REG-Foresight VCT PLC : Half-yearly report <Origin Href="QuoteRef">FTV.L</Origin>
31/08/2017 17:10
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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 (275) 9,514 9,239
activities before taxation
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 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
30 June 2017
(Unaudited) 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 292 10,250 10,542 1,226 2,482 3,708 1,786 3,416 5,202
activities before
taxation
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 11,3Recent news on Foresight VCT
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