TIDMFTV
FORESIGHT VCT PLC
LEI: 213800GNTY699WHACF46
UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE PERIODED 30 JUNE 2023
Financial Highlights
-- Total net assets GBP211.0 million
-- A final dividend of 4.4p per share was paid on 30 June 2023, costing
GBP10.7 million
-- Post-period end, a special dividend of 4.0p per share was paid on 18
August 2023, costing GBP9.8 million, following the successful
realisations of Mowgli Street Food Group Limited, Datapath Group Limited
and Innovation Consulting Group Limited
-- The value of the investment portfolio increased by GBP1.4 million, driven
by GBP9.7 million of deployment and an increase of GBP6.2 million in the
value of investments, offset by realisations of GBP14.5 million
-- Net Asset Value per share decreased by 1.8% from 87.5p at 31 December
2022 to 85.9p at 30 June 2023. After adding back the 4.4p dividend paid
on 30 June 2023, NAV Total Return per share was 90.3p, which made the
total return for the half-year 3.2%
-- The offer for subscription launched in January 2023 was closed on 13
April 2023 and raised a total of GBP23.1 million after expenses
Chair's Statement
I am pleased to present the Company's unaudited Half--Yearly
Financial Report for the period ended 30 June 2023.
Despite the challenging macroeconomic backdrop, the Company's
Net Asset Value ("NAV"), including dividends paid during the
period, increased by 2.8p per share to 90.3p. This represents a NAV
Total Return of 3.2% for the six months to 30 June 2023.
Although the UK has managed to avoid a recession so far this
year, real GDP growth has been sluggish, with a mere 0.2% recorded
in the second quarter of this year. Inflation has remained sticky
and stubbornly high, which has led to a series of interest rate
increases. In addition, the financial markets were rocked by the
collapse of both Silicon Valley Bank and Credit Suisse in March
2023, but fortunately the turmoil was short-lived and further
contagion limited. However, heightened nervousness in the financial
markets and recent changes to banks' capital adequacy rules are
beginning to reduce the level of funding available for smaller
businesses. Understandably, consumer and business confidence in the
UK remains fragile.
Nonetheless, the performance of the Company's portfolio in
aggregate has remained robust in these circumstances. The Manager
has worked closely with the individual companies and developed a
good understanding of their current business requirements.
Many of the portfolio companies successfully adapted to the new
economic landscape, with some performing extremely well while a
minority struggled as a result of a fall in consumer demand,
inflationary pressures, surging energy prices, a weak fundraising
environment and labour shortages. The overall solid performance of
the Company in the first half of 2023 demonstrates the advantages
of a well--diversified portfolio.
Strategy
The Board and the Manager continue to pursue a strategy for the
Company which includes the following four key objectives:
-- Growth in Net Asset Value Total Return above a 5% target while continuing
to grow the Company's assets
-- Payment of annual ordinary dividends of at least 5% of the NAV per share
per annum (based on the latest announced NAV per share) while
endeavouring, at a minimum, to maintain the NAV per share on a
year--on--year basis
-- Implementing a significant number of new and follow-on qualifying
investments every year, exceeding deployment requirements to maintain VCT
status
-- Maintaining a programme of regular share buybacks at a discount of no
less than 7.5% to the prevailing NAV per share
The Board and the Manager believe that these key objectives
remain appropriate and the Company's performance in relation to
each of them over the past six months is reviewed in more detail
below.
Net Asset Value and dividends
The NAV of the Company grew over the period from GBP191.7
million at 31 December 2022 to GBP211.0 million at 30 June 2023,
which is in line with the Board's objective of growing the
Company's assets.
At the end of 2022, 89% of the Company's assets were already
invested and the Board believed it would be in the Company's best
interest to raise further funds to provide liquidity for its
activities in 2023 and beyond. On 20 January 2023, the Company
launched an offer for subscription to raise up to GBP20 million,
with an over--allotment facility to raise up to a further GBP10
million, through the issue of new shares. The offer was closed on
13 April 2023 having raised gross proceeds of GBP24.1 million,
GBP23.1 million after expenses. We would like to thank those
existing shareholders who supported the offer and welcome all new
shareholders to the Company.
The final dividend for the year ended 31 December 2022 of 4.4p
per share was paid on 30 June 2023, at a total cost to the Company
of GBP10.7 million, including shares allotted under the dividend
reinvestment scheme.
Post-period end, the Company paid a special dividend of 4.0p per
share on 18 August 2023 following the successful sales of Mowgli
Street Food Group Limited, Datapath Group Limited and Innovation
Consulting Group Limited in the first quarter. These generated
proceeds of GBP14.3 million at completion. Since initial
investment, the three exits combined have returned to the Company a
total of GBP21.4 million, with a further GBP2.8 million of deferred
consideration due as at the period end. This is an exceptional
achievement from a combined initial investment of GBP4.2 million
and represents a cash-on-cash multiple of 5.8 times.
The Company continues to achieve its target dividend yield of 5%
of NAV, which was set in 2019 in light of the change in portfolio
towards earlier-stage, higher-risk companies, as required by the
VCT rules.
The Board and the Manager hope that this level may continue to
be exceeded in future by payment of additional "special" dividends
as and when particularly successful portfolio disposals are
achieved.
Investment performance and portfolio activity
A detailed analysis of the investment portfolio performance over
the year is given in the Manager's Review.
In brief, during the six months under review, the Manager
completed five new investments, in a range of sectors, and five
follow-on investments costing GBP5.9 million and GBP3.8 million
respectively. The Company also disposed of three investments very
successfully, as described above.
The Board and the Manager are confident that a more significant
number of new and follow-on investments can be achieved in
2023.
After the period end, in September 2023, GBP1.7 million was
invested in Loopr Ltd, trading as Looper Insights, a data analytics
platform to film and TV content distributors and video-on-demand
streaming services. The Company also sold its holding in Protean
Software Limited on 14 July 2023 which generated proceeds of GBP5.9
million at completion. Including cash returned to the date of this
report, the exit delivered a return multiple of 2.4 times the
original investment. Furthermore, the Company sold its holding in
Fresh Relevance Limited on 12 September 2023 which generated
proceeds of GBP10.6 million at completion. Including cash returned
to the date of this report, the exit delivered a return multiple of
3.8 times the original investment. Further details of these
investments and realisations can be found in the Manager's
Report.
The Company and Foresight Enterprise VCT plc 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 deploy funds without compromising quality and to satisfy
the investment needs of both companies.
Responsible investing
The analysis of environmental, social and governance ("ESG")
issues is embedded in the Manager's investment process and these
factors are considered key in determining the quality of a business
and its long-term success. Central to the Manager's responsible
investment approach are five ESG principles that are applied to
evaluate investee companies, acquired since May 2018, throughout
the lifecycle of their investment, from their initial review and
acquisition to their final sale. Every year, the portfolio
companies are assessed and progress is measured against these
principles. More detailed information about the process can be
found on pages 26 to 27 of the Manager's Review in the Unaudited
Half-Yearly Financial Report.
Buybacks
During the period the Company repurchased 2,716,894 shares for
cancellation at an average discount of 7.5%, in line with its
revised objective of maintaining regular share buybacks at a
discount of no less than 7.5% to the prevailing NAV per share. The
Board and the Manager consider that the ability to offer to buy
back shares at no less than 7.5% is fair to both continuing and
selling shareholders and continues to help underpin the discount to
NAV at which the shares trade.
Share buybacks are timed to avoid the Company's closed periods.
Buybacks will generally take place, subject to demand, during the
following times of the year:
-- April, after the Annual Report has been published
-- June, prior to the Half-Yearly reporting date of 30 June
-- September, after the Half-Yearly Report has been published
-- December, prior to the end of the financial year
Management charges, co-investment and performance incentive
The annual management fee is an amount equal to 2.0% of net
assets, excluding cash balances above GBP20 million, which are
charged at a reduced rate of 1.0%.
This has resulted in ongoing charges for the period ended 30
June 2023 of 2.3%, which is at the lower end of the range when
compared to competitor VCTs.
Since March 2017, co-investments made by the Manager and
individual members of the Manager's private equity team have
totalled GBP1.1 million alongside the Company's investments of
GBP90.7 million.
The co-investment scheme requires that the individual members of
the team invest in all of the Company's investments from that date
onwards and prohibits selective "cherry picking" of
co--investments. If any individual team member opts out of
co-investment, they cannot invest in anything during that year. The
Board believes that the co--investment scheme aligns the interests
of the Manager's team with those of shareholders and has
contributed to the gradual improvement in the Company's investment
performance.
In addition to the co-investment scheme, a new performance
incentive scheme was formally approved by shareholders at a general
meeting of the Company held on 15 June 2023. The new arrangements
have superseded the previous scheme and any potential outstanding
liabilities relating to it have ended. The Manager will now be able
to earn an annual performance incentive fee as summarised
below.
A performance incentive fee will be payable in respect of each
financial year commencing on or after 1 January 2023 where the
Company achieves an average annual NAV Total Return per share, over
a rolling five-year period, in excess of an average annual hurdle
of 5% (simple not compounded). If this hurdle is met, the Manager
would be entitled to an amount equal to 20% of the excess over the
hurdle subject to a cap of 1% of the closing Net Asset Value for
the relevant financial year. No fee will become due in excess of
this cap. Where there is a negative return in the relevant
financial year, no fee shall be payable even if the five-year
average hurdle is exceeded.
However, the potential fee will be carried forward and may
become due at the end of the next financial year if the performance
hurdle described above for that next financial year is achieved and
the negative return in the preceding financial year is recovered in
that next financial year. Any such catch-up fees shall be paid
alongside any fee payable for the next financial year, but subject
to the 1% cap applying to both fees in aggregate. Any such catch-up
fees cannot be rolled further forward to subsequent financial
years. The new arrangements will be subject to continual review by
the Board to ensure continued alignment with the interests of
shareholders.
More information on the current performance incentive
arrangements can be found in note 8 of this report.
A total of GBP1.1 million has been accrued as an estimate of the
performance fee due in respect of this financial year, based on the
Company's average annual performance over the last four and a half
years.
Board composition
The Board continues 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 its responsibilities. 2023 has seen some
planned changes to the composition of the Board.
The Board was delighted to appoint David Ford and Dan Sandhu as
Non-Executive Directors in January 2023. After more than 16 years
as a Non-Executive Director, including nearly 12 years as Chair of
the Audit Committee, Gordon Humphries did not stand for re-election
at the AGM on 15 June 2023.
On behalf of the Company, I would once again like to thank
Gordon for his significant contribution and dedication to the
Company, which has benefited enormously from his wise counsel
during his many years of service. We will miss Gordon and we wish
him the very best for the future. Gordon has been succeeded as
Chair of the Audit Committee by Patty Dimond, who has already
served on the Board for over two years.
Shareholder communication
We were delighted to meet with some shareholders in person at
the AGM on 15 June 2023. We hope many of you will be available to
attend our next in-person investor forum event on 19 October 2023
at The Shard. These events have proven very popular with our
shareholders in the past and provide the opportunity to learn
first-hand about some of our investee companies from their founders
and management.
Sunset clause
As explained in last year's Annual Report, a "sunset clause"
applies to the current approved scheme for EIS and VCT tax reliefs.
This clause provides that income tax relief will expire on
subscriptions made for VCT shares on or after 6 April 2025, unless
the legislation is amended to make the scheme permanent, or the
"sunset clause" is extended.
The UK Chancellor has reconfirmed in his Spring Budget the
government's commitment to extend the income tax relief available
on new VCT shares beyond the tax year ending in April 2025. The
Treasury Select Committee's report on early stage investment
published in July supported the important role played by VCTs and
called for early action on the "sunset clause". It also noted that
the UK should be able to extend the scheme without European
Commission approval, as clarified by the new Northern Ireland
Protocol, the Windsor Framework.
Trade bodies of which the Manager is a member will continue to
lobby the government to provide greater clarity on the timing and
nature of its plans for removing this obstacle.
Outlook
We are anticipating that growth in the UK will continue to be
weak in 2023: ongoing inflationary pressures, tight monetary
policies, supply chain issues, labour shortages and a lack of bank
lending appetite may continue to hinder economic recovery. We are
conscious that such conditions could prove particularly challenging
for our investee companies which are unquoted, small, early-growth
businesses and by their nature entail higher levels of risk and
lower liquidity than larger listed companies. On the other hand,
these younger companies may prove more agile and creative in their
approach and better able to adapt their operations swiftly and
identify new products and services in response to changing
circumstances.
The Company's current portfolio of investments is highly
diversified by number, business sector, size and stage of
development and overall has already demonstrated its relative
resilience in the face of economic and geopolitical difficulties.
We are confident that this approach will continue to provide
protection in volatile market conditions.
The Manager is continuing to see a promising pipeline of
potential investments, both new and follow-on. In addition to the
funds raised earlier in the year, we have recently announced our
intention to raise further funds in the coming months. These
combined funds will provide the necessary resources to make
selective acquisitions from the increasing number of investment
opportunities that are now emerging out of the recent disruption.
Although in the short term there may be considerable economic
headwinds, we believe the Company's diversified portfolio is well
positioned to generate long-term value for shareholders.
Margaret Littlejohns
Chair
26 September 2023
Manager's Review
The Board has appointed Foresight Group LLP ("the Manager") to
provide investment management and administration services.
Portfolio summary
As at 30 June 2023, the Company's portfolio comprised 52
investments with a total cost of GBP102.6 million and a valuation
of GBP171.2 million. The portfolio is diversified by sector,
transaction type and maturity profile. Details of the ten largest
investments by valuation, including an update on their performance,
are provided on pages 19 to 22 in the Unaudited Half-Yearly
Financial Report.
During the six months to 30 June 2023, the value of the
portfolio increased by GBP6.2 million and GBP9.7 million of new and
follow on investment was concluded. There was a strong series of
successful exits, realising GBP14.5 million with a further GBP2.8
million of deferred consideration recognised at the period end.
Overall therefore, the value of the unquoted portfolio increased by
GBP1.4 million in the period.
The Company's portfolio continues to navigate the various
economic challenges, including inflation, tight labour markets and
soft financial and M&A markets. Many of the portfolio companies
are performing extremely well, while others continue to adjust.
In line with the Board's strategic objectives, the investment
team remains focused on continuing to grow the Company's assets
whilst paying an annual dividend to shareholders of at least 5% of
the last announced NAV per share. The Company has so far achieved
this target for the current year and this objective remains the
Manager's focus.
New investments
Fostering strong relationships with local deal introducers
across the UK and Ireland remains central to the private equity
team's approach. The team remains focused on attending in-person
meetings and events with both deal introducers and prospective
investee companies to generate a flow of pipeline opportunities.
The regional presence is central to this approach and the Manager
opened three offices over the last year, in Leeds, Dublin and
Newcastle. These new regional offices are expected to support
stronger relationships with local advisers and increase deal flow
from these geographies.
Five new investments were completed in the six months to 30 June
2023, totalling GBP5.9 million. Post-period end, in September 2023,
the Manager invested a further GBP1.7 million in Loopr Ltd. Further
details of each of these are provided below. Behind these, there is
a strong pipeline of opportunities that the Manager expects to
convert during the second half of 2023.
Sprintroom Limited
In January 2023, GBP1.0 million of growth capital was invested
in Sprintroom, which trades as Sprint Electric. The business
designs and manufactures drives for controlling electric motors in
light and heavy industrial applications, as well as recovering and
reusing otherwise lost energy. The investment will be used to
further develop and commercialise novel alternating current
variable speed drive technology.
Red Flag Alert Technology Group Limited
In March 2023, the Company invested GBP1.7 million in Reg Flag
Alert Technology Group, a Manchester-based proprietary SaaS
intelligence platform with modular capabilities spanning
compliance, prospecting, risk management and financial health
assessments. The growth capital will be used to support continued
product development alongside an increased marketing budget which
is expected to accelerate new client acquisition with particular
focus on larger enterprise-level customers.
Firefish Software Ltd.
In March 2023, the Company invested GBP1.5 million in Firefish
Software, a Glasgow-based customer relationship management and
marketing software platform targeting the recruitment sector. The
funding will be used to further develop the platform in order to
attract a larger enterprise-level customer base and expand its
outbound sales team.
Five Wealth Limited
In March 2023, the Company invested GBP0.7 million in Five
Wealth, an established boutique financial planning business
operating across the North West of England, headquartered in
Manchester. Five Wealth's service offering is focused on the
provision of independent private client financial advice and wealth
planning. This growth capital investment will be used to support
increased marketing and advertising to drive top-line growth and
greater regulatory and compliance costs which are forecast to
increase commensurately with AUM.
The KSL Clinic Limited
In April 2023, the Company invested GBP1.0 million in The KSL
Clinic, a leading provider of hair replacement treatments, with
clinics in Manchester and Kent. The investment will be used to
invest in facilities, create high-quality, sustainable jobs and to
expand its geographic reach, resulting in significant improvements
in the wellbeing of patients.
Loopr Ltd
Post-period end, in September 2023, the Company invested GBP1.7
million in Loopr Ltd, trading as Looper Insights, a data analytics
platform to film and TV content distributors and video-on-demand
streaming services. The investment will be used build a sales and
marketing team, expand the customer success team and continue the
development of the company's software.
Follow--on investments
The Manager expects to continue to deploy additional capital
into both growing portfolio companies and those that require
support to trade through more uncertain periods. Macro factors such
as wage, commodity price and energy price inflation may impact some
elements of the portfolio, but in general the Manager ensures at
the time of initial investment that investee companies are
well--capitalised to trade through periods of lower market demand
or supply challenges. This is evidenced by the portfolio remaining
relatively resilient over the COVID-19 period, supported by the
Manager's active style, to ensure risks are identified and
mitigated early.
The Company made five follow-on investments in the period,
totalling GBP3.8 million, to support further growth opportunities.
Further details are provided below.
Pipeline
At 30 June 2023, the Company held cash of GBP36.9 million. This
will be used to fund new and follow-on investments, buybacks and
running expenses, and support the Company's dividend objectives.
The Manager has a number of opportunities under exclusivity or in
due diligence. The Company remains well positioned to continue
pursuing these potential investment opportunities.
Mizaic Ltd (formerly IMMJ Systems Limited)
In February 2023, GBP0.6 million was invested in Mizaic, a
clinical electronic document management solution supplier to the
NHS. The investment will be used to grow the leadership team and
bolster the business's abilities to support the digitisation of
records, providing easy and efficient access to patient records for
clinical care across the NHS.
Ten Health & Fitness Limited
In March 2023, Ten Health & Fitness, a multi-site operator
in the boutique health, wellbeing and fitness market, received an
additional investment of GBP0.6 million. The funding enabled the
company to complete its new flagship Kings Cross site and support
the company's transition to profitability from Q1 2023. The Kings
Cross site opened in March and is already trading well.
NorthWest EHealth Limited ("NWEH")
In March 2023, the Company invested a further GBP1.5 million in
NWEH, which provides software and services to the clinical trials
market, allowing pharmaceutical companies and contract research
organisations to conduct feasibility studies, recruit patients and
run trials. The investment will be used to support the delivery of
a number of new real world trials in FY23, while completing
building the company's Connexon platform to be compatible with up
to 18 million UK healthcare data sources. Since investment, NWEH
has won a number of new customers and is considering changing its
business model to focus more on referral revenues, which will mean
a lower cost overhead in the business.
Ollie Quinn Limited
In April 2023, the Company invested GBP1.0 million in Ollie
Quinn, a branded retailer of prescription glasses, sunglasses and
non-prescription polarised sunglasses based in the UK and Canada.
The investment will provide the cash headroom and time for
longer-term financing initiatives to be explored.
Additive Manufacturing Technologies Ltd ("AMT")
In April 2023, the Company invested GBP0.1 million in AMT, which
manufactures systems that automate the post-processing of 3D
printed parts. See the key valuation changes in the period section
on page 14 in the Unaudited Half-Yearly Financial Report for
further details.
Exits and realisations
Whilst global M&A markets are relatively soft, the Manager
has delivered some strong realisations in the period. The Manager
has witnessed particularly strong interest from overseas buyers,
particularly those that are US funded. Certain acquirers also
strategically need to acquire a UK presence following the UK's exit
from the EU. However, M&A activity in the broader market has
been lower so far in 2023 than recent years, suggesting the market
might be cooling slightly in the face of economic uncertainty and
rising interest rates.
Mowgli Street Food Group Limited
In January 2023, the Company announced the successful exit of
casual Indian food chain Mowgli to TriSpan, a global private equity
firm with extensive restaurant expertise. The Manager invested in
2017, when the business had three restaurant sites. It has since
grown to 15 sites nationally. The Manager introduced Dame Karen
Jones as chair, Matt Peck as finance director and helped recruit
Lucy Worth as operations director and together with founder Nisha
Katona, this team built a market-leading hospitality brand. The
business also shared the Manager's commitment to sustainability,
creating more than 500 jobs and ranking 16th best UK company to
work for in 2022 owing to its focus on employee welfare, local
charity support and sustainable sourcing.
The exit resulted in proceeds of GBP5.2 million, of which GBP1.6
million will be received over 12 months post the completion of the
exit, representing a return of 3.5x cost, equivalent to an IRR of
25% since the initial investment in 2017.
Datapath Group Limited
In March 2023, the Company announced the notable exit of
Datapath, a global leader in the provision of hardware and software
solutions for multiscreen displays. The transaction generated
proceeds of GBP5.0 million at completion with an additional GBP1.2
million payable over the next 24 months. When added to GBP5.4
million of cash returned to date, this implies a total cash-on-cash
return of 11.6 times the original investment, equivalent to an IRR
of 38% since the initial investment in 2007.
Since the original investment, the Manager had supported
Datapath through a period of material growth, with revenues growing
from approximately GBP7 million to GBP25 million. Datapath has
developed a market-leading hardware and software product suite for
the delivery of multiscreen displays and video walls which are sold
globally to a diverse customer base across a range of sectors.
Innovation Consulting Group Limited ("GovGrant")
In March 2023, the Company announced the impressive exit of
GovGrant to Source Advisors, a US corporate buyer backed by BV
Investment Partners. GovGrant is one of the UK's leading providers
of R&D tax relief, patent box relief and other innovation
services. The transaction generated proceeds of GBP6.8 million at
completion. When added to GBP0.5 million of cash returned to date,
this implies a total cash-on-cash return of 4.4 times the capital
of GBP1.65 million invested in October 2015, equivalent to an IRR
of 24%.
Since the original investment in 2015, the Manager had helped
GovGrant through a period of material growth during which it
supported the R&D activities of a growing number of customers.
GovGrant's high levels of service and innovative products, such as
the growing patent box offering, have contributed to driving
innovation in the UK economy. The Manager had taken a proactive
approach to supporting the exceptional senior management team, all
of whom were introduced to the business during the investment
period.
Protean Software Limited
In July 2023, the Company achieved a successful exit of its
holding in Protean Software to Joblogic, a UK-based direct provider
of Field Service Management software to SMEs, and Protean's direct
competitor. The Manager invested in Protean in July 2015 as one of
the last buyouts prior to the changes in VCT legislation. Over the
holding period the Manager helped Protean transition its highly
featured legacy product into a modern software product sold on a
SaaS basis. The transaction generated proceeds of GBP5.9 million on
completion. When added to GBP151,000 of cash returned to date, this
implies a total cash-on-cash return of 2.4 times the original
investment, equivalent to an IRR of 12% since the initial
investment.
Fresh Relevance Limited
In September 2023, the Company achieved the successful exit of
Fresh Relevance Limited to Dotdigital Group plc, returning GBP10.6
million to the Company. Including cash returned to date of GBP0.2
million, the sale implies a 3.8 times cash-on-cash return on the
total investment made of GBP2.9 million; equivalent to an IRR of
27%.
Headquartered in Southampton, Fresh Relevance is an email
marketing and e-commerce personalisation platform. It provides
online retailers with flexible software tools to improve customer
retention and acquisition. Since the initial investment in March
2017, Fresh Relevance grew revenues nearly threefold and created
close to 40 high-quality, sustainable jobs -- positively impacting
the local economy in Southampton. Many of Fresh Relevance's
developers were recruited from the University of Southampton.
Disposals in the period ended 30 June 2023
Accounting
cost Exit proceeds
Total at date of and deferred Total
invested(1) disposal(2) consideration return(3)
Company Detail (GBP) (GBP) (GBP) (GBP)
-----------
Innovation
Consulting
Group Full
Limited disposal 1,650,000 1,605,000 6,794,768 7,279,469
Mowgli
Street
Food Group Full
Limited disposal 1,526,750 1,526,750 5,183,006 5,294,466
Datapath
Group Full
Limited disposal 1,000,000 7,563,365 6,216,358 11,601,590
200 Degrees
Holdings Loan
Limited repayment 225,000 225,000 225,000 322,338
-----------
4,401,750 10,920,115 18,419,132 24,497,863
1. Total invested reflects the total cash investment made by the Company and
Foresight 2 VCT plc.
2. The accounting cost includes the valuation of Foresight 2 VCT plc's
investment in Datapath at the point it was transferred to the Company as
part of the merger in December 2015. The investment cost at the date of
transfer was GBP73,250.
3. Total return includes yield returned to the Company and Foresight 2 VCT
plc up to the date of the exit and deferred consideration due in the
future at its current holding value.
Key portfolio developments
In the first six months of the year, the portfolio has
demonstrated continued resilience in the face of the economic
headwinds that started mid-way through 2022.
Material changes in valuation, defined as increasing or
decreasing by GBP1.0 million or more since 31 December 2022, are
detailed below. Updates on these companies are included below, or
in the Top Ten Investments section on pages 19 to 22 in the
Unaudited Half-Yearly Financial Report.
Key valuation changes in the period
Valuation
Valuation change
----------------------------------------
Company (GBP) (GBP)
Callen-Lenz Associates Limited 9,164,253 3,826,007
Fresh Relevance Ltd 7,632,862 1,697,435
Protean Software Limited 5,857,207 1,475,158
Luminet Networks Limited 3,873,045 1,400,516
Aquasium Technology Limited 4,168,765 1,233,488
Fourth Wall Creative Limited 6,481,057 1,084,401
Ollie Quinn Limited 3,642,983 (1,093,390)
Additive Manufacturing Technologies Ltd -- (1,814,869)
----------------------------------------
Luminet Networks Limited
Luminet is a provider of primarily fixed wireless access ("FWA")
across c.400 sq km of central London. It can provide connectivity
to businesses via both FWA and fibre, as well as offering secure
hosting and managed services. The company serves over 700 business
customers, mostly on contracts of 36 months.
30 June 2023 update
Luminet continues to provide a high quality connectivity to
London clients and has seen growth as businesses return to offices
following COVID. A significant contract was won recently, which is
expected to support continued revenue growth over the financial
year.
Ollie Quinn Limited
Ollie Quinn is a branded retailer of prescription glasses,
sunglasses and non-prescription polarised sunglasses based in the
UK and Canada. The company provides high-quality, branded,
prescription glasses at a lower price point than other high-end
opticians in order to satisfy a gap in the market for affordable
luxury.
30 June 2023 update
The GBP1.0 million follow-on investment was completed in April
and preparations for a crowdfund are close to completion with
launch expected in September 2023.
Aquasium Technology Limited
Aquasium manufactures, services and refurbishes electron beam
welding ("EBW") equipment and vacuum furnaces ("VF"). EBW is a
reliable and efficient method of joining together a wide range of
metals, producing clean, high-integrity joints. VFs are used in
hardening, tempering and brazing applications.
30 June 2023 update
Trading has been strong for the first half of the financial
year, with revenues on budget and materially ahead of the prior
year. Both the machine sales and spares and services divisions are
trading well, with spares and servicing also benefiting from some
degree of catch up, following the pandemic. Discussions are ongoing
around the sale of the first EBFLOW machine, with a focus on
building the pipeline behind this.
Additive Manufacturing Technologies Ltd ("AMT")
AMT is developing machines for post-production of 3D printed
parts: removal of excess polymer ("depowdering"), surface
smoothing/polishing, colouring and inspection. AMT's goal is to
provide a fully automated end-to-end post-production system, the
"DMS", with robots linking each stage.
30 June 2023 update
The business is navigating the challenging economic environment
with support from the Manager, providing expertise and guidance in
line with its active management approach.
Outlook
The global and UK markets have experienced a volatile past six
months following a strong recovery in consumer and business demand
after the COVID-19 pandemic. The recovery has been somewhat stalled
due to various economic factors following the pandemic. Rising
input prices, driven by supply chain constraints during COVID-19
and rapidly increasing energy prices following Russia's invasion of
Ukraine in Q1 2022, drove inflation to a high of 11.1% in October
2022. This was initially slow to decrease, with inflation remaining
at 10.1% in March 2023 and 7.9% in June 2023, partly driven by wage
inflation resulting from a tight labour market in the UK.
The Bank of England responded by steadily raising the base
interest rate from 0.1% in December 2021 to 5.25% in August 2023.
While this is now taking effect with inflation reducing, many
analysts predict further increases to interest rates in the short
term. The Bank of England is expected to maintain interest rates at
their current level in the medium term, with most analysts
predicting no meaningful reduction during 2024. Rising wage
inflation is limiting the impact of interest rate rises, suggesting
a further tightening of monetary policy, which would potentially
drive the UK into recession in late 2023 or 2024.
Despite this backdrop, the Company's portfolio is reasonably
well positioned to withstand the market volatility and economic
headwinds. We have worked to balance risk, with the portfolio
exposed to a broad base of both well-established and earlier-stage
growth companies across a range of sectors. In the period to 30
June 2023, the portfolio continued to perform well, with the
Company realising three investments in this time.
Notable examples that demonstrate our ability to capitalise on
high-quality regional opportunities in a variety of sectors are the
sale of Mowgli Street Food Group, a UK-wide casual Indian food
chain, to TriSpan, delivering a 3.5x return, the sale of Innovation
Consulting Group, a St Albans provider of R&D tax relief,
patent box relief and other innovation services, to a US corporate
buyer backed by BV Investment Partners that generated a 4.4x return
on investment, and Datapath Group, a Derbyshire-based global leader
in the provision of visual solutions, achieving an impressive
cash-on-cash return of 11.7x the original investment. The current
portfolio is well diversified with a good mix of earlier-stage and
more mature investments that will yield attractive opportunities
for the Company over time.
The Manager continues to leverage its regional offices to source
the highest quality growth companies where we can employ our
extensive advisory network and proactive portfolio management style
to drive growth and add value to each investee company. There
remains a strong appetite for funding from the smaller UK
businesses with growth potential, which manifested itself in a
number of exciting deals completed in the past year. Despite shifts
in the investment landscape, we continue to see excellent
opportunities to support small companies in many sub--sectors, such
as health, technology and compliance systems, amongst others.
While the macro environment is precarious, we believe that the
Company's portfolio is well placed to cope with a period of
uncertainty. The UK undoubtedly remains an exceptional place to
start, fund and grow a small business, and the Manager remains
committed to supporting the best UK entrepreneurs on their
journey.
James Livingston
Foresight Group LLP
26 September 2023
Unaudited Half-Yearly Results and Responsibilities
Statements
Principal risks and uncertainties
The principal risks faced by the Company are as follows:
-- Market risk
-- Strategic and performance risk
-- Internal and financial control risk
-- Legislative and regulatory risk
-- VCT qualifying status risk
-- Investment valuation and liquidity risk
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 2022. A detailed explanation can be found on
pages 47 to 49 of the Annual Report and Accounts, which is
available on the Company's website www.foresightvct.com 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. The
emerging risks identified in the previous report included those of
climate change, inflationary pressures, interest rates, supply
chain issues, energy prices, the Russian invasion of Ukraine and
increased tension between the United States and China over the
future of Taiwan. These emerging risks continue to apply and be
monitored. The Board and the Manager continue to follow all
emerging risks closely with a view to identifying where changes
affect the areas of the market in which portfolio companies
operate. This enables the Manager to work closely with portfolio
companies, preparing them so far as possible to ensure they are
well positioned to endure potential volatility.
Directors' responsibility statement
The Disclosure and Transparency Rules ("DTR") of the UK Listing
Authority require the Directors to confirm their responsibilities
in relation to the preparation and publication of the Half-Yearly
Financial Report.
The Directors confirm to the best of their knowledge that:
1. The summarised set of financial statements has been prepared in
accordance with FRS 104
2. The interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first
six months and description of principal risks and uncertainties for the
remaining six months of the year)
3. The summarised set of financial statements gives a true and fair view of
the assets, liabilities, financial position and profit or loss of the
Company as required by DTR 4.2.4R
4. The interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and
changes therein)
Going concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the Strategic Report of the Annual Report. The
financial position of the Company, its cash flows, liquidity
position and borrowing facilities are described in the Chair's
Statement, Strategic Report and Notes to the Accounts of the 31
December 2022 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
Margaret Littlejohns
Chair
26 September 2023
Unaudited Income Statement
For the six months ended 30 June 2023
Six months ended Six months ended Year ended
30 June 2023 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Realised
gains on
investments -- 3,595 3,595 -- 12,992 12,992 -- 13,207 13,207
Investment
holding gains/(losses) -- 5,048 5,048 -- (5,070) (5,070) -- 2,138 2,138
Income 1,915 -- 1,915 486 -- 486 1,536 -- 1,536
Investment
management
fees (503) (2,619) (3,122) (464) (1,096) (1,560) (949) (2,550) (3,499)
Other expenses (438) -- (438) (295) -- (295) (680) -- (680)
Return/(loss)
on ordinary
activities
before taxation 974 6,024 6,998 (273) 6,826 6,553 (93) 12,795 12,702
Taxation (93) 93 -- -- -- -- -- -- --
Return/(loss)
on ordinary
activities
after taxation 881 6,117 6,998 (273) 6,826 6,553 (93) 12,795 12,702
Return/(loss)
per share 0.4p 2.6p 3.0p (0.1)p 3.1p 3.0p (0.1)p 5.9p 5.8p
The total columns of this statement are 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 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.
The Company has only one class of business and one reportable
segment, the results of which are set out in the Income Statement
and Balance Sheet.
There are no potentially dilutive capital instruments in issue
and, therefore, no diluted earnings per share figures are relevant.
The basic and diluted earnings per share are, therefore,
identical.
Unaudited Reconciliation of Movements in Shareholders' Funds
For the six months ended 30 June 2023
Called-up Share Capital
share premium redemption Distributable Capital Revaluation
capital account reserve reserve(1) reserve(1) reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------
As at 1
January
2023 2,192 56,380 1,195 47,701 16,602 67,659 191,729
Share issues
in the
period 290 25,936 -- -- -- -- 26,226
Expenses in
relation to
share
issues -- (1,019) -- -- -- -- (1,019)
Repurchase
of shares (27) -- 27 (2,219) -- -- (2,219)
Realised
gains on
disposal of
investments -- -- -- -- 3,595 -- 3,595
Investment
holding
gains -- -- -- -- -- 5,048 5,048
Dividends
paid -- -- -- (10,711) -- -- (10,711)
Management
fees
charged to
capital -- -- -- -- (2,619) -- (2,619)
Revenue
return for
the period
before
taxation -- -- -- 974 -- -- 974
Taxation for
the period -- -- -- (93) 93 -- --
------------
As at 30
June 2023 2,455 81,297 1,222 35,652 17,671 72,707 211,004
------------
1. Reserve is available for distribution; total distributable reserves at 30
June 2023 total GBP53,323,000 (31 December 2022: GBP64,303,000).
Unaudited Balance Sheet
At 30 June 2023
Registered number: 03421340
As at As at As at
30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
---------------------------------------
Fixed assets As at As at
Investments held at fair value through
profit or loss 171,153 157,171 169,775
Current assets
Debtors 4,545 12,309 3,037
Cash and cash equivalents 36,938 28,565 19,525
---------------------------------------
Total current assets 41,483 40,874 22,562
Creditors
Amounts falling due within one year (1,632) (156) (608)
---------------------------------------
Net current assets 39,851 40,718 21,954
Net assets 211,004 197,889 191,729
---------------------------------------
Capital and reserves
Called-up share capital 2,455 2,237 2,192
Share premium account 81,297 54,692 56,380
Capital redemption reserve 1,222 1,129 1,195
Distributable reserve 35,652 61,539 47,701
Capital reserve 17,671 17,841 16,602
Revaluation reserve 72,707 60,451 67,659
---------------------------------------
Equity shareholders' funds 211,004 197,889 191,729
---------------------------------------
Net Asset Value per share 85.9p 88.5p 87.5p
---------------------------------------
Unaudited Cash Flow Statement
For the six months ended 30 June 2023
Six months Six months Year
ended ended ended
31
30 June 30 June December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
---------------------------------------------------
Cash flow from operating activities
Loan interest received from investments 850 311 1,249
Dividends received from investments 580 96 132
Deposit and similar interest received 487 27 220
Investment management fees paid (2,011) (1,843) (3,789)
Secretarial fees paid (65) (65) (130)
Other cash payments (340) (168) (457)
---------------------------------------------------
Net cash outflow from operating activities (499) (1,642) (2,775)
---------------------------------------------------
Cash flow from investing activities
Purchase of investments (8,721) (3,170) (11,051)
Net proceeds on sale of investments 14,515 10,272 21,922
Net proceeds on deferred consideration -- 51 266
---------------------------------------------------
Net cash inflow from investing activities 5,794 7,153 11,137
---------------------------------------------------
Cash flow from financing activities
Proceeds of fundraising 23,692 18,531 18,531
Expenses of fundraising (589) (455) (473)
Repurchase of own shares (2,313) (4,468) (9,234)
Equity dividends paid (8,672) (8,075) (15,182)
---------------------------------------------------
Net cash inflow/(outflow) from financing activities 12,118 5,533 (6,358)
---------------------------------------------------
Net inflow of cash in the period 17,413 11,044 2,004
Reconciliation of net cash flow to movement in net
funds
Increase in cash and cash equivalents for the
period 17,413 11,044 2,004
Net cash and cash equivalents at start of period 19,525 17,521 17,521
---------------------------------------------------
Net cash and cash equivalents at end of period 36,938 28,565 19,525
---------------------------------------------------
Analysis of changes in net debt
At 1 January At 30 June
2023 Cash flow 2023
GBP'000 GBP'000 GBP'000
--------------------------
Cash and cash equivalents 19,525 17,413 36,938
--------------------------
Notes to the Unaudited Half-Yearly Results
For the six months ended 30 June 2023
1
The Unaudited Half-Yearly Financial Report has been prepared on
the basis of the accounting policies set out in the statutory
accounts of the Company for the year ended 31 December 2022.
Unquoted investments have been valued in accordance with IPEV
Valuation Guidelines.
2
These are not statutory accounts in accordance with S436 of the
Companies Act 2006 and the financial information for the six months
ended 30 June 2023 and 30 June 2022 has been neither audited nor
formally reviewed. Statutory accounts in respect of the year ended
31 December 2022 have been audited and reported on by the Company's
auditors and delivered to the Registrar of Companies and included
the report of the auditors which was unqualified and did not
contain a statement under S498(2) or S498(3) of the Companies Act
2006. No statutory accounts in respect of any period after 31
December 2022 have been reported on by the Company's auditors or
delivered to the Registrar of Companies.
3
Copies of the Unaudited Half-Yearly Financial Report will be
sent to shareholders via their chosen method and will be available
for inspection at the Registered Office of the Company at The
Shard, 32 London Bridge Street, London SE1 9SG.
4 Net Asset Value per share
The Net Asset Value per share is based on net assets at the end
of the period and on the number of shares in issue at the date.
Net assets Number of
shares in
issue
-----------------
30 June 2023 GBP211,004,000 245,495,673
30 June 2022 GBP197,889,000 223,678,255
31 December 2022 GBP191,729,000 219,151,944
-----------------
5 Return per share
The weighted average number of shares used to calculate the
respective returns are shown in the table below.
Shares
------------------------------
Six months ended 30 June 2023 232,668,471
Six months ended 30 June 2022 215,848,355
Year ended 31 December 2022 218,519,391
------------------------------
Earnings for the period should not be taken as a guide to the
results for the full year.
6 Income
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2022
2023 2022 GBP'000
--------------------------------------
Loan stock interest 848 337 1,184
Dividends receivable 580 122 132
Deposit and similar interest received 487 27 220
--------------------------------------
1,915 486 1,536
--------------------------------------
7 Investments at fair value through profit or loss
GBP'000
-------------------------------
Book cost as at 1 January 2023 103,766
Investment holding gains 66,009
-------------------------------
Valuation at 1 January 2023 169,775
Movements in the period:
Purchases 9,711
Disposal proceeds(1) (14,515)
Realised gains 3,595
Investment holding gains(2) 2,587
-------------------------------
Valuation at 30 June 2023 171,153
-------------------------------
Book cost at 30 June 2023 102,557
Investment holding gains 68,596
-------------------------------
Valuation at 30 June 2023 171,153
-------------------------------
1. The Company received GBP14,515,000 from the disposal of investments
during the period. The book cost of these investments when they were
purchased was GBP10,920,000. These investments have been revalued over
time and until they were sold any unrealised gains or losses were
included in the fair value of the investments.
2. Investment holding gains in the Income Statement include the deferred
consideration debtor increase of GBP2,461,000. The debtor movement
reflects the recognition of amounts receivable in respect of Mowgli
Street Food Group Limited (GBP1,647,000) and Datapath Group Limited
(GBP1,167,000), offset by an FX movement in respect of Codeplay Software
Limited (GBP42,000) and provisions made against balances in respect of
Mologic Ltd. (GBP241,000) and FFX Group Limited (GBP70,000). Post-period
end, GBP824,000 of deferred consideration was received in relation to
Mowgli Street Food Group Limited.
8 Performance incentive fee
In order to incentivise the Manager to generate enhanced returns
for shareholders, the Manager will potentially be entitled to
performance incentive payments in respect of each financial year
commencing on or after 1 January 2023 where the Company achieves an
average annual NAV Total Return per share, over a rolling five-year
period, in excess of an average annual hurdle of 5% (simple not
compounded). If the hurdle is met, the Manager would be entitled to
an amount equal to 20% of the excess over the hurdle subject to a
cap of 1% of the closing Net Asset Value for the relevant financial
year (and no fee will be due in excess of this cap).
Where there is a negative return in the relevant financial year,
no fee shall be payable even if the hurdle is exceeded. However,
the potential fee will be carried forward and will become due at
the end of the next financial year if the performance hurdle
described above for that next financial year is achieved and the
negative return in the preceding financial year is recovered in
that next financial year. Any such catch-up fees shall be paid
alongside any fee payable for the next financial year subject to
the 1% cap applying to both fees in aggregate. Any such catch-up
fees cannot be rolled further forward to subsequent financial
years.
The new performance incentive scheme, as described above, in the
Chair's Statement of the Company's 31 December 2022 Annual Report
and Accounts and the Circular dated 18 May 2023, was formally
approved by shareholders at the General Meeting held on 15 June
2023.
Estimation of the financial effect
As at 30 June 2023, the NAV Total Return since 31 December 2018
was 33.2p (being the aggregation of NAV per share as at 30 June
2023, before any performance incentive provision, of 86.4p and
dividends paid per share in the period totalling 24.9p less the NAV
per share as at 31 December 2018 of 78.1p) giving an average annual
NAV Total Return per share of 6.6p. This compares to the average
annual hurdle of 3.9p based on the opening NAV per share of 78.1p
as at 31 December 2018 and therefore an excess of 2.7p over the
hurdle.
If NAV Total Return for the year ending 31 December 2023, the
Net Asset Value of the Company as at 31 December 2023 and the
weighted average number of shares in issue over the five--year
period to 31 December 2023 remained unchanged from their positions
as at 30 June 2023, the Manager would be entitled to a performance
incentive payment of GBP1.1 million, which has been provided for in
the financial statements.
9 Related party transactions
No Director has an interest in any contract to which the Company
is a party other than their appointment and payment as
Directors.
10 Transactions with the Manager
Foresight Group LLP was appointed as Manager on 27 January 2020
and earned fees of GBP2,011,000 up to 30 June 2023 (30 June 2022:
GBP1,857,000, 31 December 2022: GBP3,499,000). Performance
incentive fees of GBP1.1 million have been accrued as at 30 June
2023 (30 June 2022: GBPnil, 31 December 2022: GBPnil).
Foresight Group LLP is the Company Secretary (appointed in
November 2017) and received, directly and indirectly, for
accounting and company secretarial services, fees of GBP65,000
during the period (30 June 2022: GBP65,000, 31 December 2022:
GBP130,000).
At the balance sheet date there was GBPnil due to Foresight
Group LLP (30 June 2022: GBP7,000, 31 December 2022: GBPnil).
END
(END) Dow Jones Newswires
September 26, 2023 08:13 ET (12:13 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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