Interim / Quarterly Report • Jun 30, 2011
Interim / Quarterly Report
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Unaudited Half-Yearly Financial Report
To provide private investors with attractive returns from a portfolio of investments in fast-growing, unquoted companies based in the United Kingdom. It is the intention to maximise tax-free income available to investors from a combination of dividends and interest received on investments and the distribution of capital gains arising from trade sales or flotations.
To combine greater security of capital than is normal within a VCT with the enhancement of investor returns created by the VCT tax benefits — income tax relief of 30% of the amount invested, and tax-free distribution of income and capital gains. The key objective of the Planned Exit Shares fund is to distribute a minimum of 110p per Share issued through a combination of tax-free income, buybacks and tender offers before the sixth anniversary of the closing date of the Offer.
To obtain VCT tax reliefs on subscriptions up to £200,000 per annum, a VCT investor must be a 'qualifying' individual over the age of 18 with UK taxable income. The tax reliefs for subscriptions from 6 April 2006 are:
| Chairman's Statement | 1 | Unaudited Income Statement | 11 |
|---|---|---|---|
| Investment Manager's Report | 2 | Unaudited Balance Sheet | 12 |
| Investment Summary | 4 | Unaudited Reconciliation of Movements | |
| Unaudited Half-Yearly Results and | in Shareholders' Funds | 12 | |
| Responsibility Statements | 8 | Unaudited Summary Cash Flow Statement | 13 |
| Unaudited Non-Statutory Analysis between | Notes to the Unaudited Half-Yearly Results | 14 | |
| Ordinary Shares and Planned Exit Shares Funds | 9 | Shareholder Information | 17 |
I am pleased to be able to report sound progress in the development of our investment portfolios.
The Company has two classes of shares (Ordinary Shares and Planned Exit Shares) and each class of share has its own portfolio of investments, the performances of which are more fully described in the Investment Manager's Report. In summary, during the period ended 30 June 2011, the net asset value of the Ordinary Share portfolio increased by 14.4%, after taking account of the 5.0p dividend paid on 17 June 2011, to 108.8p per share. The majority of the increase was generated by valuation increases in Autologic Diagnostics, Trilogy Communications, AppDNA and Alaric Systems. Further information on these companies can be found in the Investment Manager's Report. The net asset value of the Planned Exit Share portfolio increased by 1.3%, after taking account of the 3.0p dividend paid on 17 June 2011, to 93.7p per share.
Notwithstanding these positive signs, stock market sentiment as evidenced recently is fragile, significant macroeconomic uncertainties remain, and trading and credit conditions continue to be difficult in many sectors of the economy. Against this background Foresight Group continues to believe it important to adopt a cautious approach to managing the portfolio.
The Company's policy is whenever possible to maintain a steady flow of tax-free dividends, generated from income or from capital profits realised on the sale of investments. Notwithstanding our awareness of future uncertainty, encouraged by the flow of recent investment gains and income generated from loan stock, the Board paid a final dividend of 5.0p per new Ordinary Share for the year ended 31 December 2010 on 17 June 2011 and a final dividend of 3.0p per Planned Exit Share for the year ended 31 December 2010 on the same day.
Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital (IPEVC) valuation guidelines (September 2009) developed by the British Venture Capital Association and other organisations. Through these guidelines investments are valued, as defined, at 'fair value'. Ordinarily, unquoted investments will be valued at cost for a limited period following the date of acquisition, being the most suitable approximation of fair value unless there is an impairment or significant accretion in value during the period. Quoted investments and investments traded on AIM and PLUS (formerly OFEX) are valued at the bid price as at 30 June 2011. The portfolio valuations are prepared by Foresight Group and are subject to approval by the Board.
Following shareholder approval, the assets of Keydata (approximately £3.6 million) were acquired by the Company on 28 February 2011. A total of 6,463,504 Ordinary Shares (at a net asset value of 55.44p per Ordinary Share – prior to the Ordinary Share reconstruction) in Foresight VCT plc were issued as consideration to the shareholders of Keydata. Following the completion of the merger there were 54,004,889 Ordinary Shares in issue. Dependent upon the commercial success of its gasification project in Derby (now known as Clarke Power Services Limited), for which the Keydata assets were acquired, additional consideration may be payable to Keydata shareholders up to a maximum amount of £2.8 million on or shortly after 30 September 2013.
Clarke Power Services' project in Derby (3.0 MW of waste wood gasification) is progressing well with construction of the plant now largely complete. Testing and commissioning will be carried out over the next few months with first electricity output targeted for mid November 2011.
Also with shareholder approval, on 1 March 2011 the Ordinary Shares underwent a reconstruction such that the underlying net asset value (NAV) of each Ordinary Share was rebased to 100.0p. The reconstruction resulted in Ordinary Shareholders' holdings being adjusted by a ratio of 0.554417986 per Ordinary Share held at the close of business on 1 March 2011 and in 29,941,281 new Ordinary Shares being issued. The reconstruction of the Ordinary Share capital of Foresight VCT plc has not impacted the value of Shareholders' holdings.
I am pleased to report that the Company's enhanced buyback scheme proved to be popular with shareholders with 6,034,893 Ordinary Shares being tendered for the enhanced buyback at 100.0p per share, with the effect of releasing a further £1.8 million of income tax relief for shareholders.
As part of the transaction, 5,913,777 new Ordinary Shares were issued at 102.0p per share.
The Company announced alongside the enhanced buyback a small top-up offer of Ordinary Shares. The offer was open during March and April 2011 and 234,918 Ordinary Shares were issued at 100.0p per share.
On 20 June 2011 61,188 Ordinary Shares of 1.0 pence each in the Company were allotted under the Company's Dividend Reinvestment Scheme at 95.85p per share.
All of these share issues were under the new VCT provisions which commenced on 6 April 2006, namely: 30% upfront income tax relief which can be retained by qualifying investors if the shares are held for the minimum five year holding period.
As part of the Company's active buy-back programme, during the period, 1,422,000 Ordinary Shares were purchased for cancellation at a cost of £1,248,000, representing an average discount of approximately 12% to net asset value.
Following 14 years' service as a Director of Foresight VCT plc, Antony Diment retired from the Board on 26 May 2011.
I would like to thank Tony for all of his hard work in his role as a Director and Chairman of the Audit Committee since the Company's launch in 1997.
Following two years of economic fragility we are witnessing potential acquirers slowly returning to the market and this has been reflected in the increase in portfolio activity in terms of realisations over the last six months. Additionally, Foresight Group is seeing its deal flow of new investment opportunities increasing but we remain cautious about the economic outlook and the Manager will aim to invest only in new opportunities which are considered sufficiently robust and attractive. The Board and Investment Manager are hopeful that the positive current performance of the portfolio will translate into realisations that will, over the medium term, be reflected in further positive net asset value performance and continued distributions to shareholders.
Chairman Telephone: 01296 682 751 email: [email protected] 31 August 2011
As referred to in the Chairman's statement, the recent performance of a number of companies in the portfolio gives cause for optimism. However, equities and markets are displaying extreme volatility with the fundamentals remaining highly challenging and indicators broadly inconsistent. We continue to believe that consensus expectations do not fully reflect a scenario of slow growth for 2011 and that inflation could undermine prospects over coming months. Against this background, we are only looking at opportunities which are considered robust and attractive in valuation terms.
The performance of a number of portfolio companies continued to improve, reflecting growing demand and strong sales pipelines, most notably Autologic Diagnostics, Trilogy Communications, AppDNA and Alaric Systems.
Autologic Diagnostics (formerly Diagnos Holdings) develops and sells sophisticated automotive diagnostic software and hardware to independent mechanics and garages to allow them to service and repair vehicles. In the year ended 31 December 2010, it generated an operating profit of £2.7 million on sales of £9.3 million. The company is continuing to grow sales and profits in its current financial year.
Closed Loop Recycling continues to make solid operational, commercial and revenue progress with production rates at record levels and significantly improved plant reliability and consistency. An investment of £150,000 was made from the Ordinary Shares fund in the period to further upgrade its conveyor system. Product quality remains high and there is strong demand for all the recycled material it produces. The company continues to be affected by raw material quality which restricts throughput and yield, but is making progress in addressing this problem. It is also planning significant investment at the Dagenham site to increase capacity to meet the substantial demand for the cleaned and sorted output, which should be possible without adding significantly to its fixed overhead costs. Closed Loop Recycling is currently profitable and generating revenues in excess of £1.3 million per month.
Trilogy Communications is making strong progress, particularly in the defence sector where it announced a number of contract wins through partners such as Northrop Grumman and Raytheon. During 2010, Trilogy Communications was awarded the Queen's Award for Enterprise for International Trade and was also selected by UK Trade and Investment as an Exporter of the Year. The company is now growing strongly and repaid loans to the Ordinary Shares fund of £62,500 in March 2011. The outlook for the current year is positive, and the first few months of financial year 2011/12 have shown record trading results. For the year to February 2011, the company's audited accounts showed strong sales growth, with sales of £8.6 million and earnings before interest, tax, depreciation and amortisation of £1.2 million.
App-DNA has continued to achieve strong growth over the past six months. The company has set up subsidiaries in France and Australia in addition to its existing US operation, and is selling its market leading AppTitude software globally to large enterprises. The company recently won the award for "Best Desktop Transformation" at the Citrix Synergy event in San Francisco for the second year in a row. The company was also named by Everything Channel in their CRN Virtualization top 100 List.
Infrared Integrated Systems is seeing growth for its full range of solutions and services in North America, Europe and Asia. The company continues to develop innovative hardware and software solutions for people counting, queue monitoring and thermal imaging, and is exploring other markets for its products. The outlook for the current year is positive and the company is trading at record levels.
Alaric continues to perform well, enjoying strong demand Worldwide for its payment system software, principally credit card authorisation ("Authentic") and card fraud detection ("Fractals") software. Contracts have been won recently in the US, Mexico, Canada, Australia and New Zealand while a number of other promising contracts are in prospect, including in the Far East. Capacity to satisfy these orders is being met through continuing expansion of the office in Kuala Lumpur. Audited accounts for the year to 31 March 2011 showed significant growth in PBIT to £540k (NPBT of £419k) on £5.54 million sales, well ahead of budget. The budget for the current year to March 2012 shows substantial growth in sales and profitability.
@Futsal is one of the fastest growing indoor sports in the world with 30 million people currently playing this type of indoor football internationally. @Futsal's Swindon and Cardiff facilities are now fully operational and the third site in Birmingham has recently opened at which point a further £170,988 was provided from the Ordinary Shares fund to fund this expansion. Sales growth, however, is behind original expectations and progress towards profitability has been impacted as a result.
Silvigen received further funding of £83,336 to finance additional capital expenditure for its wood pellet plant which will enable increased production as well as provide additional working capital as the company builds its sales pipeline in the animal bedding and energy markets.
Land Energy has made good progress over the last six months, achieving positive EBITDA at a plant level for the period of January to March 2011. Demand continues to exceed supply at its Bridgend (Wales) wood pelleting plant – the further funding of £47,367 invested into Land Energy has financed capital expenditure and working capital at Bridgend to increase production as well as group working capital prior to the proposed merger with Silvigen. These two businesses both now operate in the same markets. It is expected that the merger will provide the enlarged group with a strong geographical footprint in the UK with access to a substantial volume of sales and waste wood feedstock suppliers.
With signs of increasing sales of Recruiter Account in late 2010, the Company invested a further £12,985 in SkillsMarket during the period to fund the operational costs associated with its turnaround strategy. Sales slowed appreciably however and were well behind budget during early 2011. As substantial further investment was required, the company's Board decided to accelerate a sales process. Despite considerable initial interest from a number of prospective purchasers, no offers were ultimately received and in consequence administrators were appointed on 18 May 2011.
Six follow-on investments were made from the Ordinary Shares fund totalling £835,995. These were smartFOCUS (£371,319), @Futsal (£170,988), Closed Loop Recycling (£150,000), Silvigen (£83,336), Land Energy (£47,367) and SkillsMarket (£12,985).
There were three realisations and three loan repayments totalling £6,859,275 in the period.
Foresight VCT's holding in smartFOCUS was sold to Francisco Partners for proceeds of £3,857,281 against an original cost of £1,076,539 generating a return of 3.6 times of original cost.
Actimax was sold to Synova Capital in April 2011 for total proceeds of £4.4 million. Foresight VCT's element of this was £1,953,215, a return of 3.6 times original cost of £546,668. A further payment of £166,048 was received during August 2011.
We took the opportunity to realise our entire holding in Ffastfill in the first six months of the year when the shares displayed underlying strength and we were able to exit at a price that represented a five year high for the business. This generated proceeds of £736,278.
Loan repayments were received from Camwood (£166,667), AppDNA (£83,333) and Trilogy Communications (£62,500) during the period.
One realisation was made from the Planned Exit Shares fund during the period. Foresight Luxembourg Solar 2 was sold to Foresight Solar VCT plc for original cost of £1,000,000, reflecting an independent third-party valuation.
The recovery in the underlying trading of many portfolio companies has benefited, to varying degrees, from the positive export conditions created by a weaker currency and reflects better than expected growth in portfolio companies' target markets. We remain reasonably optimistic about the current prospects and outlook for many portfolio companies, which continue to display strong order books and revenue and profit growth. This is tempered by continued challenging fundamentals and uncertainties that could lead to a prolonged period of low growth.
Foresight is actively pursuing a number of portfolio realisations across several market sectors to generate value and distributions for shareholders but M&A activity at the smaller company level is still limited. As the M&A market develops more momentum, we are confident that several portfolio companies across each of the Company's share classes could be attractive acquisition candidates.
Chief Investment Officer, Foresight Group
| 30 June 2011 | 31 December 2010 | ||||
|---|---|---|---|---|---|
| Amount | Amount | ||||
| Invested | Valuation | Invested | Valuation | ||
| Investment | £ | £ | Valuation Methodology | £ | £ |
| AppDNA Limited | 173,712 | 4,554,321 * | Discounted revenue multiple | 257,045 | 2,014,517 |
| Clarke Power Services Limited | 12,453,150 | 3,960,984 * | Asset basis | — | — |
| Autologic Diagnostics Holdings Limited | 750,000 | 3,068,256 * | Discounted earnings multiple | 750,000 | 2,362,596 |
| (formerly Diagnos Holdings Limited) | |||||
| Aquasium Technology Limited | 1,930,000 | 2,573,127 * | Discounted earnings multiple | 1,930,000 | 2,089,808 |
| Alaric Systems Limited | 1,473,372 | 2,033,016 * | Discounted revenue multiple | 1,473,372 | 2,033,016 |
| Trilogy Communications Limited | 825,000 | 1,855,989 * | Discounted earnings multiple | 887,500 | 1,999,486 |
| DCG Group Limited | 249,970 | 1,662,165 * | Discounted revenue multiple | 249,970 | 1,502,429 |
| Closed Loop Recycling Limited | 1,556,250 | 1,506,250 * | Price of recent funding round | 1,406,250 | 1,356,250 |
| Camwood Limited | 90,379 | 1,018,548 * | Discounted earnings multiple | 257,045 | 1,703,755 |
| Infrared Integrated Systems Limited | 250,005 | 626,367 * | Discounted earnings multiple | 250,005 | 478,789 |
| ANT plc (AIM listed) | 1,225,600 | 456,917 | Bid price | 1,225,600 | 496,649 |
| Silvigen Limited | 617,341 | 439,288 | Price of recent funding round | 534,005 | 439,288 |
| less impairment | |||||
| i-plas Group Limited | 480,362 | 413,695 | Price of recent funding round | 480,362 | 413,695 |
| less impairment | |||||
| iCore Limited | 750,000 | 375,000 | Cost less impairment | 750,000 | 375,000 |
| Corero Network Security plc | 1,635,616 | 324,910 | Bid price | 1,635,616 | 320,874 |
| (formerly Corero plc) (AIM listed) | |||||
| alwaysON Group Limited | 405,306 | 303,980 | Cost less impairment | 405,306 | 303,980 |
| Land Energy Limited | 288,882 | 288,882 | Cost | 241,515 | 241,515 |
| @Futsal Limited | 270,988 | 270,988 | Price of recent funding round | 100,000 | 100,000 |
| Rivington Street Holdings plc | 284,441 | 239,264 | Cost less impairment | 284,441 | 284,441 |
| Clarity Commerce Solutions plc | 674,900 | 201,400 | Bid price | 674,900 | 368,350 |
| (AIM listed) | |||||
| Aigis Blast Protection Limited | 860,325 | 173,194 | Discounted revenue multiple | 860,325 | 182,933 |
| Sarantel Group plc (AIM listed) | 3,690,167 | 95,296 | Bid price | 3,690,167 | 419,036 |
| Oxonica plc | 2,804,473 | 77,344 | Assets basis | 2,804,473 | 154,687 |
| DSM GeoData Limited | 700,000 | — | Nil value | 700,000 | — |
| Nanotecture Group plc | 1,000,000 | — | Nil value | 1,000,000 | — |
| SkillsMarket Limited | 1,827,316 | — | Nil value | 1,814,331 | 244,472 |
| Actimax plc | — | — | Sold | 546,668 | 2,059,200 |
| FfastFill plc (AIM listed) | — | — | Sold | 877,199 | 593,663 |
| smartFOCUS Group plc (AIM listed) | — | — | Sold | 705,220 | 2,019,723 |
| 37,267,555 | 26,519,181 | 26,791,315 | 24,558,152 |
* Top ten investments by value shown on pages 5 and 6.
| 30 June 2011 | 31 December 2010 | ||||
|---|---|---|---|---|---|
| Amount | Amount | ||||
| Invested | Valuation | Invested | Valuation | ||
| Investment | £ | £ | Valuation Methodology | £ | £ |
| DCG Group Limited | 750,000 | 810,245 * | Discounted revenue multiple | 750,000 | 797,247 |
| Closed Loop Recycling Limited | 566,667 | 566,667 * | Cost | 566,667 | 566,667 |
| Channel Safety Systems Group Limited | 565,000 | 565,000 * | Cost | 565,000 | 565,000 |
| i-plas Group Limited | 524,030 | 484,127 * | Price of recent funding round less impairment |
524,030 | 484,127 |
| Clarke Power Services Limited | 374,952 | 374,952 * | Cost | 374,952 | 374,952 |
| Foresight Luxembourg Solar 2 S.à.r.l. | — | — | Sold | 1,000,000 | 957,660 |
| 2,780,649 | 2,800,991 | 3,780,649 | 3,745,653 |
* All investments shown on page 7.
Top ten investments by value at 30 June 2011 are detailed below:
has developed software called Apptitude, which enables enterprises to automate the evaluation of the compatibility of their software estate for changes of operating system or for virtualisation. The company has offices in London, Chicago and Paris and has a blue chip customer base including BAE, Barclays, BT, Diageo and ExxonMobil. The company is currently performing strongly as companies increasingly consider migration to Windows 7 and virtualisation.
is carrying out its first project in Derby. This project is targeting 3.0MW of electricity generation from waste wood sourced from local suppliers. The project is being built in three phases with phase 1 currently under construction and expected to generate 0.5MW in October/November 2011, with the remaining two phases expected to be commissioned over the 12 month period post successful commissioning of phase 1. This project is being developed in conjunction with O-Gen UK Limited. A restructuring of Boyle Electrical Generation Limited, Burley Energy Limited, Clarke Power Services Limited, Cooke Generation Limited, Nevin Energy Resources and Spencer Energy Resources Limited was carried out in June 2011, reducing the companies down to Clarke Power Services only. This restructuring involved the transfer and hive up of all assets and liabilities into Clarke Power Services.
was founded in 1999 and develops and sells sophisticated automotive diagnostic software and hardware that enables independent mechanics, dealerships and garages to service and repair vehicles. As cars have become increasingly sophisticated and more reliant on electronic systems, mechanics need to be able to communicate to the in-car computer running the process or system, which in turn requires a diagnostic tool. Autologic Diagnostics supplies its 'Autologic' product for use with well-known car brands including Land Rover, BMW, Mercedes, Jaguar, VAG (VW, Audi, Skoda) and Porsche.
is principally engaged in the design, manufacture, sales and servicing of electron beam welding and vacuum furnace equipment. The group also provides component manufacturing and processing services utilising electron beam welding, laser machining, heat treating, abrasive water jet cutting, conventional welding and machining.
develops payment system software, principally credit card authorisation ("Authentic") and card fraud detection ("Fractals") software, which is sold to major financial institutions, card processors and, increasingly, major retailers worldwide. Alaric is enjoying strong growth and is continuing to win major new contracts. Contracts have been won recently in the USA, Mexico, Canada, Australia and New Zealand while a number of other promising contracts are in prospect, including in the Far East. Capacity to satisfy these orders is being met through continuing expansion of the office in Kuala Lumpur. Audited accounts for the year to 31 March 2011 showed significant growth in PBIT to £540k (NPBT of £419k) on £5.54 million sales, well ahead of budget, with cash at that date of £901k. The budget for the current year to March 2012 shows substantial growth in sales and profitability.
is a world class supplier of audio communications to the defence, emergency management, industrial and broadcast sectors. Trilogy counts some of the world's best known names in broadcast and defence among its customer base including the BBC, Sony, Radio France, Raytheon, Northrop Grumman and BAE. Trilogy's Mercury IP system continues to make good progress in the defence market, especially in the US.
is a provider of data storage and back-up solutions to corporates either remotely as a managed service or at customers' premises. The demand for Datapoint's services is driven by greater compliance requirements for retention and retrieval of data and the ever growing volume of electronic data produced by organisations. The company continues to build its managed service customer base and its recurring revenues. A mid-range service with multi-tenanted capability has been launched for re-sale by channel partners.
is the first plant in the UK to recycle waste PET and HDPE plastic bottles into food grade packaging material. The company continues to make solid operational, commercial and revenue progress with production rates at record levels and significantly improved plant reliability and consistency. Product quality remains high and there is strong demand for all the recycled material it produces. The company continues to be affected by raw material quality which restricts throughput and yield, but is making progress in addressing this problem. It is also planning significant investment at the Dagenham site to increase capacity to meet the substantial demand for the cleaned and sorted output, which should be possible without adding significantly to its fixed overhead costs. Closed Loop Recycling is currently profitable and generating revenues in excess of £1.3 million per month.
is the UK's leading application migration and change specialist. The company provides software, consultancy and implementation services to support Microsoft Windows application migration, for operating strategic upgrades and virtualisation as well as providing ongoing application management. Camwood provides strategic consulting programme management and project execution services.
manufactures infra-red arrays and sells cameras and thermal imagers incorporating these arrays. The company's products are focused on three markets: queue management, people counting and thermal imaging. The queue management product, which combines the infrared arrays with a software package, is targeted at major retail chains. The system improves the customer experience, reducing queue lengths, as well as enabling the supermarket to optimise staff deployment. The people counting products enable accurate measurement of flows of people, and are sold through a network of partners into a number of industries, including retail, leisure, transport and hospitality. The thermal imaging products, sold through a network of distributors, are used primarily for preventative maintenance. The company has made good progress in the US market.
is a provider of data storage and back-up solutions to corporates either remotely as a managed service or at customers' premises. The demand for Datapoint's services is driven by greater compliance requirements for retention and retrieval of data and the ever growing volume of electronic data produced by organisations. The company continues to build its managed service customer base and its recurring revenues. A mid-range service with multi-tenanted capability has been launched for re-sale by channel partners.
Investment Summary — Planned Exit Shares Portfolio
All investments at 30 June 2011 are detailed below:
is the first plant in the UK to recycle waste PET and HDPE plastic bottles into food grade packaging material. The company continues to make solid operational, commercial and revenue progress with production rates at record levels and significantly improved plant reliability and consistency. Product quality remains high and there is strong demand for all the recycled material it produces. The company continues to be affected by raw material quality which restricts throughput and yield, but is making progress in addressing this problem. It is also planning significant investment at the Dagenham site to increase capacity to meet the substantial demand for the cleaned and sorted output, which should be possible without adding significantly to its fixed overhead costs. Closed Loop Recycling is currently profitable and generating revenues in excess of £1.3 million per month.
specialises in the design, distribution, installation and service of fire detection systems, emergency lighting, Disability Discrimination Act ("DDA") products and nurse call systems. Demand for most of Channel Safety Systems' products and systems is driven by health and safety regulation and, increasingly, carbon reduction initiatives and legislation, which Channel Safety Systems addresses with its low energy LED emergency lighting range. Foresight backed an MBI of Channel Safety Systems in December 2010 with a total investment of £1.1 million from the Planned Exit fund.
is a well-established manufacturer of consumer and industrial products from recycled and waste plastics. It is well positioned in a growing market for recycled and sustainable goods that offer economic and environmental advantages. Based in Halifax, it plans to roll out multiple operations throughout the UK. Foresight funds have invested/committed £7.9 million to date, including £2.7 million in the last three months of 2010, which will significantly increase the company's capacity. This will enable it to meet the rapidly increasing demand for its industrial products in particular.
is carrying out its first project in Derby. This project is targeting 3.0MW of electricity generation from waste wood sourced from local suppliers. The project is being built in three phases with phase 1 currently under construction and expected to generate 0.5MW in October/November 2011, with the remaining two phases expected to be commissioned over the 12 month period post successful commissioning of phase 1. This project is being developed in conjunction with O-Gen UK Limited. A restructuring of Boyle Electrical Generation Limited, Burley Energy Limited, Clarke Power Services Limited, Cooke Generation Limited, Nevin Energy Resources and Spencer Energy Resources Limited was carried out in June 2011, reducing the companies down to Clarke Power Services only. This restructuring involved the transfer and hive up of all assets and liabilities into Clarke Power Services.
The principal risks faced by the Company can be divided into various areas as follows:
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 2010. A detailed explanation can be on found on page 16 of the Annual Report and Accounts which is available on www.foresightgroup.eu or by writing to Foresight Group at ECA Court, South Park, Sevenoaks, Kent, TN13 1DU.
In the view of the Board, there have been no changes to the fundamental nature of these risks, except for currency risk, 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.
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:
The Company's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Business Review in the 31 December 2010 annual report. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the Chairman's Statement, Business Review and Notes to the Accounts of the 31 December 2010 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 hedging activities; 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 despite the current uncertain economic outlook.
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 or reviewed by the auditors.
On behalf of the Board
John Gregory Chairman 31 August 2011
for the six months ended 30 June 2011
| Ordinary Shares Fund | Planned Exit Shares Fund | |||||
|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
|
| Realised gains on investments | — | 4,145 | 4,145 | — | — | — |
| Investment holding (losses)/gains | — | (23) | (23) | — | 55 | 55 |
| Unrealised loss on the value of derivatives | — | — | — | — | (35) | (35) |
| Income | 183 | — | 183 | 113 | — | 113 |
| Investment management fees | (68) | (204) | (272) | (7) | (22) | (29) |
| Other expenses | (208) | — | (208) | (31) | — | (31) |
| (Loss)/return on ordinary | ||||||
| activities before taxation | (93) | 3,918 | 3,825 | 75 | (2) | 73 |
| Taxation | 3 | — | 3 | (7) | 4 | (3) |
| (Loss)/return on ordinary | ||||||
| activities after taxation | (90) | 3,918 | 3,828 | 68 | 2 | 70 |
| Return/(loss) per share | (0.3)p | 11.0p | 10.7p | 1.1p | 0.0p | 1.1p |
at 30 June 2011
| Planned | ||
|---|---|---|
| Ordinary | Exit | |
| Shares Fund | Shares Fund | |
| £'000 | £'000 | |
| Non-current assets | ||
| Investments held at fair value through profit or loss | 26,519 | 2,801 |
| Current assets | ||
| Debtors | 1,028 | 306 |
| Derivative financial instruments | — | 12 |
| Money market securities and other deposits | 103 | 1,701 |
| Cash | 3,694 | 968 |
| 4,825 | 2,987 | |
| Creditors | ||
| Amounts falling due within one year | (126) | (1) |
| Net current assets | 4,699 | 2,986 |
| Net assets | 31,218 | 5,787 |
| Capital and reserves | ||
| Called-up share capital | 287 | 62 |
| Share premium account | 21,552 | 5,784 |
| Special distributable reserve | 10,583 | (54) |
| Capital redemption reserve | 344 | — |
| Revenue reserve | (262) | 160 |
| Capital reserve | 1,031 | (175) |
| Revaluation reserve | (2,317) | 10 |
| Equity shareholders' funds | 31,218 | 5,787 |
| Number of shares in issue | 28,694,271 | 6,179,833 |
| Net asset value per share | 108.8p | 93.7p |
Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2011
| Called-up | Share | Special | Capital | |||||
|---|---|---|---|---|---|---|---|---|
| share | premium | distributable | redemption | Revenue | Capital | Revaluation | ||
| capital | account | reserve | reserve | reserve | reserve | reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 January 2011 | 475 | 11,893 | 18,070 | 29 | (172) | (1,611) | (2,294) | 26,390 |
| Share reconstruction | (241) | — | — | 241 | — | — | — | — |
| Share issues in the period | 127 | 9,785 | — | — | — | — | — | 9,912 |
| Expenses in relation to share issues |
— | (126) | — | — | — | — | — | (126) |
| Repurchase of shares | (74) | — | (7,283) | 74 | — | — | — | (7,283) |
| Net realised gain on disposal of investments |
— | — | — | — | — | 4,145 | — | 4,145 |
| Investment holding losses | — | — | — | — | — | — | (23) | (23) |
| Dividends | — | — | — | — | — | (1,503) | — | (1,503) |
| Management fees charged to capital |
— | — | (204) | — | — | — | — | (204) |
| Revenue loss for the period | — | — | — | — | (90) | — | — | (90) |
| As at 30 June 2011 | 287 | 21,552 | 10,583 | 344 | (262) | 1,031 | (2,317) | 31,218 |
| As at 30 June 2011 | 62 | 5,784 | (54) | — | 160 | (175) | 10 | 5,787 |
|---|---|---|---|---|---|---|---|---|
| Revenue return for the period |
— | — | — | — | 68 | — | — | 68 |
| Tax credited to capital | — | — | — | — | — | 4 | — | 4 |
| Management fees charged to capital |
— | — | (22) | — | — | — | — | (22) |
| Dividends | — | — | — | — | — | (185) | — | (185) |
| Unrealised loss on the value of derivatives |
— | — | — | — | — | — | (35) | (35) |
| Investment holding gains | — | — | — | — | — | — | 55 | 55 |
| As at 1 January 2011 | 62 | 5,784 | (32) | — | 92 | 6 | (10) | 5,902 |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| capital | account | reserve | reserve | reserve | reserve | reserve | Total | |
| share | premium | distributable | redemption | Revenue | Capital | Revaluation | ||
| Called-up | Share | Special | Capital |
| Six months ended 30 June 2011 | Six months ended 30 June 2010 | Year ended 31 December 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | (unaudited) | (audited) | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Realised gains/(losses) on investments | — | 4,145 | 4,145 | — | (1,293) | (1,293) | — | (1,112) | (1,112) |
| Investment holding gains | — | 32 | 32 | — | 4,950 | 4,950 | — | 8,748 | 8,748 |
| Unrealised (loss)/gain on the value of derivatives | — | (35) | (35) | — | — | — | — | 25 | 25 |
| Income | 296 | — | 296 | 303 | — | 303 | 665 | — | 665 |
| Investment management fees | (75) | (226) | (301) | (50) | (149) | (199) | (113) | (339) | (452) |
| Other expenses | (239) | — | (239) | (200) | — | (200) | (355) | — | (355) |
| (Loss)/return on ordinary activities before taxation Taxation |
(18) (4) |
3,916 4 |
3,898 — |
53 — |
3,508 — |
3,561 — |
197 — |
7,322 — |
7,519 — |
| (Loss)/return on ordinary activities after taxation | (22) | 3,920 | 3,898 | 53 | 3,508 | 3,561 | 197 | 7,322 | 7,519 |
| Return/(loss) per share: Ordinary Share (restated) |
(0.3)p | 11.0p | 10.7p | 0.1p | 13.2p | 13.3p | 0.4p | 27.7p | 28.1p |
| Planned Exit Share | 1.1p | 0.0p | 1.1p | 0.7p | (0.1)p | 0.6p | 1.7p | (0.7)p | 1.0p |
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 other than the acquisitions of Keydata Income VCT 1 plc and Keydata Income VCT 2 plc. No operations were discontinued in the year.
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.
for the six months ended 30 June 2011
| As at | As at | As at | |
|---|---|---|---|
| 30 June | 30 June | 31 December | |
| 2011 | 2010 | 2010 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Non-current assets | |||
| Investments held at fair value through profit or loss | 29,320 | 22,663 | 28,304 |
| Current assets | |||
| Debtors | 1,238 | 2,075 | 1,383 |
| Derivative financial instruments | 12 | 85 | 47 |
| Money market securities and other deposits | 1,804 | 3,622 | 1,998 |
| Cash | 4,662 | 211 | 670 |
| 7,716 | 5,993 | 4,098 | |
| Creditors: | |||
| Amounts falling due within one year | (31) | (198) | (110) |
| Net current assets | 7,685 | 5,795 | 3,988 |
| Net assets | 37,005 | 28,458 | 32,292 |
| Capital and reserves | |||
| Called-up share capital | 349 | 539 | 537 |
| Share premium account | 27,336 | 17,715 | 17,677 |
| Special distributable reserve | 10,529 | 18,314 | 18,038 |
| Capital redemption reserve | 344 | 27 | 29 |
| Revenue reserve | (102) | (224) | (80) |
| Capital reserve | 856 | (1,786) | (1,605) |
| Revaluation reserve | (2,307) | (6,127) | (2,304) |
| Equity shareholders' funds | 37,005 | 28,458 | 32,292 |
| Net asset value per share: | |||
| Ordinary Share | 108.8p | 85.3p* | 100.1p* |
| Planned Exit Shares | 93.7p | 95.0p | 95.5p |
* Rebased due to Ordinary Shares reconstruction on 1 March 2011 using conversion ratio of 0.554417986.
| As at 30 June 2011 | 349 | 27,336 | 10,529 | 344 | (102) | 856 | (2,307) | 37,005 |
|---|---|---|---|---|---|---|---|---|
| Revenue loss for the period | — | — | — | — | (22) | — | — | (22) |
| Tax credited to capital | — | — | — | — | — | 4 | — | 4 |
| Management fees charged to capital |
— | — | (226) | — | — | — | (226) | |
| Dividends | — | — | — | — | — | (1,688) | — | (1,688) |
| Net realised gain on disposal of investments Investment holding gains Unrealised loss on the value of derivatives |
— — — |
— — — |
— — — |
— — — |
— — — |
4,145 — — |
— 32 (35) |
4,145 32 (35) |
| Repurchase of shares | (74) | — | (7,283) | 74 | — | — | — | (7,283) |
| Share issues in the period Expenses in relation to share issues |
127 — |
9,785 (126) |
— — |
— — |
— — |
— — |
— — |
9,912 (126) |
| Share reconstruction | (241) | — | — | 241 | — | — | — | — |
| As at 1 January 2011 | 537 | 17,677 | 18,038 | 29 | (80) | (1,605) | (2,304) | 32,292 |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| capital | account | reserve | reserve | reserve | reserve | Reserve | Total | |
| share | premium | distributable | redemption | Revenue | Capital | Revaluation | ||
| Share | Special |
for the six months ended 30 June 2011
| Six months | Six months | Year | |
|---|---|---|---|
| ended | ended | ended | |
| 30 June 2011 | 30 June 2010 | 31 December 2010 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Cash flow from operating activities | |||
| Investment income received | 261 | 102 | 374 |
| Deposit and similar interest received | 7 | 2 | 12 |
| Investment management fees paid | (293) | (98) | (480) |
| Secretarial fees paid | (41) | (59) | (118) |
| Other cash payments | (540) | (152) | (334) |
| Net cash outflow from operating activities and returns on investment | (606) | (205) | (546) |
| Taxation | — | — | — |
| Returns on investment and servicing of finance | |||
| Purchase of investments | (837) | (2,035) | (4,350) |
| Net proceeds on sale of investments | 7,875 | 20 | 775 |
| Net proceeds from deferred consideration | — | 19 | 20 |
| Net capital inflow/(outflow) from financial investment | 7,038 | (1,996) | (3,555) |
| Equity dividends (paid)/received | (1,629) | 11 | 11 |
| Management of liquid resources | |||
| Subscription to money market | — | (3,201) | (3,200) |
| Redemption from money market | 194 | 149 | 1,772 |
| 194 | (3,052) | (1,428) | |
| Financing | |||
| Proceeds of fund raising | 235 | 5,633 | 6,520 |
| Acquisition issue shares | 8 | — | — |
| Expenses of fund raising | — | (273) | (339) |
| Repurchase of own shares | (1,248) | (140) | (226) |
| (1,005) | 5,220 | 5,955 | |
| Increase/(decrease) in cash | 3,992 | (22) | 437 |
for the six months ended 30 June 2011
Following shareholder approval, the assets of Keydata (approximately £3.6 million) were acquired by the Company on 28 February 2011. A total of 6,463,504 Ordinary Shares (at an NAV of 55.44p per Ordinary Share – prior to the Ordinary Share reconstruction) in Foresight VCT plc were issued as consideration to the shareholders of Keydata. Following the completion of the merger there were 54,004,889 Ordinary Shares in issue. Dependent upon the commercial success of its gasification project in Derby, for which the Keydata assets were acquired, additional consideration may be payable to Keydata shareholders up to a maximum amount of £2.8 million on or shortly after 30 September 2013.
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 | Planned Exit Shares Fund | ||||
|---|---|---|---|---|---|
| Net | Number | Net | Number | ||
| Assets | of Shares | Assets | of Shares | ||
| £'000 | in Issue | £'000 | in Issue | ||
| 30 June 2011 | 31,218 | 28,694,271 | 5,787 | 6,179,833 | |
| 30 June 2010 | 22,585 | 47,741,385* | 5,873 | 6,179,833 | |
| 31 December 2010 | 26,390 | 47,541,385* | 5,902 | 6,179,833 |
* The net asset values per share on page 12 have been rebased due to the Ordinary Shares reconstruction.
The weighted average number of shares for the Ordinary Shares and Planned Exit Share funds used to calculate the respective returns are shown in the table below.
| Ordinary | Planned Exit | |
|---|---|---|
| Shares | Shares | |
| Fund | Fund | |
| Six months ended 30 June 2011 | 35,674,443 | 6,179,833 |
| Six months ended 30 June 2010 | 26,611,808* | 4,213,657 |
| Year ended 31 December 2010 | 26,528,417* | 5,407,639 |
* The weighted average number of shares has been adjusted to take account of the Ordinary Shares reconstruction.
Earnings for the period should not be taken as a guide to the results for the full year.
| Six months | Six months | Year | |
|---|---|---|---|
| ended | ended | ended | |
| 30 June 2011 | 30 June 2010 | 31 December 2010 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Loan stock interest | 285 | 300 | 652 |
| Overseas based Open Ended Investment Companies ("OEICs") | 11 | 3 | 13 |
| Bank deposits | — | — | — |
| Other | — | — | — |
| 296 | 303 | 665 |
for the six months ended 30 June 2011
| Company | Quoted | Unquoted | Total |
|---|---|---|---|
| £'000 | £'000 | £'000 | |
| Book cost as at 1 January 2011 Investment holding (losses)/gains |
9,095 (4,592) |
21,478 2,323 |
30,573 |
| (2,269) | |||
| Valuation at 1 January 2011 | 4,503 | 23,801 | 28,304 |
| Movements in the period: | |||
| Cost of investments acquired | — | 12,453 | 12,453 |
| Investment holding losses of investments acquired | — | (8,493) | (8,493) |
| Purchases at cost | 371 | 466 | 837 |
| Disposal proceeds | (4,594) | (3,281) | (7,875) |
| Realised gains | 2,640 | 1,422 | 4,062 |
| Investment holding (losses)/gains | (1,602) | 1,634 | 32 |
| Valuation at 30 June 2011 | 1,318 | 28,002 | 29,320 |
| Book cost at 30 June 2011 | 7,512 | 32,538 | 40,050 |
| Investment holding losses | (6,194) | (4,536) | (10,730) |
| Valuation at 30 June 2011 | 1,318 | 28,002 | 29,320 |
| Ordinary Shares | Quoted | Unquoted | Total |
| £'000 | £'000 | £'000 | |
| Book cost as at 1 January 2011 | 9,095 | 17,697 | 26,792 |
| Investment holding (losses)/gains | (4,592) | 2,358 | (2,234) |
| Valuation at 1 January 2011 | 4,503 | 20,055 | 24,558 |
| Movements in the period: | |||
| Cost of investments acquired | — | 12,453 | 12,453 |
| Investment holding losses of investments acquired | — | (8,493) | (8,493) |
| Purchases at cost | 371 | 466 | 837 |
| Disposal proceeds | (4,594) | (2,281) | (6,875) |
| Realised gains | 2,640 | 1,422 | 4,062 |
| Investment holding (losses)/gains | (1,602) | 1,579 | (23) |
| Valuation at 30 June 2011 | 1,318 | 25,201 | 26,519 |
| Book cost at 30 June 2011 | 7,512 | 29,757 | 37,269 |
| Investment holding losses | (6,194) | (4,556) | (10,750) |
| Valuation at 30 June 2011 | 1,318 | 25,201 | 26,519 |
Deferred consideration of £83,000 was also recognised by the Ordinary Shares fund in the period.
| Planned Exit Shares | Quoted £'000 |
Unquoted £'000 |
Total £'000 |
|---|---|---|---|
| Book cost as at 1 January 2011 | — | 3,781 | 3,781 |
| Investment holding losses | — | (35) | (35) |
| Valuation at 1 January 2011 | — | 3,746 | 3,746 |
| Movements in the period: | |||
| Disposal proceeds | — | (1,000) | (1,000) |
| Investment holding gains | — | 55 | 55 |
| Valuation at 30 June 2011 | — | 2,801 | 2,801 |
| Book cost at 30 June 2011 | — | 2,781 | 2,781 |
| Investment holding gains | — | 20 | 20 |
| Valuation at 30 June 2011 | — | 2,801 | 2,801 |
for the six months ended 30 June 2011
Foresight Group, as investment Manager of the Company, is considered to be a related party by virtue of its management contract with the Company. During the period, services of a total value of £301,000 (30 June 2010: £199,000; 31 December 2010: £452,000) were purchased by the Company from Foresight Group. At 30 June 2011, the amount due from Foresight Group was £5,000.
Foresight Fund Managers Limited, as Secretary of the Company and as a subsidiary of Foresight Group, is also considered to be a related party of the Company. During the period, services of a total value of £50,000 excluding VAT (30 June 2010: £50,000; 31 December 2010: £100,000) were purchased by the Company from Foresight Fund Managers Limited. At 30 June 2011, the amount due to Foresight Fund Managers Limited included within creditors was £3,000 (excluding VAT).
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.
Shareholders who wish to have dividends paid directly into their bank account rather than by cheque to their registered address can complete a Mandate Form for this purpose. Mandates can be obtained by telephoning the Company's registrar, Computershare Investor Services plc (see back cover for details).
The Company's Ordinary Shares and Planned Exit Shares are listed on the London Stock Exchange. The mid-price of the Company's Ordinary and Planned Exit Shares is given daily in the Financial Times in the Investment Companies section of the London Share Service. Share price information can also be obtained from many financial websites.
Communications with shareholders are mailed to the registered address held on the share register. In the event of a change of address or other amendment this should be notified to the Company's registrar, Computershare Investor Services plc, under the signature of the registered holder.
The Company's Ordinary and Planned Exit Shares can be bought and sold in the same way as any other quoted company on the London Stock Exchange via a stockbroker. The primary market maker for Foresight VCT plc is Singer Capital Markets.
Investment in VCTs should be seen as a long-term investment and Shareholders selling their shares within five years of original purchase may lose any tax reliefs claimed. Investors who are in any doubt about selling their shares should consult their independent financial adviser.
Please call Foresight Group (see details below) if you or your adviser have any questions about this process.
| April 2012 | Announcement of preliminary results for the year ending 31 December 2011. |
|---|---|
| April 2012 | Posting of the annual report for the year ending 31 December 2011. |
| May 2012 | Annual General Meeting. |
| August 2012 | Announcement of Half-Yearly Results for the six months ending 30 June 2011. |
As part of our investor communications policy, shareholders can arrange a mutually convenient time to come and meet the Company's investment management team at Foresight Group. If you are interested please call Foresight Group (see details below).
Please contact Foresight Group for any queries regarding Foresight VCT plc:
| Telephone: | 01732 471800 |
|---|---|
| Fax: | 01732 471810 |
| e-mail: | [email protected] |
| website: | www.foresightgroup.eu |
Foresight VCT plc is managed by Foresight Group which is authorised and regulated by the Financial Services Authority. Past performance is not necessarily a guide to future performance. Stock markets and currency movements may cause the value of the investments and the income from them to fall as well as rise and investors may not get back the amount they originally invested. Where investments are made in unquoted securities and smaller companies, their potential volatility may increase the risk to the value of, and the income from, the investment.
John Gregory (Chairman) Peter Dicks Gordon Humphries Antony Diment (resigned 26 May 2011)
Foresight Fund Managers Limited ECA Court South Park Sevenoaks TN13 1DU
Foresight Group ECA Court South Park Sevenoaks TN13 1DU
KMPG Audit Plc Saltire Court 20 Castle Terrace Edinburgh EH1 2EG
Lloyds TSB plc Midland and North Wales Regional Commercial Services Office 123 Colmore Row Birmingham B3 2DL
No.1 Colmore Square Birmingham B4 6AA
Computershare Investor Services plc PO Box 82 The Pavilions Bridgwater Road Bristol BS99 6ZZ
03421340
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