TIDMFTD
FORESIGHT 3 VCT PLC
2013 Highlights
-- Net asset value per Ordinary Share in the year to 31 March 2013 decreased
by 3.0%, represented by a fall in net asset value to 75.2p.
-- Funding totalling GBP2.6 million was provided to 12 companies. This
included GBP0.4m of capitalised interest which was added to the principal
cost.
-- Realisation proceeds and loan repayments totalling GBP1.0 million were
received from seven portfolio companies.
-- The Company raised gross proceeds of GBP1.7 million in the year ended 31
March 2013, with a further GBP0.3 million raised after the year end.
Year ended Year ended
31 March 31 March
2013 2012
Net asset value per Ordinary Share 75.2p 77.5p
Net asset value per Ordinary Share (including all 130.0p 132.3p
dividends paid)
Share price per Ordinary Share 65.5p 73.3p
Share price total return per Ordinary Share (including 120.3p 128.1p
all dividends paid)
Chairman's Statement
"Despite setbacks in the environmental sector, Foresight Group remains
positive about the prospects of the remaining investments in this
portfolio."
Graham Ross Russell
Chairman
Performance
The year under review continued to be overshadowed by the poor state of
government finances in many parts of the World. In the UK, economic
activity was patchy, giving rise to concerns about a triple dip
recession (which was ultimately narrowly avoided), while bank lending to
smaller businesses continued to be restricted. The US economy showed
better performance but US Government spending remains constrained by the
impact of the sequester cuts.
The economic environment affected portfolio companies in a variety of
ways. Some companies with longer established businesses were able to
find growth opportunities in export markets. Others that needed to
maintain or increase their borrowing to pursue development projects or
to expand their activities had difficulty in doing so. This was
particularly so for companies in the environmental sector.
Against this background, I can report that the net asset value of the
Ordinary Share portfolio as at 31 March 2013 decreased by 3.0% to 75.2p
(31 March 2012: 77.5p).
The Ordinary Shares portfolio benefited from the good performance of
investments in Alaric Systems, Datapath Group Holdings, The Message Pad
and Ixaris Systems, all of which are traditional private equity
investments and saw increases in valuation. There was also a positive
performance from Autologic Diagnostics Group and TFC Europe. Amongst
other valuation adjustments, however, additional substantial provisions
have been made in the cases of 2K Manufacturing and O-Gen Acme Trek
which are both in the environmental portfolio. Closed Loop Recycling,
our largest environmental investment, has made substantial progress in
the year.
Overall, valuation decreases outweighed portfolio gains despite a robust
performance from the private equity portfolio companies. This has been
largely because of the continued poor performance of many of the
environmental investments. The disappointing performance has been caused
in most cases by the difficulty in implementing novel technology and the
much greater cost than originally estimated by management teams, in
bringing these companies to the point where they become self sustaining.
Where the required additional funding has not been available from
outside sources this has led to the need for the Investment Manager
("Foresight Group") to make difficult judgements about whether to
continue to support companies or to let them close. The Board and
Foresight Group have concluded in the light of the experience in this
sector that no new investments will be made in environmental
infrastructure, and that to the extent that funds for new investment
become available they should be focused on more mature and established
private equity businesses with lower risk profiles.
During the period, GBP94,920 was received from Alaric Systems comprising
redemption premium (GBP61,320) and repayment of loan principal
(GBP33,600). The Company's entire investment in AIM listed Croma Group's
ordinary shares was sold, generating proceeds of GBP147,730 as was the
entire investment in AIM listed Sarantel Group, generating proceeds of
GBP11,282. In addition to the January 2012 sale, a disposal in Autologic
Diagnostics Group also took place, generating GBP1,000 of proceeds.
Administration proceeds of GBP25,000 and GBP378,947 were received from
Crumb Rubber and i-plas Group respectively and were treated as loan
repayments in the year. Deferred consideration from Lab901 of GBP346,766
was also received.
Despite setbacks in the environmental sector, Foresight Group remains
positive about the prospects of the remaining investments in this
portfolio.
The Board did not pay an interim dividend in the period (2012: 2.5p per
share) and is not recommending a final dividend on the Ordinary Shares
(2012: nil) for the year ended 31 March 2013.
Share Issues and Share Buy-backs
The Company launched a small top-up offer on 3 December 2012. During the
year ended 31 March 2013, 1,027,599 Ordinary Shares were allotted based
on net asset values ranging from 78.7p to 85.3p per share, raising
GBP0.82 million.
The previous top-up offer, which was launched on 23 December 2011
alongside its enhanced buyback offer to shareholders was open between 1
April 2012 and 30 September 2012, and resulted in 997,114 Ordinary
Shares being allotted at a price of 87.26p raising GBP0.85 million.
It continues to be the Board's policy to consider repurchasing shares
when they become available in order to provide a degree of liquidity for
the sellers of the Company's shares. During the period, the Company
repurchased 599,994 Ordinary Shares for cancellation at a cost of
GBP0.41 million.
Enhanced Buyback
Take up by shareholders of the enhanced buyback offer was significant
with shareholders representing 8,753,756 Ordinary Shares (8,490,436
shares issued) taking up the offer during April 2012. During March 2013,
enhanced buybacks were mentioned in the Chancellor's budget as an area
that was not necessarily in the spirit of the VCT legislation and we
expect a consultation paper to be published by HM Treasury during the
summer of 2013. The outcome of this consultation will help shape the
Board's position with regards to the Company's ability to offer enhanced
buybacks in the future.
Valuation Policy
Investments held by the Company have been valued in accordance with the
International Private Equity and Venture Capital Valuation ("IPEVCV")
guidelines (December 2012) 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 ISDX
Growth Market (formerly PLUS) are valued at the bid price as at 31 March
2013. The portfolio valuations are prepared by Foresight Group, reviewed
and approved by the Board quarterly and subject to review by the
auditors annually.
Annual General Meeting
The Company's Annual General Meeting will take place on 17 September
2013 at 1pm. I look forward to welcoming you to the Meeting, which will
be held in Sevenoaks, details of which can be found on page 50 of the
annual report and accounts.
Outlook
The Board remains cautious about the general outlook. The first priority
is to support the existing portfolio where prospects justify further
investment to optimise realising gains from disposal of successful
investments. Over the medium term we are optimistic that realisations
can be achieved, paving the way to further distributions to
shareholders. These realisations are likely to be achieved through trade
sales as many large companies have significant cash resources available
to them; however in the current climate, such companies are reluctant to
invest these reserves. Foresight Group recognises that this has resulted
in the Company's holding period for its portfolio companies being longer
than originally anticipated, which has impacted the making of material
distributions to shareholders. We expect this to change as economic
conditions improve and it is our intention then to resume the payment of
dividends as soon as possible.
Graham Ross Russell
Chairman
11 July 2013
Investment Manager's Report
Manager's Commentary
The performance of the portfolio during the year to 31 March 2013 was
impacted both positively and negatively, resulting overall in a 3.0%
decrease in net asset value. Investments experienced mixed trading
conditions during the year, with generally weak economic activity in the
UK along with restrictions on bank lending to UK SMEs. Activity in the
USA was stronger. These factors affected the portfolio with some more
established businesses growing successfully and achieving record results,
particularly those addressing overseas markets. Others, pursuing
development projects or expanding their activities, had real difficulty
in raising the necessary finance.
During the year, the private equity portfolio performed well. This was
in marked contrast to the environmental infrastructure investments which
generally struggled in difficult market conditions. The private equity
portfolio benefited from the strong performances of several investments,
in particular Datapath Group Holdings, Alaric Systems, Autologic
Diagnostics Group and TFC Europe, which all achieved record sales and
profits, resulting in substantial increases in their valuations. We
expect the private equity investments to drive net asset value
performance and generate liquidity through realisations over the coming
months.
Foresight Group has carefully assessed and reviewed the environmental
infrastructure investments to identify those with potential that merit
further support and those struggling to make progress. In consequence,
decisions were made during the year not to continue to finance certain
environmental investments, namely i-plas Group and Silvigen which were
placed into administration. Reflecting further delays in redeveloping
O-Gen Acme Trek's waste wood to energy plant in Stoke, a provision of
GBP2,170,327 was made during the year against the cost of the
investment. As these difficult conditions are expected to continue for
some time, the Board and Investment Manager have agreed that no further
environmental infrastructure investments will be made, other than for
possible small follow on investments necessary to support those
environmental companies considered to have potential. Reflecting the
better risk adjusted returns available from private equity investments,
in future the Investment Manager will focus solely on making this type
of investment. The five remaining environmental investments now
represent less than 25% of net assets with Closed Loop Recycling being
the most significant holding.
The valuations of several of the portfolio companies have been impacted
by applying lower multiples to earnings despite their good performances.
Foresight Group remains positive about the prospects for the portfolio
overall and is focussed on achieving realisations from the existing
portfolio to increase net asset value, facilitate shareholder
distributions and provide additional funding for new investments.
Although remaining cautious about the economic outlook, Foresight Group
is now seeing an increasing number of high quality private equity
investment opportunities.
Annual Portfolio Review
1. Follow-on funding
Company
GBP
2K Manufacturing
1,192,000
AtFutsal Group
196,346
Autologic Diagnostics Group (includes GBP148,203
of capitalised interest)
148,403
Crumb Rubber
35,000
Flowrite Refrigeration Holdings (capitalised
interest)
7,635
i-plas Group
150,000
Ixaris Systems
96,533
Silvigen
16,666
The Bunker Secure Hosting (includes GBP272,641
of capitalised interest)
315,075
The Message Pad
190,003
Vertal
34,757
Zoo Digital Group
7,792
Total
2,390,210
2. New Investments
Company
GBP
Flowrite Refrigeration Holdings
200,000
Total
200,000
3. Exits
Company
GBP
Croma Group
147,730
Sarantel Group
11,282
Total
159,012
4. Realisations
Company
GBP
Autologic Diagnostics Group
1,000
Alaric Systems
94,920
Crumb Rubber
25,000
i-plas Group
378,947
Lab901
346,766
Total
846,633
5. Material Provisions
Company
GBP
2K Manufacturing
1,502,057
Global Immersion
872,061
ICA Group
91,889
i-plas Group
644,733
O-Gen Acme Trek
2,170,327
Silvigen
384,706
O-Gen UK
130,468
Total
5,796,241
Performance Summary
A number of companies in the portfolio performed strongly during the
year, most notably Datapath Group Holdings, Alaric Systems, Autologic
Diagnostics Group and TFC Europe which all achieved record sales and
profits, resulting in substantial increases in their valuations
totalling GBP4.94 million. The Message Pad and The Bunker Secure Hosting
also performed well, as did the new investment in Flowrite Refrigeration
Holdings completed in May 2012. Flowrite Refrigeration Holdings is a
well established Kent based company offering refrigeration and air
conditioning maintenance and services to leisure and commercial
businesses nationally which is already trading well ahead of budget. In
February 2013, Closed Loop Recycling raised loans totalling GBP12.8
million to double its production capacity and good progress is now being
made in installing new sorting and production equipment. Once this is
fully installed and commissioned, the company's profitability is
expected to be enhanced substantially.
As explained below and summarised in Table 5 above, provisions totalling
GBP5.8 million were made against seven investments, mainly environmental,
including 2K Manufacturing, i-plas Group, Silvigen, O-Gen Acme Trek and
O-Gen UK. Where provisions have been made against the value of
underlying investments, we have also provided against the income due
from such investments.
The present mixed trading conditions are expected to continue for some
time while the general economic climate remains uncertain and a
prolonged period of low growth is considered likely.
Post the year end of 31 March 2013, the Company invested GBP250,000
alongside other Foresight VCTs in a GBP1.8 million management buy-out of
Battersea based Procam Television, one of the UK's leading broadcast
hire companies, supplying equipment and crew for location TV production.
Portfolio Company Highlights
Alaric Systems, which develops and sells credit card authorisation and
credit card anti fraud software to major financial institutions and
retailers worldwide, performed particularly strongly in the year to 31
March 2013, generating an unaudited profit before interest and tax of
GBP2.1 million on sales of GBP10.4 million, well ahead of the previous
year (PBIT of GBP1.5 million on sales of GBP8.7 million). A number of
significant orders have been won recently which support achievement of
the demanding budget for the current year. Capacity to satisfy these
orders and further develop the product range is being met through
continuing expansion of offices in Kuala Lumpur, Rome and London. In May
and September 2012, reflecting strong cash generation, Alaric paid a
total of GBP103,000 to the Company, comprising loan stock interest
(GBP8,080), redemption premium (GBP61,320) and repayment of loan
principal (GBP33,600). The strong performance resulted in an increase in
Alaric's valuation by GBP1.9 million.
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. Sales have
built up steadily in the flagship super arena in Birmingham and the
second super arena in Leeds which opened in August 2012 has made a
promising start. The company has recently reached cash break even on a
monthly basis. As part of a GBP762,500 funding round to finance the
opening of the new super arena in Leeds, GBP196,346 was invested in
equity and loans in April 2012. Educational activities are increasingly
important with some 700 students now taking sports related courses with
AtFutsal Group and a number of partnerships have been created with
educational establishments, football clubs and training organisations.
This student number is lower than budgeted although there are plans for
nearly 2,000 students to be recruited in the academic year starting in
September 2013. At this point the company should reach EBITDA
profitability.
Following the successful GBP48 million secondary buy-out by ISIS Private
Equity in January 2012, the Company retained investments in equity and
loan stock valued at GBP1.98 million in Autologic Diagnostics Group.
Unaudited results for the year ended 31 December 2012 show an operating
profit of GBP6.0 million (pre exceptional deal costs) was achieved on
sales of GBP17.2 million (GBP5.2 million on sales of GBP12.2 million in
2011). Autologic is continuing to grow sales and profits further,
particularly in the USA. Interest of GBP148,203 deferred under the terms
of the loan agreement with Autologic was capitalised during the year. In
addition to this, a disposal also took place in the year, in which a
small number of shares were bought by a new operating partner,
generating GBP1,000 of proceeds.
Biofortuna, a molecular diagnostics business based in the Wirral, has
developed unique expertise in the important area of enzyme stabilisation,
effectively hi-tech freeze drying. Its first range of products, SSPGo,
is a series of genetic compatibility tests for organ transplant
recipients, although the application of the technology is extremely
broad. Because of the company's stabilisation and freeze-drying
technology, its products can be transported easily (by post if needed)
and stored at room temperature for up to two years. The company is
making progress in a number of areas, including expanding into adjacent
premises, broadening its product range, increasing manufacturing
capacity and improving internal processes. FDA trials for its SSPGo
product range, required to obtain approval, showed notably good results.
The SSPGo product range continues to see repeat orders from Abbott. The
freeze-dried kit manufacturing service shows promise, with contract
discussions with a number of parties.
In February 2013, Closed Loop Recycling successfully raised GBP12.8m of
loans to double the capacity of its Dagenham plant by investing in
additional plastic sorting facilities and production lines. Following
completion of this expansion in late 2013, annual sales are expected to
double and profitability is expected to increase substantially. In April
2013, the first part of this new capacity came on stream, resulting in
record monthly turnover. Although demand for the company's recycled PET
and HDPE exceeds its current capacity, weak current PET prices and raw
material quality issues (resulting in below target but now improving
yields) have resulted in trading losses being incurred over the last few
months. The company's main raw material supplier opened a new plastic
sorting facility in late 2012 which initially experienced quality issues
but these have now been substantially addressed. Performance is expected
to improve further over the coming months and the major focus for the
management team is to improve yield while maintaining/increasing
production volumes.
During the year, GBP35,000 was invested in Crumb Rubber to meet its
urgent working capital requirements. However, extended customer decision
making and lengthy sales cycles combined with slower than expected
growth in sales resulted in the company incurring significant losses.
The decision was reluctantly made not to provide further funding. The
investment was sold to the other shareholders in November 2012 in return
for GBP25,000 of loans being repaid.
Datapath Group is a world leading innovator in the field of computer
graphics and video-wall display technology. For the year ended 31 March
2012, the combined (pre and post re-capitalisation) group company
achieved an operating profit of GBP4.5 million on sales of GBP12.1
million (GBP3.1 million operating profit on sales of GBP10.3 million in
2011). The company continued its strong growth in the year to 31 March
2013 with draft financials showing record profits and sales being
achieved, supporting an increase in valuation of GBP2.65 million during
the year.
Evance Wind Turbines, which manufactures 5kW tree sized (up to 50 feet)
wind turbines, enjoyed strong sales growth during 2012, driven primarily
by the introduction of the UK Feed in Tariff regime. For the year to 31
March 2012, the company achieved its first operating profit on sales of
GBP7.25 million (over three times the level of sales in the previous
year). Both sales and profits grew well in the year to 31 March 2013,
with the company delivering its 1,500th machine. However, the reduction
in the Feed in Tariff from 1 October 2012, combined with a noticeable
tightening and lengthening of the planning permission process nationally,
has since adversely affected orders and sales. The company is increasing
its sales efforts overseas and in the developing corporate market where
it has won some initial orders.
In May 2012, GBP200,000 was invested in Flowrite Refrigeration Holdings
alongside other Foresight VCTs to finance the GBP3.2 million management
buyout of Flowrite Services Limited, a long established Kent based
company which provides refrigeration and air conditioning maintenance
and related services nationally, principally to leisure and commercial
businesses, such as hotels, clubs, pubs and restaurants. The management
team has accelerated sales efforts, already winning a number of
significant new customers and contracts, and a number of possible
acquisitions are being considered to broaden the national coverage. The
company is enjoying strong growth and is trading markedly ahead of
budget.
Global Immersion, which designed, built and maintained visualisation
systems for immersive theatres and planetariums Worldwide, won several
major orders in 2010 which led to a record operating profit of GBP0.5
million being achieved on sales of GBP8.0 million in the year to 30 June
2011. Reflecting prevailing difficult economic conditions, market demand
subsequently fell materially with lengthening sales cycles and strong
margin pressure, resulting in substantial trading losses being incurred.
Administrators were appointed in December 2012, so a full provision of
GBP872,061 was made against this investment.
Following a cost cutting programme, management reorganisation and price
rises for its recycled plastic building products in late 2011, i-plas
Group's trading improved in Spring 2012, break even EBITDA being
achieved in April 2012. To fund working capital, the Company invested a
further GBP150,000 in May and June 2012. However, during summer 2012,
the company experienced a marked fall in demand from its customers in
the construction industries and also significant margin pressure,
resulting in growing losses. With little prospect of a sustained
recovery in its markets, the decision was made not to provide further
funding, and an administrator was appointed in October. This
necessitated a further provision of GBP644,733 being made against the
original cost of investment to reduce it to nil. GBP378,947 was
subsequently recovered from asset sales by the administrator.
An investment of GBP96,533 was made in Ixaris Systems in April 2012 as
part of a GBP1.35 million fund raising for the continuing development of
its Opn platform. Ixaris Systems, which develops and operates Entropay,
a prepaid payment service using the VISA network, has also continued to
develop and increase sales of Opn, its platform that enables enterprises
to develop custom applications for payments. This platform is being used
by companies in the affiliate marketing and travel sectors. Unaudited
results for the year to 31 December 2012 show an operating loss of
GBP0.4 million was incurred on sales of GBP8.4 million, reflecting
continuing investment in software and systems. Trading in the current
year to date is ahead of budget and the management team has been
strengthened by the appointment of a new Chief Operating Officer.
Following the successful sale of the investment in Lab901 to Agilent
Technologies in February 2010, a final payment of GBP346,766 was
received in March 2013 representing deferred consideration.
Meridian Technique enjoyed buoyant trading during the year for its
orthopaedic surgery planning software which is sold to hospitals and
surgeries, principally in the UK and USA. Unaudited results for the year
to 31 March 2013 show an EBITDA of GBP0.68 million on sales of GBP3.04
million. The company continues to be strongly cash generative and post
the year end, repaid loans of GBP327,000. New partnerships have been
established in Asia further enhancing prospects.
An investment of GBP190,003 was made in The Message Pad in June 2012 as
part of a GBP771,000 rights issue to finance the continuing growth of
the company's contact centre software technology division. Operating
profitability was achieved recently with a growing level of contracted
recurring SaaS revenues and the sales pipeline remains strong. The
company was recently accredited within the G Cloud framework enabling it
to provide contact centre services to all government departments and the
wider public sector over the Cloud.
Following a detailed strategic review in December 2011 and in the light
of the likely expenditure required to bring O-Gen Acme Trek's advanced
gasification 3MW waste wood to energy plant in Stoke into full
production, the decision was made to mothball the plant until the
similar 3.8MW plant in Plymouth recently completed by MITIE validated
this technology. Following a change in the ROC subsidy regime in late
2012, O-Gen UK is currently working to redevelop the Stoke facility into
an 8MW plant using alternative, well established standard gasification
technology. Discussions are currently taking place with the technology
provider, a major EPC contractor and potential funders. Reflecting
continuing delays in progressing these plans, a provision of
GBP2,170,327 was made against the cost of this investment in the year.
O-Gen UK is a leading developer of waste wood gasification facilities in
the UK and is currently in advanced stages of developing a GBP40m
project in Birmingham, for which planning permission has been obtained.
The company is also developing a growing pipeline of opportunities at
various stages of maturity. The company continues to develop
relationships with a number of technology providers and major EPC
contractors. The company has a partnership with MITIE, the major UK FTSE
250 outsourcing group, which has built a 3.8MW plant in Plymouth which
is now being commissioned, with operations expected to commence in mid
2013. O-Gen UK will not finance the construction of these plants but
will benefit from project management fees, equity shareholdings, fuel,
operation and maintenance contracts. A provision of GBP130,468 has been
made against the valuation of this investment.
A further GBP16,666 was invested during the year in Silvigen to fund
urgently needed working capital. Reflecting much slower than expected
growth in sales and continuing losses, the decision was made not to
provide further funding, resulting in the company going into
administration in September 2012. A provision of GBP384,706 was made in
the year to fully provide against the cost of this investment.
TFC Europe, a leading distributor of technical fasteners in the UK and
Germany, continued to enjoy strong growth during the year to 31 March
2013, achieving record sales and profits. Trading continues to remain
strong in the current year to date with a growing order book.
The Bunker Secure Hosting, which operates two ultra secure data centres,
continues to win new orders, grow its annual revenues and generate
substantial profits. Unaudited results in the year to 31 December 2012
show an EBITDA of GBP1.77 million on sales of GBP8.5 million, at which
date recurring annual revenues were running at GBP8.8 million. To
strengthen sales efforts, additional sales resource has been recruited
and a series of new Cloud based services is currently being launched.
Growth has continued in the current year whilst investment in upgrading
the existing infrastructure continues. Interest of GBP272,641 deferred
under the terms of the loan agreement with The Bunker Secure Hosting was
capitalised during the year. In October 2012, a small number of shares
were purchased from a minority shareholder at a cost of GBP42,435.
2K Manufacturing manufactures and sells high quality Ecosheet boards
from its fully automated Luton factory. Limited production capacity
continues to constrain output and the company continues to incur losses
despite a record order book. Double shift working and price increases
have been introduced but customer demand still cannot be met even at
full plant capacity. To meet working capital requirements, a further
GBP1,192,000 was invested in loans during the year. The company has been
seeking to raise up to a further GBP10 million to increase its
production capacity for some time but discussions with existing and
prospective investors have been frustratingly slow. Discussions continue
with both potential purchasers and merger partners. Reflecting these
delays in raising this expansion capital, a provision of GBP1,502,057
has been made against the cost of this investment.
The Company's entire investment in AIM listed Croma Group's ordinary
shares was sold, generating proceeds of GBP147,730 as was the entire
investment in AIM listed Sarantel Group, generating proceeds of
GBP11,282. A small number of shares were purchased in AIM listed Zoo
Digital at a cost of GBP7,792.
Outlook
Despite a period of forecast low growth and weak UK economic conditions,
the private equity portfolio is considered to be well positioned and is
expected to continue to perform robustly overall, driving increased NAV
and liquidity, whereas the environmental infrastructure portfolio is
expected to face continuing difficult market conditions. As stated above,
no further environmental investments will be made, other than for
possible small follow on investments where necessary to support
environmental investments considered to have potential. The Investment
Manager will focus solely on making private equity investments where
they are currently experiencing a strong deal flow.
Foresight remains positive about the prospects for the portfolio overall
and is focussed on achieving realisations. Although generally cautious
about the economic outlook, Foresight is now seeing an increasing number
of high quality private equity investment opportunities.
David Hughes
Foresight Group
Chief Investment Officer
11 July 2013
The Disclosure and Transparency Rules ("DTR") of the UK Listing
Authority require certain disclosures in relation to the annual
financial report, as follows:
Principal risks, risk management and regulatory environment
The Board believes that the principal risks faced by the Company are:
-- Economic risk - events such as an economic recession and movement in
interest rates could affect smaller companies' performance and
valuations.
-- Loss of approval as a Venture Capital Trust - the Company must comply
with Section 274 of the Income Tax Act 2007 which allows it to be
exempted from capital gains tax on investment gains. Any breach of these
rules may lead to: the Company losing its approval as a VCT; qualifying
shareholders who have not held their shares for the designated holding
period having to repay the income tax relief they obtained; and future
dividends paid by the Company becoming subject to tax. The Company would
also lose its exemption from corporation tax on capital gains.
-- Investment and strategic - inappropriate strategy, poor asset allocation
or consistent weak stock selection might lead to under performance and
poor returns to shareholders.
-- Regulatory - the Company is required to comply with the Companies Act
2006, the rules of the UK Listing Authority and United Kingdom Accounting
Standards. Breach of any of these might lead to suspension of the
Company's Stock Exchange listing, financial penalties or a qualified
audit report.
-- Reputational - inadequate or failed controls might result in breaches of
regulations or loss of shareholder trust.
-- Operational - failure of the Manager's or Company Secretary's accounting
systems or disruption to its business might lead to an inability to
provide accurate reporting and monitoring.
-- Financial - inadequate controls might lead to misappropriation of assets.
Inappropriate accounting policies might lead to misreporting or breaches
of regulations. Additional financial risks, including interest rate,
credit, market price and currency, are detailed in note 15 to the Annual
Report & Accounts.
-- Market risk - investment in AIM traded, ISDX Growth market and unquoted
companies by its nature involves a higher degree of risk than investment
in companies traded on the main market. In particular, smaller companies
often have limited product lines, markets or financial resources and may
be dependent for their management on a smaller number of key individuals.
In addition, the market for stock in smaller companies is often less
liquid than that for stock in larger companies, bringing with it
potential difficulties in acquiring, valuing and disposing of such stock.
-- Liquidity risk - the Company's investments, both unquoted and quoted, may
be difficult to realise. Furthermore, the fact that a share is traded on
AIM or ISDX Growth markets does not guarantee its liquidity. The spread
between the buying and selling price of such shares may be wide and thus
the price used for valuation may not be achievable.
The Board seeks to mitigate the internal risks by setting policy,
regular review of performance, enforcement of contractual obligations
and monitoring progress and compliance. In the mitigation and management
of these risks, the Board applies the principles detailed in the UK
Corporate Governance Code. Details of the Company's internal controls
are contained in the Corporate Governance and Internal Control sections.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements, in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law the Directors have elected to
prepare the financial statements in accordance with UK Accounting
Standards and applicable law (UK Generally Accepted Accounting
Practice).
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Company and of the profit or loss of the
Company for that period.
In preparing these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the
financial statements; and
- prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company's transactions and
disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that its financial statements
comply with the Companies Act 2006. They have general responsibility for
taking such steps as are reasonably open to them to safeguard the assets
of the Company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible
for preparing a Directors' Report, Directors' Remuneration Report and
Corporate Governance Statement that comply with that law and those
regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website
(which is delegated to Foresight Group and incorporated into their
website). Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company; and
- the Directors' Report includes a fair review of the development and
performance of the business and the position of the Company together
with a description of the principal risks and uncertainties that the
Company faces.
On behalf of the Board
Graham Ross Russell
Chairman
11 July 2013
Audited Income Statement
for the year ended 31 March 2013
Year ended Year ended
31 March 2013 31 March 2012
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Realised (losses)/gains
on investments - (2,536) (2,536) - 2,225 2,225
Investment holding
gains/(losses) - 2,377 2,377 - (8,434) (8,434)
Income/(interest
expense) 445 - 445 (298) - (298)
Investment management
fees (246) (737) (983) (296) (889) (1,185)
Other expenses (437) - (437) (402) - (402)
Loss on ordinary
activities before
taxation (238) (896) (1,134) (996) (7,098) (8,094)
Taxation - - - - - -
Loss on ordinary
activities after
taxation (238) (896) (1,134) (996) (7,098) (8,094)
Loss per Ordinary Share (0.5)p (1.8)p (2.3)p (1.9)p (13.9)p (15.8)p
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 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.
Audited Reconciliation of Movements in Shareholders' Funds
Share Capital Profit and
Called-up share premium redemption loss
capital account reserve account Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended 31
March 2012
As at 1 April
2011 505 35,446 1,857 10,617 48,425
Share issues
in the year 13 1,248 - - 1,261
Expenses in
relation to
share
issues - (132) - - (132)
Repurchase of
shares (15) - 15 (1,212) (1,212)
Cancellation
of share
premium* - (36,562) - 36,562 -
Dividends - - - (1,268) (1,268)
Loss for the
year - - - (8,094) (8,094)
As at 31
March 2012 503 - 1,872 36,605 38,980
*The share premium of the Company was cancelled by order of the High
Court of Justice, Chancery Division, on 23 November 2011 and
registered at Companies House on 23 November 2011. This has enabled the
Company to increase its distributable reserve to which, amongst
other things, losses can be written off, providing the Company greater
flexibility when considering dividend payments to shareholders and from
which share buybacks can be financed.
Called-up Share Capital Profit and
share premium redemption loss
capital account reserve account Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended 31
March 2013
As at 1 April
2012 503 - 1,872 36,605 38,980
Share issues
in the year 105 8,995 - - 9,100
Expenses in
relation to
share
issues - (125) - - (125)
Repurchase of
shares (93) (221) 93 (7,895) (8,116)
Loss for the
year - - - (1,134) (1,134)
As at 31
March 2013 515 8,649 1,965 27,576 38,705
Audited Balance Sheet
at 31 March 2013
Registered Number: 03121772
As at As at
31 March 2013 31 March 2012
GBP'000 GBP'000
Fixed assets
Investments held at fair value through profit
or loss 35,447 33,850
35,447 33,850
Current assets
Debtors 2,122 2,227
Money market securities and other deposits 475 2,786
Cash 739 231
3,336 5,244
Creditors
Amounts falling due within one year (78) (114)
Net current assets 3,258 5,130
Net assets 38,705 38,980
Capital and reserves
Called-up share capital 515 503
Share premium account 8,649 -
Capital redemption reserve 1,965 1,872
Profit and loss account 27,576 36,605
Equity shareholders' funds 38,705 38,980
Net asset value per Ordinary Share 75.2 p 77.5 p
Graham Ross Russell
Chairman
11 July 2013
Audited Cash Flow Statement
for the year ended 31 March 2013
Year ended Year ended
31 March 2013 31 March 2012
GBP'000 GBP'000
Cash flow from operating activities
Investment income received 171 422
Deposit and similar interest received 9 2
Investment management fees paid (993) (1,204)
Secretarial fees paid (121) (143)
Other cash payments (449) (226)
Net cash outflow from operating activities and returns
on investment (1,383) (1,149)
Taxation - -
Investing activities
Purchase of unquoted investments and investments quoted
on AIM (2,163) (8,515)
Net proceeds on sale of unquoted investments 847 6,047
Net proceeds on sale of quoted investments 159 479
Net proceeds on deferred consideration - 7
Net capital outflow from investing activities (1,157) (1,982)
Equity dividends paid - (1,268)
Management of liquid resources
Movement in money market funds 2,311 2,588
2,311 2,588
Financing
Proceeds of fund raising 1,348 1,104
Expenses of fund raising (125) (285)
Repurchase of own shares (486) (1,928)
737 (1,109)
Increase/(decrease) in cash 508 (2,920)
Reconciliation of net cash flow to movement in net
cash
Increase/(decrease) in cash for the year 508 (2,920)
Net cash at start of year 231 3,151
Net cash at end of year 739 231
Analysis of changes in net cash
At 1 April At 31 March
2012 Cash flow 2013
GBP'000 GBP'000 GBP'000
Cash 231 508 739
Money market securities and other deposits 2,786 (2,311) 475
Cash and cash equivalents 3,017 (1,803) 1,214
Notes
1. The Audited Annual Report and Accounts has been prepared on the
basis of accounting policies set out in the statutory accounts of the
Company for the year ended 31 March 2013. All investments held by the
Company are classified as "held at fair value through profit and loss".
The Directors fair value investments in accordance with the
International Private Equity and Venture Capital Valuation ("IPEVCV")
guidelines, as updated in December 2012. This classification is followed
as the Company's business is to invest in financial assets with a view
to profiting from their total return in the form of capital growth and
income.
2. These are not statutory accounts in accordance with S436 of the
Companies Act 2006. The full audited accounts for the year ended 31
March 2013, which were unqualified and did not contain any statements
under S498(2) of Companies Act 2006 or S498(3) of Companies Act 2006,
will be lodged with the Registrar of Companies. Statutory accounts for
the year ended 31 March 2013 including an unqualified audit report and
containing no statements under the Companies Act 2006 will be delivered
to the Registrar of Companies in due course.
3. Copies of the Annual Report & Accounts 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 and can be accessed on the following website:
www.foresightgroup.eu
4. Net asset value per Ordinary Share
Net asset value per Ordinary Share is based on net assets at the year
end of GBP38,704,618 (2012: GBP38,980,499), and on 51,471,765 Ordinary
Shares (2012: 50,310,366 Ordinary Shares), being the number of Ordinary
Shares in issue at that date.
5. Loss per Ordinary Share
Year ended
31 March Year ended
2013 31 March 2012
GBP'000 GBP'000
Total loss after taxation (1,134) (8,094)
Basic loss per share (note a) (2.3)p (15.8)p
Revenue loss from ordinary activities after
taxation (238) (996)
Revenue loss per share (note b) (0.5)p (1.9)p
Capital loss from ordinary activities after
taxation (896) (7,098)
Capital loss per share (note c) (1.8)p (13.9)p
Weighted average number of shares in issue in the
year 50,804,645 51,187,456
Notes:
a) Total loss per share is total loss after taxation divided by the
weighted average number of shares in issue during the year.
b) Revenue loss per share is revenue loss after taxation divided by the
weighted average number of shares in issue during the year.
c) Capital loss per share is capital loss after taxation divided by the
weighted average number of shares in issue during the year.
6. The Annual General Meeting of Foresight 3 VCT plc ("the Company")
will be held on 17 September 2013 at 1 pm at the offices of Foresight
Group, ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU.
7. Income/(interest expense)
Year ended 31 March Year ended 31 March
2013 2012
GBP'000 GBP'000
Loan stock interest 438 (333)
Overseas based Open Ended Investment
Companies ("OEICs") 7 33
Bank deposits - 2
445 (298)*
*The interest expense in the year ended 31 March 2012 arose because of
provisions made against loan stock interest receivable from investee
companies.
8. Investments held at fair value through profit or loss
Quoted Unquoted Total
GBP'000 GBP'000 GBP'000
Book cost as at 1 April 2012 5,846 39,116 44,962
Investment holding losses (4,127) (6,985) (11,112)
Valuation at 1 April 2012 1,719 32,131 33,850
Movements in the year:
Purchases at cost 8 2,583 2,591
Disposal proceeds (159) (847) (1,006)
Realised losses (2,027) (338) (2,365)
Investment holding gains 1,557 820 2,377
Valuation at 31 March 2013 1,098 34,349 35,447
Book cost at 31 March 2013 3,668 40,514 44,182
Investment holding losses (2,570) (6,165) (8,735)
Valuation at 31 March 2013 1,098 34,349 35,447
Deferred consideration of GBP171,000, not recognised in realised losses
in the Income Statement, was received during the year.
9. Transactions with the manager
Foresight Group and Foresight Fund Managers Limited are considered to be
Related Parties of the Company. Details of arrangements with these
parties are given in the Director's Report and Note 3.
Foresight Group, acting as investment manager to the Company in respect
of its venture capital investments, earned fees of GBP983,000 during the
year (2012: GBP1,185,000). Fees excluding VAT of GBP123,000 (2012:
GBP119,000) were received during the year for company secretarial,
administrative and custodian services to the Company.
At the balance sheet date, there was GBP24,755 due from Foresight Group
(GBP2012: GBP13,000 due from Foresight Group) and GBPnil due to
Foresight Fund Managers Limited (2012: GBP2,000 due from Foresight Fund
Managers). No amounts have been written off in the year in respect of
debts due to or from the related parties.
Foresight Group also received investee companies arrangement fees of
GBP58,563 (2012: GBP203,722). VCF Partners, an associate of Foresight
Group, received from investee companies, Directors' fees of GBP190,975
(2012: GBP225,773).
No carried interest payments were made in the year.
END
This announcement is distributed by Thomson Reuters on behalf of Thomson
Reuters clients.
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 3 VCT PLC via Thomson Reuters ONE
HUG#1715868
http://www.foresightgroup.eu/
Foresight 3 Vct (LSE:FTD)
Historical Stock Chart
From Nov 2024 to Dec 2024
Foresight 3 Vct (LSE:FTD)
Historical Stock Chart
From Dec 2023 to Dec 2024
