TIDMFTV
FORESIGHT VCT PLC
LEI: 213800GNTY699WHACF46
Final results
31 December 2021
Foresight VCT plc, managed by Foresight Group LLP, today
announces the final results for the year ended 31 December
2021.
These results were approved by the Board of Directors on 13
April 2022.
The Annual Report will shortly be available in full at
www.foresightgroup.eu. All other statutory information can also be
found there.
Highlights
-- Total net assets GBP185.1 million
-- A final dividend of 3.7p per share was paid on 25 June 2021, costing
GBP7.5 million
-- Net Asset Value per share increased by 22.3% from 73.7p at 31 December
2020 to 90.1p at 31 December 2021. After adding back the payment of a
3.7p dividend made on 25 June 2021, NAV Total Return per share was 93.8p,
increasing the total return in the year to 27.3%
-- Six new investments totalling GBP9.9 million and six follow-on
investments totalling GBP5.2 million made during the year
-- The value of the investment portfolio rose by GBP34.3 million in the year
to 31 December 2021. This was driven by an increase of GBP42.0 million in
the valuation of investments plus GBP15.1 million of new investments
offset by sales of investments totalling GBP22.8 million
-- The offer for subscription launched in July 2021 was closed on 8 April
2022 and raised a total of GBP23.4 million after expenses
-- The Board is recommending a final dividend for the year ended
31 December 2021 of 4.5p per share, to be paid on 24 June 2022
Chair's statement
I am pleased to present the Company's audited Annual Report and
Accounts for the year ended 31 December 2021 and to report a
significant uplift in Net Asset Value ("NAV") per share for the
year.
I would like to draw your attention to the separate section on
page 7 of the Annual Report and Accounts which includes information
on material post year end events.
Overview of 2021
The NAV per share increased from 73.7p to 90.1p during the year
and, after adding back the dividend of 3.7p which was paid in June
2021, the total return was an increase to 93.8p. This represents a
strong investment performance with a NAV Total Return per share of
27.3% for the 12 months.
The widespread rollout of the vaccination programme in the UK in
2021 has fortunately resulted in a reduction in hospitalisations
and deaths from COVID-19 despite the emergence of new, more
transmissible variants. As a consequence, Government restrictions
have gradually been lifted and life has begun to return to a more
normal pattern, although some structural changes may now persist in
the way that we live and work, as the use of technology has
accelerated during this period.
After a sharp drop in value in 2020, the Company's portfolio in
aggregate experienced a recovery which continued strongly
throughout 2021. 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, particularly those companies in the travel, retail
and hospitality sectors, struggled as a result of lockdowns, social
distancing and travel restrictions, but these businesses are
beginning to bounce back as pent-up demand is unlocked. At the end
of 2021, 29 companies in the existing portfolio recorded a combined
increase in unrealised value of GBP41.6 million, offset by 11
companies recording an aggregate fall in unrealised value of GBP4.0
million. Three investments were sold in full and one partially.
For the last two years the Manager has continued to work very
closely with all the businesses in the portfolio to help them
minimise the damage to their operations from the pandemic and to
revise their strategies where necessary. Many of the members of the
private equity team have done this whilst working from home.
Despite this disruption to their working lives, they have also
managed to source a growing number of investment opportunities
during the year and added several new investments to the portfolio.
It is a sign of the improving outlook that the team's initial focus
on value preservation of the portfolio during the worst of the
pandemic has since changed to investment growth and acquisition.
The Board would like to thank the members of the team for their
dedication and diligence during this time.
Strategy
The Board and the Manager continue to pursue a strategy for the
Company which includes the following four key objectives:
-- Further development of Net Asset Value Total Return while continuing to
grow the Company's assets
-- Payment of an annual dividend of at least 5% of the NAV per share (based
on the last announced NAV per share) and at the same time endeavouring,
at a minimum, to maintain the NAV per share on a year--on--year basis
-- The implementation of a significant number of new and follow-on
qualifying investments every year
-- Maintaining a programme of regular share buybacks at a discount in the
region of 10% 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 year is reviewed in more detail
below.
Net Asset Value
As at 31 December 2021 the NAV of the Company was GBP185.1
million (31 December 2020: GBP151.8 million), which is in line with
the Board's objective of growing the Company's assets.
At the start of the year, 87% 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 2021 and beyond. On 26 July 2021 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. By the end of 2021,
GBP5.3 million of capital had been raised net of expenses and, as
at the date of this report, funds raised have increased to GBP23.4
million, of which GBP18.1 million has been raised post year end, as
detailed in the post balance sheet events note 20 of the Annual
Report and Accounts. We would like to thank those existing
shareholders who have supported this offer and welcome all new
shareholders to the Company.
During the year the NAV per share increased by 22.3% from 73.7p
at 31 December 2020 to 90.1p at 31 December 2021. After adding back
the payment of a dividend of 3.7p per share on 25 June 2021, which
is detailed below, NAV Total Return per share for the year was
93.8p, representing a total return of 27.3%.
After paying the dividend of 5.0% of NAV, the Company has
exceeded its objective of maintaining the NAV per share on a
year--on--year basis.
The total return per share from an investment made five years
ago would be 38.9%, which is above the minimum target return set by
the Board of 5% per annum. Exceeding this target is at the centre
of the Company's current and future portfolio management
strategy.
Dividends
The final dividend for the year ended 31 December 2020 of 3.7p
per share was paid on 25 June 2021 based on an ex-dividend date of
10 June 2021, with a record date of 11 June 2021. The total cost of
this dividend was GBP7.5 million, including shares allotted under
the dividend reinvestment scheme.
The Board is recommending a final dividend for the year ended 31
December 2021 of 4.5p per share, to be paid on 24 June 2022 based
on an ex-dividend date of 9 June 2022, with a record date of 10
June 2022.
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
current VCT rules. The Board and the Manager hope that this level
may 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.
During the year under review, the Manager completed six new
investments, mostly in the technology and healthcare sectors, and
six follow-on investments costing GBP9.9 million and GBP5.2 million
respectively. The Company also disposed of three investments and
partially disposed of one investment, generating proceeds of
GBP22.8 million with a further GBP1.5 million of deferred
consideration included within debtors at the year end. Details of
each of these new portfolio companies and disposals can be found in
the Manager's Review.
The Board and the Manager are confident that a more significant
number of new and follow-on investments can be achieved in 2022 as
the economy continues to open up and more opportunities emerge.
After the year end, a new investment of GBP1.1 million was made
into Homelink Healthcare Limited and a further follow-on investment
of GBP0.5 million was made into Rovco Limited.
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, these portfolio
companies are assessed and progress measured against these
principles. More detailed information about the process can be
found on page 38 of the Manager's Review in the Annual Report and
Accounts.
Buybacks
During the year the Company repurchased 8,657,404 shares for
cancellation at an average discount of 10.0%, achieving its
objective of maintaining regular share buybacks at a discount of
10.0%, as noted above. The Board and the Manager consider that the
ability to offer to buy back shares at a target discount of
approximately 10.0% is fair to both continuing and selling
shareholders and is an appropriate way to help underpin the
discount to NAV at which the shares trade.
Share buybacks are timed to avoid the Company's closed periods.
Buybacks will generally take place, subject to demand, during the
following times of 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 31 December 2021 of 2.0% of net
assets, 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 GBP1.0 million alongside the Company's investments of
GBP70.9 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 performance incentive scheme only applies after an
investment has been sold and the scheme incorporates three
different hurdles, all of which need to be achieved at different
stages before any performance fee can be paid: an Investment Growth
Hurdle for the individual investment at exit and also two NAV Total
Return Hurdles, the first upon the exit of the investment and the
second three years later. The NAV Total Return Hurdle increases
each year, so the second NAV Total Return Hurdle will be higher
than the first. The continued improvement in the Company's net
asset performance and in its NAV Total Return per share has
resulted in the initial NAV Total Return Hurdle under the
arrangement being met for the first time.
As at 31 December 2021, the individual Investment Growth Hurdles
have been met for two realised and 13 unrealised investments out of
the 31 new early--stage investments made since the introduction of
the performance incentive arrangements and a contingent liability
of GBP4.9 million in respect of this is disclosed in note 15 of the
Annual Report and Accounts. For the first time, the Company has
provided for a GBP0.3 million liability in relation to the
Accrosoft exit, which achieved two of the three hurdles at the date
of exit. An investment under the arrangement will only qualify for
the payment of a performance fee if all three hurdles described
above have been met.
More information on the performance incentive arrangements
(including an explanation of terms used above) can be found in note
13 of the Annual Report and Accounts.
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. 2021 saw some planned
changes to the composition of the Board.
The Board was delighted to appoint Patricia (Patty) Dimond as a
Non-Executive Director in February 2021. Details of Patty's
experience and expertise can be found in her biography on page 45
of the Annual Report and Accounts.
After nearly 11 years as Chair, John Gregory retired at the AGM
on 27 May 2021, as planned. On behalf of the Company, I would again
like to thank John for his significant contribution and commitment
to the Company, which has benefited enormously from his wisdom and
guidance during his service as Chair. My fellow Directors and I
wish John a happy retirement.
The Nomination Committee will continue its plans to refresh the
Board over the next two years and aims to achieve a sensible
balance between continuity and reinvigoration in compliance with
the AIC code.
Material post year end events
The Russian invasion of Ukraine in February 2022 has created a
humanitarian crisis in Europe on a scale not seen for decades, with
the war's fatalities and casualties mounting and millions of
Ukrainian refugees seeking shelter in neighbouring countries. The
wider ramifications of this tragedy are still unknown but
inflationary pressures worldwide are increasing, particularly in
energy and food, and supply chains, already under strain from the
pandemic, will continue to be disrupted. The war has also increased
the potential for further market turmoil and cyber attacks. The
portfolio has some limited direct exposure to Russia and Ukraine
but this remains manageable. The Manager is working closely with
management teams of investee companies to be prepared and plan for
a deteriorating economy.
Since the year end, the Company has continued to allot new
shares under its Prospectus published on 26 July 2021, containing
an offer for subscription to raise up to GBP20 million with an
over-allotment facility to raise a further GBP10 million. In
advance of the allotment of the Company's new shares under this
offer in March and as a result of increased market volatility, the
Board announced on 18 March 2022 two unaudited NAVs per share: a
NAV of 90.1p per share as at 31 December 2021 and 87.5p per share
as at 28 February 2022. The reduction of 2.9% in NAV since 31
December 2021 follows from the general decline in public markets
since that date. Since this announcement, allotments of new shares
have been based on a NAV per share of 87.5p, the most up to date
unaudited valuation at the time.
On 25 March 2022, in order to accommodate further demand and in
accordance with the terms of the Prospectus, the Board decided to
implement the over--allotment facility in part to raise up to a
further GBP5 million. The offer was closed to applications on 7
April 2022 and ended on 8 April 2022 with gross funds raised of
GBP24.1 million.
Shareholder communication
We were disappointed that we were not able to meet with
shareholders in person in 2021 as a result of the travel
restrictions imposed due to COVID-19. As an alternative,
shareholders were invited to a virtual AGM in May, followed at the
beginning of June by an online investor forum facilitated by the
Manager. We appreciate how popular such events are with our
investors and hope to hold future events in person if safe to do
so.
Annual General Meeting
The Company's Annual General Meeting will take place on 31 May
2022 at 1.00pm and we look forward to meeting as many of you as
possible in person, providing rules permit. Please refer to the
formal notice on page 89 of the Annual Report and Accounts for
further details in relation to the format of this year's meeting,
including remote attendance. Voting will be conducted on a poll
rather than a show of hands with the Chair of the AGM holding the
proxy votes. We would encourage you to submit your votes by proxy
ahead of the deadline of 1.00pm on 27 May 2022 and, if attending
remotely, to forward any questions by email to
InvestorRelations@foresightgroup.eu in advance of the meeting.
Outlook
The global economy has rebounded strongly this year from the low
levels of activity recorded in 2020, when the pandemic first struck
and successive lockdowns severely impacted both supply and demand
factors. However, the legacy of COVID-19, combined with the ongoing
impact of Brexit and the current geopolitical conflict in Ukraine,
continue to challenge both our economy and society and create
uncertainty for businesses. In particular, the risks of
inflationary pressures, supply chain issues and staff shortages are
emerging and may impact the future economic recovery. In these
conditions, the Company's investments in unquoted, small,
early-growth businesses entail higher levels of risk, greater
volatility in valuation and lower liquidity than larger listed
companies. It is unlikely, therefore, given these new global
developments that the Company will generate the same level of total
return that has been achieved in 2021.
However, the Manager understands well the management and
business requirements of each of the companies within the
investment portfolio and is working closely with them to help them
adapt to, and grow within, this changing environment.
The Company's current portfolio of investments is well
diversified by number, business sector, size and stage of
development and overall has demonstrated its relative resilience in
the face of the pandemic and its repercussions. We anticipate that
the portfolio in aggregate will also be able to withstand the
increasing challenges and uncertainties arising from the current
turmoil in Central Europe and will continue to prosper over
time.
The fundraising referred to earlier will provide additional
resources to make new acquisitions and enable the Company to take
advantage of the increasing numbers of investment opportunities
that are now emerging out of the recent disruption. We are
cautiously optimistic that the existing portfolio and these new
acquisitions will generate long term value for shareholders.
Margaret Littlejohns
Chair
13 April 2022
Manager's review
The Board has appointed Foresight Group LLP ("the Manager") to
provide investment management and administration services.
Portfolio summary
As at 31 December 2021, the Company's portfolio comprised 49
investments with a total cost of GBP102.7 million and a valuation
of GBP167.0 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 24 to 28 of the Annual Report and
Accounts.
In the year, the value of the investment portfolio rose by
GBP34.3 million as a result of an increase of GBP42.0 million in
the valuation of investments plus GBP15.1 million of new
investments offset by sales of investments totalling GBP22.8
million. Overall, the portfolio has performed well as markets
reopened following the impact of COVID-19.
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 whilst paying an annual dividend to
shareholders of at least 5% of the last announced NAV per share. In
the year, Net Asset Value Total Return was 27.3%, net assets
increased 22.0% to GBP185.1 million and an annual dividend of 5% of
the NAV per share as at 31 December 2020 was paid, meaning that the
Company has successfully met these objectives.
New investments
The Manager was able to meet prospective companies in person
again, an important part of assessing investments and developing
relationships with management teams. Many management teams have
successfully steered their businesses through the pandemic whilst
developing clearer medium and longer-term growth plans. The Manager
has also invested further in its origination capabilities and
identified a large number of appropriate investment opportunities
during the year.
Over the course of 2021, six new investments were completed,
investing a total of GBP9.9 million. 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 GBP5.2 million were also made in existing investee
companies.
Hexarad Group Limited
In June 2021, the Company invested GBP0.8 million into Hexarad
Group, an early-stage, high-growth healthcare technology company,
providing teleradiology services to NHS Trusts and UK private
healthcare customers. Headquartered in London, the company was
founded in 2016 by a team of NHS consultant radiologists and
differentiates itself through its clinical leadership and
technology-led proposition. The investment into Hexarad Group will
enable the company to support more NHS and private healthcare
customers and further improve how they use the technology which is
core to its customer and radiologist experience.
NorthWest EHealth Limited
In June 2021, the Company invested GBP1.5 million into NorthWest
EHealth, 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 expand the
current data network, enabling the company to support a larger
number of trials at a global level, increase product development
and expand the sales and marketing team to help build long-term,
strategic relationships.
Additive Manufacturing Technologies Ltd
In June 2021, the Company invested GBP1.7 million into Additive
Manufacturing Technologies ("AMT"), which manufactures systems that
automate the post-processing of 3D printed parts. AMT originally
received seed funding from Foresight Williams EIS in September
2019. The additional investment, made alongside further investment
from Foresight Williams and other institutions, will be used to
further accelerate its commercial progress.
Callen-Lenz Associates Limited
In August 2021, the Company made a GBP2.4 million investment
into Callen-Lenz Associates, a developer, designer and manufacturer
of high performance unmanned aerial vehicles ("UAVs") as well as
components and navigation and communication software for UAVs.
Callen-Lenz Associates delivers research and development contracts
for large public and private sector clients, which create
regulatory approved technologies that are made into products and
sold to other commercial customers. Founded in 2007, it has four
revenue segments: research and development, hardware, software and
services which are mutually supportive to clients as they move
through the design and sales process with the engineering team. The
investment will enable Callen-Lenz Associates to scale the business
through new hires in key operating and engineering functions.
Newsflare Limited
In December 2021, the Company invested GBP2.0 million into
Newsflare, a marketplace for user-generated video ("UGV") which
currently has one of the largest video libraries with fully cleared
rights in the world, with over 244,000 licensable videos on its
platform. Newsflare was founded in 2011 and is headquartered in
London with staff in Los Angeles, New York and a technology team in
Bulgaria. This investment will allow the company to focus on
building its video library, attract new customers by expanding the
sales and marketing teams as well as improving their platform and
technology.
Crosstown Dough Ltd
In December 2021, the Company invested GBP1.5 million into
Crosstown Dough, a premium sweet treat brand offering a range of
doughnuts, recently complemented by cookies and ice cream, with a
growing vegan offering. Founded in 2014, it has 14
bricks-and-mortar stores and 12 market stalls and food trucks, plus
its goods are sold online through its website, providing customers
with an on--demand or pre-order delivery service, which traded well
during the pandemic. The investment will support the further
rollout of the retail network as well as growing the digital,
wholesale and corporate/events revenue streams.
Follow-on investments
The Manager had expected that more portfolio companies would
need additional capital to support them through continued difficult
trading conditions resulting from the lockdown. However, the
portfolio has remained relatively resilient, supported by the
Manager.
The Manager has arranged follow-on investments into six
companies during 2021, totalling GBP5.2 million. Further details of
each of these are provided below.
The additional equity injections in the period were mainly used
to support each company's further growth plans, such as launching
new products or to expand into new markets. As markets continue to
open up, the Manager remains cautiously optimistic about the health
of the rest of the portfolio and the need for follow-on funding
over the coming months.
Clubspark Group Ltd
In March 2021, Clubspark Group, a software platform that
provides sports clubs and centres with the ability to manage
operations such as court and equipment booking, received a GBP1.5
million follow-on investment from the Company. The investment will
be used to push further into international markets, including the
US.
Fresh Relevance Ltd
In May 2021, a GBP0.7 million follow-on investment was made into
Fresh Relevance, a SaaS email marketing and web personalisation
platform providing online retailers with personalised customer
experiences and real-time marketing tools. The investment will be
used to support further growth and accelerate the product
rollout.
Biotherapy Services Limited
In July 2021, a follow-on investment of GBP0.7 million was made
into Biotherapy Services ("BTS"), a leading pharmaceutical biotech
company. BTS has developed a wound care treatment for diabetic foot
ulcers and the additional funds will be used to support its
clinical development through trials.
Vio Healthtech Limited (formerly Fertility Focus Limited)
In August 2021, a GBP0.3 million follow-on investment was made
into Vio Healthtech, a leading fertility monitoring technology
company that has developed registered medical devices that enable
women to predict ovulation. The funding will be used to support a
new product launch over the next 12 months.
Fourth Wall Creative Limited
In November 2021, an additional GBP1.3 million was invested into
Fourth Wall Creative ("FWC"). FWC designs, procures and fulfils
branded merchandise for use in membership welcome packs,
season-ticket presentation boxes and hospitality gifts for sports
clubs and organisations, predominantly football clubs in the UK but
increasingly cricket and rugby clubs. The investment will be used
to invest further in its technology to enable the company to add
more customers, allowing it to secure long-term licence agreements
with sports teams to directly engage with the fans on their behalf.
This will allow FWC to drive fan engagement for the clubs.
Ten Health & Fitness Limited
In December 2021, 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
will be used for the rollout strategy of more sites as consumers
return to in-person studio offerings with an increased focus on
health and wellbeing.
Realisations
The M&A climate has been robust in certain sectors,
particularly in healthcare, technology and ecommerce. The Manager
continues to engage with a range of potential acquirers of several
portfolio companies, with demand for these high-growth businesses
demonstrated by both private equity and trade buyers.
FFX Group Limited
In January 2021, the Company successfully sold its investment in
FFX Group, one of the UK's largest multi--channel, independent
suppliers of high--quality power tools, fixings and building
supplies. The transaction generated proceeds of GBP11.1 million at
completion and the Company will receive up to GBP0.3 million of
deferred consideration after 18 months, subject to certain
conditions. This implies a cash-on-cash return of 4.3x the initial
investment of GBP2.7 million, made in October 2015, which is
equivalent to an IRR of c.32%. During the investment period, FFX
Group opened a new 60,000 sq ft distribution centre and a new head
office in Kent.
The business updated its brand and launched an extensive range
of its own products. Since the Company's investment, FFX Group more
than tripled revenues and increased headcount by over 125.
Mologic Ltd.
In July 2021, the Company successfully sold its investment in
Mologic, a health diagnostics company providing both contract
research services for clients and developing its own range of
proprietary point-of-care diagnostics products. It was sold to
Global Access Health, a not-for-profit company financed by the
Soros Economic Development Fund, the impact investing arm of the
Open Society Foundations and a group of other philanthropic
organisations and investors. The return multiple of 3.1x includes
deferred consideration, reflecting an IRR of c.38%. During the
investment period, the Mologic team had worked with the Manager to
strengthen the business, develop the product portfolio, increasing
turnover by over 165% and employee numbers by over 40%. The
business has also developed a presence in the US, opening an office
on the East Coast, and also a manufacturing partnership in West
Africa.
Ixaris Systems Ltd
In August 2021, the Company sold its holding in Ixaris Systems,
an award-winning leader in B2B travel payment technology, to Nium,
a global B2B payments platform based in Singapore, resulting in
proceeds of c.GBP1.2 million representing a return of 1.5x cost.
Ixaris Systems' main product is a pre-paid debit card providing
flexible funding and payment methods. Ixaris Systems has clients in
over 50 countries, ranging from the world's largest travel brands
to independent travel agencies.
The decision was made to exit this investment as it would likely
have needed considerable further investment to continue trading
given the depressed travel industry. Without a clear timeline on
market recovery, a process was undertaken to find the best acquirer
for Ixaris Systems led by a new executive chair brought in with the
Manager's support.
Since investment, the Manager helped recruit key senior team
members as well as helping the business establish partnerships with
Visa and Mastercard and increase headcount by over 75.
Accrosoft Limited
In October 2021, the Company completed the sale of Accrosoft, a
recruitment and employee onboarding software company, to Acendre
Technologies Inc., an HR software business headquartered in the US.
One of its main products is Vacancy Filler ("VF"), software which
streamlines talent acquisition and recruitment management for
organisations. It helps millions of candidates to apply for jobs
easily and empowers recruiters and hiring managers to recruit
better and faster. Acendre and Accrosoft's VF product are
complementary businesses and by joining forces they will be able to
offer a recruitment and HR management software platform across a
much wider customer base, as well as establishing a presence in
Europe.
Prior to the sale of Accrosoft, its subsidiary, Weduc, was spun
out, with the Company retaining its 19.4% shareholding. Weduc is a
leading communication platform sold into the education sector and
was initially launched in 2017. The company has grown significantly
since the Manager's original investment, doubling its customer
numbers over the past year.
This transaction generated proceeds of GBP4.3 million, which
represents a return of 1.8x and IRR of 25.9% over a period of three
years with further upside possible given the ongoing investment in
Weduc.
Realisations in the year ended 31 December 2021
Valuation
Accounting at
cost at date Realised 31 December
of disposal Proceeds gain/(loss) 2020
Company Detail (GBP) (GBP) (GBP) (GBP)
------------
FFX Group Full
Limited disposal 2,676,426 11,056,074 8,379,648 11,196,564
Full
Mologic Ltd. disposal 2,434,483 6,270,206 3,835,723 5,054,260
Ixaris
Systems Full
Ltd disposal 2,266,036 1,207,635 (1,058,401) 632,221
Accrosoft Partial
Limited disposal 2,363,062 4,276,188 1,913,126 3,369,089
------------
Total disposals 9,740,007 22,810,103 13,070,096 20,252,134
--------------------------
Pipeline
At 31 December 2021, the Company had cash reserves of GBP17.5
million, which will be used to fund new and follow--on investments,
buybacks and running expenses. The Manager is seeing its pipeline
of potential investments grow and has a number of opportunities
under exclusivity or in due diligence, which it continues to
progress.
The onset of COVID-19 and the resulting economic downturn
resulted in lower new investment activity in 2020, while 2021 saw
an increased flow of opportunities as restrictions reduced
throughout the year. Depending on the length and severity of any
potential COVID-19 variants and associated restrictions, the
Manager expects to see a higher proportion of the Company's
deployment focused on new investments in the short to medium
term.
As the economy recovers from the worst effects of the lockdowns,
the Manager expects the demand for funding to increase. However,
given high levels of liquidity in the market, investment
opportunities are likely to be reasonably competitive. Therefore,
the Manager remains focused on using its direct origination
strategy to identify off-market opportunities and supplement
traditional sources of deal flow.
Post-year end activity
HomeLink Healthcare Limited
Post year end, in March 2022, GBP1.1 million of growth capital
was invested into HomeLink Healthcare, a specialist provider of
Hospital-at-Home and Virtual Ward services. The company employs
highly qualified and experienced nurses and rehabilitation teams to
provide services to patients in their own homes, through contracts
with the NHS. These services deliver a range of clinical
interventions, including wound care, intravenous therapies,
physiotherapy, and rehabilitation. The clinical services offered
alleviate pressure on the NHS by freeing up vital bed space, saving
time and reducing costs.
Rovco Limited
Post year end, in March 2022, Rovco received a GBP0.5 million
follow-on growth capital investment, part of a funding round
totalling GBP15.2 million. Rovco is a leading provider of autonomy
and cloud managed robotics for subsea surveys in offshore wind and
oil field decommissioning. The investment will allow Rovco, and its
technology division Vaarst, to further tech development and
continue global expansion to Austin, Texas and Tokyo, Japan, as
well as increasing its presence across Europe.
Key portfolio developments
Material changes in valuation, defined as increasing or
decreasing by GBP1.0 million or more since 31 December 2020, are
detailed below. Updates on these companies are included below, or
in the Top Ten Investments section on pages 24 to 28 of the Annual
Report and Accounts.
Key valuation changes in the year
Company Valuation methodology Net movement (GBP)
----------------------------------
Discounted earnings
Hospital Services Group Limited multiple 6,867,997
Discounted revenue
Nano Interactive Group Limited multiple 4,396,303
Discounted earnings
Specac International Limited multiple 3,740,867
Discounted earnings
TFC Europe Limited multiple 2,683,854
TLS Management Limited (formerly
Dhalia Limited) Net assets 2,620,405
Discounted earnings
Cinelabs International Ltd multiple 2,577,655
Discounted earnings
Roxy Leisure Ltd multiple 2,341,310
Discounted earnings
Mowgli Street Food Group Limited multiple 2,321,642
Discounted revenue
Codeplay Software Limited multiple 1,804,243
Discounted revenue
Ollie Quinn Limited multiple 1,329,909
Innovation Consulting Group Discounted earnings
Limited multiple 1,283,902
Discounted revenue
Spektrix Limited multiple 1,171,851
Discounted revenue
NorthWest EHealth Limited multiple 1,159,042
Discounted revenue
Fresh Relevance Ltd multiple 1,032,572
Online Poundshop Limited Nil value (1,099,597)
----------------------------------
TLS Management Limited
TLS is based in Barwell, Leicestershire and is a specialist
provider of lens manufacturing, refurbishment and servicing to the
film and television markets.
31 December 2021 update
Performance in the lens rehousing business continued to underpin
the company's impressive performance, representing 82% of FY2021
full-year revenue. Demand from domestic and international customers
remains strong with a robust order book providing revenue
visibility for the next two years, driven by the high levels of
production activity returning in the film and TV markets.
Cinelabs International Ltd
Cinelabs International provides non-creative post production
services to film and TV production houses globally, primarily to
those shooting on analogue film. It also offers film restoration,
digitisation and archiving services to owners of film archives.
31 December 2021 update
Cinelabs International's performance over 2021 was a significant
improvement compared to the prior year given the strong performance
in TV dramas and more consistent revenues from music promotions.
However, feature film revenue remains impacted by COVID-19
postponements and some global supply chain issues for certain types
of Kodak films. Cinelabs International made an attractive
acquisition during the year which is performing well and brought
additional digital capabilities.
Roxy Leisure Ltd
Roxy Leisure is a games bar group with venues predominantly
across the North of England. It offers a range of entertainment
facilities including pool tables, ping-pong, bowling, shuffleboard,
mini golf, arcade games and karaoke.
31 December 2021 update
Roxy Leisure has had an extremely strong year since the lifting
of restrictions, with customers returning in force. It is also
benefiting significantly from the ongoing investments in new sites
made during the pandemic. The search for potential new sites in
other key target cities continues.
Mowgli Street Food Group Limited
A fast-casual chain of Indian street food restaurants founded in
2014, Mowgli Street Food Group is differentiated from traditional
Indian restaurants with a focus on healthy dishes and an extensive
gluten-free, vegetarian and vegan offering.
31 December 2021 update
Mowgli Street Food Group continues to trade very strongly across
its 14 sites, including London and Cheltenham, which opened in
2021, and despite the Omicron wave and "Plan B" restrictions. There
is a schedule of site openings planned throughout the UK for
2022.
Codeplay Software Limited
Codeplay Software is an Edinburgh-based software developer and
software consultancy business which was established in 2002.
Codeplay Software's consultancy customers are chip manufacturers
which need to develop tools that will extract the best performance
from their products.
31 December 2021 update
After investing in developing the product offering, Codeplay
Software has a platform which enables artificial intelligence
algorithms to run more efficiently on next generation car hardware
platforms. The nature of recent projects with large global tech
customers is increasingly strategic.
Online Poundshop Limited
Online Poundshop is an online-only discount retailer of general
merchandise. Founded and chaired by the founder of Poundland and a
proven operator in the sector, it currently has over 200,000
customers in its database and sells over 3,000 products which are
fulfilled from a 21,000 sq ft warehouse in Dudley.
31 December 2021 update
Despite generating ongoing revenues, the company had a
challenging year, in part due to the return to the high street by
consumers and in part due to stock availability challenges. A
funding round was required and the Manager decided not to invest
further, resulting in subsequent dilution and the holding has been
written down to zero.
Outlook
The direct impact of COVID-19 is gradually receding but the
combination of loose fiscal policy and relaxation of restrictions
globally is resulting in other challenges for businesses. In the
UK, the success of the vaccination rollout has enabled the
Government to remove restrictions and now "live with the virus".
There is an expectation that the UK's return to normal should
continue at least until next winter. This, combined with the
gradual easing of COVID-19 related border security measures, will
provide a welcome boost to hospitality, travel and leisure. The
Manager remains cautiously optimistic but will keep the situation
under review and will support the portfolio as required at the
first sign of any relapse caused by new emerging COVID-19
variants.
The gradual opening up of the global economy and the
consequential increase in demand for resources and staff are
putting pressure on supply chains and resulting in staffing
concerns across some industries. Several of Foresight Group's
portfolio companies have been impacted by the global computer chip
shortage amongst other raw material price rises and delays in
delivery. Businesses are also struggling with both staff retention
and hiring new staff as the number of vacancies in the market is
driving both churn and wage inflation. However, such is the demand
in several markets, many companies are successfully passing cost
increases on to the end customer, protecting margins but adding to
the global consumer squeeze.
Hospitality, which had a particularly torrid 2020, enjoyed a
strong summer 2021 and festive period, as consumers relieved
pent-up demand and returned to a pre-pandemic trend of increased
levels of experiential spend. This has resulted in positive results
at portfolio companies including Roxy Leisure and Mowgli Street
Food Group. Similarly, technology businesses with clear revenue
visibility and a differentiated product, and healthcare services
businesses, continue to trade strongly and are the current focus of
the Manager's origination efforts.
Inflation across the western world is at levels that have not
been seen for many years. The majority of Foresight Group's
portfolio CEOs and finance directors have worked in a high
inflation environment and the Manager is encouraging a prudent
approach to cost inflation and supply chain management and
requesting scenario analyses to model the impact of medium-term
inflation on margins.
The Russian invasion of Ukraine, in recent weeks, has brought
further pressure on inflation and energy prices, as well as the
potential for further market turmoil and increased cyber risks. The
Company's portfolio has some direct exposure to Russia and Ukraine,
but this remains manageable. We are working closely with management
teams to ensure scenario planning for a wider economic impact has
been undertaken.
The Manager is pleased with the overall performance of the
portfolio over the past 12 months, especially in these challenging
times, and looks forward to a further improvement as conditions
return to normal.
During the pandemic, in addition to taking advantage of the
Coronavirus Job Retention (or "furlough") Scheme, many small
businesses turned to Government-supported debt facilities including
"Bounce Back Loans", the Future Fund and the Coronavirus Business
Interruption Loan Scheme. As companies come to the end of their
repayment holidays, the drain on operating cash flow of interest
and capital repayments is making companies look to alternative
sources of funding for support or growth which should support VCT
deal flow.
Global equity markets are currently highly volatile with a
number of lockdown "winners" such as Amazon, Peloton and Netflix
beginning to lose their shine, whilst mining stocks and traditional
sectors including banking and utilities are showing record profits.
The threat of war in Europe is looming over capital markets;
however, M&A activity remains relatively buoyant and both
international buyers and domestic investors have high levels of
deployable capital which should provide support for a continued
steady flow of realisations.
Notwithstanding the continued uncertainty, the Manager expects
to see a sustained high level of activity from UK companies seeking
growth capital, given VCTs remain an attractive source of capital
for entrepreneurs.
Russell Healey
on behalf of Foresight Group LLP
Head of Private Equity
13 April 2022
Income statement
for the year ended 31 December 2021
Year ended 31 December 2021 Year ended 31 December 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Realised
gains/(losses)
on
investments -- 13,070 13,070 -- (1,415) (1,415)
Investment
holding gains -- 30,424 30,424 -- 6,250 6,250
Income 858 -- 858 1,844 -- 1,844
Investment
management
fees (772) (2,612) (3,384) (680) (2,039) (2,719)
Other expenses (587) -- (587) (580) -- (580)
(Loss)/return
on ordinary
activities
before
taxation (501) 40,882 40,381 584 2,796 3,380
Taxation -- -- -- -- -- --
(Loss)/return
on ordinary
activities
after
taxation (501) 40,882 40,381 584 2,796 3,380
(Loss)/return (0.2)p 19.9p 19.7p 0.3p 1.4p 1.7p
per share
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 74 to 88 of the Annual Report and Accounts
form part of these financial statements.
Reconciliation of movements in shareholders' funds
Share Capital
Year ended Called-up premium redemption Distributable Capital Revaluation
share
31 December capital account reserve reserve(1) reserve(1) reserve Total
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------
As at 1
January
2021 2,060 67,634 994 50,546 (4,513) 35,097 151,818
Share issues
in the
year(2) 83 6,714 -- -- -- -- 6,797
Expenses in
relation to
share
issues(3) -- (198) -- -- -- -- (198)
-------------
Repurchase of
shares (87) -- 87 (6,142) -- -- (6,142)
Cancellation
of share
premium -- (39,196) -- 39,196 -- -- --
Realised
gains on
disposal of
investments -- -- -- -- 13,070 -- 13,070
Investment
holding
gains -- -- -- -- -- 30,424 30,424
Dividends
paid -- -- -- (7,508) -- -- (7,508)
Management
fees charged
to capital -- -- -- -- (2,612) -- (2,612)
Revenue loss
for the
year -- -- -- (501) -- -- (501)
-------------
As at 31
December
2021 2,056 34,954 1,081 75,591 5,945 65,521 185,148
-------------
Share Capital
Year ended Called-up premium redemption Distributable Capital Revaluation
share
31 December capital account reserve reserve(1) reserve(1) reserve Total
2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------
As at 1
January
2020 1,740 78,841 951 23,799 (1,059) 28,847 133,119
Share issues
in the
year(2) 363 25,655 -- -- -- -- 26,018
Expenses in
relation to
share
issues(3) -- (1,221) -- -- -- -- (1,221)
Repurchase of
shares (43) -- 43 (2,674) -- -- (2,674)
Cancellation
of share
premium -- (35,641) -- 35,641 -- -- --
Realised
losses on
disposal of
investments -- -- -- -- (1,415) -- (1,415)
Investment
holding
gains -- -- -- -- -- 6,250 6,250
Dividends
paid -- -- -- (6,804) -- -- (6,804)
Management
fees charged
to capital -- -- -- -- (2,039) -- (2,039)
Revenue
return for
the year -- -- -- 584 -- -- 584
-------------
As at 31
December
2020 2,060 67,634 994 50,546 (4,513) 35,097 151,818
-------------
1. Reserve is available for distribution; total distributable reserves at 31
December 2021 total GBP81,536,000 (2020: GBP46,033,000).
2. Includes the dividend reinvestment scheme.
3. Expenses in relation to share issues includes trail commission for prior
years' fundraising.
The notes on pages 74 to 88 of the Annual Report and Accounts
form part of these financial statements.
Balance sheet
At 31 December 2021
Registered number: 03421340
As at As at
31 December 31 December
2021 2020
GBP'000 GBP'000
----------------------------------------------------
Fixed assets
Investments held at fair value through profit or
loss 167,006 132,739
----------------------------------------------------
Current assets
Debtors 1,669 239
Cash and cash equivalents 17,521 18,939
----------------------------------------------------
19,190 19,178
Creditors
Amounts falling due within one year (751) (99)
----------------------------------------------------
Net current assets 18,439 19,079
Amounts falling due greater than one year (297) --
Net assets 185,148 151,818
---------------------------------------------------- ----------- -----------
Capital and reserves
Called-up share capital 2,056 2,060
Share premium account 34,954 67,634
Capital redemption reserve 1,081 994
Distributable reserve 75,591 50,546
Capital reserve 5,945 (4,513)
Revaluation reserve 65,521 35,097
----------------------------------------------------
Equity shareholders' funds 185,148 151,818
Net Asset Value per share 90.1p 73.7p
----------------------------------------------------
The financial statements were approved by the Board of Directors
and authorised for issue on 13 April 2022 and were signed on its
behalf by:
Margaret Littlejohns
Chair
The notes on pages 74 to 88 of the Annual Report and Accounts
form part of these financial statements.
Cash flow statement
for the year ended 31 December 2021
Year ended Year ended
31
December 31 December
2021 2020
GBP'000 GBP'000
-----------------------------------------------------
Cash flow from operating activities
Loan interest received from investments 582 478
Dividends received from investments 384 1,437
Deposit and similar interest received 1 34
Investment management fees paid (3,095) (2,719)
Secretarial fees paid (122) (120)
Other cash payments (462) (449)
-----------------------------------------------------
Net cash outflow from operating activities (2,712) (1,339)
-----------------------------------------------------
Cash flow from investing activities
Purchase of investments (15,111) (7,680)
Net proceeds on sale of investments 22,810 296
Net proceeds on deferred consideration -- 13
-----------------------------------------------------
Net cash inflow/(outflow) from investing activities 7,699 (7,371)
-----------------------------------------------------
Cash flow from financing activities
Proceeds of fundraising 5,407 24,203
Expenses of fundraising (164) (637)
Repurchase of own shares (5,496) (2,668)
Equity dividends paid (6,152) (5,573)
-----------------------------------------------------
Net cash (outflow)/inflow from financing activities (6,405) 15,325
-----------------------------------------------------
Net (outflow)/inflow of cash in the year (1,418) 6,615
Reconciliation of net cash flow to movement in net
funds
(Decrease)/increase in cash and cash equivalents for
the year (1,418) 6,615
Net cash and cash equivalents at start of year 18,939 12,324
-----------------------------------------------------
Net cash and cash equivalents at end of year 17,521 18,939
-----------------------------------------------------
Analysis of changes in net debt
At At
1 January 31 December
2021 Cash flow 2021
GBP'000 GBP'000 GBP'000
--------------------------
Cash and cash equivalents 18,939 (1,418) 17,521
--------------------------
The notes on pages 74 to 88 of the Annual Report and Accounts
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 2021,
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 2021 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.
1. 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 2021. 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.
1. Copies of the Annual Report will be sent to shareholders and can be
accessed on the following website: www.foresightvct.com.
1. 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
2021 2020
--------------------------
Net assets GBP185,148,000 GBP151,818,000
No. of shares at year end 205,591,087 205,954,017
Net Asset Value per share 90.1p 73.7p
--------------------------
1. Return per share
Year ended Year ended
31 December 31 December
2021 2020
GBP'000 GBP'000
-----------------------------------------------------
Total return after taxation 40,381 3,380
Total return per share (note a) 19.7p 1.7p
-----------------------------------------------------
Revenue (loss)/return from ordinary activities after
taxation (501) 584
Revenue (loss)/return per share (note b) (0.2)p 0.3p
-----------------------------------------------------
Capital return from ordinary activities after
taxation 40,882 2,796
Capital return per share (note c) 19.9p 1.4p
-----------------------------------------------------
Weighted average number of shares in issue in the
year 204,937,084 199,164,754
-----------------------------------------------------
Notes:
1. Total return per share is total return after taxation divided by the
weighted average number of shares in issue during the year.
2. Revenue (loss)/return per share is revenue return after taxation divided
by the weighted average number of shares in issue during the year.
3. Capital return per share is capital return after taxation divided by the
weighted average number of shares in issue during the year.
1. 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 31 May 2022 at 1.00pm. Details will be published on both
the Company's and the Manager's website at
www.foresightvct.com.
1. Income
Year ended Year ended
31 December 31 December
2021 2020
GBP'000 GBP'000
--------------------------------------
Loan stock interest 473 370
Dividends receivable 384 1,437
Deposit and similar interest received 1 34
Other income -- 3
--------------------------------------
858 1,844
--------------------------------------
1. Investments held at fair value through profit or loss
2021 2020
GBP'000 GBP'000
--------------------------------
Unquoted investments 167,006 132,739
--------------------------------
GBP'000
--------------------------------
Book cost as at 1 January 2021 97,316
Investment holding gains 35,423
--------------------------------
Valuation at 1 January 2021 132,739
Movements in the year:
Purchases at cost 15,111
Disposal proceeds(1) (22,810)
Realised gains 13,070
Investment holding gains(2) 28,896
--------------------------------
Valuation at 31 December 2021 167,006
--------------------------------
Book cost at 31 December 2021 102,687
Investment holding gains 64,319
--------------------------------
Valuation at 31 December 2021 167,006
--------------------------------
1. The Company received GBP22,810,000 (2020: GBP296,000) from the disposal
of investments during the year. The book cost of these investments when
they were purchased was GBP9,740,000 (2020: GBP1,724,000). 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 of GBP1,528,000 with GBP141,000 relating to FFX
Group Limited, GBP1,202,000 relating to Mologic Ltd., GBP114,000 relating
to Ixaris Systems Ltd and GBP71,000 relating to Accrosoft Limited.
1. 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.
1. Transactions with the Manager
Foresight Group CI Limited, which acted as Manager to the
Company until 27 January 2020, earned fees of GBPnil (2020:
GBP192,000). Foresight Group LLP was appointed as Manager on 27
January 2020 and earned fees of GBP3,087,000 up to 31 December 2021
(2020: GBP2,527,000).
Foresight Group LLP is the Company Secretary (appointed in
November 2017) and received accounting and company secretarial
services fees of GBP122,000 (2020: GBP120,000) during the year. At
31 December 2021, the amount due to Foresight Group LLP was GBPnil
(2020: GBPnil).
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
(END) Dow Jones Newswires
April 13, 2022 12:27 ET (16:27 GMT)
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