Interim / Quarterly Report • Jun 30, 2019
Interim / Quarterly Report
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UNAUDITED HALF-YEARLY FINANCIAL REPORT 30 JUNE 2019
Foresight VCT plc is a Venture Capital Trust aiming to provide from a portfolio of investments in fast growing, unquoted UK companies.
Foresight Group is always keen to hear from investors. If you have any feedback about the service you receive or any queries relating to Foresight VCT plc, please contact the Investor Relations team:
InvestorRelations@ foresightgroup.eu
Annual and Half-Yearly Reports, as well as quarterly Factsheets and information on new investments, can be viewed online.
In line with the Manager's ESG policies, the Board wish to offer shareholders the opportunity to receive communications electronically. Please refer to the letter alongside this report which details the various options.
As part of the Manager's investor communications policy, investor forums are held throughout the year. Shareholders can also arrange a mutually convenient time to meet the Company's investment management team at Foresight Group. Please contact Investor Relations if you are interested.
We respect your privacy and are committed to protecting your personal data. If you would like to find out more about the measures the Manager takes in processing your personal information, please refer to the privacy policy, which can be found at http://www. foresightgroup.eu/privacycookies/
| Annual Results to 31 December 2019 | April 2020 |
|---|---|
| Annual General Meeting | May 2020 |
| Interim Results to 30 June 2020 | August 2020 |
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 contacting the Company's registrar, Computershare Investor Services plc.
Changes to the terms and conditions of the Dividend Reinvestment Scheme took effect on 8 April 2019. Details of the new terms were sent to participants of the Scheme and are available on Foresight Group's website.
Investors can manage their shareholding online using Investor Centre, Computershare's secure website. Shareholders just require their Shareholder Reference Number (SRN), which can be found on any communications previously received from Computershare, to access the following:
Holding Enquiry Balances l Values History l Payments l Reinvestments
Payments Enquiry Dividends l Other payment types
Address Change Change registered address to which all communications are sent
Bank Details Update Choose to receive dividend payments directly into your bank account instead of by cheque
Outstanding Payments Reissue payments using our online replacement service
Downloadable Forms Dividend mandates l Stock transfer l Dividend reinvestment Change of address
The Company's shares are listed on the London Stock Exchange. Share price information is available on Foresight Group's website and can also be obtained from many financial websites.
The Company's 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 Panmure Gordon & Co.
Investment in VCTs should be seen as a long-term investment and shareholders selling their shares within five years of original subscription may lose any tax reliefs claimed. Investors who are in any doubt about selling their shares should consult their independent financial adviser.
Please contact Foresight Group if you or your adviser have any questions about this process.
| FINANCIAL HIGHLIGHTS Key Metrics |
2 2 |
|
|---|---|---|
| CHAIRMAN'S STATEMENT | 3 | |
| MANAGER'S REVIEW Portfolio Summary Top Ten Investments Portfolio Overview |
6 10 16 |
|
| GOVERNANCE Unaudited Half-Yearly Results and Responsibilities Statements |
17 | |
| FINANCIAL STATEMENTS Unaudited Income Statement Unaudited Balance Sheet Unaudited Reconciliation of Movements in Shareholders' Funds Unaudited Cash Flow Statement Notes to the Unaudited Half-Yearly Results |
18 19 19 20 21 |
|
| GLOSSARY OF TERMS FCA Information |
23 24 |
CORPORATE INFORMATION 25
Total Net Assets as at 30 June 2019 Dividend paid 3 May 2019
Uplift in Portfolio Value in period to 30 June 2019
£4.8m
£132.3m
| KEY METRICS | 30 June 2019 |
31 December 2018 |
|---|---|---|
| Total net assets | £132.3m | £136.7m |
| Net asset value per share | 75.4p | 78.1p |
| Net asset value total return* | 220.8p | 219.9p |
| Share price | 65.8p | 68.5p |
| Share price total return*^ | 217.1p | 216.2p |
| Dividends paid in the period^ | 5.0p | 5.0p |
| Dividend yield based on share price | 7.6% | 7.3% |
| Ordinary Shares in issue | 175,481,093 | 175,051,026 |
*Based on an original 100.0p invested at launch in 1997.
| 30 June 2019 |
31 December 2018 |
|
|---|---|---|
| Discount to NAV^ | 12.7% | 12.3% |
| Average discount on buybacks^ | 10.0% | 10.1% |
| Shares bought back during the period under review | 1,546,316 | 2,622,352 |
| Shares issued under the dividend reinvestment scheme | 1,976,383 | 2,071,401 |
| Increase in net asset value during period (after adding back dividends)^ | 2.9% | 3.9% |
| Ongoing charges ratio | 2.3% | 2.1% |
^Definitions of these Alternative Performance Measures (APMs) can be found in the Glossary on page 23.
John Gregory Chairman of Foresight VCT plc
I am pleased to present the Unaudited Half-Yearly Financial Report for Foresight VCT plc for the period ended 30 June 2019.
The Directors, together with the Manager, continue to pursue a strategy for the Company which includes the following four key objectives:
During the period ended 30 June 2019 the NAV per share rose by 2.3p, an increase of 2.9%. However, following the payment of a 5.0p per share dividend on 3 May 2019, which is detailed below, the NAV of the Company decreased from £136.7 million at 31 December 2018 to £132.3 million as at 30 June 2019.
At 30 June 2019 the cash resources of the Company were £19.8 million and in line with the current strategy, the Directors will give consideration to the benefits which might arise from further fund raising in the coming months.
The interim dividend of 5.0p per share was paid on 3 May 2019 based on an ex-dividend date of 11 April 2019, with a record date of 12 April 2019. The cost of this dividend was a total of £8.8 million, including shares allotted under the dividend reinvestment scheme.
The Company has achieved or exceeded its target of paying an annual dividend of at least 5.0p per share
for each of the past nine years. Since establishing the current dividend strategy major changes have taken place to the VCT rules and, as I have highlighted in recent Statements to Shareholders, these have been intended to shift investment into earlier stage, higher risk companies. By their nature these companies normally take longer to mature and, though eventual returns should be similar, the Board anticipates that for the coming few years enhancement to investment values, realisations and income will all be more volatile. As a consequence, although the total amount of distributions over the longer term could be similar, the Board believes that it would be prudent to move the dividend policy towards a targeted annual dividend yield of 5% of NAV per annum. This should be enhanced by additional 'special' dividends as and when particularly successful portfolio exits are made.
The total return per share from an investment made five years ago would be 12.6%, which is materially below the target return set by the Directors, and it is the future achievement of this target that is at the centre of the Company's current and future portfolio management strategy.
A detailed analysis of the investment portfolio performance over the period is given in the Manager's Review.
Before the payment of dividends, the Company's NAV increased in the period by £4.4 million. The Board believes that this reflects the benefit of the enlarged and diversified portfolio of qualifying investments which the Manager has built up over the past few years. The Company started the current year with 85% of its assets invested in a range of unquoted growth capital investments; the Board and Manager believe that, in aggregate, these investments will continue to mature and should help improve the future rate of growth in NAV.
During the period under review the Manager completed four new VCT qualifying investments amounting to £9.0 million. Details of each of these new portfolio companies can be found in the Manager's Review.
The Manager expects that the current pipeline of opportunities should support completion of a number of additional new investments during the remainder of the current year.
The Board is aware that Foresight 4 VCT plc ('Foresight 4') has over the past two years raised a considerable amount of new money, much of which needs to be invested in the near future. The Company and Foresight 4 have the same Manager and share similar investment policies. The Board closely monitors the extent and nature of the pipeline of investment opportunities and is reassured by the Manager's confidence in being able to increase the level of new investments without compromising quality during 2019 and beyond, so as to be in a position to satisfy the investment needs of both the Company and Foresight 4.
During the period the Company repurchased 1.5 million shares for cancellation at an average discount of 10.0%. The Board and the Manager consider that the ability to offer to buy back shares at a target discount of approximately 10% is fair to both continuing and selling shareholders and is an appropriate way to help underpin the discount to NAV at which the shares trade.
Share buybacks are timed during the year taking account of the Company's closed periods. These will generally take place, subject to demand, during the following times of year:
Yearly Financial Report has been published; and
• December, prior to the end of the financial year.
is an amount equal to 2.0% of net assets, excluding cash balances above £20 million, which are charged at a reduced rate of 1.0%. This has resulted in ongoing charges for the period ended 30 June 2019 being 2.3% of net assets, which is at the lower end of the range when compared to competitor VCTs.
Since March 2017, coinvestments made by the Manager and individual members of Foresight Group's private equity team have totalled £0.6 million alongside the Company's investments of £41.4 million. Under the terms of the Incentive Arrangements, the 'Total NAV Return Hurdle' has not yet been achieved and no performance incentive payment is due.
The Board continues regularly to review its own performance and undertakes succession planning to maintain an appropriate level of independence, experience, diversity and skills in order to be in a position to discharge all its responsibilities. There is no present intention to alter the composition of the Board and the first planned change is scheduled to take effect during 2021.
As part of its commitment to high quality investor relations, Foresight Group continues to host its popular investor forums. In addition to an annual event in London, several regional investor forums have been or will be held around the country. Details of regional events will be sent to Shareholders resident in the locality as and when they are organised.
The Board is offering shareholders the opportunity to elect the method by which they receive shareholder communications in the future. Details of this are included in the letter enclosed with this report. The Board believes that, in addition to promoting sustainability, a shift towards electronic communications will result in cost savings for the Company.
The Board regularly reviews the Company's ongoing costs and launched a tender for its audit contract following the signing of the 2018 Annual Report and Accounts. The previous auditor, KPMG LLP, was invited to tender alongside several other firms. Following this competitive tender process, I am pleased to confirm that Deloitte LLP have been appointed as company auditor for the year ending 31 December 2019. The Board would like to thank KPMG for their service over the past eight years. As announced earlier today, KPMG's section 519 statement will be enclosed with this report.
The persisting uncertainty over Brexit and worrying indicators for various areas of world trade are unhelpful for business in general. Foresight VCT invests primarily in developing companies which by their nature benefit from general economic growth, and the current environment places additional demands upon them and their management teams. Foresight Group's private equity team is well aware of the management and business needs of each of the companies within the investment portfolio and is working closely with them to ensure that they are able to make progress during these testing times. The Board and the Manager are optimistic that the existing portfolio has potential to grow further during the current year and beyond and that the present pipeline of potential investments includes some attractive opportunities.
Chairman Telephone 01296 682751 Email: [email protected] 30 August 2019
During the period, the portfolio saw an uplift in valuation of £4.8 million
Foresight VCT plc Unaudited Half-Yearly Financial Report 30 June 2019 5
The Company has appointed Foresight Group CI Limited as its manager ("The Manager") to provide investment management and administration services. Foresight Group CI Limited has appointed Foresight Group LLP to be its investment adviser. The Manager has also delegated secretarial, accounting and other administration services to Foresight Group LLP.
References to "the Manager" throughout this report refer to the activities of Foresight Group CI Limited and include the activities of Foresight Group LLP when acting as the Manager's investment adviser and administrative delegate.
We were pleased to deliver an uplift in portfolio value of £4.8 million in the period, although NAV was reduced by payment of an £8.8 million dividend and performance was therefore behind target. Good progress was made in regards new investments with four completed in the six-month period, deploying £9.0 million. We continue to manage the Company's resources to ensure sufficient liquidity for new and follow-on investments, dividends and regular buybacks, with the Company repurchasing 1.5 million shares at an average discount of 10% in the period under review.
As the portfolio mix evolves in line with the new VCT rules we believe the Board's new target dividend of 5% of NAV per annum, enhanced by the opportunity for 'special' dividends following successful portfolio exits, more appropriately reflects likely returns from the underlying portfolio.
As at 30 June 2019 the Company's portfolio comprised 42 investments with a total cost of £85.7 million and a valuation of £112.8 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 10 to 14.
The Company invested a total of £9.0 million during the first six months of 2019. This included Clubspark, a sports management software company, Steamforged Games, a developer and retailer of tabletop games, Fourth Wall Creative, a technology-led sports merchandising business and most recently Ten Health & Fitness, a boutique group of health and fitness studios.
In January 2019 the Company made a c.£1.3 million investment into Sportlabs Technology Limited, trading as ClubSpark, a specialist software company providing sports management software to sports clubs, venues, coaches and participants. ClubSpark was founded in 2012 by two ex-Lawn Tennis Association employees who spotted an opportunity to develop a platform to manage operations for the LTA member clubs. The investment will be used to establish an international presence, enhance the platform and expand into new sports markets.
In March 2019 the Company invested c.£2.4 million in Steamforged Games, a developer and retailer of tabletop games with a portfolio of miniature role playing, board and card games. Founded in 2014, Steamforged Games has successfully carved out a niche in the market developing tabletop games based on popular video game titles, as well as their own original content. The investment will be used to fund growth through product development and international expansion.
The Company invested c.£3.0 million in Fourth Wall Creative, a technology-led sports merchandising business. Founded in 2010, their core business is the design and distribution of membership welcome packs on behalf of football clubs. The investment will fund growth through the development of new services, expanding the customer base and exploring other sports opportunities.
In June 2019 the Company invested c.£2.4 million in Ten Health, a group of boutique fitness studios offering a range of services including physiotherapy, massage therapy and fitness classes. Founded in 2007, Ten Health was developed to bridge the gap in the market between traditional healthcare and mainstream fitness. The investment will be used to further develop Ten Health's non-fitness services and to support a roll-out of new studios.
There have been no follow-on investments during the six months to 30 June 2019.
Foresight Group continues to see a strong pipeline of potential investments and has a number of opportunities under exclusivity or in due diligence. Our investment team currently consists of 24 experienced private equity professionals operating from six offices in the UK, due to be expanded to seven later in 2019. We review nearly 1,500 business plans of potential investee companies per year, with an increasing number of prospects originated directly by our investment team. This approach allows us to seek off-market opportunities which are often better value as there is less competition in the process.
During the first half of 2019 we are on track to review a record number of businesses thanks to our expanding regional footprint. The Company focuses on SMEs in all sectors across the UK, seeking funding of £1-5 million.
At 30 June 2019, the Company had cash balances of £19.8 million, which will be used to fund new and follow-on investments, buybacks and running expenses. The Company remains well positioned to continue pursuing the potential investment opportunities in the pipeline.
The Business Advisory Limited repaid a £45,000 loan in the period. Other than this there have been no exits during the six months to 30 June 2019. Foresight Group continues to engage with a range of potential acquirers of several portfolio companies, with demand for these high growth businesses demonstrated by both private equity and trade buyers.
In May 2019 LGDA Limited (formerly Autologic Diagnostics Group Limited) was dissolved, realising a loss of £3,782,272. The investment in Autologic had been valued at £nil since 2017. This loss results from the transfer from unrealised to realised reserves and has no impact on NAV in the current period.
Overall, the value of unquoted investments held rose to £112.8 million, driven by £9.0 million of deployment and an increase in the value of existing investments by £4.8 million. Material changes in valuation, defined as increasing or decreasing by
£1.0 million or more since 31 December 2018, are detailed below. Updates on these companies are included below, or in the Top Ten Investments section on pages 10 to 14.
| Company | Valuation (£) | Valuation Change (£) |
|---|---|---|
| FFX Group Limited | 7,408,267 | 2,320,670 |
| Specac International Limited | 6,315,005 | 1,267,684 |
| Ixaris Systems Limited | 5,580,716 | 1,017,326 |
| Datapath Group Limited | 7,782,267 | (1,027,677) |
| Online Poundshop Limited | 933,187 | (1,041,399) |
| Powerlinks Media Limited | 411,358 | (1,129,666) |
Online retailer Poundshop has had a soft period of trading primarily due to the seasonality of their business combined with unusually hot weather and a reduced level of stock. Sales are down, however management are working on improving gross margins and their cash management to reduce further losses.
PowerLinks Media, a real-time trading platform for native digital advertisements, has converted several large new clients over the past six months. Sales however remain behind expectations. To help fund growth, PowerLinks Media undertook a small private capital raise in Q2 and will continue to focus on managing its cost base.
There remains uncertainty around the UK's withdrawal from the EU and it is likely that economic growth will stay subdued, or even slip into negative territory, over the coming year. Generally, the business environment remains uncertain with the Bank of England keeping interest rates low and with employment still at record levels. This was reflected through muted levels of UK consumer confidence in July, and this is anticipated to fall again in August due to rising concerns over a no-deal Brexit. The Bank of England also cut its outlook for growth in 2020 to 1.3%, from a previous projection of 1.6%. There is a likely period of volatility ahead, nonetheless Foresight Group remains positive about the prospects for the Company's diversified portfolio. We continue to see encouraging levels of activity from smaller UK companies seeking growth capital, as well as from potential acquirers of portfolio companies. Your investment management team remains focused on targeting companies in markets with sound fundamentals, with attractive growth attributes and strong management teams.
Foresight Group has undertaken a further review of the impact of Brexit on the investment portfolio,
attempting to identify and mitigate potential risks that could arise as a result of Brexit, as well as identifying opportunities that could result from it. Given the lack of clarity on timing or type of Brexit and the relatively limited resources available to small companies, mitigation planning is clearly challenging. However, given the diverse nature of businesses in the portfolio, with a combination of UK-centric businesses and companies that are net importers/net exporters from and to the EU and the rest of the world, Foresight Group remains confident the Company is reasonably well positioned to deal with potential volatility. Nevertheless, the investment team is scenario planning for all eventual outcomes. We will continue to monitor investments closely and adapt to market changes to ensure the Company's portfolio is well-placed to deliver returns to its investors.
Head of Private Equity Foresight Group 30 August 2019
I'm thrilled to be working with Foresight Group to continue the growth of Mowgli. I feel passionately about offering healthy, authentic Indian street food to market. Foresight Group's expertise in growing businesses, alongside our recently appointed new recruits, will allow us to expand into new geographies.
Manager's Review
Nisha Katona, Founder, Mowgli
Foresight VCT plc Unaudited Half-Yearly Financial Report 30 June 2019 9
By value as at 30 June 2019
Datapath is a UK manufacturer of multiscreen computer graphics cards and video capture hardware, specialising in video wall and data wall technology.
Datapath continued to generate material profits and build its cash position in the year ended 31 March 2019. The company has invested heavily in new product development and its sales channels, including a new US sales team. We are now beginning to see traction in the US with sales growth tracking ahead of Europe and Asia. Gross margin levels remain ahead of prior year, which has primarily been driven by increased revenues from software.
| Initial Investment* | September 2007 |
|---|---|
| Amount invested (£)* | 1,000,000 |
| Accounting cost (£)** | 7,563,365 |
| Valuation (£) | 7,782,267 |
| Basis of valuation | Discounted earnings multiple |
| Equity held (%) | 12.9% |
*The amount and date of initial investment by Foresight 2 VCT plc ("F2").
**The accounting cost reflects the valuation of the F2 investment in Datapath at the point it was transferred from F2 to the Company as part of the merger in December 2015.
FFX is a multi-channel supplier of high-quality hand tools, power tools and accessories, fixings, fasteners and general building products.
FFX continues to trade strongly, with revenue and EBITDA up significantly compared to prior year, and comfortably ahead of budget. The direct sales team has grown to six people. The team consistently delivers their targets, with the new marketing channels having a noticeable impact on sales.
SECTOR: BUSINESS SERVICES
| Initial Investment | September 2015 |
|---|---|
| Amount invested (£)* | 2,676,426 |
| Accounting cost (£)** | 2,676,426 |
| Investment value (£) | 7,408,267 |
| Basis of valuation | Discounted earnings multiple |
| Equity held (%) | 33.1% |
*Including the amount of initial investment by F2.
**The accounting cost includes the value at which F2's holding was transferred to the Company as part of the merger in December 2015.
Specac International is a leading manufacturer of high specification sample analysis and preparation equipment used in testing and research laboratories worldwide.
Specac has had a strong period of trading mainly driven by higher sales volumes and higher than budgeted gross margins. There have been some recent disruptions due to the office relocation in May, nevertheless the order book remains healthy and in line with budget.
SECTOR: INDUSTRIALS & MANUFACTURING
| Initial Investment | April 2015 |
|---|---|
| Amount invested (£) | 1,345,000 |
| Accounting cost (£) | 1,300,000 |
| Valuation (£) | 6,315,005 |
| Basis of valuation | Discounted earnings multiple |
| Equity held (%) | 39.2% |
TFC Europe is one of Europe's leading suppliers of fixing and fastening products to customers across a wide range of industries, including aerospace, automotive, oil & gas and mechanical engineering.
TFC continues to perform well, with sales tracking slightly ahead of budget for the year. The company is exposed to the macroeconomic environment and we expect some volatility in trading over the next 12 months. Management remain focused on their plan for organic growth and Foresight Group are working closely with the new Chairman to execute the strategy.
SECTOR: INDUSTRIALS & MANUFACTURING
| Initial Investment* | March 2007 |
|---|---|
| Amount invested (£)* | 939,092 |
| Accounting cost (£)** | 3,614,612 |
| Investment value (£) | 5,829,935 |
| Basis of valuation | Discounted earnings multiple |
| Equity held (%) | 26.7% |
*The amount and date of initial investment by F2.
**The accounting cost reflects the valuation of the F2 investment in TFC at the point it was transferred from F2 to the Company as part of the merger in December 2015.
IXARIS SYSTEMS LIMITED www.ixaris.com LONDON
Ixaris is a payments platform enabling efficient global payments, targeted in particular at the travel sector.
The company continues to build traction in the travel sector and is now entirely focused on the payments platform business, which grew by over 70% during 2018 and processed over \$2bn of payments during the year. A number of key strategic relationships are helping to stimulate growth, with several new agreements in the pipeline. *The amount and date of initial investment by F2.
SECTOR: CONSUMER & LEISURE
| Initial Investment* | March 2006 |
|---|---|
| Amount invested (£)* | 822,858 |
| Accounting cost (£)** | 2,266,036 |
| Investment value (£) | 5,580,716 |
| Basis of valuation | Discounted revenue multiple |
| Equity held (%) | 5.6% |
**The accounting cost reflects the valuation of the F2 investment in Ixaris at the point it was transferred from F2 to the Company as part of the merger in December 2015.
Protean develops and sells field service management software for organisations involved in the supply, installation, maintenance and hire of equipment.
Protean continues to trade strongly, with revenues significantly up compared with prior year and ahead of budget. The team's focus remains on product development, as well as making their customer adoption and support functions as effective as possible. Protean has also increased headcount across the support and technology teams to support the high demand for installations.
| SECTOR: TMT |
|
|---|---|
| Initial Investment | July 2015 |
|---|---|
| Amount invested (£)* | 2,500,000 |
| Accounting cost (£)** | 2,500,000 |
| Valuation (£) | 5,386,406 |
| Basis of valuation | Discounted revenue multiple |
| Equity held (%) | 39.7% |
*Including the amount of initial investment by F2.
**The accounting cost includes the value at which F2's holding was transferred to the Company as part of the merger in December 2015.
www.olliequinn.co.uk LONDON
Ollie Quinn is a branded retailer of prescription glasses, sunglasses and non-prescription polarised sunglasses based in the UK and Canada.
Ollie Quinn's trading position has improved, achieving sales ahead of budget. The improvement in profitability has been driven by strong performance in Canada, more stable UK store performance and the maintenance of a lean overhead base.
| Initial Investment | March 2017 |
|---|---|
| Amount invested (£) | 5,693,917 |
| Accounting cost (£) | 5,693,917 |
| Valuation (£) | 5,312,970 |
| Basis of valuation | Discounted revenue multiple |
| Equity held (%) | 64.7% |
Nano Interactive is an advertising technology business specialising in search re-targeting campaigns for its global customer base. The business was founded in 2010 and has five offices in Germany, UK, France, Poland and Serbia.
Nano Interactive has seen improvements in trading with revenues ahead of budget thanks to several new strategic relationships. There have been several key personnel changes to support this, including a new Head of Sales in Germany and a new salesperson in the UK, who are working on building a healthy sales pipeline.
| SECTOR: TMT |
||
|---|---|---|
| Initial Investment | October 2017 | |
| Amount invested (£) | 3,448,969 | |
| Accounting cost (£) | 3,448,969 | |
| Valuation (£) | 4,089,147 | |
| Basis of valuation | Discounted revenue multiple |
|
Equity held (%) 30.9%
SPEKTRIX LIMITED www.spektrix.com LONDON
Spektrix is an enterprise software company, providing ticketing, CRM, marketing, and fundraising software to companies in the performing arts sector.
Spektrix has had a positive start following the Company's investment in December 2018, with revenues up compared to prior year. A new Chair, Mark Redwood, was also appointed during the period with Foresight Group's assistance. Mark has a strong background in technology and has worked with similar PE-backed businesses in the past.
SECTOR: TMT
| Initial Investment | December 2018 |
|---|---|
| Amount invested (£) | 3,448,276 |
| Accounting cost (£) | 3,448,276 |
| Valuation (£) | 4,050,168 |
| Basis of valuation | Discounted revenue multiple |
| Equity held (%) | 9.3% |
Fresh Relevance is an email marketing and web personalisation platform providing online retailers with personalised customer experiences and marketing tools across desktop and mobile.
Fresh Relevance continues to show good trading performance. During the period the company reshaped the sales team, hiring a new Vice President to lead the UK and US effort with a focus on accelerating direct sales. Pricing changes are beginning to have a positive impact on average contract value from new customers.
| SECTOR: TMT |
||
|---|---|---|
| Initial Investment Amount invested (£) |
March 2017 2,117,750 |
|
| Accounting cost (£) | 2,117,750 | |
| Valuation (£) | 4,004,100 | |
| Discounted | ||
| Basis of valuation | revenue multiple | |
| Equity held (%) | 28.9% |
Working with Foresight was very straightforward; it was a pleasure negotiating with sensible, pragmatic backers. We are very excited by the potential of this fast-growing business.
Tim Horrell, Managing Director, FFX
| 30 June 2019 | 31 December 2018 | |||||
|---|---|---|---|---|---|---|
| Accounting cost |
Valuation | Accounting cost |
Valuation | |||
| Investment | £ | £ | Valuation Methodology | £ | £ | |
| Datapath Group Limited | 7,563,365 | 7,782,267 * | Discounted earnings multiple | 7,563,365 | 8,809,944 | |
| FFX Group Limited | 2,676,426 | 7,408,267 * | Discounted earnings multiple | 2,676,426 | 5,087,597 | |
| Specac International Limited | 1,300,000 | 6,315,005 * | Discounted earnings multiple | 1,300,000 | 5,047,321 | |
| TFC Europe Limited | 3,614,612 | 5,829,935 * | Discounted earnings multiple | 3,614,612 | 5,089,131 | |
| Ixaris Systems Limited | 2,266,036 | 5,580,716 * | Discounted revenue multiple | 2,266,036 | 4,563,390 | |
| Protean Software Limited | 2,500,000 | 5,386,406 * | Discounted revenue multiple | 2,500,000 | 5,005,118 | |
| Ollie Quinn Limited | 5,693,917 | 5,312,970 * | Discounted revenue multiple | 5,693,917 | 5,168,522 | |
| Nano Interactive Group Limited | 3,448,969 | 4,089,147 * | Discounted revenue multiple | 3,448,969 | 3,406,761 | |
| Spektrix Limited | 3,448,276 | 4,050,168 * | Discounted revenue multiple | 3,448,276 | 3,448,276 | |
| Fresh Relevance Limited | 2,117,750 | 4,004,100 * | Discounted revenue multiple | 2,117,750 | 3,399,436 | |
| Itad Limited | 2,750,000 | 3,981,894 | Discounted earnings multiple | 2,750,000 | 4,322,121 | |
| Industrial Efficiency II Limited | 2,603,260 | 3,964,176 | Discounted cash flow | 2,603,260 | 3,939,206 | |
| Hospital Services Group Limited | 3,320,000 | 3,382,905 | Discounted earnings multiple | 3,320,000 | 3,789,657 | |
| Luminet Networks Limited | 2,364,532 | 2,974,787 | Discounted earnings multiple | 2,364,532 | 2,364,532 | |
| Fourth Wall Creative Limited | 2,955,665 | 2,955,665 | Discounted earnings multiple | — | — | |
| Aquasium Technology Limited | 333,333 | 2,888,692 | Discounted earnings multiple | 333,333 | 3,544,404 | |
| The Business Advisory Limited | 1,605,000 | 2,858,775 | Discounted earnings multiple | 1,650,000 | 2,444,703 | |
| ABL Investments Limited | 2,750,000 | 2,807,467 | Discounted earnings multiple | 2,750,000 | 3,567,320 | |
| Mologic Ltd | 2,434,483 | 2,725,749 | Discounted revenue multiple | 2,434,483 | 2,434,483 | |
| Steamforged Games | 2,364,532 | 2,623,505 | Discounted revenue multiple | — | — | |
| Mowgli Street Food Limited | 1,526,750 | 2,377,431 | Discounted earnings multiple | 1,526,750 | 2,021,403 | |
| Ten Health & Fitness Limited | 2,364,532 | 2,364,532 | Discounted revenue multiple | — | — | |
| Cinelabs International Limited | 2,216,250 | 2,200,396 | Discounted revenue multiple | 2,216,250 | 2,224,046 | |
| 200 Degrees Holdings Limited | 1,477,832 | 2,118,500 | Discounted earnings multiple | 1,477,832 | 2,114,037 | |
| Accrosoft Limited | 1,724,138 | 2,114,562 | Discounted revenue multiple | 1,724,138 | 1,724,138 | |
| Aerospace Tooling Holdings Limited | 150,000 | 1,975,446 | Discounted earnings multiple | 150,000 | 1,683,538 | |
| Clubspark Limited | 1,270,936 | 1,679,062 | Discounted revenue multiple | — | — | |
| The Naked Deli Ltd | 1,724,139 | 1,630,768 | Discounted revenue multiple | 1,724,139 | 1,724,139 | |
| Positive Response Communications Limited |
1,000,000 | 1,264,300 | Discounted revenue multiple | 1,000,000 | 1,311,234 | |
| Codeplay Software Limited | 689,656 | 1,250,537 | Discounted revenue multiple | 689,656 | 689,656 | |
| Dhalia Limited | 100 | 1,224,147 | Net assets | 100 | 1,251,250 | |
| Procam Television Holdings Limited | 1,664,893 | 1,119,667 | Discounted earnings multiple | 1,664,893 | 2,118,078 | |
| Online Poundshop Limited | 2,610,000 | 933,187 | Discounted revenue multiple | 2,610,000 | 1,974,586 | |
| Idio Limited | 920,313 | 914,616 | Discounted revenue multiple | 920,313 | 695,435 | |
| Fertility Focus Limited | 862,080 | 902,627 | Discounted revenue multiple | 862,080 | 862,080 | |
| Biofortuna Limited | 1,072,519 | 427,247 | Discounted revenue multiple | 1,072,519 | 754,370 | |
| Powerlinks Media Limited | 2,709,360 | 411,358 | Discounted revenue multiple | 2,709,360 | 1,541,024 | |
| Whitchurch PE 1 Limited | 100,000 | 291,127 | Net assets | 100,000 | 291,511 | |
| Cole Henry PE 2 Limited | 100,000 | 217,765 | Net assets | 100,000 | 218,091 | |
| Flowrite Refrigeration Limited | 209,801 | 194,647 | Received offer | 209,801 | 194,783 | |
| Kingsclere PE 3 Limited | 100,000 | 178,162 | Net assets | 100,000 | 178,443 | |
| Sindicatum Carbon Capital Limited | 246,075 | 61,519 | Cost less impairment | 246,075 | 61,519 | |
| Oxonica Limited | 2,804,473 | — | Nil value | 2,804,473 | — | |
| Autologic Diagnostics Group Limited | — | — | Dissolved | 3,782,272 | — | |
| Mitgjorn Limited | — | — | Dissolved | 100 | — | |
| Total | 85,654,003 112,774,199 | 80,525,710 | 99,065,283 |
* Top ten investments by value shown on pages 10 to 14.
The principal risks faced by the Company are 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 2018. A detailed explanation can be found on page 27 of the Annual Report and Accounts which is available on Foresight Group'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.
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 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
2018 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 30 August 2019
FOR THE SIX MONTHS ENDED 30 JUNE 2019
| Six months ended 30 June 2019 (Unaudited) |
Six months ended 30 June 2018 (Unaudited) |
Year ended 31 December 2018 (Audited) |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Realised (losses)/gains on | |||||||||
| investments | — | (3,341) | (3,341) | — | 2,192 | 2,192 | — | 921 | 921 |
| Investment holding gains | — | 8,204 | 8,204 | — | 523 | 523 | — | 5,916 | 5,916 |
| Income | 677 | — | 677 | 735 | — | 735 | 1,398 | — | 1,398 |
| Investment management fees |
(314) | (943) | (1,257) | (293) | (879) | (1,172) | (595) | (1,784) | (2,379) |
| Other expenses | (289) | — | (289) | (213) | — | (213) | (472) | — | (472) |
| Return on ordinary activities before taxation |
74 | 3,920 | 3,994 | 229 | 1,836 | 2,065 | 331 | 5,053 | 5,384 |
| Taxation | — | — | — | (32) | 32 | — | (34) | 34 | — |
| Return on ordinary activities after taxation |
74 | 3,920 | 3,994 | 197 | 1,868 | 2,065 | 297 | 5,087 | 5,384 |
| Return per share: | 0.1p | 2.2p | 2.3p | 0.1p | 1.1p | 1.2p | 0.2p | 2.9p | 3.1p |
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.
AT 30 JUNE 2019
| As at | As at | As at | |
|---|---|---|---|
| 30 June 2019 | 30 June 2018 | 31 December 2018 | |
| £'000 | £'000 | £'000 | |
| Fixed assets | |||
| Investments held at fair value through profit or loss | 112,774 | 85,407 | 99,065 |
| Current assets | |||
| Debtors | 235 | 723 | 542 |
| Money market securities and other deposits | 17,323 | 44,582 | 34,723 |
| Cash | 2,487 | 3,669 | 2,696 |
| 20,045 | 48,974 | 37,961 | |
| Creditors | |||
| Amounts falling due within one year | (479) | (181) | (300) |
| Net current assets | 19,566 | 48,793 | 37,661 |
| Net assets | 132,340 | 134,200 | 136,726 |
| Capital and reserves | |||
| Called-up share capital | 1,755 | 1,762 | 1,751 |
| Share premium account | 100,495 | 99,172 | 99,115 |
| Capital redemption reserve | 935 | 908 | 920 |
| Distributable reserve | 3,224 | 13,566 | 12,929 |
| Capital reserve | (862) | 5,596 | 3,422 |
| Revaluation reserve | 26,793 | 13,196 | 18,589 |
| Equity shareholders' funds | 132,340 | 134,200 | 136,726 |
| Net asset value per share: | 75.4p | 76.2p | 78.1p |
FOR THE SIX MONTHS ENDED 30 JUNE 2019
| Called-up | Share | Capital | |||||
|---|---|---|---|---|---|---|---|
| share | premium | redemption | Distributable | Capital | Revaluation | ||
| capital | account | reserve | reserve | reserve | reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 January 2019 | 1,751 | 99,115 | 920 | 12,929 | 3,422 | 18,589 | 136,726 |
| Share issues in the period* | 19 | 1,426 | — | — | — | — | 1,445 |
| Expenses in relation to share issues | — | (46) | — | — | — | — | (46) |
| Repurchase of shares | (15) | — | 15 | (1,026) | — | — | (1,026) |
| Realised losses on disposal of | |||||||
| investments | — | — | — | — | (3,341) | — | (3,341) |
| Investment holding gains | — | — | — | — | — | 8,204 | 8,204 |
| Dividends paid | — | — | — | (8,753) | — | — | (8,753) |
| Management fees charged to capital | — | — | — | — | (943) | — | (943) |
| Revenue return for the period | — | — | — | 74 | — | — | 74 |
| As at 30 June 2019 | 1,755 | 100,495 | 935 | 3,224 | (862) | 26,793 | 132,340 |
*Relating to the dividend reinvestment scheme.
Distributable reserves at 30 June 2019 totalled £2.4 million. Share premium totalling £21.6 million was cancelled on 30 July 2019, increasing distributable reserves by this amount.
Registered Number: 03421340
FOR THE SIX MONTHS ENDED 30 JUNE 2019
| Six months | Six months | Year | |
|---|---|---|---|
| ended | ended | ended | |
| 30 June | 30 June | 31 December | |
| 2019 | 2018 | 2018 | |
| £'000 | £'000 | £'000 | |
| Cash flow from operating activities | |||
| Investment income received | 494 | 577 | 1,180 |
| Deposit and similar interest received | 107 | 108 | 258 |
| Investment management fees paid | (1,257) | (1,172) | (2,379) |
| Secretarial fees paid | (62) | (56) | (115) |
| Other cash payments | (257) | (319) | (495) |
| Net cash outflow from operating activities | (975) | (862) | (1,551) |
| Cash flow from investing activities | |||
| Purchase of investments | (8,956) | (7,936) | (17,705) |
| Net proceeds on sale of investments | 45 | 3,019 | 3,380 |
| Net proceeds on deferred consideration | 441 | 339 | 310 |
| Net proceeds on liquidation of investments | — | 20 | 20 |
| Net cash outflow from investing activities | (8,470) | (4,558) | (13,995) |
| Cash flow from financing activities | |||
| Expenses of fund raising | (46) | (48) | (95) |
| Repurchase of own shares | (810) | (1,104) | (1,763) |
| Dividends paid | (7,308) | (7,176) | (7,176) |
| Movement in money market funds | 17,400 | 15,900 | 25,759 |
| Net cash inflow from financing activities | 9,236 | 7,572 | 16,725 |
| Net (outflow)/inflow of cash in the period | (209) | 2,152 | 1,179 |
| Reconciliation of net cash flow to movement in net funds | |||
| (Decrease)/increase in cash and cash equivalents for the period | (209) | 2,152 | 1,179 |
| Net cash and cash equivalents at start of period | 2,696 | 1,517 | 1,517 |
| Net cash and cash equivalents at end of period | 2,487 | 3,669 | 2,696 |
Analysis of changes in net debt
| At 1 | At 30 | ||
|---|---|---|---|
| January | June | ||
| 2019 | Cash Flow | 2019 | |
| £'000 | £'000 | £'000 | |
| Cash and cash equivalents | 2,696 | (209) | 2,487 |
FOR THE SIX MONTHS ENDED 30 JUNE 2019
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.
| Number of | ||
|---|---|---|
| Net assets | Shares in Issue | |
| 30 June 2019 | £132,340,000 | 175,481,093 |
| 30 June 2018 | £134,200,000 | 176,180,654 |
| 31 December 2018 | £136,726,000 | 175,051,026 |
The weighted average number of shares used to calculate the respective returns are shown in the table below.
| Shares | |
|---|---|
| Six months ended 30 June 2019 | 175,365,523 |
| Six months ended 30 June 2018 | 175,775,983 |
| Year ended 31 December 2018 | 175,834,593 |
Earnings for the period should not be taken as a guide to the results for the full year.
| Year ended | |||
|---|---|---|---|
| Six months ended | Six months ended | 31 December | |
| 30 June 2019 | 30 June 2018 | 2018 | |
| £'000 | £'000 | £'000 | |
| Loan stock interest | 457 | 568 | 985 |
| Dividends | 113 | 60 | 155 |
| Overseas based Open Ended Investment Companies ("OEICs") | 100 | 100 | 241 |
| Bank interest | 7 | 7 | 17 |
| 677 | 735 | 1,398 |
FOR THE SIX MONTHS ENDED 30 JUNE 2019
| £'000 | |
|---|---|
| Book cost as at 1 January 2019 | 80,527 |
| Investment holding gains | 18,538 |
| Valuation at 1 January 2019 | 99,065 |
| Movements in the period: | |
| Purchases | 8,956 |
| Disposal proceeds | (45) |
| Realised losses* | (3,782) |
| Investment holding gains** | 8,580 |
| Valuation at 30 June 2019 | 112,774 |
| Book cost at 30 June 2019 | 85,656 |
| Investment holding gains | 27,118 |
| Valuation at 30 June 2019 | 112,774 |
*Realised losses in the income statement include deferred consideration of £441,000 received from the sale of Trilogy Communications Limited.
**Investment holding gains in the income statement have been reduced by the offset in the deferred consideration debtor of £376,000, relating to Trilogy Communications Limited.
No Director has an interest in any contract to which the Company is a party other than their appointment and payment as directors.
Foresight Group CI Limited acts as manager to the Company. During the period, services of a total cost of £1,257,000 (30 June 2018: £1,172,000; 31 December 2018: £2,379,000) were purchased by the Company from Foresight Group CI Limited. At 30 June 2019, the amount due to Foresight Group CI Limited was £nil (30 June 2018: £nil; 31 December 2018: £nil).
During the period, administration services of a total cost of £60,000 (30 June 2018: £56,000; 31 December 2018: £117,000) were delivered to the Company by Foresight Group LLP, Company Secretary. At 30 June 2019, the amount due to Foresight Group LLP was £nil (30 June 2018: £nil; 31 December 2018: £2,000).
On 30 July 2019 share premium totalling £21.6 million was cancelled, increasing distributable reserves by this amount.
A Venture Capital Trust as defined in the Income Tax Act 2007.
The Net Asset Value (NAV) is the amount by which total assets exceed total liabilities, i.e. the difference between what the company owns and what it owes. It is equal to shareholders' equity, sometimes referred to as shareholders' funds.
Net Asset Value expressed as an amount per share.
The sum of the published NAV per share plus all dividends paid per share. This allows performance comparisons to be made between VCTs.
The sum of the current share price plus all dividends paid per share. This allows performance comparisons to be made between VCTs.
The sum of dividends paid during the period expressed as a percentage of the share price at the period end date.
A discount to NAV is the percentage by which the mid-market share price of the Company is lower than the net asset value per share.
The sum of expenditure incurred in the ordinary course of business expressed as a percentage of the Net Asset Value at the reporting date.
An investment which consists of shares or securities first issued to the VCT (and held by it ever since) by a Qualifying Company and satisfying certain conditions under the VCT legislation.
A company satisfying certain conditions under the VCT legislation. The conditions are detailed but include that the company must be unquoted (companies listed on AIM can qualify), have a permanent establishment in the UK, apply the money raised for the purposes of growth and development for a qualifying trade within a certain time period and not be controlled by another company. There are additional restrictions relating to the size and stage of the company to focus investment into earlier stage businesses, as well as maximum investment limits (certain of such restrictions and limits being more flexible for 'knowledge intensive' companies). VCT funds cannot be used by a Qualifying Company to acquire shares in another company or a trade.
The Company has appointed Foresight Group CI Limited as its manager ("The Manager") to provide investment management and administration services. Foresight Group CI Limited has appointed Foresight Group LLP to be its investment adviser. The Manager has also delegated secretarial, accounting and other administration services to Foresight Group LLP.
References to "the Manager" throughout this report refer to the activities of Foresight Group CI Limited and include the activities of Foresight Group LLP when acting as the Manager's investment adviser and administrative delegate.
Fraudsters use persuasive and high-pressure tactics to lure investors into scams.
They may offer to sell shares that turn out to be worthless or non-existent, or to buy shares at an inflated price in return for an upfront payment.
While high profits are promised, if you buy or sell shares in this way you will probably lose your money.
Consider that if you buy or sell shares from an unauthorised firm you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme. 8
Think about getting independent financial and professional advice before you hand over any money. 9
5,000 people contact the Financial Conduct Authority about share fraud each year, with victims losing an average of £20,000
If you are approached by fraudsters please tell the FCA using the share fraud reporting form at www.fca.org.uk/scams, where you can find out more about investment scams.
You can also call the FCA Consumer Helpline on 0800 111 6768.
If you have already paid money to share fraudsters you should contact Action Fraud on 0300 123 2040.
03421340
John Gregory (Chairman) Jocelin Harris Gordon Humphries Margaret Littlejohns
Foresight Group LLP The Shard 32 London Bridge Street London SE1 9SG
Foresight Group CI Limited PO Box 156 Dorey Court St Peter Port Guernsey GY1 4EU
Deloitte LLP (appointed 30 August 2019) 20 Castle Terrace Edinburgh EH1 2DB
Shakespeare Martineau LLP No. 1 Colmore Square Birmingham B4 6AA
and
60 Gracechurch Street London EC3V 0HR
Computershare Investor Services plc The Pavilions Bridgwater Road Bristol BS99 6ZZ
Panmure Gordon & Co One New Change London EC4M 9AF
Lloyds Bank plc 25 Gresham Street London EC2V 7HN
Foresight VCT plc currently conducts its affairs so that its shares can be recommended by IFAs to ordinary retail investors in accordance with the FCA's rules in relation to non-mainstream pooled investment products and intends to continue to do so for the foreseeable future.
The shares are excluded from the FCA's restrictions which apply to non-mainstream pooled investment products because they are shares in a VCT.
The Company has appointed the Manager, which is licensed by the Guernsey Financial Services Commission, to provide investment management services. The Manager has, as is permitted and as approved by the Board, appointed Foresight Group LLP to act as its investment adviser. Foresight Group LLP is a subsidiary undertaking of the Manager and is authorised and regulated by the Financial Conduct Authority.
The Company has appointed the Manager to provide services which include company secretarial, accounting and other administration services required in connection with the business and the operation of the Company. All of these services have been delegated to Foresight Group LLP, the company secretary.
Past performance is not necessarily a guide to future performance. Stock markets and currency movements may cause the value of 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 increases the risk to the value of, and the income from, the investment.
The Shard 32 London Bridge Street London SE1 9SG
26 Foresight VCT plc Unaudited Half-Yearly Financial Report 30 June 2019 This publication is printed on paper sourced from certified sustainable forests.
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