TIDMFTV
FORESIGHT VCT PLC
LEI: 213800GNTY699WHACF46
UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE PERIODED 30 JUNE 2022
FINANCIAL HIGHLIGHTS
-- Total net assets GBP197.9 million
-- A final dividend of 4.5p per share was paid on 24 June 2022, costing
GBP10.0 million
-- The value of the portfolio decreased by GBP9.8 million in the six months
to 30 June 2022. This was driven by successful realisations of GBP19.9
million offset by GBP3.2 million of deployment and an increase of GBP6.9
million in the value of investments
-- The Board has declared a special dividend of 4.0p per share to be paid on
21 October 2022 following the successful sales of TFC Europe Limited and
Codeplay Software Limited
-- Net Asset Value per share decreased by 1.8% from 90.1p at 31
December 2021 to 88.5p at 30 June 2022. After adding back the 4.5p
dividend paid on 24 June 2022, NAV Total Return per share was 93.0p,
which made the total return in the period 3.2%
-- The offer for subscription launched in July 2021 was closed on 8 April
2022 and raised a total of GBP23.4 million after expenses
CHAIR'S STATEMENT
I am pleased to present the Company's unaudited Half-Yearly
Financial Report for the period ended 30 June 2022.
The year started positively as the economy continued to rebound
from the pandemic and benefit from pent-up consumer demand, but
this recovery was swiftly curtailed after Russia invaded Ukraine in
February 2022. The war has continued to wreak death and destruction
and displaced large numbers of Ukrainian refugees, with no signs of
abating. Supply chains were already under strain from the pandemic
but further disruption by the war and subsequent sanctions have
particularly impacted food and energy supplies, causing inflation
to rise rapidly worldwide. The war has also increased the potential
for further market turmoil and cyber attacks. The Company's
portfolio has some limited direct exposure to Russia and Ukraine
but this remains manageable.
During the six months to 30 June 2022, the value of investments
held fell by GBP9.8 million as a result of GBP19.9 million of
successful realisations, partially offset by new investments of
GBP3.2 million and an increase in the value of the portfolio of
GBP6.9 million. The increase in the valuation of the portfolio of
GBP6.9 million was explained by 22 unrealised investments recording
a combined uplift of GBP11.4 million, three realised investments
achieving an uplift of GBP8.9 million and 19 unrealised investments
experiencing a decrease in valuation of GBP13.4 million. The
valuation of the remaining seven investments was unchanged in the
period.
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 six months is reviewed in more detail
below.
Net Asset Value
As at 30 June 2022, the NAV of the Company was GBP197.9 million
(31 December 2021: GBP185.1 million), which is in line with the
Board's objective of growing the Company's assets.
At the start of the period, 90% of the Company's assets were
already invested and back in July 2021, 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. The offer was
closed on 8 April 2022 having raised GBP23.4 million of capital net
of expenses.
We would like to thank those existing shareholders who have
supported this offer and welcome all new shareholders to the
Company.
During the period the NAV per share decreased by 1.8% from 90.1p
at 31 December 2021 to 88.5p at 30 June 2022. After adding back the
payment of a dividend of 4.5p per share on 24 June 2022, which is
detailed below, NAV Total Return per share for the period was
93.0p, representing a total return of 3.2%.
After paying the dividend of 5.0% of NAV, the Company has met
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 36.0%, 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 2021 of 4.5p
per share was paid on 24 June 2022 based on an ex-dividend date of
9 June 2022, with a record date of 10 June 2022. The total cost of
this dividend was GBP10.0 million, including shares allotted under
the dividend reinvestment scheme.
The Board has declared a special dividend of 4.0p per share to
be paid on 21 October 2022 following the successful sales of TFC
Europe Limited on 29 June 2022 and Codeplay Software Limited on 30
June 2022. The two exits together realised gains of GBP15.6 million
since initial investment, including an uplift of GBP8.9 million in
the six months to 30 June 2022 and returned GBP19.9 million of cash
proceeds to the Company, an exceptional achievement from a combined
investment of GBP4.3 million.
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.
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 period under review, the Manager completed two new
investments, one in the healthcare sector and one in the media
sector, costing GBP2.6 million in total, and one follow-on
investment of GBP0.5 million. The Company also disposed of three
investments, generating proceeds of GBP19.9 million with a further
GBP0.9 million of deferred consideration included within debtors at
the period 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 and
beyond as the economy continues to open up and more opportunities
emerge.
After the end of the reporting period, new investments of GBP1.7
million and GBP2.4 million were made into Strategic Software
Applications Ltd and Copptech UK Limited respectively while a
further follow-on investment of GBP0.7 million was made into
Hexarad Group 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 24 of the Manager's Review in the Unaudited
Half-Yearly Financial Report.
Buybacks
During the period the Company repurchased 4,840,841 shares for
cancellation at an average discount of 10.0%, achieving its
objective of maintaining regular share buybacks at a discount of
around 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 30 June 2022 of 1.9% 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
GBP74.1 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. Despite continued improvement in the Company's net
asset performance and in its NAV Total Return per share, the
increase in RPI of 11.8% in June 2022 has resulted in the initial
NAV Total Return Hurdle under the arrangement no longer being met
at 30 June 2022.
As at 30 June 2022, the individual Investment Growth Hurdles
have been met for three realised and 16 unrealised investments out
of the 33 new early-stage investments made since the introduction
of the performance incentive arrangements and a contingent
liability of GBP6.2 million in respect of this is disclosed in note
8. A realisation 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 on the previous page) can
be found in note 13 of the 2021 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.
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.
Shareholder communication
We were delighted to meet once again with some shareholders in
person at the AGM on 31 May 2022, having long been unable to do so
as a result of the travel restrictions due to COVID-19.
Arrangements were also made to enable shareholders to attend
online. However, very few took advantage of this facility and the
Board has decided, in view of the considerable cost of providing
it, not to repeat this in 2023. Additionally, the Manager is hoping
to reintroduce in-person investor forum events in the winter which
have proven popular with our shareholders in the past.
Outlook
The legacy of COVID-19, combined with the ongoing impact of
Brexit and the current geopolitical conflict in Ukraine, will
continue to raise challenges and create uncertainty for businesses.
In particular, inflationary pressures, supply chain issues and
staff shortages have all emerged and are likely to worsen over the
coming months. The Bank of England is predicting a recession in the
UK by the end of this year. In these deteriorating economic
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
economic situation and will continue to prosper over time.
The fundraising referred to earlier provides additional
resources to make new investments and enables 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
30 September 2022
MANAGER'S REVIEW
The Board has appointed Foresight Group LLP ("the Manager") to
provide investment management and administration services
Portfolio summary
As at 30 June 2022, the Company's portfolio comprised 48
investments with a total cost of GBP98.9 million and a valuation of
GBP157.2 million. The portfolio is diversified by sector,
transaction type and maturity profile. Details of the ten largest
investments by valuation, including an update on their performance,
are provided on pages 16 to 20 of the Manager's Review in the
Unaudited Half-Yearly Financial Report.
During the six months to 30 June 2022, the value of the
portfolio fell by GBP9.8 million as a result of GBP19.9 million of
successful realisations, partially offset by new investments of
GBP3.2 million and an increase in the value of the investments of
GBP6.9 million. The Company's portfolio continues to recover
following the impact of COVID-19 over the past 24 months. Many of
the portfolio companies have successfully navigated the new
economic landscape, with some performing extremely well, while
others continue to adjust.
In line with the Board's strategic objectives, the investment
team remains focused on continuing to grow the Company's assets
whilst paying an annual dividend to shareholders of at least 5% of
the last announced NAV per share. The Company has so far achieved
this target for the current year and this objective remains the
Manager's focus.
New investments
Since COVID-19 restrictions eased, there has been a shift
towards more in-person events and meetings, and whilst not yet back
to pre-pandemic levels, it is now easier for the private equity
team to meet prospective companies and their teams face to face.
This is an important part of assessing investments and developing
relationships with management teams and other members of the local
investment community. The Manager and SMEs have adjusted to this
new landscape given companies still wish to grow their businesses
and act on opportunities as they arise. The Manager continued to
meet new companies and advisers throughout the period and build its
reputation in each of the regions it operates in.
Two new investments were completed in the six months to 30 June
2022. Further details of each of these are provided below. Behind
these, there is a strong pipeline of opportunities that the Manager
expects to convert during the second half of 2022.
SO-SURE Limited
In May 2022, the Company invested GBP1.6 million into SO-SURE, a
digital insurance platform for consumer mobile phones and home
contents. The investment will be used to scale up operations and
extend the product range, which has shown great potential beyond
the existing lines.
HomeLink Healthcare Limited
In March 2022, the Company invested GBP1.1 million of growth
capital into HomeLink, a specialist provider of clinical services
to patients in their own homes, alleviating pressure on the NHS,
freeing up vital bed space, saving time and reducing costs. The
investment will be used to consolidate HomeLink's position as a
first mover in a sizeable and growing market.
Strategic Software Applications Ltd
Post-period end, in August 2022, the Company invested GBP1.7
million of growth capital into Strategic Software Applications,
previously referred to as Axiom HQ but now trading as Ruleguard, a
SaaS technology provider supporting regulatory compliance for
financial institutions. The investment will be used to help the
business maximise opportunities as its target market grows in line
with the adoption of specialised technology as a result of
increasing regulatory complexity.
Copptech UK Limited
Also in August 2022, the Company invested GBP2.4 million of
growth capital into Copptech UK, an innovative anti-microbial
technology company that uses a patented microparticle in polymers,
plastics and building materials to kill bacteria, fungi and viruses
on contact.
The investment will be used to help the business grow sales and
market presence in new geographies.
Follow-on investments
The Manager expects to continue to deploy additional capital
into both growing portfolio companies and those that require
support to trade through more uncertain periods. Macro factors such
as wage, commodity price and energy price inflation may impact some
elements of the portfolio, but in general the Manager ensures at
the time of initial investment that investee companies are
well-capitalised to trade through periods of lower market demand or
supply challenges. This is evidenced by the portfolio remaining
relatively resilient over the COVID-19 period, supported by the
Manager, with an active management style to ensure risks are
identified and mitigated early.
The Company made one follow-on investment in the period,
totalling GBP0.5 million, to support further growth opportunities.
Further details are provided below.
Rovco Ltd
In March 2022, Rovco, a developer of 3D computer vision and AI
technology for streamlining and ultimately automating the
monitoring and management of marine infrastructure, received a
GBP0.5 million follow-on investment from the Company as part of a
GBP15.3 million funding round. The investment will be used to
support the growing working capital needs in the contract business
as well as the expansion of Rovco's commercial, operational and
technological capabilities.
Hexarad Group Limited
Post-period end, the Company completed a GBP0.7 million
investment into Hexarad as part of a GBP2.1 million funding round.
Hexarad is a high-growth healthcare technology company, delivering
teleradiology services to NHS and private healthcare customers. It
gives healthcare providers access to faster diagnosis of medical
images (CT, MRI and X-Ray), using proprietary allocation tools to
distribute scans to a pool of remote radiologists.
Pipeline
At 30 June 2022, the Company held cash of GBP28.6 million. This
will be used to fund new and follow-on investments, buybacks and
running expenses and support the Company's dividend objectives. The
Manager has a number of opportunities under exclusivity or in due
diligence. The Company remains well-positioned to continue pursuing
these potential investment opportunities.
Exits and realisations
The M&A climate has remained buoyant during the period but
it may be cooling.
In June 2022, the Company successfully realised investments in
Codeplay Software Limited and TFC Europe Limited and sold its
holding in Online Poundshop Limited. Codeplay is one of the leading
solutions providers to the semiconductor industry. During the
investment period, the Manager helped the business reframe its
strategy to offer a suite of services rather than standalone
products, which made it an important player in an ecosystem of high
performance computing. It evolved its technology and developed new
routes to market.
The Manager also introduced a chairperson and through the
Manager's joint venture with Williams Advanced Engineering, the
business was able to access the automotive market.
The business was sold to a leading computer chip developer in a
transaction that generated proceeds of GBP9.6 million at
completion, an exceptional return on an investment of GBP0.7
million. The sale of industrial fastener products supplier TFC
generated proceeds of GBP10.3 million, another strong performance.
Since the original investment, the Company helped to extend TFC's
network in the UK and Germany.
TFC also rapidly expanded its vendor managed inventory service,
growing the customer base, so it now provides a market-leading
service to SMEs and international global businesses operating
across a range of industries. The Company supported three
acquisitions as well as considerable investment in new and existing
facilities, opening new sites in England, Northern Ireland and
Europe.
Following a sustained period of difficult trading, the Company's
holding in discount e-tailer Online Poundshop was written down to
nil and the business was sold to a trade buyer.
Disposals in the period ended 30 June 2022
Valuation
Accounting at
cost at
date Realised 31 December
of disposal Proceeds gain/(loss) 2021
Company Detail (GBP) (GBP) (GBP) (GBP)
----------- ------------ ----------- ------------ ----------- -----------
TFC Europe Full
Limited disposal 3,614,612 10,271,922 6,657,310 6,887,033
----------- ------------ ----------- ------------ ----------- -----------
Codeplay
Software Full
Limited disposal 689,656 9,582,978(1) 8,893,322 4,099,278
----------- ------------ ----------- ------------ ----------- -----------
Online
Poundshop Full
Limited disposal 2,610,000 -- (2,610,000) --
----------- ------------ ----------- ------------ ----------- -----------
6,914,268 19,854,900 12,940,632 10,986,311
1. A further GBP917,456 of deferred consideration has been reflected in the
accounts.
Key portfolio developments
In the first six months of the year, the portfolio has shown
further recovery, which started in the second half of 2021, as
businesses adapt to the new economic climate.
The value of investments held reduced by GBP9.8 million in the
six months to 30 June 2022, driven largely by realisations of
GBP19.9 million, offset partially by deployment of GBP3.2 million
and an increase in the value of existing investments of GBP6.9
million.
Material changes in valuation, defined as increasing or
decreasing by GBP1.0 million or more since 31 December 2021, are
detailed below. Updates on these companies are included below, or
in the Top Ten Investments section on pages 16 to 20 of the
Manager's Review in the Unaudited Half-Yearly Financial Report.
Key valuation changes in the period
Valuation
Company Valuation (GBP) change (GBP)
------------------------------------ --------------- ------------
Hospital Services Group Limited 19,162,231 3,331,496
Spektrix Limited 8,511,330 1,642,436
Fresh Relevance Ltd 5,806,367 (1,049,432)
Cinelabs International Ltd 2,296,968 (1,436,619)
Datapath Group Limited 5,335,881 (1,745,882)
Innovation Consulting Group Limited 5,161,909 (1,964,780)
Ollie Quinn Limited 4,370,440 (2,370,322)
Cinelabs International Ltd
Cinelabs 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.
30 June 2022 update
Cinelabs' performance at the start of the year was softer than
anticipated, driven by an overall lower number of projects for both
film and digital. As is common in the industry, the summer and
autumn periods seem to have rebounded and the pipeline of
contracted projects for the second half of the year is strong.
Cinelabs has also recently won some new high-profile episodic
series, which will support revenue visibility.
Ollie Quinn Limited
Ollie Quinn is a branded retailer of prescription glasses,
sunglasses and non-prescription polarised sunglasses based in the
UK and Canada. The company provides high-quality, branded,
prescription glasses cheaper than other high-end opticians in order
to satisfy a gap in the market for affordable luxury.
30 June 2022 update
Ollie Quinn's performance has been impacted by COVID-19
lockdowns, particularly in Canada where regional restrictions
persisted for longer than the UK, and by the beginnings of a
squeeze on consumer discretionary spend. The business has taken
advantage of economic conditions to open a number of new sites on
favourable lease terms, targeting affluent towns including St
Albans, Guildford and Richmond.
Outlook
The global and UK markets have experienced a volatile past 12
months following a strong recovery in consumer and business demand
after the COVID-19 pandemic. At the same time, supply chains
remained constrained by continued lockdowns in China and Europe and
the cautious return of labour to the UK workforce, as lockdowns and
furlough schemes altered people's working patterns. All these
factors began to drive price inflation in late 2021 -- a symptom
that was further compounded by the war in Ukraine -- causing the
prices of gas, electricity, precious metals and food, amongst other
commodities, to soar in Q1 2022.
The Bank of England responded by raising the base interest rate
from 0.1% in December 2021 to 2.25% in September 2022 to help
reduce inflation, which has increased from 7.5% in December 2021 to
12.3%(1) by August 2022 and most analysts expect further increases
to both inflation and interest rates in the medium term. The Bank
of England now forecasts that the UK will enter a recession later
in 2022.
Despite this backdrop, the Company's portfolio is well
positioned to withstand the market volatility. We have worked to
balance risk, with the portfolio exposed to a broad base of both
well-established and earlier-stage growth companies across a range
of sectors. Over the past 12 months, the portfolio continued to
perform well, with the Company realising six investments in this
time.
Notable examples that demonstrate our ability to capitalise on
high-quality regional opportunities in a variety of sectors are the
sale of Codeplay, an Edinburgh--based software tool developer, to a
US corporate buyer delivering an impressive 16.1x return, and the
sale of TFC, an East Sussex distributor of specialist fixings and
industrial fasteners, that generated a 12.6x return on investment.
The current portfolio has a good mix of earlier stage and more
mature investments, which are expected to generate both income and
capital returns for investors over time.
The Manager continues to leverage its regional offices to source
the highest quality growth companies where we can employ our
extensive advisory network and proactive portfolio management style
to drive growth and add value to each investee company. There
remains a strong appetite for funding from the smaller UK
businesses with growth potential, which manifested itself in a
number of exciting deals completed in the past year. Despite shifts
in the investment landscape, we continue to see excellent
opportunities to support small companies in many sub-sectors, such
as health, technology and compliance systems, amongst others.
While the macro environment is precarious, we believe that the
Company's portfolio is well placed to cope with a period of
uncertainty. The UK undoubtedly remains an exceptional place to
start, fund and grow a small business, and the Manager remains
committed to supporting the best UK entrepreneurs on their
journey.
James Livingston
Foresight Group LLP
30 September 2022
1. Bank of England, RPI December 2021 to August 2022
www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23
UNAUDITED HALF-YEARLY RESULTS AND RESPONSIBILITIES
STATEMENTS
Principal risks and uncertainties
The principal risks faced by the Company are as follows:
-- Market risk
-- Strategic and performance risk
-- Internal control risk
-- Legislative and regulatory risk
-- VCT qualifying status risk
-- Investment valuation and liquidity risk
The Board reported on the principal risks and uncertainties
faced by the Company in the Annual Report and Accounts for the year
ended 31 December 2021. A detailed explanation can be found on
pages 40 to 41 of the Annual Report and Accounts, which is
available on the Company's website www.foresightvct.com or by
writing to Foresight Group at The Shard, 32 London Bridge Street,
London, SE1 9SG.
In the view of the Board, there has been a further change to the
fundamental nature of these risks since the previous report. The
emerging risks identified in the previous report included that of
climate change, inflationary pressures and the Russian invasion of
Ukraine. These emerging risks continue to apply and be monitored.
In addition, tensions are increasing in the relationship between
the United States and China over the future of Taiwan, where a
large proportion of sophisticated microchips are manufactured and
exported to businesses in the West, including those in the
Company's portfolio. The Board and the Manager continue to follow
all emerging risks closely with a view to identifying where changes
affect the areas of the market in which portfolio companies
operate. This enables the Manager to work closely with portfolio
companies, preparing them to the best extent possible to ensure
they are well positioned to endure potential volatility.
Directors' responsibility statement
The Disclosure and Transparency Rules ("DTR") of the UK Listing
Authority require the Directors to confirm their responsibilities
in relation to the preparation and publication of the Half-Yearly
Financial Report.
The Directors confirm to the best of their knowledge that:
a) The summarised set of financial statements has been prepared in accordance with FRS 104
b) The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year)
c) The summarised set of financial statements gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.2.4R
d) The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein)
Going concern
The Company's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the Strategic Report of the Annual Report. The
financial position of the Company, its cash flows, liquidity
position and borrowing facilities are described in the Chair's
Statement, Strategic Report and Notes to the Accounts of the 31
December 2021 Annual Report. In addition, the Annual Report
includes the Company's objectives, policies and processes for
managing its capital; its financial risk management objectives;
details of its financial instruments; and its exposures to credit
risk and liquidity risk.
The Company has considerable financial resources together with
investments and income generated therefrom across a variety of
industries and sectors. As a consequence, the Directors believe
that the Company is well placed to manage its business risks
successfully.
The Directors have reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing the annual financial
statements.
The Half-Yearly Financial Report has not been audited nor
reviewed by the auditors.
On behalf of the Board
Margaret Littlejohns
Chair
30 September 2022
UNAUDITED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2022
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(Unaudited) (Unaudited) (Audited)
------- ----------- ------- ------- ----------- ------- ------- --------- -------
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------- ----------- ------- ------- ----------- ------- ------- --------- -------
Realised gains
on
investments -- 12,992 12,992 -- 8,380 8,380 -- 13,070 13,070
Investment
holding
(losses)/gains -- (5,070) (5,070) -- 14,123 14,123 -- 30,424 30,424
Income 486 -- 486 135 -- 135 858 -- 858
Investment
management
fees (464) (1,096) (1,560) (363) (1,090) (1,453) (772) (2,612) (3,384)
Other expenses (295) -- (295) (289) -- (289) (587) -- (587)
--------------- ------- ----------- ------- ------- ----------- ------- ------- --------- -------
(Loss)/return
on ordinary
activities
before
taxation (273) 6,826 6,553 (517) 21,413 20,896 (501) 40,882 40,381
Taxation -- -- -- -- -- -- -- -- --
--------------- ------- ----------- ------- ------- ----------- ------- ------- --------- -------
(Loss)/return
on ordinary
activities
after
taxation (273) 6,826 6,553 (517) 21,413 20,896 (501) 40,882 40,381
--------------- ------- ----------- ------- ------- ----------- ------- ------- --------- -------
(Loss)/return
per share (0.1)p 3.1p 3.0p (0.2)p 10.4p 10.2p (0.2)p 19.9p 19.7p
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 period.
The Company has no recognised gains or losses other than those
shown above, therefore no separate statement of total recognised
gains and losses has been presented.
The Company has only one class of business and one reportable
segment, the results of which are set out in the Income Statement
and Balance Sheet.
There are no potentially dilutive capital instruments in issue
and, therefore, no diluted earnings per share figures are relevant.
The basic and diluted earnings per share are, therefore,
identical.
UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE SIX MONTHSED 30 JUNE 2022
Called-up Share Capital
share premium redemption Distributable Capital Revaluation
capital account reserve reserve(1) reserve(1) reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ --------- ------- ---------- ------------- ---------- ----------- -------
As at 1
January
2022 2,056 34,954 1,081 75,591 5,945 65,521 185,148
Share issues
in the
period 229 20,360 -- -- -- -- 20,589
Expenses in
relation to
share
issues -- (622) -- -- -- -- (622)
Repurchase
of shares (48) -- 48 (3,812) -- -- (3,812)
Realised
gains on
disposal of
investments -- -- -- -- 12,992 -- 12,992
Investment
holding
losses -- -- -- -- -- (5,070) (5,070)
Dividends
paid -- -- -- (9,967) -- -- (9,967)
Management
fees
charged to
capital -- -- -- -- (1,096) -- (1,096)
Revenue loss
for the
period -- -- -- (273) -- -- (273)
------------ --------- ------- ---------- ------------- ---------- ----------- -------
As at 30
June 2022 2,237 54,692 1,129 61,539 17,841 60,451 197,889
1. Reserve is available for distribution; total distributable reserves at 30
June 2022 total GBP79,380,000 (31 December 2021: GBP81,536,000).
UNAUDITED BALANCE SHEET
AT 30 JUNE 2022
Registered Number: 03421340
As at As at As at
30 June 30 June 31 December
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
--------------------------------------- ----------- ----------- -----------
Fixed assets
Investments held at fair value through
profit or loss 157,171 150,320 167,006
Current assets
Debtors 12,309 192 1,669
Cash and cash equivalents 28,565 14,070 17,521
--------------------------------------- ----------- ----------- -----------
Total current assets 40,874 14,262 19,190
Creditors
Amounts falling due within one year (156) (1,172) (751)
--------------------------------------- ----------- ----------- -----------
Net current assets 40,718 13,090 18,439
Amounts falling due greater than one
year -- -- (297)
--------------------------------------- ----------- ----------- -----------
Net assets 197,889 163,410 185,148
--------------------------------------- ----------- ----------- -----------
Capital and reserves
Called-up share capital 2,237 2,031 2,056
Share premium account 54,692 68,935 34,954
Capital redemption reserve 1,129 1,041 1,081
Distributable reserve 61,539 39,406 75,591
Capital reserve 17,841 2,777 5,945
Revaluation reserve 60,451 49,220 65,521
--------------------------------------- ----------- ----------- -----------
Equity shareholders' funds 197,889 163,410 185,148
--------------------------------------- ----------- ----------- -----------
Net Asset Value per share 88.5p 80.5p 90.1p
UNAUDITED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2022
Six months Six months Year
ended ended ended
31
30 June 30 June December
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
----------------------------------------------------- ----------- ----------- ---------
Cash flow from operating activities
Loan interest received from investments 311 284 582
Dividends received from investments 96 42 384
Deposit and similar interest received 27 1 1
Investment management fees paid (1,843) (1,453) (3,095)
Secretarial fees paid (65) (61) (122)
Other cash payments (168) (252) (462)
----------------------------------------------------- ----------- ----------- ---------
Net cash outflow from operating activities (1,642) (1,439) (2,712)
----------------------------------------------------- ----------- ----------- ---------
Cash flow from investing activities
Purchase of investments (3,170) (6,274) (15,111)
Net proceeds on sale of investments 10,272 11,056 22,810
Net proceeds on deferred consideration 51 -- --
----------------------------------------------------- ----------- ----------- ---------
Net cash inflow from investing activities 7,153 4,782 7,699
----------------------------------------------------- ----------- ----------- ---------
Cash flow from financing activities
Proceeds of fundraising 18,531 -- 5,407
Expenses of fundraising (455) (37) (164)
Repurchase of own shares (4,468) (2,023) (5,496)
Equity dividends paid (8,075) (6,152) (6,152)
----------------------------------------------------- ----------- ----------- ---------
Net cash inflow/(outflow) from financing activities 5,533 (8,212) (6,405)
----------------------------------------------------- ----------- ----------- ---------
Net inflow/(outflow) of cash in the period 11,044 (4,869) (1,418)
----------------------------------------------------- ----------- ----------- ---------
Reconciliation of net cash flow to movement in net
funds
Increase/(decrease) in cash and cash equivalents for
the period 11,044 (4,869) (1,418)
Net cash and cash equivalents at start of period 17,521 18,939 18,939
----------------------------------------------------- ----------- ----------- ---------
Net cash and cash equivalents at end of period 28,565 14,070 17,521
Analysis of changes in net debt
At 30 June At 1 January
2022 Cash flow 2022
GBP'000 GBP'000 GBP'000
-------------------------- ---------- --------- ------------
Cash and cash equivalents 28,565 11,044 17,521
NOTES TO THE UNAUDITED HALF-YEARLY RESULTS
FOR THE SIX MONTHSED 30 JUNE 2022
1. The Unaudited Half-Yearly Financial Report has been prepared on the basis
of the accounting policies set out in the statutory accounts of the
Company for the year ended 31 December 2021. Unquoted investments have
been valued in accordance with IPEV Valuation Guidelines.
1. These are not statutory accounts in accordance with S436 of the Companies
Act 2006 and the financial information for the six months ended 30 June
2022 and 30 June 2021 has been neither audited nor formally reviewed.
Statutory accounts in respect of the year ended 31 December 2021 have
been audited and reported on by the Company's auditors and delivered to
the Registrar of Companies and included the report of the auditors which
was unqualified and did not contain a statement under S498(2) or S498(3)
of the Companies Act 2006. No statutory accounts in respect of any period
after 31 December 2021 have been reported on by the Company's auditors or
delivered to the Registrar of Companies.
1. Copies of the Unaudited Half-Yearly Financial Report will be sent to
shareholders via their chosen method and will be available for inspection
at the Registered Office of the Company at The Shard, 32 London Bridge
Street, London, SE1 9SG.
1. Net Asset Value per share
The Net Asset Value per share is based on net assets at the end
of the period and on the number of shares in issue at the date.
Number of
Net assets shares in issue
----------------- --------------- ---------------
30 June 2022 GBP197,889,000 223,678,255
30 June 2021 GBP163,410,000 203,113,554
31 December 2021 GBP185,148,000 205,591,087
1. Return per share
The weighted average number of shares used to calculate the
respective returns are shown in the table below.
Shares
------------------------------ -----------
Six months ended 30 June 2022 215,848,355
Six months ended 30 June 2021 205,199,150
Year ended 31 December 2021 204,937,084
Earnings for the period should not be taken as a guide to the
results for the full year.
1. Income
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- ---------- -----------
Loan stock interest 337 92 473
Dividends receivable 122 42 384
Deposit and similar interest received 27 1 1
-------------------------------------- ---------- ---------- -----------
486 135 858
1. Investments at fair value through profit or loss
GBP'000
--------------------------------- --------
Book cost as at 1 January 2022 102,687
Investment holding gains 64,319
--------------------------------- --------
Valuation at 1 January 2022 167,006
Movements in the period:
Purchases 3,170
Disposal proceeds(1) (19,855)
Realised gains(2) 12,941
Investment holding losses(3) (6,091)
--------------------------------- --------
Valuation at 30 June 2022 157,171
--------------------------------- --------
Book cost at 30 June 2022 98,943
Investment holding gains 58,228
--------------------------------- --------
Valuation at 30 June 2022 157,171
1. The Company generated GBP19,855,000 from the disposal of investments
during the period. Proceeds of GBP9,583,000 million from the Codeplay
Software Limited disposal were received post period end in early July
2022 and are shown in debtors as at the date of this report. The book
cost of these investments when they were purchased was GBP6,914,000.
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. Realised gains in the Income Statement includes deferred consideration of
GBP51,000 received from Accrosoft Limited in the period.
3. Investment holding losses in the Income Statement include the deferred
consideration debtor increase of GBP1,021,000. The debtor movement
reflects the recognition of amounts receivable from Codeplay Software
Limited (GBP917,000) and FFX Group Limited (GBP155,000), offset by a
receipt from Accrosoft Limited (GBP51,000).
1. Contingent assets and liabilities
In order to incentivise the Manager to generate enhanced returns
for shareholders, the Manager will potentially be entitled to
performance incentive payments in respect of investments made in
new investee companies on or after 31 March 2017 (including
follow-ons in such investee companies), as described in note 13 of
the Company's 31 December 2021 Annual Report and Accounts
(including an explanation of terms used below).
As at 30 June 2022, the NAV Total Return was 117.4p (being the
aggregate of the NAV per share as at 30 June 2022 of 88.5p and
dividends paid per share (rebased) since 18 December 2015 totalling
28.9p). This compares to the NAV Total Return Hurdle as at 30 June
2022 of 119.1p.
As at 30 June 2022, the Investment Growth Hurdle had been met
for three realised and 16 unrealised investments out of the 33 new
early-stage investments made since the introduction of the
performance incentive arrangements.
Estimation of the financial effect
Should all the hurdles detailed in note 13 of the Annual Report
and Accounts be met in the future, the Manager will receive a fee
equal to 20% of the amount by which the cash proceeds received by
the Company exceed the Investment Growth Hurdle. Based on the
current investments made on or after 31 March 2017 the contingent
liability, if investments were sold at their current carrying
value, would be GBP6.2 million. Included in this GBP6.2 million,
there is a potential contingent liability of GBP3.1 million in
relation to the realisations of Mologic, Accrosoft and Codeplay,
the latter of which proceeds were received post period end in early
July 2022.
The fee will only be paid after three years following the sale
of a relevant investment, once the end NAV Total Return can be
measured. As the payment is conditional on meeting the hurdles and
payment would only occur three years after the relevant exit, this
contingent liability is not provided for in the financial
statements.
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 LLP was appointed as Manager on 27 January 2020
and earned fees of GBP1,857,000 up to 30 June 2022 (30 June 2021:
GBP1,453,000, 31 December 2021: GBP3,087,000).
Foresight Group LLP is the Company Secretary (appointed in
November 2017) and received, directly and indirectly, for
accounting and company secretarial services, fees of GBP65,000
during the period (30 June 2021: GBP61,000, 31 December 2021:
GBP122,000).
At the balance sheet date there was GBPnil due to Foresight
Group LLP (30 June 2021: GBPnil, 31 December 2021: GBPnil).
However, management fees of GBP7,000 have been accrued as at 30
June 2022 (30 June 2021: GBPnil, 31 December 2021: GBPnil).
END
For further information, please contact:
Company Secretary
Foresight Group LLP
Contact: Gary Fraser Tel: 0203 667 8100
Investor Relations
Foresight Group LLP
Contact: Ellie Kakoulli Tel: 0203 667 8181
(END) Dow Jones Newswires
September 30, 2022 08:30 ET (12:30 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.
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