Final Results
FORESIGHT ENTERPRISE VCT PLC
LEI: 213800MWJNR3WZZ3ZP42
26 April 2024
Final results
31 December 2023
Foresight Enterprise VCT plc, managed by Foresight Group LLP,
today announces the final results for the year ended 31 December
2023.
These results were approved by the Board of Directors on 26
April 2024.
The Annual Report will shortly be available in full at
www.foresightenterprisevct.com. All other statutory information can
also be found there.
Financial Highlights
- After adding back the payments of a 3.3p dividend made on 30
June 2023, NAV Total Return per share as at 31 December 2023 was
68.9p, representing a positive total return of 6.2% in the
year.
- Nine new investments costing £11.7 million and eight follow-on
investments costing £7.0 million were made during the year.
- The Company fully exited its investments in Datapath Group
Limited, Innovation Consulting Group Limited, Protean Software
Limited and Luminet Networks Limited, realising gains of £5.4
million in the year and returning proceeds of £20.6 million to the
Company.
- In the year, the value of the investment portfolio rose by £9.5
million (2022: £8.7 million).
- An interim dividend of 3.3p per share was paid on 30 June 2023,
returning £7.7 million to Shareholders.
- The offer for subscription launched in October 2023 was closed
to applications on 30 January 2024 and raised a total of £28.8
million after expenses.
CHAIR’S STATEMENT
I am pleased to present the audited Annual Report and Accounts
for the year ended 31 December 2023 and to report a Net Asset
Value Total Return of 6.2% for the year including a dividend yield
of 5.7%.
Overview of 2023
The business environment remains challenging after the substantial
impact of the COVID-19 pandemic receded, with geopolitical
tensions, supply chain issues, rapidly rising inflation and energy
prices, and the threat of recession the new economic reality. I
believe that the careful planning, help and advice the Manager
provided the portfolio companies during the pandemic will continue
to be relevant to the current and future economic situations. While
there will be bumps in the road, the Board believes that the
portfolio is in good shape to withstand what we currently see
ahead.
The Company’s portfolio in aggregate has remained resilient amid
economic and political turmoil which continues. Many of the
portfolio companies have successfully adapted to the new economic
landscape, with some performing extremely well and demonstrating
the strength of their management teams. A minority struggled as a
result of a fall in consumer demand, inflationary pressures and a
surge in the cost of energy prices.
In the year ended 31 December 2023, 24 companies in the
portfolio recorded a combined increase in valuation of
£19.4 million, offset by 19 companies recording an aggregate
fall in valuation of £9.9 million.
Strategy
The Board believes that it is in the best interests of Shareholders
to continue to pursue a strategy of:
- Growth in Net Asset Value Total Return above a 5% target while
continuing to grow the Company’s assets
- Payment of annual dividends of at least 5% of the NAV per share
per annum based on the opening NAV of that financial year
- Implementation of 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 5%, subject to market conditions
Central to the Company being able to achieve these objectives is
the ability of the Manager to source and complete attractive new
qualifying investment opportunities.
Whilst this task has not been made easier by the changes to VCT
legislation since 2015, which (amongst other requirements) place
greater emphasis on growth or development capital investment into
younger companies, the Company is fortunate in that it has pursued
a policy of seeking growth capital investments for several years
prior to the rule changes and the Manager has an established track
record in this area.
Performance and portfolio activity
During the year Net Asset Value per share increased by 1.1% from
64.9p at 31 December 2022 to 65.6p at 31 December 2023.
After adding back the payments of a 3.3p dividend paid on 30 June
2023, NAV Total Return per share at 31 December 2023 was
68.9p, representing a positive total return of 6.2%. This positive
movement is a result of the strategy and business changes
throughout the portfolio alluded to above.
During the year the Manager completed nine new investments and
eight follow-on investments costing £11.7 million and £7.0 million
respectively. The Manager also fully disposed of four investments,
generating proceeds of £20.5 million, a £0.1 million loan
repayment, and a further £1.8 million of deferred consideration
included within debtors at the year end, representing a combined
return multiple of 5.8x.
After the year end, the Company made three new and two follow-on
investments totalling £8.3 million. Furthermore, in March 2024, the
Company realised its holding in Specac International Limited. The
exit generated proceeds of £11.2 million at completion. When added
to £1.5 million of cash returned to date, this implies a total
cash-on-cash return of 10.6 times the initial investment,
equivalent to an Internal Rate of Return ("IRR") of 34%. Further
details of these investments and realisations can be found in the
Manager’s Review.
The Board and the Manager are confident that a number of new and
follow‑on investments can be achieved this year, particularly with
the increased investment activity noted above. Details of each of
these new, existing and former portfolio companies can be found in
the Manager’s Review.
The Manager continues to see a strong pipeline of potential
investments sourced through its regional networks and
well-developed relationships with advisers and the SME community.
It is also focused on supporting the existing portfolio through the
current economic climate. Following the successful fundraise
launched in October 2023, the Company is in a position to fully
support the portfolio, where appropriate, and exploit potential
attractive investment opportunities.
The offer was closed to applications on 30 January 2024 having
raised gross proceeds of £30.0 million, £28.8 million after
expenses, as detailed in the post-balance sheet events in note 20.
The Board would like to thank those existing Shareholders who have
already supported this offer and welcome all new Shareholders to
the Company.
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, these portfolio
companies are assessed and progress measured against these
principles. More detailed information about the process can be
found on pages 43 to 46 of the Manager’s Review of the Annual
Report.
Dividends
An interim dividend of 3.3p per share was declared on
8 June 2023 based on an ex-dividend date of 15 June 2023
and a record date of 16 June 2023. The dividend was paid on
30 June 2023, returning £7.7 million to Shareholders.
As noted in the prior Annual Report and Accounts, and in light
of the change in portfolio towards earlier-stage, higher-risk
companies as required by the VCT rules, the Board felt it prudent
to adjust the dividend policy towards a targeted annual dividend
yield of 5% of NAV per annum. The Board and the Manager continue to
hope that this may be enhanced by additional 'special' dividends as
and when particularly successful portfolio exits are made.
Buybacks
The Board is pleased to have achieved an average discount across
all buybacks of 5.8% to the Net Asset Value per share in the year
as it moved from a target of 7.5% to 5%, and continues to have an
objective of maintaining buybacks at a discount of 5%, subject to
market conditions.
Management charges and performance
incentive
The annual management fee is an amount equal to 2.0% of net assets.
This has resulted in ongoing charges for the period ended 31
December 2023 of 2.2% after adding back the performance incentive
expense to total expenses for the year, which is at the lower end
of the range when compared to competitor VCTs.
As explained in note 13, the Directors have prepared a
calculation incorporating estimated future dividends over a three
year period and expect a performance incentive fee to become
payable during that period. Therefore, a liability of £1,115,000
has been recognised as at 31 December 2023 (2022:
£280,000).
Shareholder communication
We were delighted to meet with some Shareholders in person at the
AGM last year. We hope many of you will be available to attend this
year’s AGM on 11 June 2024, as detailed on the following page.
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 all its responsibilities.
We have added two new Board members during the year, Kavita
Patel and Ian Harris, in view of the retirement of Simon Jamieson
at the AGM held on 8 June 2023 and the intended retirement of
Raymond Abbott.
May I thank Simon for his dedication to the Company and the
Board over the last nine years, having overseen great change
through previously difficult times. I wish him all the best for the
future.
On 1 January 2024 Raymond Abbott stepped down as chair after
seven years and I was appointed as Chair by the board. Raymond will
retire following the AGM being held on 11 June 2024. Myself and the
Board thank Raymond for his sterling contribution to the genuine
progress that the Company has made in recent years. We will miss
his extensive experience and wise counsel.
Annual General Meeting
The Company’s Annual General Meeting will take place on
11 June 2024 and we look forward to meeting as many of you as
possible in person. Please refer to the formal notice on pages 104
to 107 of the Annual Report for further details in relation to the
format of this year’s meeting. We would encourage you to submit
your votes by proxy ahead of the deadline of 1:00pm on 7 June 2024
and to forward any questions by email to
InvestorRelations@foresightgroup.eu in advance of
the meeting.
Sunset clause
The "Sunset clause" for EIS and VCT reliefs has now been extended
by the government to 6 April 2035. The clause provides that income
tax relief will no longer be given to subscriptions made on or
after 6 April 2035, unless the legislation is amended to make the
scheme permanent, or the “Sunset clause” is extended. The
government has the power to extend or remove the sunset clause
through secondary legislation, which would allow the VCT and EIS
schemes to operate in their current form beyond the current expiry
date of the scheme. During the Autumn Statement delivered by the
government in November 2023, Chancellor Jeremy Hunt announced the
extension of the VCT and EIS clause to April 2035. The UK
should be able to extend the scheme without European Commission
approval, clarified by the Northern Ireland Protocol, the Windsor
Framework.
Outlook
As mentioned in my introduction, while the impact of the pandemic
has lessened, wider geopolitical uncertainty is having an impact on
economic volatility, including, but not limited to, the significant
rise in energy prices, rapid inflation, the cost of living crisis
and the potential for a global recession. Supply chains remain
under pressure post Brexit and the pandemic, and exacerbated by the
well‑publicised transport issues in the Red Sea. Such issues are
unlikely to be resolved soon. While the Company’s portfolio has not
been materially exposed, we continue to monitor these
macroeconomic and geopolitical developments. It is very likely that
the economic impacts we are currently experiencing will raise
issues and concerns for the individual investee company management
teams and the Manager.
However, the portfolio is showing strong signs of resilience and
the Manager has been working with management teams to assess
business plans, consider funding requirements and help navigate
through these difficult times. The portfolio is well diversified in
terms of sector, size and number and the Manager’s approach through
the pandemic will continue to be valuable to tackle the challenges
ahead.
The Company is well positioned to continue to support the
portfolio and the fundraising will also provide options to seek new
investments and take advantage of the opportunities that are
regularly sought by the Manager.
Michael Gray
Chair
26 April 2024
MANAGER’S REVIEW
As at 31 December 2023 the Company’s portfolio comprised 46
investments with a total cost of £72.7 million and a valuation of
£119.6 million.
Portfolio summary
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 28 to 32 of the Annual Report.
In the year, the valuation of the investment portfolio increased
by £7.6 million, as a result of an increase of £9.5 million in the
valuation of investments, plus £18.7 million of new and follow-on
investments offset by sales of investments totalling £20.6 million.
Overall, the portfolio has performed well despite uncertainty in
the market with significant geopolitical issues and continued
domestic price inflation, coupled with high interest rates.
In line with the Board’s strategic objectives, the Manager
remains focused on growing the Company through further development
of Net Asset Value Total Return. In the year, net assets increased
by 21.7% to £168.5 million after the payment of dividends, meaning
that the Company successfully met these this objective in the
period under review.
New investments
2023 was characterised by higher interest rates and cost inflation,
although this began to stabilise during the latter part of the year
leading into 2024. Many investee management teams have successfully
steered their businesses through the uncertainty of the year,
whilst developing clearer medium and longer-term growth plans.
The Manager has continued to invest in its deal origination
capabilities and identified a large number of potentially
attractive investment opportunities during the year.
Over the course of 2023, nine new investments were completed; a
total investment of £11.7 million. New investments were across
recruitment, software, industrials, financial planning, health
services, communications and technology. Behind these, there
continues to be a strong pipeline of opportunities that the Manager
expects to convert during the next 12 months. Follow-on investments
totalling £7.0 million were also made into eight existing investee
companies.
Sprintroom Limited
In January 2023, the Company invested £1.0 million of growth
capital 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 £1.8 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 further product development
and expand its commercial capabilities.
Firefish Software Ltd.
In March 2023, the Company invested £1.5 million in Firefish
Software, a Glasgow based customer relationship management and
marketing software platform targeting the recruitment sector. The
funding will be used to support the company in its growth
plans.
Five Wealth Limited
In March 2023, the Company invested £0.7 million in Five Wealth, an
established boutique financial planning business operating across
the North West of England. 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 accelerate Five Wealth’s ambition to help more people reach
their financial planning goals.
The KSL Clinic Limited
In April 2023, the Company invested £1.0 million in The KSL Clinic,
a leading provider of hair replacement treatments, with clinics in
Manchester and Kent. The investment will enable the company to grow
its medical team and expand its geographic presence.
Loopr Ltd
In September 2023, the Company invested £1.8 million in Loopr Ltd,
trading as Looper Insights, a fast-growing, London-based technology
business providing data analytics to digital content distributors
and streaming services. The investment will enable Looper to
increase the solution’s automation and customer integration and
accelerate rollout of its products internationally.
Navitas Digital Safety Limited
In December 2023, the Company invested £1.5 million in Navitas
Digital Safety Limited, a digital food safety management business.
The company uses a combination of hardware and software to provide
a complete food safety management solution to hospitality sector
customers. The investment will support the company’s effort to
expand its commercial capabilities and further develop the
platform.
Kognitiv Spark Inc
In December 2023, the Company invested £1.0 million in Kognitiv
Spark, a developer of augmented reality software that enables the
remote sharing of critical data to on-site employees. Developed
specifically for industrial communications, the company’s core
product offers superior performance in terms of data compression
and visualisation. The funding will be used to expand the
management team and explore new commercial opportunities.
Live Group Holdings Limited
In December 2023, the Company invested £1.4 million in Live Group,
a global events and communications agency selling digital and live
communications and events services. The company has developed
a proprietary delegate management platform to collect attendee
data, share content and enhance engagement with delegates. The
investment will be used to enhance and further develop the platform
whilst supporting growth plans, including international growth.
Follow-on investments
Given the expansion of the portfolio, there has been an increase in
follow-on investments during the year. These follow-on investments
are to support further growth initiatives within the portfolio. The
Manager is pleased to report that despite continuing macroeconomic
uncertainty and stubbornly high interest rates and inflation, the
portfolio remains resilient overall.
The Manager made follow-on investments into eight companies
during 2023, totalling £7.0 million. Further details of each
of these are provided below.
The additional equity injections in the year were used to
support further growth plans, such as launching new products or
opening new sites and providing cash headroom for further growth.
In view of the economic outlook, which remains challenging, the
Manager continues to be vigilant about the health of the rest of
the portfolio and the need for follow-on funding over the coming
months.
Mizaic Ltd (formerly IMMJ Systems
Limited)
In February 2023, £0.7 million was invested in Mizaic, a clinical
electronic document management solution for the NHS. The investment
was used to back the new leadership team and enhance the product
roadmap, bolstering the business’ ability to support digitising
patient records. Mizaic’s principal product, MediViewer, saves time
and costs for the NHS and improves the outcomes for the
clinician-patient experience.
NorthWest EHealth Limited (“NWEH”)
In March 2023 and October 2023, the Company invested a further £2.5
million in aggregate 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 provided support to
the delivery of a number of new real-world trials, while also
enabling the company to complete its ConneXon platform.
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 £0.4 million. The funding enabled the
company to complete its new flagship Kings Cross site and support
the company’s growth strategy.
Additive Manufacturing Technologies Ltd
(“AMT”)
In April 2023, the Company invested £0.1 million in AMT, which
manufactures systems that automate the post-processing of 3D
printed parts. See the Key valuation changes in the period section
below for further details.
viO HealthTech Limited
In September 2023, the Company invested £14k in viO HealthTech
Limited, a developer of innovative medical devices that allow women
to predict and detect ovulation with a high degree of accuracy. The
funding will support the business in the next stage of its market
testing.
Weduc Holdings Limited
In October 2023, the Company invested £0.3 million in Weduc
Limited, a communication platform enabling smoother communication
between parents, teachers and students, alleviating the
administrative burden for teachers and improving parent and student
engagement. The investment will be used to support the continued
growth of the platform.
Clubspark Group Limited
In October 2023, the Company invested £0.6 million in Clubspark
Group Limited, a sports club management and reporting platform for
local organisations and national governing bodies. The funding will
provide further cash headroom to support Clubspark’s continued
growth.
Callen-Lenz Associates Limited
In December 2023, the Company invested £2.5 million in Callen-Lenz
Associates Limited. Callen-Lenz develops, designs and manufactures
air vehicles, vehicle components and navigation and communication
software for high performance unmanned aerial vehicles ("UAVs")
globally. The investment will fund the pursuit of commercial
opportunities.
Realisations
The M&A climate has proved more challenging than in recent
years in light of the macroeconomic conditions of high interest
rates and geopolitical uncertainty. Despite this, the Manager was
pleased to report some particularly strong realisations, as well as
the disposal of one challenged business within the portfolio. The
Manager continues to engage with a range of potential acquirers of
several portfolio companies and to carefully consider the timing of
exit for each. Demand remains for high‑quality, high-growth
businesses from both private equity and trade buyers.
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 £6.8 million at
completion. When added to £0.7 million of cash returned to date,
this implies a total cash-on-cash return of 4.5x the capital of
£1.65 million invested in October 2015, equivalent to an IRR of
25%. The Company's accounting cost of £1.94 million included the
£0.3 million valuation at which Foresight 3 VCT’s (“F3”) holding
was transferred to the Company as part of the merger in June
2017.
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.
Datapath Group Limited
In March 2023, the Company exited Datapath, a global leader in the
provision of hardware and software solutions for multi-screen
displays. The transaction generated proceeds of £10.2 million at
completion and a further £0.6 million was received in November
2023. An additional £1.8 million is payable over 24 months
following exit.
The investment in Datapath was initially held by F3 and was
transferred to the Company on the merger in June 2017. F3 initially
invested £2.0 million into the business in 2007. The accounting
cost of £11.1 million refers to the value at which F3’s holding was
transferred to the Company.
When added to £10.8 million of cash returned pre-exit, this
implies a total cash-on-cash return of 11.6x the original
investment of £2.0 million, equivalent to an IRR of 37% since the
initial investment in 2007.
Since the original investment, the Manager supported Datapath
through a period of material growth with revenues growing from
approximately £7 million to £25 million. Datapath has developed a
market leading hardware and software product suite for the delivery
of multi-screen displays and video walls, which are sold globally
to a diverse customer base across a range of sectors.
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 Company 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 modern software sold on a
SaaS basis. The transaction generated proceeds of £3.5 million on
completion. When added to the £0.1 million cash returned pre-exit,
this implies a total cash-on-cash return of 2.4x on the original
investment, equivalent to an IRR of 12% since the initial
investment. The Company's accounting cost of £1.8 million included
the £0.3 million valuation at which F3’s holding was transferred to
the Company as part of the merger in June 2017.
Luminet Networks Limited
In October 2023, the Company announced the exit of Luminet,
London’s largest fixed wireless network operator and leading
business to business internet provider. The transaction generated
proceeds of £1.2 million at completion including an exit fee of
£71,000. This implies a total cash-on-cash return of 1.2x the
original investment, equivalent to an IRR of 4%.
The Company's investment helped the company to scale up by
adding additional base stations to the existing infrastructure, as
well as navigate through the challenging period of COVID-19-related
uncertainty.
Realisations in the year ended 31 December
2023
Company |
Detail |
Accounting cost at
date of disposal
(£) |
Proceeds4
(£) |
Realised
gain/(loss)
(£) |
Valuation at
31 December 2022
(£) |
Datapath Group Limited1 |
Full disposal |
11,081,243 |
10,099,424 |
(981,819) |
10,491,390 |
Innovation Consulting Group Limited2 |
Full disposal |
1,938,046 |
6,330,446 |
4,392,400 |
5,426,677 |
Protean Software Limited3 |
Full disposal |
1,795,229 |
3,173,829 |
1,378,600 |
2,629,229 |
Luminet Networks Limited |
Full disposal |
960,000 |
868,159 |
(91,841) |
621,800 |
Positive Response Corporation Ltd |
Loan repayment |
100,000 |
100,000 |
— |
100,000 |
Total disposals |
|
15,874,518 |
20,571,858 |
4,697,340 |
19,269,096 |
- Excludes £583,000 of deferred consideration which was received
in November 2023. A further £1,750,000 of deferred consideration
has been recognised within debtors. The accounting cost of £11.1
million includes the valuation of the F3 investment at the point it
was transferred to the Company.
- The accounting cost includes the valuation of the F3 investment
at the point it was transferred to the Company.
- The accounting cost includes the valuation of the F3 investment
at the point it was transferred to the Company.
- Proceeds on exit excluding interest, dividends and exit fees
where applicable.
Pipeline
As at 31 December 2023, the Company had cash reserves of £47.8
million, which will be used to fund new and follow‑on investments,
buybacks, dividends and corporate expenditure. The Manager is
seeing a strong pipeline of potential investments grow and has a
number of new opportunities under exclusivity or, with several
opportunities in due diligence or in exclusivity, with further deal
completions expected to be announced in the coming months.
Stubbornly high interest rates and inflation have created
challenging trading conditions for many companies, with inflation
of wages and input prices of particular concern. Interest on bank
debt remains at a significantly higher level than 18 months ago,
however the Manager notes that the cautious approach to leveraging
portfolio companies provides some protection here. Continuing
geopolitical concern surrounding conflicts in Ukraine and the
Middle East have also caused supply chain disruption. These
challenges create opportunities to source attractive investments
however, with many companies seeking to strengthen their
balance sheets.
The Manager continues to see an attractive pipeline of
opportunities and does not see this changing in the medium term.
The Company is able to access these opportunities through its wide
and proprietary network across the country, supported to a greater
extent by its network of regional offices. The Manager considers
the Company’s strategy to be well-suited to market volatility, due
to its balanced mix of companies across sectors and stages,
experienced investment team and network of high quality
non-executives.
Post-year end activity
Family Adventures Group Limited
In January 2024, the Company invested £2.5 million of growth
capital in Family Adventures Group Limited, a provider of daycare
nurseries and children’s leisure sites that combines soft play
areas with role play facilities. All inspected sites have been
rated “Good” by Ofsted and have an average score of 9.9/10 on
daynurseries.co.uk; whilst the leisure sites have market leading
Net Promoter Scores (“NPS”) and high repeat visits.
The investment will be used to aid the business with a
continued rollout of nursery and leisure sites across the South
West and Midlands.
Evolve Dynamics Limited
In March 2024, the Company completed a £2.0 million investment in
Evolve Dynamics Limited. Founded in 2016, the company designs and
manufactures smaller Unmanned Aerial Systems (“UAS”) with
capabilities for Intelligence, Surveillance, Target Acquisition and
Reconnaissance (“ISTAR”). The investment will help to scale the
business and aid in new product launches.
Lepide Group Holding Company Ltd
In March 2024, the Company invested £2.0 million in Lepide, a cyber
security software solution that helps organisations to protect
their unstructured data. Lepide actively monitors event logs within
Windows Active Directory in order to detect suspicious activity and
help organisations to manage over‑exposure of data. The investment
will help scale the business and accelerate growth initiatives.
Homelink Healthcare Limited
In March 2024, the Company completed a £1.0 million follow-on
investment in Homelink Healthcare Limited. Foresight first
invested in HomeLink in March 2022. Contracting with the NHS, the
business provides patients with wound care, physiotherapy and
intravenous therapies in their own home. HomeLink is also a leader
in remote monitoring practice and offers a virtual ward solution.
The investment will support the organic expansion of the
company.
Sprintroom Limited
In March 2024, the Company completed a £0.8 million follow-on
investment in Sprintroom Limited, 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 drive continued revenue growth.
Specac International Limited
In March 2024, the Manager announced the sale of Specac
International, a leading manufacturer of high specification sample
analysis and preparation equipment used in testing and research
laboratories worldwide, primarily supporting infrared spectroscopy.
The transaction generated proceeds of £11.2 million at completion.
When added to £1.5 million of cash returned pre-exit, this implies
a total cash-on-cash return of 10.6x, equivalent to an IRR of 34%.
Since investment, the business has grown to sell globally through
both original equipment manufacturers and distributors. The Manager
also engaged with the team to support management changes,
improvements in governance, increases in headcount and numerous
product launches. The exit will facilitate the continued growth of
the business.
Key portfolio developments
Material changes in valuation, defined as increasing or decreasing
by £1.0 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 28 to 32 of the Annual Report.
Key valuation changes in the year
Company |
Valuation methodology |
Net movement
(£) |
Callen-Lenz Associates Limited |
Discounted offer received |
9,648,664 |
Copptech UK Limited |
Discounted revenue multiple |
(1,023,465) |
Crosstown Dough Ltd |
Discounted revenue multiple |
(1,159,058) |
So-Sure Limited |
Nil value |
(1,600,000) |
Aerospace Tooling Corporation Limited |
Discounted earnings multiple |
(1,786,770) |
Additive Manufacturing Technologies Ltd |
Price of last funding round |
(1,796,806) |
Copptech UK Limited
Copptech has developed a series of antimicrobial technologies using
copper, zinc and organic active ingredients. The active ingredient
is added to polymers, plastics or dispersions such as varnish and
kills bacteria, fungi and viruses on contact.
31 December 2023 update
Sales in the 12 months to 31 December 2023 were in line with the
prior year. The company’s EBITDA loss was driven by investment in
overhead and a drop in gross margin as finished goods sales were
prioritised to build strategic relationships. The management team
continue to review costs and level of R&D.
So-Sure Limited
So-Sure is an insurance technology company acting as “Managing
General Agent“ for insurers, offering a more trusted proposition,
greater pricing transparency and improved customer experience
through its customer-centric digital platform.
31 December 2023 update
So-Sure has not performed in line with the management plan
presented to the Manager's Investment Committee at the time of the
initial investment and was fully written off in the quarter.
Crosstown Dough Ltd
Crosstown began trading in 2014 and has a portfolio of 31 sites,
including a mix of bricks and mortar, food trucks and market
stalls. Crosstown’s core products are fresh sourdough doughnuts
made at its central production unit in Battersea. Crosstown has
also developed an online presence, via its website and other
delivery providers, as well as a wholesale offering.
31 December 2023 update
Crosstown participated in The Mother of the Nation Festival in Abu
Dhabi in December, helping to build the brand internationally and
presenting future growth opportunities. Management continues to
focus on improvements to the existing retail network to return to
like-for-like growth, as well as selective new site opportunities.
Crosstown continues to invest in its digital business, following
the recruitment of a new Head of Ecommerce.
Aerospace Tooling Corporation
Limited
ATL provides specialist inspection, maintenance, repair and
overhaul ("MRO") services for components in high-specification
aerospace and turbine engines.
31 December 2023 update
Sales were in line with prior year. ATL has implemented
improvements in its processes and internal systems which have led
to improvements in gross margin but there remains a focus on the
delivery of a growing order book, which is expected to result in an
uplift in sales for 2024. Some challenges remain over equipment
reliability issues and the board has implemented a plan to resolve
these.
Additive Manufacturing Technologies
Limited
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.
31 December 2023 update
A significant cost reduction exercise has been implemented, with
the full impact continuing to be realised in the business. The
Manager continues to support the business with the restructuring
plan and its progress towards a break‑even position.
Outlook
Global economies demonstrated some recovery in 2023 with signs of
stability returning, however the UK is proving slower to recover.
The FTSE 100 grew by just 4%, whilst the MCSI World Index grew by
c.20% during the year and many global indexes surpassed this,
including the S&P 500 and NASDAQ – the latter seeing 45%
growth.
Consumer confidence has remained relatively weak in the face of
inflation, which fell steadily throughout 2023 to 4.2% but remained
high by recent standards. To combat this, interest rates increased
from 3% to 5.25% throughout the year, eroding consumer spending
power and putting leveraged businesses under financial pressure. At
a global level, the ongoing conflict in Ukraine and emerging
conflict in the Middle East have led to continuing supply chain
uncertainty and volatility in oil and gas prices. Overall, the UK
economy experienced stagnation during 2023 and entered a technical
recession in the latter half of the year, although many
commentators expected this to be shallow by historic standards. As
a result of these factors, M&A volumes dropped noticeably in
2023.
Despite this challenging backdrop, the Company has performed
well in the year, achieving a 6.2% NAV Total Return for
Shareholders. Strong exits were achieved, to both trade and PE
buyers and across various sectors, demonstrating that demand
remains for high-quality assets that are well prepared for sale.
The exits of Datapath Group Limited and Innovation Consulting Group
Limited from across a range of sectors, significantly contributed
to the Company’s dividend of 3.3p per share for the year,
delivering an attractive dividend yield of 5.8% and exceeding the
Company’s target.
The Company retains a portfolio that is well balanced across
sectors and stages, with some companies delivering strong
profitability whilst other earlier-stage investments continue to
display strong growth. The Manager’s cautious approach to taking on
leverage has protected many portfolio companies from concerns
surrounding rising interest rates.
Looking forward to 2024, considerable uncertainty remains in the
UK economy. The UK’s economic activity was subdued during 2023.
This had an effect on lenders’ confidence which had also been
challenged by high interest rates and inflation. Interest rates are
also set to remain well above recent norms for the foreseeable
future, impacting consumer spending power. The forthcoming
general election, which will be announced at some point this year,
will only add to the sense of uncertainty, although it seems likely
the government will seek to reduce the tax burden to the degree
possible in the run up to an election.
More broadly there is cause for optimism, however. The UK
continues to be a global leader in key sectors such as technology,
life sciences and financial services. There is a strong and
established network of support for growing young companies and
world-class universities continue to nurture exciting spin-outs.
Multinationals continue to see the UK as an attractive place to
invest and grow their businesses. The strength of the US technology
and finance sectors in recent years has made UK valuations seem
relatively cheap by comparison, offering attractive opportunities
for sale to international buyers.
The Manager is pleased with the performance in the year,
especially against the backdrop of a challenging macroeconomic
picture. Looking forward, the economy returning to growth and
interest rates and inflation having passed their peak has potential
for continued good performance over the medium term. The Company’s
strong performance has improved its position in the VCT market,
which is an increasingly attractive and visible source of capital
for the UK’s ambitious entrepreneurs. The portfolio remains
diversified and resilient to macroeconomic headwinds, supported by
a collaborative, hands-on approach from the Manager.
James Livingston
on behalf of Foresight Group LLP
Co-Head of Private Equity
26 April 2024
INCOME STATEMENT
For the year ended 31 December 2023
|
|
Year ended 31 December 2023 |
Year ended 31 December 2022 |
|
|
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Realised gains on investments |
|
— |
5,366 |
5,366 |
— |
17,493 |
17,493 |
Investment holding gains/(losses) |
|
— |
6,405 |
6,405 |
— |
(8,465) |
(8,465) |
Income |
|
2,683 |
— |
2,683 |
871 |
— |
871 |
Investment management fees |
|
(759) |
(3,845) |
(4,604) |
(681) |
(2,323) |
(3,004) |
Other expenses |
|
(790) |
— |
(790) |
(673) |
— |
(673) |
Return/(loss) on ordinary activities before
taxation |
|
1,134 |
7,926 |
9,060 |
(483) |
6,705 |
6,222 |
Taxation |
|
(225) |
225 |
— |
— |
— |
— |
Return/(loss) on ordinary activities after
taxation |
|
909 |
8,151 |
9,060 |
(483) |
6,705 |
6,222 |
Return/(loss) per share |
|
0.4p |
3.5p |
3.9p |
(0.2)p |
3.3p |
3.1p |
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 comprehensive
income 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.
The notes on pages 86 to 103 of the Annual Report form
part of these financial statements.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
Year ended 31 December 2023 |
|
Called-up share capital £’000 |
Share
premium
account
£’000 |
Capital
redemption
reserve
£’000 |
Distributable
reserve1
£’000 |
Capital
reserve1
£’000 |
Revaluation
reserve
£’000 |
Total
£’000 |
As at 1 January 2023 |
|
2,133 |
68,203 |
573 |
57,309 |
(32,793) |
43,025 |
138,450 |
Share issues in the year2 |
|
540 |
36,127 |
— |
— |
— |
— |
36,667 |
Expenses in relation to share issues3 |
|
— |
(1,529) |
— |
— |
— |
— |
(1,529) |
Repurchase of shares |
|
(106) |
— |
106 |
(6,480) |
— |
— |
(6,480) |
Realised gains on disposal of investments |
|
— |
— |
— |
— |
5,366 |
— |
5,366 |
Investment holding losses |
|
— |
— |
— |
— |
— |
6,405 |
6,405 |
Dividends paid |
|
— |
— |
— |
(7,692) |
— |
— |
(7,692) |
Management fees charged to capital |
|
— |
— |
— |
— |
(3,845) |
— |
(3,845) |
Revenue return for the year before taxation |
|
— |
— |
— |
1,134 |
— |
— |
1,134 |
Taxation for the year |
|
— |
— |
— |
(225) |
225 |
— |
— |
As at 31 December 2023 |
|
2,567 |
102,801 |
679 |
44,046 |
(31,047) |
49,430 |
168,476 |
- Reserve is available for distribution; total distributable
reserves at 31 December 2023 total £12,999,000 (2022:
£24,516,000).
- Includes the dividend reinvestment scheme.
- Expenses in relation to share issues includes trail commission
for prior years’ fundraising.
The notes on pages 86 to 103 of the Annual Report form part of
these financial statements.
|
|
|
Share |
Capital |
|
|
|
|
|
|
Called-up |
premium |
redemption |
Distributable |
Capital |
Revaluation |
|
|
|
share capital |
account |
reserve |
reserve1 |
reserve1 |
reserve |
Total |
Year ended 31 December 2022 |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
As at 1 January 2022 |
|
1,928 |
52,996 |
549 |
74,246 |
(47,963) |
51,490 |
133,246 |
Share issues in the year2 |
|
229 |
15,681 |
— |
— |
— |
— |
15,910 |
Expenses in relation to share issues3 |
|
— |
(474) |
— |
— |
— |
— |
(474) |
Repurchase of shares |
|
(24) |
— |
24 |
(1,471) |
— |
— |
(1,471) |
Realised gains on disposal of investments |
|
— |
— |
— |
— |
17,493 |
— |
17,493 |
Investment holding losses |
|
— |
— |
— |
— |
— |
(8,465) |
(8,465) |
Dividends paid |
|
— |
— |
— |
(14,983) |
— |
— |
(14,983) |
Management fees charged to capital |
|
— |
— |
— |
— |
(2,323) |
— |
(2,323) |
Revenue loss for the year |
|
— |
— |
— |
(483) |
— |
— |
(483) |
As at 31 December 2022 |
|
2,133 |
68,203 |
573 |
57,309 |
(32,793) |
43,025 |
138,450 |
- Reserve is available for distribution; total distributable
reserves at 31 December 2023 total £12,999,000 (2022:
£24,516,000).
- Includes the dividend reinvestment scheme.
- Expenses in relation to share issues includes trail commission
for prior years’ fundraising.
The notes on pages 86 to 103 of the Annual Report form part of
these financial statements.
BALANCE SHEET
At 31 December 2023
Registered number: 03506579
|
|
As at |
As at |
|
|
31 December |
31 December |
|
|
2023 |
2022 |
|
|
£’000 |
£’000 |
Fixed assets |
|
|
|
Investments held at fair value through profit or loss |
|
119,587 |
111,966 |
Current assets |
|
|
|
Debtors |
|
2,726 |
2,152 |
Cash and cash equivalents |
|
47,843 |
24,814 |
|
|
50,569 |
26,966 |
Creditors |
|
|
|
Amounts falling due within one year |
|
(1,680) |
(482) |
Net current assets |
|
48,889 |
26,484 |
Net assets |
|
168,476 |
138,450 |
Capital and reserves |
|
|
|
Called-up share capital |
|
2,567 |
2,133 |
Share premium account |
|
102,801 |
68,203 |
Capital redemption reserve |
|
679 |
573 |
Distributable reserve |
|
44,046 |
57,309 |
Capital reserve |
|
(31,047) |
(32,793) |
Revaluation reserve |
|
49,430 |
43,025 |
Equity Shareholders’ funds |
|
168,476 |
138,450 |
Net Asset Value per share |
|
65.6p |
64.9p |
The financial statements were approved by the Board of Directors
and authorised for issue on 26 April 2024 and were signed on its
behalf by:
Michael Gray
Chair
The notes on pages 86 to 103 of the Annual Report form part of
these financial statements.
CASH FLOW STATEMENT
For the year ended 31 December 2023
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2023 |
2022 |
|
|
£’000 |
£’000 |
Cash flow from operating activities |
|
|
|
Loan interest received from investments |
|
1,238 |
653 |
Dividends received from investments |
|
175 |
38 |
Other income received from investments |
|
71 |
— |
Deposit and similar interest received |
|
1,190 |
202 |
Investment management fees paid |
|
(3,029) |
(2,766) |
Performance incentive fee paid |
|
(734) |
— |
Secretarial fees paid |
|
(197) |
(178) |
Other cash payments |
|
(549) |
(433) |
Net cash outflow from operating activities |
|
(1,835) |
(2,484) |
Cash flow from investing activities |
|
|
|
Purchase of investments |
|
(17,652) |
(9,987) |
Proceeds on sale of investments |
|
20,572 |
20,951 |
Proceeds on deferred consideration |
|
669 |
234 |
Net cash inflow from
investing activities |
|
3,589 |
11,198 |
Cash flow from financing activities |
|
|
|
Proceeds of fundraising |
|
34,910 |
13,987 |
Expenses of fundraising |
|
(474) |
(361) |
Repurchase of own shares |
|
(6,504) |
(1,467) |
Equity dividends paid |
|
(6,657) |
(13,172) |
Net cash inflow/(outflow) from financing
activities |
|
21,275 |
(1,013) |
Net inflow of cash for the year |
|
23,029 |
7,701 |
Reconciliation of net cash flow to movement in net
funds |
|
|
|
Increase in cash and cash equivalents for the year |
|
23,029 |
7,701 |
Net cash and cash equivalents at start of
year |
|
24,814 |
17,113 |
Net cash and cash equivalents at end of year |
|
47,843 |
24,814 |
Analysis of changes in net debt
|
At
1 January
2023
£’000 |
Cash flow
£’000 |
At
31 December
2023
£’000 |
Cash and cash equivalents |
24,814 |
23,029 |
47,843 |
The notes on pages 86 to 103 of the Annual Report form part of
these financial statements.
Notes
1. These are not statutory accounts in accordance with S436 of the
Companies Act 2006. The full audited accounts for the year ended 31
December 2023, which were unqualified and did not contain
statements under S498(2) of the Companies Act 2006 or S498(3) of
the Companies Act 2006, will be lodged with the Registrar of
Companies. Statutory accounts for the year ended 31 December 2023
including an unqualified audit report and containing no statements
under the Companies Act 2006 will be delivered to the Registrar of
Companies in due course.
2. The audited Annual Financial Report has been prepared on the
basis of accounting policies set out in the statutory accounts of
the Company for the year ended 31 December 2023. All investments
held by the Company are classified as ‘fair value through the
profit and loss’. Unquoted investments have been valued in
accordance with IPEV guidelines. Quoted investments are stated at
bid prices in accordance with the IPEV guidelines and Generally
Accepted Accounting Practice.
3. Copies of the Annual Report will be sent to shareholders and
can be accessed on the following website:
www.foresightenterprisevct.com
4. Net Asset Value per share
The Net Asset Value per share is based on net assets at the end of
the year and on the number of shares in issue at that date.
|
31 December |
31 December |
|
2023 |
2022 |
Net assets |
£168,476,000 |
£138,450,000 |
No. of shares at year end |
256,728,468 |
213,316,422 |
Net Asset Value per share |
65.6p |
64.9p |
5. Return per share
|
Year ended |
Year ended |
|
31 December |
31 December |
|
2023 |
2022 |
|
£’000 |
£’000 |
Total return after taxation |
9,060 |
6,222 |
Total return per share (note a) |
3.9p |
3.1p |
Revenue return/(loss) from ordinary activities after taxation |
909 |
(483) |
Revenue return/(loss) per share (note b) |
0.4p |
(0.2)p |
Capital return from ordinary activities after taxation |
8,151 |
6,705 |
Capital return per share (note c) |
3.5p |
3.3p |
Weighted average number of shares in issue in the year (note
d) |
230,692,970 |
198,639,819 |
Notes:
- Total return per share is total return after taxation divided
by the weighted average number of shares in issue during the
year.
- Revenue return/(loss) per share is revenue return/(loss) after
taxation divided by the weighted average number of shares in issue
during the year.
- Capital return per share is capital return after taxation
divided by the weighted average number of shares in issue during
the year.
- The weighted average number of shares is calculated by taking
the number of shares issued and bought back during the year,
multiplying each by the percentage of the year for which that share
number applies and then totalling with the number of shares in
issue at the beginning of the year.
6. Annual General Meeting
The Annual General Meeting of the Company will be held at the
offices of Foresight Group LLP, The Shard, 32 London Bridge Street,
SE1 9SG on 11 June 2024 at 1.00pm. Details will be published on
both the Company’s and the Manager’s website at
www.foresightenterprisevct.com.
7. Income
|
Year ended |
Year ended |
|
31 December |
31 December |
|
2023 |
2022 |
|
£’000 |
£’000 |
Loan stock interest |
1,247 |
631 |
Deposit and similar interest received |
1,190 |
202 |
Dividends receivable |
175 |
38 |
Other income |
71 |
— |
|
2,683 |
871 |
8. Investments held at fair value through profit or
loss
|
31 December |
31 December |
|
2023 |
2022 |
|
£’000 |
£’000 |
Unquoted investments |
119,587 |
111,966 |
|
|
£’000 |
Book cost at 1 January 2023 |
|
69,921 |
Investment holding gains |
|
42,045 |
Valuation at 1 January 2023 |
|
111,966 |
Movements in the year: |
|
|
Purchases at cost |
|
18,652 |
Disposal proceeds1 |
|
(20,572) |
Realised gains² |
|
4,697 |
Investment holding gains³ |
|
4,844 |
Valuation at 31 December 2023 |
|
119,587 |
Book cost at 31 December 2023 |
|
72,698 |
Investment holding gains |
|
46,889 |
Valuation at 31 December 2023 |
|
119,587 |
- The Company received £20,572,000 (2022: £20,951,000) from the
disposal of investments during the year. The book cost of these
investments when they were purchased was £15,875,000 (2022:
£3,692,000). 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.
- Realised gains in the Income Statement include deferred
consideration receipts from Accrosoft Limited (£6,000), Datapath
Group Limited (£583,000), and completion proceeds received from
Datapath Group Limited (£78,000) and Protean Software Limited
(£2,000).
- Investment holding gains in the Income Statement include the
deferred consideration debtor increase of £1,561,000. The debtor
movement reflects the recognition of amounts receivable from
Datapath Group Limited (£1,750,000), offset by a receipt from
Accrosoft Limited (£6,000). The Codeplay Software Limited debtor
increased due to its foreign exchange movement (£46,000), and
provisions have been made against balances potentially due from
Mologic Ltd (£105,000), Ixaris Systems Limited (£89,000) and FFX
Group Limited (£36,000).
9. Related party transactions
No Director has an interest in any material contract to which the
Company is a party other than their appointment and remuneration as
Directors. Please refer to page 69 of the Annual Report for the
Directors’ remuneration tables.
10. Transactions with the Manager
Foresight Group LLP earned fees of £3,035,000 in the year ended 31
December 2023 (2022: £2,724,000). Additionally, a performance fee
of £734,000 was paid in the year (2022: £nil), and a liability of
£1,115,000 has been recognised as at 31 December 2023 (2022:
£280,000).
Foresight Group LLP is the Company Secretary and received
accounting and company secretarial services fees of £197,000 during
the year (2022: £178,000).
As at 31 December 2023, the amount due to Foresight Group LLP
was £8,000 (2022: £nil).
No amounts have been written off in the year in respect of debts
due to or from the Manager.
END
For further information please contact:
Gary Fraser, Foresight Group: 020 3667 8181
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