Foresight Solar VCT PLC : Half-yearly report
FORESIGHT SOLAR VCT PLC
Summary
Net asset value total return per Ordinary Share in the six months to 31 December 2012 was 6.3%, representing an uplift in net asset value to 102.5p (30 June 2012: 98.8p).
In line with original expectations, an interim dividend of 2.5p per Ordinary Share will be paid to shareholders on 12 April 2013. The dividend will have an ex-dividend date of 20 March 2013 and a record date of 22 March 2013.
A small further investment of £6,820 was made into Foresight Luxembourg Solar 2 S.â.r.l during the period and a loan repayment of £410,505 was received from Foresight VCT (Lux) 1 S.â.r.l.
The Ordinary Shares fund is considered fully invested and therefore the Board has decided to launch a "C" Shares fund to take advantage of new solar photovoltaic investment opportunities benefiting from the Renewable Obligation Certificate (ROC) regime (as opposed to the Feed-in-Tariff (FiT) scheme that benefited investments in the Ordinary Shares fund).
| Six months ended | Year ended | |
| 31 December 2012 | 30 June 2012 | |
| Net asset value per Ordinary Share | 102.5p | 98.8p |
| Revenue return per Ordinary Share | 3.2p | 0.1p |
| Capital return per Ordinary Share | 3.2p | 5.1p |
| Total return per Ordinary Share | 6.4p | 5.2p |
| Share price per Ordinary Share | 90.9p | 93.0p |
Chairman's Statement
Results
I am pleased to be able to report on a period of robust performance from the Company's portfolio of solar investments. Despite the recent wet weather in the UK, the plants are performing in line with or better than original expectations. This has resulted in a 3.8% increase in net asset value to 102.5p at 31 December 2012 from 98.8p at 30 June 2012. All of the investments are more fully described in the Investment Manager's Report.
Dividends
The Board plans to pay dividends of 5.0p per Ordinary Share each year throughout the life of Foresight Solar VCT plc after the first year, payable bi-annually via dividends of 2.5p per Ordinary Share in April and October each year. The level of dividends is not, however, guaranteed.
In line with original expectations, the first interim dividend of 2.5p per Ordinary Share was paid on 31 October 2012 and a second interim dividend of 2.5p per Ordinary Share will be paid to shareholders on 12 April 2013, making 5.0p per Ordinary Share in total. The dividend will have an ex-dividend date of 20 March 2013 and a record date of 22 March 2013.
Share Issues & New Fund Raising
During the period there were no issues or buybacks of Ordinary Shares.
The Ordinary Shares fund is now effectively fully invested and therefore the Board has decided to launch a "C" Shares fund to take advantage of new solar photovoltaic (PV) investment opportunities benefiting from the Renewable Obligation Certificate (ROC) regime (as opposed to the Feed-in-Tariff (FiT) scheme that benefited investments in the Ordinary Shares fund). The new fund, which will be launched as a separate "C" Share class whose assets and liabilities will be segregated from those of the Ordinary Shares fund, will be managed by the existing Foresight Group Solar team. The target is for a total fund-raising of £20 million. Although the funds will be run separately there will be areas of commonality between the funds, which should allow for cost savings that will benefit both sets of shareholders.
The prospectus for the new £20 million "C" Shares fund-raising is expected to be available during February 2013.
Valuation Policy
Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital (IPEVC) valuation guidelines (August 2010) developed by the British Venture Capital Association and other organisations. Through these guidelines, investments are valued as defined at 'fair value'. Ordinarily, unquoted investments will be valued at cost for a limited period following the date of acquisition, being the most suitable approximation of fair value unless there is an impairment or significant accretion in value during the period. The portfolio valuations are prepared by Foresight Group, reviewed and approved by the Board quarterly and subject to audit annually.
Outlook
The Board and Foresight Group, the Investment Manager, are satisfied with the current portfolio and the quality of the returns being seen from those projects, which gives us confidence in achieving the original objectives of the Company. A refinancing of existing projects is being considered to release funds for further investment in a rapidly growing UK PV sector which should enhance returns to shareholders.
Additionally, as outlined earlier in my statement, a further fund-raising is being proposed to shareholders to enable the Company to take advantage of further solar investment opportunities, although these investments will be managed in a separate "C" Shares fund as the Government incentives and returns from Solar ROC investments differ from the investments in the fully invested Ordinary Shares fund.
David Hurst-Brown
Chairman
15 February 2013
Investment Manager's Report
The six months to 31 December 2012 has been a period of consolidation following the new investment activity over the previous 12 months. Operational improvements have been made across a number of the portfolio companies contributing to the technical performance of the PV plants being some 5% better than anticipated. Cash generation across the portfolio is facilitating dividend distributions in line with expectations.
The UK photovoltaic ('PV') solar market has grown to more than 1.8 gigawatts and the Department of Energy and Climate Change (DECC) is now very supportive of the sector given that equipment prices have fallen significantly over the last 18-24 months. The larger scale ground based UK solar market is now focused on the ROC subsidy mechanism. This is a widely understood subsidy mechanism that has been in place for more than 10 years in the UK to support the wind sector. The ROC rate for UK solar PV is 2 ROCs per MW/hour for plants connected by 1 April 2013 and 1.6 ROCs for plants connected
in the following 12 months. At these levels of subsidies, current and anticipated equipment pricing will facilitate investment returns that meet the VCT's criteria and, combined with a large pipeline of projects in development in the market, provide opportunities for further investment.
Returns to existing shareholders can be enhanced by refinancing part of the existing portfolio to release funds that can be re-invested in further projects under the ROC scheme. This should enhance the equity return on the existing portfolio and generate further yield on the new investments. As a result, we anticipate a progression in the dividend rate and expect that a larger portfolio should command a greater exit premium when the investments are sold. We are now actively exploring refinancing options with a view to finalising this in the quarter ending 30 June 2013.
The size of the available pipeline also justifies the issue of a "C" Share class which may invest together with the Ordinary Share class and other Foresight Group funds depending on availability of funding. A separate Circular will be issued to shareholders on the proposed new share issue.
Portfolio Review
Output from the UK portfolio was 7% above expectation for the calendar year ended December 2012. Most of this over performance was due to better technical operation of the plant. For example, the high voltage cable has been relocated at the Kent Solar farm so that the VCT's portfolio companies benefit from lower losses of energy as the electricity travels from the point of generation to the grid connection point. Insurance and power purchase agreements are also being consolidated in order to improve commercial terms and/or efficiencies.
The better than expected performance of the UK portfolio has resulted in an associated uplift in valuation and an increase in net asset value. The Spanish project valuation has however been reduced by 25% reflecting unexpected regulatory changes in connection with tax and the level of indexation applied to the feed-in tariff revenues.
A small investment is expected to be completed after the period end, in Greenersite Ltd which owns a fully FiT accredited 100 kilowatt roof top PV plant on a farm in Herefordshire.
Outlook
UK solar PV installations are expected to grow rapidly at least until 1 April 2014 based on ROC subsidy support. The VCT can use this opportunity to enhance investment returns generated by the existing portfolio by using refinancing proceeds to build a bigger portfolio that should generate more yield and value on an exit. In the meantime we expect to maintain a minimum dividend rate of 5% per annum.
Jamie Richards
Head of Infrastructure
Foresight Group
15 February 2013
Unaudited Half-Yearly Financial Report and Responsibility Statements
Principal Risks and Uncertainties
The principal risks faced by the Company can be divided into various areas as follows:
Performance
Regulatory
Operational; and
Financial
The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Accounts for the year ended 30 June 2012. A detailed explanation can be on found on page 9 of the Annual Report and Accounts which is available at www.foresightgroup.eu or by writing to Foresight Group at ECA Court, 24-26 South Park, Sevenoaks, Kent, TN13 1DU.
In the view of the Board, there have been no changes to the fundamental nature of these risks since the previous report and these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the six months under review.
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 Unaudited Half-Yearly Financial Report for the six months ended 31 December 2012.
The Directors confirm to the best of their knowledge that:
(a) the summarised set of financial statements has been prepared in accordance with the pronouncement on interim reporting issued by the Accounting
Standards Board;
(b) the Unaudited Half-Yearly Financial Report for the six months ended 31 December 2012 includes a fair review of the information required by DTR 4.2.7R
(indication of important events during the first six months of the year and a description of principal risks and uncertainties that the Company faces for the
six months of the year);
(c) the summarised set of financial statements give 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; and
(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 Business Review on page 8 of the 30 June 2012 Annual Report and Accounts. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the Chairman's Statement, Business Review and Notes to the Accounts of the 30 June 2012 Annual Report and Accounts. In addition, the Annual Report and Accounts includes the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.
The Company has considerable financial resources together with investments and income generated therefrom, which benefit from Feed-in-Tariffs guaranteed by the UK Government. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook.
Cash flow projections have been reviewed and show that the Company has sufficient funds to meet both its contracted expenditure and its discretionary cash outflows in the form of the share buy-back programme and dividend policy. The Company has no external loan finance in place and therefore is not exposed to any gearing covenants.
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 for the six months ended 31 December 2012 has not been audited or reviewed by the auditors.
On behalf of the Board
David Hurst-Brown
Chairman
15 February 2013
Unaudited Income Statement
for the six months ended 31 December 2012
| Six months ended | Six months ended | Year ended | |||||||
| 31 December 2012 | 31 December 2011 | 30 June 2012 | |||||||
| (unaudited) | (unaudited) | (audited) | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Investment holding gains/(losses) | - | 1,567 | 1,567 | - | (360) | (360) | - | 2,240 | 2,240 |
| Income | 1,442 | - | 1,442 | 375 | - | 375 | 488 | - | 488 |
| Investment management fees | (69) | (206) | (275) | (64) | (191) | (255) | (130) | (390) | (520) |
| (Losses)/gains on the value of derivatives | - | (142) | (142) | - | 104 | 104 | - | 63 | 63 |
| Other expenses | (143) | - | (143) | (183) | - | (183) | (339) | - | (339) |
| Return/(loss) on ordinary activities before taxation | 1,230 | 1,219 | 2,449 | 128 | (447) | (319) | 19 | 1,913 | 1,932 |
| Taxation | - | - | - | - | - | - | - | - | - |
| Return/(loss) on ordinary activities after taxation | 1,230 | 1,219 | 2,449 | 128 | (447) | (319) | 19 | 1,913 | 1,932 |
| Return/(loss) per Ordinary Share | 3.2p | 3.2p | 6.4p | 0.4p | (1.2)p | (0.8)p | 0.1p | 5.1p | 5.2p |
The total column of this statement is the profit and loss account of the Company and the revenue and capital columns represent supplementary information.
All revenue and capital items in the above Unaudited Income Statement are derived from continuing operations. No operations were acquired or discontinued in the year.
The Company has no recognised gains or losses other than those shown above, therefore no separate statement of total recognised gains and losses has been presented.
Unaudited Balance Sheet
at 31 December 2012
| Registered Number: 07289280 | |||
| As at | As at | As at | |
| 31 December 2012 | 31 December 2011 | 30 June 2012 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Fixed assets | |||
| Investments held at fair value through profit and loss | 37,674 | 29,646 | 36,511 |
| Current assets | |||
| Debtors | 891 | 1,262 | 1,240 |
| Money market securities and other deposits | 18 | 5,026 | 336 |
| Cash | 814 | 139 | 58 |
| 1,723 | 6,427 | 1,634 | |
| Creditors | |||
| Amounts falling due within one year | (64) | (411) | (254) |
| Net current assets | 1,659 | 6,016 | 1,380 |
| Net assets | 39,333 | 35,662 | 37,891 |
| Capital and reserves | |||
| Called-up share capital | 384 | 384 | 384 |
| Share premium account | - | 35,929 | - |
| Capital redemption reserve | 1 | 1 | 1 |
| Profit and loss account | 38,948 | (652) | 37,506 |
| Equity shareholders' funds | 39,333 | 35,662 | 37,891 |
| Net asset value per Ordinary Share | 102.5p | 92.9p | 98.8p |
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 December 2012
| Called-up share capital | Share premium account | Capital redemption reserve | Profit and loss account | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 July 2012 | 384 | - | 1 | 37,506 | 37,891 |
| Expenses in relation to share issues | - | - | - | (48) | (48) |
| Dividends | - | - | - | (959) | (959) |
| Capital return for the period | - | - | - | 1,219 | 1,219 |
| Revenue return for the period | - | - | - | 1,230 | 1,230 |
| As at 31 December 2012 | 384 | - | 1 | 38,948 | 39,333 |
Unaudited Summary Cash Flow Statement
for the six months ended 31 December 2012
| Six months ended | Six months ended | Year ended | |
| 31 December 2012 | 31 December 2011 | 30 June 2012 | |
| £'000 | £'000 | £'000 | |
| Cash flow from operating activities | |||
| Dividends received | 707 | - | - |
| Investment income received | 935 | 26 | 36 |
| Deposit and similar interest received | - | 6 | 7 |
| Investment management fees paid | (404) | (233) | (495) |
| Secretarial fees paid | (80) | (25) | (106) |
| Other cash payments | (117) | (768) | (232) |
| Net cash inflow/(outflow) from operating activities and returns on investment | 1,041 | (994) | (790) |
| Returns on investment and servicing of finance | |||
| Purchase of investments | (7) | (20,712) | (32,190) |
| Net proceeds on sale of investments | 411 | - | 7,108 |
| Purchase of financial assets | - | - | (361) |
| Net capital inflow/(outflow) from financial investment | 404 | (20,712) | (25,443) |
| Equity dividends paid | (959) | - | - |
| Financing | |||
| Proceeds of fund raising | - | 5,612 | 5,577 |
| Expenses of fund raising | (48) | (219) | (408) |
| Repurchase of own share | - | (78) | (98) |
| (48) | 5,315 | 5,071 | |
| Increase/(decrease) in cash | 438 | (16,391) | (21,162) |
| Reconciliation of net cash flow to movement in net funds | |||
| Increase/(decrease) in cash for the period | 438 | (16,391) | (21,162) |
| Net cash at start of year | 394 | 21,556 | 21,556 |
| Net cash at end of year | 832 | 5,165 | 394 |
| 1 July 2012 | Cash Flow | 31 December 2012 | |
| £'000 | £'000 | £'000 | |
| Analysis of changes in net debt | |||
| Cash and cash equivalents | 394 | 438 | 832 |
Notes to the Unaudited Half-Yearly Financial Report
for the six months ended 31 December 2012
The Unaudited Half-Yearly results have been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the year ended 30 June 2012. Unquoted investments have been valued in accordance with IPEVC guidelines. Quoted investments are stated at bid prices in accordance with UK Generally Accepted Accounting Practice.
These are not statutory accounts in accordance with S436 of the Companies Act 2006 and the Unaudited Half-Yearly Financial Reports for the six months ended 31 December 2012 and 31 December 2011 have been neither audited nor reviewed. Statutory accounts in respect of the period to 30 June 2012 have been audited and reported on by the Company's auditors and delivered to the Registrar of Companies and included the report of the auditor 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 30 June 2012 have been reported on by the Company's auditor or delivered to the Registrar of Companies.
Copies of the Unaudited Half-Yearly Financial Report for the six months ended 31 December 2012 have been sent to shareholders and are available for inspection at the Registered Office of the Company at ECA Court, 24-26 South Park, Sevenoaks, Kent, TN13 1DU.
Copies of the Unaudited Half-Yearly Financial Report for the six months ended 31 December 2012 are also available electronically at
www.foresightgroup.eu.
Net asset value per Ordinary Share
The net asset value per Ordinary Share is based on net assets at the end of the period and on the number of Ordinary Shares in issue at the date.
| Net Assets | Number of Shares | |
| £'000 | in issue | |
| 31 December 2012 | 39,333 | 38,366,252 |
| 31 December 2012 | 35,662 | 38,387,252 |
| 30 June 2012 | 37,891 | 38,366,252 |
Return per Ordinary Share
| Six months ended | Six months ended | Year ended | |||||
| 31 December 2012 | 31 December 2011 | 30 June 2012 | |||||
| (unaudited) £'000 | (unaudited) £'000 | (audited) £'000 | |||||
| Total return/(loss) after taxation | 2,449 | (319) | 1,932 | ||||
| Total return/(loss) per Ordinary Share (note a) | 6.4p | (0.8)p | 5.2p | ||||
| Revenue return from ordinary activities after taxation | 1,230 | 128 | 19 | ||||
| Revenue return per Ordinary Share (note b) | 3.2p | 0.4p | 0.1p | ||||
| Capital return/(loss) from ordinary activities after taxation | 1,219 | (447) | 1,913 | ||||
| Capital return/(loss) per Ordinary Share (note c) | 3.2p | (1.2)p | 5.1p | ||||
| Weighted average number of shares in issue in the period | 38,366,252 | 36,357,545 | 37,361,746 | ||||
| Notes: | |||||||
| a) Total return per Ordinary Share is total return after taxation divided by the weighted average number of shares in issue during the period. | |||||||
| b) Revenue return per Ordinary Share is revenue return after taxation divided by the weighted average number of shares in issue during the period. | |||||||
| c) Capital return per Ordinary Share is capital return after taxation divided by the weighted average number of shares in issue during the period. | |||||||
Income
| Six months ended | Six months ended | Year ended | |
| 31 December 2012 | 31 December 2011 | 30 June 2012 | |
| (unaudited) £'000 | (unaudited) £'000 | (audited) £'000 | |
| Bank interest | - | 6 | 7 |
| Overseas based Open Ended Investment Companies (OEICs) | - | 29 | 37 |
| Loan stock interest | 735 | 340 | 444 |
| Dividends received | 707 | - | - |
| 1,442 | 375 | 488 |
Investments held at fair value through profit or loss
| Unquoted & Total | |||
| £'000 | |||
| Book cost as at 1 July 2012 | 34,215 | ||
| Investment holding gains | 2,296 | ||
| Valuation at 1 July 2012 | 36,511 | ||
| Movements in the period: | |||
| Purchases at cost | 7 | ||
| Disposal proceeds | (411) | ||
| Investment holding gains | 1,567 | ||
| Valuation at 31 December 2012 | 37,674 | ||
| Book cost at 31 December 2012 | 33,812 | ||
| Investment holding gains | 3,862 | ||
| Valuation at 31 December 2012 | 37,674 |
Transactions with the manager
Details of arrangements of the Company with Foresight Group are given in the Annual Report and Accounts for the year ended 30 June 2012, in the Directors' Report and Notes 3 and 13.
Foresight Group, which acts as investment manager to the Company in respect of its venture capital investments earned fees of £275,000 in the six months ended 31 December 2012.
Foresight Group also provides administration services to the Company, and received fees of £54,000 during the six months ended 31 December 2012. The annual administration and accounting fee (which is payable together with any applicable VAT) is 0.3% of the net funds raised by the offer (subject to a minimum index-linked fee of £60,000).
At the balance sheet date there was £3,414 due to Foresight Group.
Foresight Group are responsible for external costs such as legal and accounting fees, incurred on transactions that do not proceed to completion ('abort expenses'). In line with industry practice, Foresight Group retain the right to charge arrangement and syndication fees and Directors' or monitoring fees ('deal fees') to companies in which the Company invests. Foresight Group did not receive any fees of this nature in the six months ended 31 December 2012.
Foresight Group is also a party to the performance incentive agreement described in Note 13 of the Annual Report and Accounts for the year ended 30 June 2012.
Foresight Fund Managers are the Secretary of the Company and received £nil during the six months ended 31 December 2012 for their services.
END
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Foresight Solar VCT PLC via Thomson Reuters ONE
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