Foresight VCT PLC : Half-yearly report
FORESIGHT VCT PLC
Financial Highlights
Ordinary Shares Fund
Interim dividend of 7.5p per Ordinary Share paid on 23 March 2012.
Net asset value per Ordinary Share increased by 3.6% for the six month period ended 30 June 2012 to 120.8p compared to 123.9p as at 31 December 2011, after taking into account the interim dividend above.
Realisation proceeds and loan repayments totalling £5,374,083 were received from four portfolio companies by the Ordinary Shares Fund.
The Ordinary Shares fund provided follow-on funding totalling £1,568,305 for eight portfolio companies and invested £2,480,181 in four new companies.
Planned Exit Shares Fund
Net asset value per Planned Exit Share as at 30 June 2012 was 89.2p compared to 92.4p as at 31 December 2011.
Four investments were made by the Planned Exit Shares fund totalling £860,835.
One loan repayment was received by the Planned Exits Shares fund for £125,000.
Infrastructure Shares Fund
Net asset value per Infrastructure Share as at 30 June 2012 was 94.6p.
Chairman's Statement
Performance and Dividends
I am pleased to be able to report generally sound progress in the development of our investment portfolios.
At 30 June 2012, the Company has three classes of shares (Ordinary Shares, Planned Exit Shares and Infrastructure Shares) and each class of shares has its own portfolio of investments, the performances of which are more fully described in the Investment Manager's Report.
In particular there has been continued strong performance in the Ordinary Shares portfolio during the period ended 30 June 2012 with the net asset value increasing by 3.6% to 120.8p per share after taking account of the 7.5p per share interim dividend. The majority of the increase was generated by valuation increases in Autologic Diagnostics, Alaric and Aquasium. Further information on these companies can be found in the Investment Manager's Report. The net asset value of the Planned Exit Share portfolio decreased by 3.5% due to provisions being made against the valuations of Closed Loop Recycling and i-plas. In respect of Closed Loop the Investment Manager has been actively involved in the development of this business and has confidence for the Company's investment in it, which is held in both the Ordinary Shares fund and Planned Exit Shares fund. The Infrastructure Shares fund recently closed having raised some £16.4 million for Foresight VCT, in excess of the original £15 million target. The net asset value at 30 June 2012 was 94.6p per Infrastructure Share. The pipeline of opportunities for the investment of these funds is promising and I hope to be able to report on several new investments in the annual report and accounts to 31 December 2012.
Notwithstanding these positive signs, stock market sentiment as evidenced recently is fragile, significant macroeconomic uncertainties remain, and trading and credit conditions continue to be difficult in many sectors of the economy. Against this background the Board and Foresight Group continues to believe it important to adopt a cautious approach to managing the portfolio.
The Company's policy is whenever possible to maintain a steady flow of tax-free dividends, generated from income or from capital profits realised on the sale of investments. As a result of the series of recent successful realisations, the Board is pleased to have been in a position to approve an interim dividend of 7.5p per Ordinary Share, which was paid on 23 March 2012. In addition to underpinning dividends in the future, these realisations have provided the funds required for new investments to replace those that have been sold and with the opportunity to generate further value for shareholders.
Furthermore, the Board announced on 1 June 2012 an interim dividend of 5.0p per Planned Exit Share to be paid on 31 August 2012. The shares were quoted ex dividend on 15 August 2012 and the record date for payment was 17 August 2012.
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. Quoted investments and investments traded on AIM and PLUS (formerly OFEX) are valued at the bid price as at 30 June 2012. The portfolio valuations are prepared by Foresight Group and are subject to approval by the Board.
Enhance Buyback
I am pleased to report that the Company's 2012 enhanced buyback scheme proved to be popular with shareholders with 2,830,963 Ordinary Shares being tendered for the enhanced buyback at 117.49p per share. As a result of this transaction, 2,748,723 new Ordinary Shares were issued at 121.2p per share.
Other Share Issues and Share Buybacks
Alongside the enhanced buyback, the Company announced a top-up offer of Ordinary Shares. During April 2012, 173,176 Ordinary Shares were issued at 121.2p per share.
On 30 March 2012, 70,844 Ordinary Shares were allotted under the Company's Dividend Reinvestment Scheme at 117.46p per share.
On 7 October 2011, the Company launched a joint offer with Foresight 2 VCT plc to raise £30 million through the issue of Infrastructure Shares, a new share class. Between 1 January 2012 and 30 June 2012, 16,406,496 Infrastructure Shares were allotted at 100.0p per share. The offer closed on 18 July 2012 having issued a total of 16,647,858 Infrastructure Shares at 100.0p per share.
All of these share issues were under the new VCT provisions which commenced on 6 April 2006, namely: 30% upfront income tax relief which can be retained by qualifying investors if the shares are held for the minimum five year holding period.
As part of the Company's continuing buyback programme, during the period, 417,338 Ordinary Shares were purchased for cancellation at a cost of £449,484.
Investment Manager Novation
On 18 June 2012, the Board approved the novation of the investment management contract from Foresight Group LLP to Foresight Group CI Limited, another Foresight Group company. The novation does not affect the services provided to the company or the terms, conditions or costs of those services.
Outlook
Following over two years of economic fragility, potential acquirers have now returned to the market, which has been reflected in the increase in portfolio activity in terms of realisations over the last 12 months. Additionally, Foresight Group is seeing its deal flow of new investment opportunities increasing and this has been reflected in the recently completed new investments referred to in the Investment Manager's Report. We remain cautious about the economic outlook, however, and the Investment Manager will aim to invest only in opportunities which are considered sufficiently robust and attractive. The Board and Investment Manager believe the portfolio contains a number of attractive companies and that these may translate into realisations that will, over the medium term, be reflected in further positive net asset value performance and continued distributions to shareholders.
John Gregory
Chairman
31 August 2012
For further information please contact:
Gary Fraser, Foresight Fund Managers Limited Tel: 01732 471800
Investment Manager's Report
The Company's three share classes (Ordinary Shares, Planned Exit Shares and Infrastructure Shares) each have their own separate investment portfolio, the performance of each of which is described below. For some investments it may be appropriate for them to be held by more than one class of share.
Following a recent series of successful exits within the Ordinary Shares fund, cash has been generated for reinvestment, to pay dividends and for share buybacks to be implemented and accordingly new potential investment opportunities are being actively but cautiously considered. Following a new investment of £690,000 in Leisure Efficiency Limited in January 2012, the Planned Exit fund was effectively fully invested. The recently established Infrastructure Shares fund successfully raised the maximum amount sought of £16.4 million by the closing date of 18 July 2012 and a number of investments are being considered from a growing pipeline of secondary PFI opportunities although the first investment has not yet been made. Against a background of challenging economic fundamentals and continuing uncertainties and volatility, the Investment Manager is only looking at new opportunities which are considered sufficiently robust and attractive, particularly in valuation terms.
The performance of the Ordinary Shares fund during the six month period to 30 June 2012 has been encouraging overall while the performance of the Planned Exit Shares fund has been affected by both positive and negative factors during the period. This resulted in the net asset value per Ordinary Share increasing by 3.6% to 120.8p per share after adding back the interim dividend of 7.5p on 23 March 2012, and the net asset value per Planned Exit Share decreasing by 3.5% to 89.2p per share. The net asset value per Infrastructure Share is 94.6p.
Ordinary Shares Fund Portfolio Review
As referred to in the Chairman's Statement, the performance of the Ordinary Shares portfolio overall during the period has been encouraging, notwithstanding the generally weak UK macroeconomic environment and the recent dip into a mild recession. A number of investee companies continued to trade well and enjoyed good growth, most notably Aquasium, Autologic Diagnostics, Infrared Integrated Systems and Alaric Systems, with exporters trading appreciably better than those companies largely serving domestic markets. Unsurprisingly, others have been affected to varying degrees by recession induced factors, including i-plas and Silvigen. These mixed trading conditions are likely to prevail well beyond 2012, putting greater emphasis on robust business models and quality of management.
Similar to 2011, activity in the Ordinary Shares portfolio continued at a high level during the six month period to 30 June 2012, particularly in terms of successful realisations and new investments. Reflecting strong merger and acquisition activity and investor interest in the technology sector, four significant realisations during the period generated proceeds totalling up to £6.5 million, namely the sale of Ebtec, a subsidiary of Aquasium Technology (£2,187,278), the partial sale of the investment in Autologic Diagnostics (£2,092,178) and the sales of Infrared Integrated Systems (£621,311) and Camwood (£473,316). Four new investments totalling £2,480,181 were completed during the period, namely Wholesale Efficiency Limited (£1,000,000), Leisure Efficiency II Limited (£675,150), Flowrite Refrigeration Holdings Limited (£492,500) and Biofortuna Limited (£312,531). The performance highlights during the six months to 30 June 2012 are detail below.
Following the demerger of the business on 1 January 2012 referred to in the last Annual Report, Abacus Wood (formerly Land Energy) made good progress during the period, achieving positive EBITDA at the Bridgend plant level. Demand continues to exceed supply for the plant's wood pellets and a further £240,265 was invested by the Ordinary Shares fund to finance capital expenditure and working capital. The new management team, led by Julian Tranter, a highly experienced CEO, plans to double plant capacity at Bridgend and expand into the growing distributed energy supply markets by establishing ESCos (Energy Supply Companies), many of which are already supplied. This expansion is proposed to be funded by raising an estimated £9.5 million from new investors, some of which will be into SPVs in order to minimise existing shareholder dilution. Reflecting the terms of the demerger, a provision of £60,765 has been made against the original cost of investment.
Alaric Systems, which develops and sell credit card authorisation and anti credit card fraud software to major financial institutions and retailers worldwide, performed particularly strongly in the year to 31 March 2012, generating a profit before interest and tax of £1.5 million on sales of £8.7 million markedly ahead of the previous year, in which a PBIT of £0.5 million was achieved on sales of £5.76 million. The growing sales pipeline includes a number of large contracts which are either in negotiation or prospect but their timing is difficult to predict. Capacity to satisfy the order book is being met through continuing recruitment in Kuala Lumpur and also London. In May 2012, the Company received £73,857, comprising a loan redemption premium payment (£62,920) and interest (£10,937).
Trading during the period at both subsidiaries of Aquasium Technology, namely CVE and Ebtec, has exceeded both budgeted revenues and operating profits with continuing demand for CVE's smaller electron welding machines. In June 2012, the Massachusetts based subsidiary, Ebtec Corporation, was successfully sold to NASDAQ listed EDAC Technologies Corporation for approximately $11 million in cash and stock, generating a 2.5 times return on original cost. Ebtec is an engineering services company providing high energy beam precision electron welding, cutting and drilling services to diverse industry sectors including the aerospace, power and medical sectors. Having invested a total of £1.93 million in Aquasium since 2001, the Company received £3,036,059 from the sale of Ebtec, comprising an initial £2,613,294 in cash (including interest of £426,016) plus up to a further £422,765 held in escrow receivable over the next 16 months. The Company still holds 33% of Aquasium's equity and £666,667 of loans.
AtFutsal Group provides facilities for futsal, a fast growing type of indoor football with 30 million participants worldwide and the only type of indoor football recognised by the Football Association. The Swindon arena is generating cash while sales have built up steadily at the flagship super arena in Birmingham which is now operating at cash break-even. Educational activities are increasingly important with several hundred students now taking sports related courses within AtFutsal's arenas and a number of partnerships established with educational establishments, football clubs and training organisations. The small, sub optimal Cardiff arena was closed down recently as a result of continuing small losses and a change in educational funding in Wales from September 2012. To help create national coverage, a further super arena has just been opened in Leeds funded with £762,500 from Foresight VCTs, including £98,173 from the Company. Sales growth is behind original expectations with UK consumer spending under pressure, but the company will benefit from economies of scale as national coverage will enhance the growth of the educational activities.
Autologic Diagnostics develops and sells sophisticated automotive diagnostic software and hardware to independent mechanics and garages to allow them to service and repair vehicles. In the year ended 31 December 2011, it generated an operating profit of £5.2 million on sales of £12.2 million (£2.7 million on sales of £9.3 million in 2010). The company is continuing to grow sales and profits in its current financial year, particularly in the USA. As mentioned above, part of the investment in Autologic was sold in January 2012 in a £48 million secondary management buy-out funded by ISIS Equity Partners. The sale generated cash proceeds of £2.1 million, against original cost of £0.75 million and Foresight VCT has retained an ongoing investment of £1.486 million in a combination of equity and loan stock in the new company formed to effect the buy-out.
The Company's investment in Camwood (original cost £90,378) was sold in April 2012 to the senior management team for £473,316, generating a 5.2 times return. Foresight first invested in Camwood, an IT consulting company providing application portfolio management services to large enterprises, in October 2003, ultimately investing a total of £1.54 million on behalf of the Company (£543,000) and another Foresight managed fund by way of loans and equity. During 2008, the Camwood software IP and development staff were hived down into a subsidiary, App-DNA, which was subsequently sold to Citrix Systems Inc in October 2011 for $92 million. As referred to in the last Annual Accounts, the sale of App-DNA generated a return for the Company of £7.5 million (with up to a further £0.9 million held in escrow), some 32 times original cost.
Closed Loop Recycling is now making solid operational, commercial and revenue generating progress resulting from production rates at record levels, significantly improved plant reliability and consistency of demand exceeding capacity. The company continues to be affected by raw material quality which restricts throughput and yield, but is making some progress in addressing this problem. In March, the Company advanced a short-term loan of £230,069 to meet working capital requirements. Two major investment projects totalling over £17 million are planned at the Dagenham site. The first is to double and improve the mixed plastic sorting capacity (thereby removing a major constraint on inputs and so improving plant throughput and efficiency) and the second to increase production capacity to meet the substantial demand for the cleaned and sorted output, which should be possible without adding significantly to its fixed overhead costs. These projects are expected to be largely financed through a variety of funds, including third party and other Foresight managed funds. Facilities provided by Allied Irish Bank, the incumbent bank, will be placed onto a term basis.
Notwithstanding the above solid trading and advancing expansion plans, a provision of 10% (£193,632) has been made against the original cost of the investment to reflect the proposed introduction of an executive share option scheme. Principally because of the weight of prior ranking capital provided by the Foresight funds, the recently enlarged management team currently has no realistic equity incentive, a situation which is not considered to be in the best, longer term interests of all shareholders. To address this, a capital reorganisation is being effected to facilitate the introduction of such an incentive scheme, which is in line with normal market practice but necessitates making such a provision.
Northampton based Infrared Integrated Systems, a market leader in the retail queue monitoring and people counting markets, continued to grow strongly and profitably, implementing a significant contract in the US to provide its queue monitoring solution across the estate of a major supermarket group. The company was trading at record levels, with a strong pipeline of large potential customers undergoing product trials and was strongly cash generative. Following a competitive sale process, a large US corporation made an attractive takeover offer in June 2012. The Company sold its investment for up to £901,878, of which £621,311 was paid at completion and up to a further £280,567 is receivable over the next two years and is held either in escrow or subject to future performance criteria being met, giving a 2.5 to 3.6 times return on the original cost of investment of £250,005.
Trading at i-plas Group, which manufactures a range of building products from waste plastics, was particularly disappointing during the period with continuing heavy losses despite price rises, cost-cutting and a management reorganisation in late 2011. The Company advanced short-term loans totalling £123,334 to fund working capital requirements during the period. Further funding is being sought from new investors. Reflecting the poor performance, a provision of £388,515 has been made against the cost of this investment, reducing the carrying value to £nil.
Despite strong interest in Silvigen's animal bedding product, 'Silvibed', principally from chicken growers, this has not yet been reflected in a satisfactory rate of sales growth as many prospective customers are still bound by longer-term contracts elsewhere. In February, the Company advanced a short-term loan of £58,335 to meet working capital requirements. With continuing losses and yet further funding required, the plant has recently been mothballed. A further provision of 50% has been made, reducing the carrying value to zero and an administrator is likely to be appointed shortly.
Withion Power has successfully built, tested and connected to the National Grid the first 0.5MW phase of its planned 3MW waste wood to energy plant in Derby. During the period, the plant has been operating at regular planned intervals, exporting electricity to the Grid while undergoing further trials and optimisation procedures. During the period, the company invested £766,000 alongside £234,000 Foresight 2 VCT plc to finance capital expenditure and provide additional working capital. Further funding is expected to be sought from third parties during 2012 and 2013 to facilitate the construction of further phases to reach 3MW in total. Under the original merger terms between Foresight VCT and the keydata VCTs, additional share consideration may be due to keydata shareholders after September 2013 if the value of the merger assets (Withion) at 30 September 2013 is greater than their value at the time of the merger. At the current time there has been no increase in value.
Planned Exit Shares Fund Portfolio Review
One new investment was made during the period, with £690,000 being invested by the Planned Exit Shares fund in Leisure Efficiency Limited in January which purchased and installed energy saving equipment at 34 David Lloyd Leisure sites. Revenues are generated by taking the predominant share of the resultant energy savings for the first seven years of the arrangement.
The Planned Exit Shares fund backed a management buy-in of long established Petersfield based Channel Safety Systems with £565,000 in December 2010. Channel designs and distributes fire safety systems and emergency lighting, as well as providing associated services. Notwithstanding stagnant market conditions in the construction and electrical contracting sectors, the company achieved limited growth in sales and EBITDA in its financial year to 31 October 2011 and is continuing to trade profitably in line with budget in the current year. The management team is pursuing several growth strategies, including launching new products such as energy efficient LED emergency lighting and a domestic fire detection range which have met with considerable demand.
The opportunity was taken to acquire a further small shareholding for £2,835 from a retiring director of Data Continuity Group, which implements and maintains data storage, backup and data recovery services solutions for companies, under term contracts and increasingly as a managed service. The company continues to trade well and enjoys a very high level of customer retention.
As reported in the last Annual Accounts, in December 2011, the Foresight VCT Planned Exit Shares fund and the Foresight 2 VCT Planned Exit Shares fund each invested £800,000 in Industrial Engineering Plastics by way of loans and equity to finance a management buy-in of this long established, profitable distributor/ fabricator of plastic materials to a wide range of customers in a variety of industrial sectors. It soon became apparent that the new management structure needed to be amended. Accordingly, the shares held by the recently appointed buy-in manager representing 50% of the equity were acquired during the period by the two funds for a total cost of £150,000, split equally between the two funds. The company continues to trade well in line with budget under the able management of the original founder while a new Managing Director is recruited.
In February, Portchester Equity repaid £125,000 to each of the Foresight VCT Planned Exit Shares fund and the Foresight 2 VCT Planned Exit Shares fund. The remaining £500,000 loans from each VCT were rolled over for a further six months to fund short-term working capital requirements of one of the subsidiaries of this family owned investment company which owns majority shareholdings in seven separate, well-established trading companies. The remaining £500,000 of loans were repaid on 8 August 2012.
Although most investments are performing well within the Planned Exit Shares fund, trading at i-plas Group is particularly disappointing as explained above. Reflecting the poor performance, a provision of £262,015 has been made against the cost of this investment, reducing the carrying value to £nil. As explained above, although Closed Loop Recycling is trading well and plans to increase capacity are well advanced, it has been necessary to make a provision of 10% (£56,667) against the original cost of the investment to reflect the proposed introduction of an executive share option scheme as explained above.
Where provisions have been made against the value of underlying investments, we have also provided against the income due from such investments and this is reflected in the negative income amount in the Income Statement of the Company.
As planned, a dividend of 5.0p per share is due to be paid on 31 August 2012.
Infrastructure Shares Fund Portfolio Review
Fundraising for the Infrastructure Share class closed on 18 July 2012 with the maximum funds being raised of £32.8 million, split equally between the Company and Foresight 2 VCT plc, i.e. £16.4 million for each VCT. The investment strategy is focused on infrastructure investments in secondary market PFI, energy efficiency and onsite power.
The Foresight team comprises experienced PFI professionals with strong track records in both secondary and primary market PFI as well as wider infrastructure investments. Over recent months, the team has met existing PFI equity investors, including the established infrastructure funds and contractor-investors, to source suitable assets as well as leveraging its strong relationships with the PFI financial advisory and accounting communities which often act on behalf of vendors during secondary market disposals. The team is currently in discussions with 12 potential investment opportunities totalling over £30 million, including schools, fire stations and water treatment works, and is working through the risk assessment, due diligence and VCT clearance processes in respect of certain projects. The current pipeline is encouraging but there are challenges to completing on these assets including the outcome of due diligence and risk assessment and successful completion of negotiations with the vendors regarding fair value of the assets.
As well as secondary market PFI investments, Foresight are considering investments in energy efficiency and onsite energy which are covered by the investment policy, exhibit an infrastructure-like risk and return profile and are likely to achieve VCT qualifying trade status with HMRC. Foresight are confident that the Infrastructure share funds will be invested by April 2013 in a range of suitable assets.
Investment Activity
Ordinary Shares Fund - Purchases
Four new investments totalling £2,480,181 were completed during the period, namely Wholesale Efficiency (£1,000,000), Leisure Efficiency II (£675,150), Flowrite Refrigeration Holdings (£492,500) and Biofortuna (£312,531). Eight follow-on investments were made during the period from the Ordinary Shares fund totalling £1,568,305, namely: Withion Power (£766,000); Abacus Wood (formerly Land Energy) (£240,265); Closed Loop Recycling (£230,069); i-plas Group (£123,334); AtFutsal (£98,173); Silvigen (£58,335); Trilogy (£32,000) and DCG (£20,129).
As part of a £2.1 million growth capital funding round in March 2012, alongside existing shareholders and other Foresight VCTs, the Company invested £312,531 in Wirral based Biofortuna, a molecular diagnostics company with leading, proprietary expertise in cryo-preserving, enabling molecular reagents to be freeze-dried and stabilised, thereby substantially reducing distribution costs and transport losses while increasing the ease of use of such reagents.
In March 2012, alongside other Foresight VCTs, the Company invested £675,150 and £1,000,000 by way of loans and equity in Leisure Efficiency II and Wholesale Efficiency respectively, pending investment in two specific energy efficiency opportunities. These and a pipeline of other such opportunities are actively being progressed.
In May 2012, the Foresight funds led a £3.5 million management buyout of Maidstone based Flowrite Services, which provides refrigeration and air conditioning maintenance and installation services principally to pubs and restaurants in the UK through a national network of some 60 engineers. Alongside management and other Foresight VCTs, the Company invested £492,500 in the form of loans and equity in a new holding company, Flowrite Refrigeration Holdings Limited, established to effect the buyout. Flowrite achieved significant operating profits on sales of £7.5 million during the year to 31 October 2011. Trading to date in the current year is ahead of that in the corresponding period for last year.
The Board and Investment Manager have agreed that, within the existing investment policy, greater emphasis should, for the foreseeable future, be placed on private equity investments and less emphasis on environmental infrastructure investments.
Ordinary Shares Fund - Realisations
As described more fully above, four significant realisations were achieved during the period, generating total proceeds of £5,374,083, namely the sale of Ebtec, a subsidiary of Aquasium Technology (£2,187,278), the partial sale of the investment in Autologic Diagnostics (£2,092,178) and the sales of Camwood (£473,316) and Infrared Integrated Systems (£621,311).The Company also received £73,857 from Alaric, comprising a loan redemption premium payment and interest and a distribution of £69,809 from Oxonica.
Planned Exit Shares Fund - Purchases
One new investment was made during the period, with £690,000 being invested by the Planned Exit Shares fund in Leisure Efficiency in January and £75,000 being invested into Industrial Engineering Plastics in March as mentioned above. There were two follow-on investments into Data Continuity Group and Trilogy Communications for £2,835 and £93,000 respectively.
Planned Exit Shares Fund - Realisations
A loan repayment of £125,000 was received from Portchester Equity.
Outlook
Trading at many of the portfolio companies during the period was stronger than expected at the beginning of the year, benefiting from positive export conditions. Other businesses operating solely in UK markets have found trading to be relatively difficult, except for those with particular competitive advantages. The continuing M & A market facilitated a number of successful realisations, generating significant profits and cash for dividends, share buybacks and reinvestment.
These mixed trading conditions are likely to prevail well beyond 2012 but we are cautiously optimistic about the current prospects and outlook for a number of portfolio companies, which continue to display good order books and revenue and profit growth. The M & A market continues to be active which augurs well for further possible realisations during 2012 and 2013. However, with challenging and uncertain macroeconomic fundamentals plus the potential for the recession to continue for some time, Foresight is planning for a prolonged period of little or no real growth. Foresight is now actively pursuing new investment opportunities - particularly private equity investments rather than environmental infrastructure investments - but is adopting a cautious approach in the light of current trading conditions.
David Hughes
Chief Investment Officer
Foresight Group
31 August 2012
Unaudited Half-Yearly Results and Responsibility Statements
Principal Risks and Uncertainties
The principal risks faced by the Company are 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 31 December 2011. A detailed explanation can be found on page 19 of the Annual Report which is available on www.foresightgroup.eu or by writing to Foresight Group at ECA Court, South Park, Sevenoaks, Kent, TN13 1DU.
In the view of the Board, there have not been any 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 Interim Report and financial statements.
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 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; 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 in the 31 December 2011 annual report. 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 31 December 2011 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 hedging activities; and its exposures to credit risk and liquidity risk.
The Company has adequate financial resources together with investments and income generated there from 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 despite the current uncertain economic outlook.
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 or reviewed by the auditors.
On behalf of the Board
John Gregory
Chairman
31 August 2012
Unaudited Non-Statutory Analysis between the
Ordinary Shares, Planned Exit Shares and Infrastructure Shares Funds
Income Statements
for the six months ended 30 June 2012
| Ordinary Shares Fund | Planned Exit Shares Fund | Infrastructure Shares Fund | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
| Realised gains on investments | - | 5,055 | 5,055 | - | - | - | - | - | - | ||
| Investment holding losses | - | (3,962) | (3,962) | - | (299) | (299) | - | - | - | ||
| Income | 644 | - | 644 | 216 | - | 216 | 1 | - | 1 | ||
| Investment management fees | (101) | (303) | (404) | (7) | (21) | (28) | (23) | (68) | (91) | ||
| Other expenses | (233) | - | (233) | (39) | - | (39) | (12) | - | (12) | ||
| Return/(loss) on ordinary activities before taxation | 310 | 790 | 1,100 | 170 | (320) | (150) | (34) | (68) | (102) | ||
| Taxation | 30 | - | 30 | (35) | 5 | (30) | - | - | - | ||
| Return/(loss) on ordinary activities after taxation | 340 | 790 | 1,130 | 135 | (315) | (180) | (34) | (68) | (102) | ||
| Return/(loss) per share | 1.2p | 2.8p | 4.0p | 2.2p | (5.1)p | (2.9)p | (0.3)p | (0.6)p | (0.9)p | ||
Balance Sheets
at 30 June 2012
| Ordinary Shares Fund | Planned Exit Shares Fund | Infrastructure Shares Fund | |
| £'000 | £'000 | £'000 | |
| Fixed assets | |||
| Investments held at fair value through profit or loss | 22,340 | 5,044 | 12,500 |
| Current assets | |||
| Debtors | 2,412 | 338 | 4,059 |
| Money market securities and other deposits | 5,611 | 109 | - |
| Cash | 3,394 | 182 | - |
| 11,417 | 629 | 4,059 | |
| Creditors | |||
| Amounts falling due within one year | (312) | (158) | (1,037) |
| Net current assets | 11,105 | 471 | 3,022 |
| Net assets | 33,445 | 5,515 | 15,522 |
| Capital and reserves | |||
| Called-up share capital | 277 | 62 | 164 |
| Share premium account | 3,539 | - | 15,460 |
| Capital redemption reserve | 384 | - | - |
| Special distributable reserve | 26,854 | 5,643 | (68) |
| Revenue reserve | 159 | 314 | (34) |
| Capital reserve | 11,331 | (141) | - |
| Revaluation reserve | (9,099) | (363) | - |
| Equity shareholders' funds | 33,445 | 5,515 | 15,522 |
| Number of shares in issue | 27,684,809 | 6,179,833 | 16,406,496 |
| Net asset value per share | 120.8p | 89.3p | 94.6p |
At 30 June 2012 there was an inter-share debtor/creditor of £168,000 which has been eliminated on aggregation.
Reconciliations of Movements in Shareholders' Funds
for the six months ended 30 June 2012
| Ordinary Shares Fund | Called-up share capital | Share premium account | Capital redemption reserve | Special distributable reserve | Revenue reserve | Capital reserve | Revaluation reserve | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 January 2012 | 279 | - | 352 | 30,932 | (181) | 8,372 | (5,137) | 34,617 |
| Shares issues in the period | 30 | 3,595 | - | - | - | - | - | 3,625 |
| Expenses in relation to share issues | - | (56) | - | - | - | - | - | (56) |
| Repurchase of shares | (32) | - | 32 | (3,775) | - | - | - | (3,775) |
| Net realised gain on disposal of investments | - | - | - | - | - | 5,055 | - | 5,055 |
| Investment holding losses | - | - | - | - | - | - | (3,962) | (3,962) |
| Dividends | - | - | - | - | - | (2,096) | - | (2,096) |
| Management fees charged to capital | - | - | - | (303) | - | - | - | (303) |
| Revenue return for the period | - | - | - | - | 340 | - | - | 340 |
| As at 30 June 2012 | 277 | 3,539 | 384 | 26,854 | 159 | 11,331 | (9,099) | 33,445 |
| Planned Exit Shares Fund | Called-up share capital | Share premium account | Capital redemption reserve | Special distributable reserve | Revenue reserve | Capital reserve | Revaluation reserve | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| As at 1 January 2012 | 62 | - | - | 5,682 | 179 | (146) | (64) | 5,713 |
| Expenses in relation to share issues | - | - | - | (18) | - | - | - | (18) |
| Investment holding losses | - | - | - | - | - | - | (299) | (299) |
| Management fees charged to capital | - | - | - | (21) | - | - | - | (21) |
| Tax credited to capital | - | - | - | - | - | 5 | - | 5 |
| Revenue return for the period | - | - | - | - | 135 | - | - | 135 |
| As at 30 June 2012 | 62 | - | - | 5,643 | 314 | (141) | (363) | 5,515 |
| Infrastructure Shares Fund | Called-up share capital | Share premium account | Capital redemption reserve | Special distributable reserve | Revenue reserve | Capital reserve | Revaluation reserve | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| As at 1 January 2012 | - | - | - | - | - | - | - | - |
| Share issues in the period | 164 | 16,157 | - | - | - | - | - | 16,321 |
| Expenses in relation to share issues | - | (697) | - | - | - | - | - | (697) |
| Management fees charged to capital | - | - | - | (68) | - | - | - | (68) |
| Revenue loss for the period | - | - | - | - | (34) | - | - | (34) |
| As at 30 June 2012 | 164 | 15,460 | - | (68) | (34) | - | - | 15,522 |
Unaudited Income Statement
for the six months ended 30 June 2012
| Six months ended 30 June 2012 (unaudited) | Six months ended 30 June 2011 (unaudited) | Year ended 31 December 2011 (audited) | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Realised gains on investments | - | 5,055 | 5,055 | - | 4,145 | 4,145 | - | 11,312 | 11,312 |
| Investment holding (losses)/gains | - | (4,261) | (4,261) | - | 32 | 32 | - | (2,871) | (2,871) |
| Realised gain on the value of derivatives | - | - | - | - | - | - | - | 25 | 25 |
| Unrealised (losses)/gains on the value of derivatives | - | - | - | - | (35) | (35) | - | (25) | (25) |
| Income | 861 | - | 861 | 296 | - | 296 | 712 | - | 712 |
| Investment management fees | (131) | (392) | (523) | (75) | (226) | (301) | (166) | (499) | (665) |
| Other expenses | (284) | - | (284) | (239) | - | (239) | (460) | - | (460) |
| Return/(loss) on ordinary activities before taxation | 446 | 402 | 848 | (18) | 3,916 | 3,898 | 86 | 7,942 | 8,028 |
| Taxation | (5) | 5 | - | (4) | 4 | - | (8) | 8 | - |
| Return/(loss) on ordinary activities after taxation | 441 | 407 | 848 | (22) | 3,920 | 3,898 | 78 | 7,950 | 8,028 |
| Return/(loss) per share: | |||||||||
| Ordinary Share | 1.2p | 2.8p | 4.0p | (0.3)p | 11.0p | 10.7p | (0.1)p | 25.0p | 24.9p |
| Planned Exit Share | 2.2p | (5.1)p | (2.9)p | 1.1p | 0.0p | 1.1p | 1.4p | (1.0)p | 0.4p |
| Infrastructure Share | (0.3)p | (0.6)p | (0.9)p | N/A | N/A | N/A | N/A | N/A | N/A |
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 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.
Unaudited Balance Sheet Registered Number: 05200494
at 30 June 2012
| As at | As at | As at | |
| 30 June 2012 | 30 June 2011 | 31 December 2011 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Fixed assets | |||
| Investments held at fair value through profit and loss | 39,884 | 29,320 | 27,458 |
| Current assets | |||
| Debtors | 6,641 | 1,238 | 2,119 |
| Derivative financial instruments | - | 12 | - |
| Money market securities and other deposits | 5,720 | 1,804 | 11,341 |
| Cash | 3,576 | 4,662 | 98 |
| 15,937 | 7,716 | 13,558 | |
| Creditors | |||
| Amounts falling due within one year | (1,339) | (31) | (686) |
| Net current assets | 14,598 | 7,685 | 12,872 |
| Net assets | 54,482 | 37,005 | 40,330 |
| Capital and reserves | |||
| Called-up share capital | 503 | 349 | 341 |
| Share premium account | 18,999 | 27,336 | - |
| Capital redemption reserve | 384 | 344 | 352 |
| Special distributable reserve | 32,429 | 10,529 | 36,614 |
| Revenue reserve | 439 | (102) | (2) |
| Capital reserve | 11,190 | 856 | 8,226 |
| Revaluation reserve | (9,462) | (2,307) | (5,201) |
| Equity shareholders' funds | 54,482 | 37,005 | 40,330 |
| Net asset value per share: | |||
| Ordinary Share | 120.8p | 108.8p | 123.9p |
| Planned Exit Share | 89.3p | 93.7p | 92.4p |
| Infrastructure Share | 94.6p | N/A | N/A |
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2012
| Company | Called-up share capital | Share premium account | Capital redemption reserve | Special distributable reserve | Revenue reserve | Capital reserve | Revaluation reserve | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 January 2012 | 341 | - | 352 | 36,614 | (2) | 8,226 | (5,201) | 40,330 |
| Shares issues in the period | 194 | 19,752 | - | - | - | - | - | 19,946 |
| Expenses in relation to share issues | - | (753) | - | (18) | - | - | - | (771) |
| Repurchase of shares | (32) | - | 32 | (3,775) | - | - | - | (3,775) |
| Net realised gain on disposal of investments | - | - | - | - | - | 5,055 | - | 5,055 |
| Investment holding losses | - | - | - | - | - | - | (4,261) | (4,261) |
| Dividends | - | - | - | - | - | (2,096) | - | (2,096) |
| Management fees charged to capital | - | - | - | (392) | - | - | - | (392) |
| Tax credited to capital | - | - | - | - | 5 | - | 5 | |
| Revenue return for the period | - | - | - | - | 441 | - | - | 441 |
| As at 30 June 2012 | 503 | 18,999 | 384 | 32,429 | 439 | 11,190 | (9,462) | 54,482 |
Unaudited Cash Flow Statement
for the six months ended 30 June 2012
| Six months ended | Six months ended | Year ended | |
| 30 June 2012 (unaudited) | 30 June 2011 (unaudited) | 31 December 2011 (audited) | |
| £'000 | £'000 | £'000 | |
| Cash flow from operating activities | |||
| Investment income received | 657 | 261 | 400 |
| Deposit and similar interest received | 29 | 7 | 20 |
| Investment management fees paid | (353) | (293) | (713) |
| Secretarial fees paid | (60) | (41) | (138) |
| Other cash payments | (217) | (540) | (551) |
| Net cash inflow/(outflow) from operating activities and returns on investment | 56 | (606) | (982) |
| Taxation | - | - | |
| Returns on investment and servicing of finance | |||
| Purchase of investments | (4,909) | (837) | (3,259) |
| Net proceeds on sale of investments | 5,632 | 7,875 | 16,120 |
| Net proceeds from derivative transactions | - | - | 49 |
| Net capital inflow from financial investment | 728 | 7,038 | 12,910 |
| Equity dividends paid | (2,096) | (1,629) | (1,646) |
| Management of liquid resources | |||
| Movement in money market funds | 5,621 | 194 | (9,343) |
| 5,621 | 194 | (9,343) | |
| Financing | |||
| Proceeds of fund raising | - | 235 | 235 |
| Acquisition issue shares | - | 8 | 8 |
| Expenses of fund raising | (72) | - | (180) |
| Dividends reinvested | 83 | - | 59 |
| Repurchase of own shares | (842) | (1,248) | (1,633) |
| (831) | (1,005) | (1,511) | |
| Increase/(decrease) in cash | 3,478 | 3,992 | (572) |
Notes to the Unaudited Half-Yearly Results
The unaudited interim results have been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2011. Unquoted investments have been valued in accordance with IPEVC guidelines. Quoted investments are stated at bid prices in accordance with the IPEVC guidelines and Generally Accepted Accounting Practice.
These are not statutory accounts in accordance with S434 of the Companies Act 2006 and the financial information for the six months ended 30 June 2012 and 30 June 2011 have been neither audited nor reviewed. Statutory accounts in respect of the period to 31 December 2011 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 2011 have been reported on by the Company's auditors or delivered to the Registrar of Companies.
Copies of the unaudited Half-Yearly Financial Report will be sent to shareholders and will be available for inspection at the Registered Office of the Company at ECA Court, 24-26 South Park, Sevenoaks, Kent, TN13 1DU.
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.
| Ordinary Shares Fund | Planned Exit Shares Fund | Infrastructure Shares Fund | ||||
| Net Assets | Number of shares in issue | Net Assets | Number of shares in issue | Net Assets | Number of shares in issue | |
| £'000 | £'000 | £'000 | ||||
| 30 June 2012 | 33,445 | 27,684,809 | 5,515 | 6,179,833 | 15,522 | 16,406,496 |
| 30 June 2011 | 31,218 | 28,694,271 | 5,787 | 6,179,833 | N/A | N/A |
| 31 December 2011 | 34,617 | 27,940,367 | 5,713 | 6,179,833 | N/A | N/A |
.
Return per share
The weighted average number of shares for the Ordinary Shares, Planned Exit Shares and Infrastructure Shares funds used to calculate the respective returns are shown in the table below.
| Ordinary Shares Fund | Planned Exit Shares Fund | Infrastructure Shares Fund | |
| (shares) | (shares) | (shares) | |
| Six months ended 30 June 2012 | 27,964,520 | 6,179,833 | 11,804,500 |
| Six months ended 30 June 2012 | 35,674,443 | 6,179,833 | N/A |
| Year ended 31 December 2011 | 32,097,234 | 6,179,883 | N/A |
.
Earnings for the period should not be taken as a guide to the results for the full year.
Income
| Six months ended | Six months ended | Year ended | |
| 30 June 2012 (unaudited) | 30 June 2011 (unaudited) | 31 December 2011 (audited) | |
| £'000 | £'000 | £'000 | |
| Deposit interest | 833 | 285 | 599 |
| Overseas based Open Ended Investment Companies ("OEICs") | 28 | 11 | 24 |
| Dividends | - | - | 77 |
| Bank deposits | - | - | 2 |
| Other income | - | - | 10 |
| 861 | 296 | 712 |
Investments held at fair value through profit or loss
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Related Parties
Foresight Group, as Investment Manager of the Company, is considered to be a related party by virtue of its management contract with the Company. During the period, services of a total value of £523,000 (30 June 2011: £301,000; 31 December 2011: £665,000) were purchased by the Company from Foresight Group. At 30 June 2012, the amount due to Foresight Group was £116,000.
Foresight Fund Managers Limited, as Secretary of the Company and as a subsidiary of Foresight Group, is also considered to be a related party of the Company. During the period, services of a total value of £50,000 (30 June 2011: £50,000; 31 December 2011: £100,000) were purchased by the Company from Foresight Fund Managers Limited. At 30 June 2012, the amount due to Foresight Fund Managers Limited included within creditors was £nil.
No Director has, or during the period had, a contract of service with the Company. No Director was party to, or had an interest in, any contract or arrangement (with the exception of Directors' fees) with the Company at any time during the period under review or as at the date of this report.
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 VCT PLC via Thomson Reuters ONE
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