credited to capital

-

-

-

-

37

-

37

Revenue return for the period

-

-

-

547

-

-

547

As at 30 June 2017

324

-

1

26,447

(1,600)

2,631

27,803

 

 

 


Unaudited Income Statement

for the six months ended 30 June 2017

 

 

Six months ended
30 June 2017
(Unaudited)

  Revenue  Capital  Total

  £'000  £'000  £'000

Six months ended
30 June 2016
(Unaudited)

  Revenue  Capital  Total

  £'000  £'000  £'000

Year ended

31 December 2016

(Audited)

  Revenue  Capital  Total

  £'000  £'000  £'000

Realised losses on investments

-

(1,933)

(1,933)

-

(1,208)

(1,208)

-

(3,262)

(3,262)

Investment holding gains

-

13,684

13,684

-

4,408

4,408

-

8,279

8,279

Income

1,020

-

1,020

1,769

-

1,769

2,916

-

2,916

Investment management fees

(360)

(1,501)*

(1,861)*

(240)

(718)

(958)

(534)

(1,601)

(2,135)

Other expenses

(368)

-

(368)

(303)

-

(303)

(596)

-

(596)

Return on ordinary
activities before
taxation

292

10,250

10,542

1,226

2,482

3,708

1,786

3,416

5,202

Taxation

(37)

37

-

(120)

120

-

(220)

220

-

Return on ordinary activities after taxation

255

10,287

10,542

1,106

2,602

3,708

1,566

3,636

5,202

(Loss)/return per share:

 

 

 

 

 

 

 

 

 

Ordinary Share

(0.2)p

6.1p

5.9p

0.2p

2.0p

2.2p

0.4p

2.8p

3.2p

Planned Exit Share

(0.2)p

0.1p

(0.1)p

0.1p

8.7p

8.8p

0.3p

2.9p

3.2p

Infrastructure Share

1.7p

2.3p

4.0p

2.8p

(1.3)p

1.5p

3.4p

0.9p

4.3p

 

                               

*Includes £422,000 accrued performance incentive fee for the Infrastructure Shares Fund.

The total column of this statement is the profit and loss account of the Company and the revenue and capital columns represent supplementary information.

All revenue and capital items in the above Income Statement are derived from continuing operations. No operations were acquired or discontinued in the period.

The Company has no recognised gains or losses other than those shown above, therefore no separate statement of total recognised gains and losses has been presented.

 

 

 

Unaudited Balance Sheet                                                                                            

at 30 June 2017

 

Registered Number: 03421340

As at

30 June 2017

£'000

As at

30 June 2016

£'000

As at

31 December 2016

£'000

Fixed assets

 

 

 

Investments held at fair value through profit or loss

108,419

95,113

92,217

Current assets

 

 

 

Debtors

1,556

2,705

2,193

Money market securities and other deposits

59,431

29,926

30,976

Cash

7,304

2,612

11,361

 

68,291

35,243

44,530

Creditors

 

 

 

Amounts falling due within one year

(578)

(1,010)

(192)

Net current assets

67,713

34,233

44,338

Net assets

176,132

129,346

136,555

Capital and reserves

 

 

 

Called-up share capital

2,199

1,582

1,718

Share premium account

96,504

100,982

112,541

Capital redemption reserve

435

429

435

Distributable reserve

63,389

24,069

18,543

Capital reserve

(8,645)

(2,411)

(5,248)

Revaluation reserve

22,250

4,695

8,566

Equity shareholders' funds

176,132

129,346

136,555

Net asset value per share:

 

 

 

Ordinary Share

83.8p

82.6p

83.6p

Planned Exit Share

7.7p

45.6p

25.9p

Infrastructure Share

85.6p

91.1p

81.7p

 

Unaudited Reconciliation of Movements in Shareholders' Funds

for the six months ended 30 June 2017

 

 

Called-up

share capital

Share premium account

Capital redemption reserve

Distributable

reserve

Capital reserve

Revaluation reserve

Total

Company

£'000

£'000

£'000

£'000

£'000

£'000

£'000

As at 1 January 2017

1,718

112,541

435

18,543

(5,248)

8,566

136,555

Share issues in the period

481

40,892

-

-

-

-

41,373

Expenses in relation to share issues

-

(1,724)

-

(33)

-

-

(1,757)

Cancellation of share premium

-

(55,205)

-

55,205

-

-

-

Realised losses on disposal of investments

-

-

-

-

(1,933)

-

(1,933)

Investment holding gains

-

-

-

-

-

13,684

13,684

Dividends paid

-

-

-

(10,581)

-

-

(10,581)

Management fees charged to capital

-

-

-

-

(1,501)

-

(1,501)

Tax credited to capital

-

-

-

-

37

-

37

Revenue return for the period

-

-

-

255

-

-

255

As at 30 June 2017

2,199

96,504

435

63,389

(8,645)

22,250

176,132

 

 

Unaudited Cash Flow Statement

for the six months ended 30 June 2017

 

 

Six months ended 30 June 2017 £'000

Six months ended 30 June 2016 £'000

Year

ended 31 December 2016

£'000

Cash flow from operating activities

 

 

 

Investment income received

1,337

1,819

2,768

Deposit and similar interest received

45

44

98

Investment management fees paid

(1,464)

(837)

(2,118)

Secretarial fees paid

(56)

(55)

(110)

Other cash payments

(246)

(598)

(848)

Net cash (outflow)/inflow from operating activities

(384)

373

(210)

Returns on investing activities

 

 

 

Purchase of unquoted investments

(6,773)

-

(4,877)

Net proceeds on sale of investments

2,258

92

9,287

Net proceeds on deferred consideration

199

64

64

Receipt/(return) of cash held on behalf of investee companies

-

84

(548)

Net cash (outflow)/inflow from investing activities

(4,316)

240

3,926

Financing

 

 

 

Proceeds of fund raising

39,384

22,898

36,028

Expenses of fund raising

(1,150)

(560)

(886)

Repurchase of own shares

-

(737)

(1,329)

Equity dividends paid

(9,136)

(7,445)

(12,961)

Movement in money market funds

(28,455)

(15,038)

(16,088)

Net cash inflow from financing activities

643

(882)

4,764

Net (decrease)/increase in cash in the period

(4,057)

(269)

8,480

Analysis of changes in net debt

 

At 1

 

At 30

 

January

 

June

 

2017

Cash Flow

2017

 

£'000

£'000

£'000

Cash and cash equivalents

11,361

(4,057)

7,304

 

 

 


Notes to the Unaudited Half-Yearly Results

 

 

1)     The Unaudited Half-Yearly Financial Report has been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2016. Unquoted investments have been valued in accordance with IPEV Valuation Guidelines. Quoted investments are stated at bid prices in accordance with the IPEV Valuation Guidelines and UK Generally Accepted Accounting Practice.

 

2)     These are not statutory accounts in accordance with S436 of the Companies Act 2006 and the financial information for the six months ended 30 June 2017 and 30 June 2016 has been neither audited nor formally reviewed. Statutory accounts in respect of the period to 31 December 2016 have been audited and reported on by the Company's auditors and delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under S498(2) or S498(3) of the Companies Act 2006. No statutory accounts in respect of any period after 31 December 2016 have been reported on by the Company's auditors or delivered to the Registrar of Companies.

 

3)     Copies of the Unaudited Half-Yearly Financial Report will be sent to shareholders and will be available for inspection at the Registered Office of the Company at The Shard, 32 London Bridge Street, London, SE1 9SG.

 

4)     Net asset value per share

 

The net asset value per share is based on net assets at the end of the period and on the number of shares in issue at the date.

 

 

Ordinary Shares Fund

Number of

Net assets  Shares

Planned Exit Shares Fund

Number of

Net assets  Shares

Infrastructure Shares Fund

Number of

Net assets  Shares

 

£'000

in Issue

£'000

in Issue

£'000

in Issue

30 June 2017

147,447

176,051,960

882

11,404,314

27,803

32,495,246

30 June 2016

94,514

114,394,997

5,222

11,454,314

29,610

32,495,246

31 December 2016

107,046

127,985,288

2,949

11,404,314

26,560

32,495,246

 

 

  1. Return per share

 

The weighted average number of shares for the Ordinary Shares, Planned Exit Shares and Infrastructure Shares funds used to calculate the respective returns are shown in the table below.

 

Ordinary Shares

Fund (Shares)

Planned Exit Shares Fund (Shares)

Infrastructure Shares Fund (Shares)

 

Six months ended 30 June 2017

156,000,564

11,404,314

32,495,246

 

Six months ended 30 June 2016

101,437,735

11,526,687

32,510,141

 

Year ended 31 December 2016

109,561,757

11,488,663

32,502,653

 

Earnings for the period should not be taken as a guide to the results for the full year.

 

  1. Income

 

 

 

Year ended

 

Six months ended

Six months ended

31 December

 

30 June 2017

30 June 2016

2016

 

£'000

£'000

£'000

 

Loan stock interest

578

1,095

2,133

 

Dividends

397

630

685

 

Overseas based Open Ended Investment Companies ("OEICs")

45

44

98

 

 

1,020

1,769

2,916

 

 

 


 

  1. Investments held at fair value through profit or loss

 

 

Ordinary

Shares Fund

£'000

Planned Exit Shares Fund

£'000

Infrastructure

Shares Fund

£'000

Company

£'000

 

Book cost as at 1 January 2017

58,877

3,396

22,140

84,413

 

Investment holding gains/(losses)

7,274

(855)

1,385

7,804

 

Valuation at 1 January 2017

66,151

2,541

23,525

92,217

 

Movements in the period:

 

 

 

 

 

Purchases

6,773

-

-

6,773

 

Disposal proceeds

(225)

(2,033)

-

(2,258)

 

Realised (losses)/gains*

(2,325)

193

-

(2,132)

 

Investment holding gains/(losses)**

12,781

(208)

1,246

13,819

 

Valuation at 30 June 2017

83,155

493

24,771

108,419

 

Book cost at 30 June 2017

63,100

1,556

22,140

86,796

 

Investment holding gains/(losses)

20,055

(1,063)

2,631

21,623

 

Valuation at 30 June 2017

83,155

493

24,771

108,419

 

*Deferred consideration of £199,000 was received by the Ordinary Shares fund in the period and is included within realised losses in the income statement. This was offset by a decrease in the deferred consideration debtor of £199,000.

**Deferred consideration debtors relating to the sale of Trilogy were adjusted during the period, generating increases of £24,000 for the Ordinary Shares fund and £40,000 for the Planned Exit Shares fund.

 

 

  1. Related party transactions

 

No Director has, or during the period had, a contract of service with the Company. No Director was party to, or had an interest in, any contract or arrangement (with the exception of Directors' fees) with the Company at any time during the period under review or as at the date of this report.

 

 

  1. Transactions with the Manager

 

Foresight Group CI Limited acts as manager to the Company in respect of its investments. During the period, services of a total value of £1,439,000 (30 June 2016: £958,000; 31 December 2016: £2,135,000) were purchased by the Company from Foresight Group CI Limited. At 30 June 2017, the amount due to Foresight Group CI Limited was £nil (30 June 2016: £2,000 credit; 31 December 2016: £17,000).

Foresight Fund Managers Limited, as Secretary of the Company and as a subsidiary of Foresight Group, is also considered to effectively be a transaction with the manager. During the period, services of a total value of £56,000 excluding VAT (30 June 2016: £55,000; 31 December 2016: £110,000) were purchased by the Company from Foresight Fund Managers Limited. At 30 June 2017, the amount due to Foresight Fund Managers Limited included within creditors was £nil (30 June 2016: £nil; 31 December 2016: £nil).

 

 

END

 





This announcement is distributed by Nasdaq Corporate Solutions (One Liberty Plaza, 165 Broadway, New York, NY 10006. Tel: +1 212 401 8700. www.nasdaqomx.com) on behalf of NASDAQ OMX Corporate Solutions clients. Source: Foresight VCT PLC, ECA Court, South Park, , Sevenoaks, TN13 1DU, , United Kingdom
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