TIDMFTF
FORESIGHT 4 VCT PLC
Summary Financial Highlights
-- Net asset value per Ordinary Share at 31 March 2016 was 70.4p (31 March
2015: 83.9p), after allowing for the 4.0p per share dividend paid on 18
December 2015.
-- On 10 August 2015 the O and C Share funds were merged. On the basis of
the conversion ratio of 1.022646, 19,101,896 new Ordinary Shares were
allotted.
-- A 25.0p dividend per C Share was paid to C Shareholders on 6 August
2015.
-- Seven new investments were made by the fund totalling GBP7.2 million and
two follow-on investments were made totalling GBP0.2 million.
-- The fund realised GBP0.9 million from sales and loan redemptions from
four portfolio companies.
Chairman's Statement
Performance
In the year to 31 March 2016, the net asset value per Ordinary Share
decreased by 11.3% to 70.4p from 83.9p at 31 March 2015, after allowing
for the 4.0p per share dividend paid in December 2015.
Overall, the Board is pleased with the composition of the portfolio,
particularly the prospects for the recent addition of seven new
investments for a total consideration of GBP7.2 million. Of these new
investments made during the year, several are already making encouraging
progress, particularly Itad and Specac. Reflecting the Board and
Manager's confidence in the current portfolio, the performance in the
last quarter of the year under review showed an increase in underlying
NAV of 2.5%. We believe the portfolio is well placed to deliver growth,
underpin future dividends and enhance shareholder returns.
The overall fall in the year is, however, disappointing and was largely
due to the performance of one portfolio company, Aerospace Tooling,
which saw a reduction or delay in orders as some of its customers were
severely impacted by the significant drop in the price of oil. Although
it did not feel the impact as acutely as Aerospace Tooling, TFC Europe
also suffered a drop in revenues from market driven factors related to
the fall in the price of oil. Aerospace Tooling was reduced by GBP4.6
million or 7.9p per share. Some encouraging progress has been made in
winning orders and acquiring new customers but this process and the
related sales cycles inevitably takes time. A new, experienced, CEO was
appointed in January 2016 and the company is now returning to
profitability. Despite the further provisions against the valuation
following the period of sustained difficult trading conditions, I would
like to remind Shareholders that the Company has previously repaid the
entire cost of the original investment to the VCT.
Derby-based Datapath Group is the largest holding in the portfolio,
being valued at GBP8.7 million and is a world leading innovator in the
field of computer graphics and video-wall display technology utilised in
a number of international markets. The company is increasing market
share in control rooms, betting shops and signage and entering other new
areas such as the medical market. For the year to 31 March 2015, an
operating profit of GBP6.8 million was achieved on sales of GBP20.3
million, with the North American division trading ahead of budget. The
Board and Manager continue to focus on derisking large portfolio
exposures such as Datapath and, in November 2015, Datapath paid a
special dividend of GBP2.1 million to the Company. This was met
principally from the company's own cash resources and management loans
which are expected to be repaid from internally generated cash flow over
the next year.
For a detailed review of all of the Company's investments I refer you to
the Manager's Report that starts on page 10 of the Annual Report and
Accounts.
Dividends
Prior to the merger, on 6 August 2015, a special dividend of 25.0p per C
Share was paid to C Shareholders, following good performance of the
portfolio including the sale of Defaqto Group Limited on 30 March 2015
for GBP9.5 million, as announced on 31 March 2015. Holders of C Shares
receiving this dividend were also given the opportunity to reinvest
their dividend proceeds into new Ordinary Shares by way of a top up
offer.
An interim dividend of 4.0p per Ordinary Share for the year ended 31
March 2016 was paid on 18 December 2015 to the Shareholders on the
register on 3 December 2015. It continues to be the Company's policy to
provide a flow of tax-free dividends, generated from income and from
capital profits realised on the sale of investments. Distributions will,
however, inevitably be dependent on cash being generated from portfolio
investments and successful realisations.
The recent and continuing success in generating cash from portfolio
investments within the fund gives the Board confidence that it will be
able to maintain the future payment of dividends to Shareholders.
Merger, Top-up Share Issues and Share Buy-backs
On 10 August 2015 the O and C share funds were merged, based on the net
asset value of the Company's C Shares as at 31 March 2015 of 85.8p per C
Share (being the audited NAV per C Share of 110.8p as at 31 March 2015,
adjusted to take account of the 25.0p per C Share dividend paid on 6
August 2015) and the NAV of the Company's Ordinary Shares as at 31 March
2015 of 83.9p. The conversion ratio was 1.022646. On the basis of this
conversion ratio, 19,101,896 new Ordinary Shares were allotted.
In accordance with the terms of the dividend reinvestment offer referred
to above, on 11 August 2015, 423,717 Ordinary Shares were allotted at
83.9p per share.
During the period under review 434,528 Ordinary Shares were repurchased
for cancellation at a cost of GBP266,000. These were purchased at a
discount to NAV ranging from 20.9% to 30.1%.
Shareholder Communication
As part of its ongoing commitment to improving shareholder communication
the Board has solicited shareholder views by means of a survey in 2016
and has also held a successful Shareholder Forum in June 2016. As the
event was oversubscribed we will be in touch later this year about
opportunities to attend similar events.
VCT Legislation
As previously discussed, changes to VCT regulations were finally
confirmed on 18 November 2015. There were no material changes to those
detailed in my interim report. One of the principal purposes of the
changes was to prevent VCT investment being used to acquire existing
shares or the principal trade or assets of businesses.
The key aspects of the proposed new rules are as follows:
-- Introducing an 'age of company' restriction of a maximum of seven years
at the time of first VCT investment;
-- Introducing a lifetime state aided investment limit of GBP12 million; and
-- Prohibiting VCT investment financing acquisitions (as mentioned above).
Although the recent rule changes preclude VCTs investing in replacement
capital transactions, the Treasury and HMRC have since agreed to review
this policy following representations from inter alia the British
Venture Capital Association, the Association of Investment Companies, a
number of legal firms and VCT managers, including Foresight Group.
Rather than an absolute restriction on replacement capital transactions,
this review will consider relaxing the current rules to enable VCTs to
invest an element of replacement capital alongside a significant element
of growth capital in any particular transaction, possibly up to a
maximum of 50% of the total amount invested. Agreement for the change is
currently expected to take up to two years and shareholders will be kept
informed of any significant developments.
If concluded satisfactorily, the range of potential investment
opportunities for VCTs would be widened, compared to the more
restrictive regime that currently applies.
Brexit
There are two principal areas where the implementation of Brexit could
impact the VCT:
1. Investee Companies - there has been much debate on the possible impact on
trade between Europe and the UK following the Brexit vote and how this
will impact UK corporates. Although it is much too early to say how large
or small the impact may ultimately be, we do not believe that the impact
will be material in the short to medium term; and
2. Regulation - many parts of the current VCT legislation has been cast from
EU State Aid Directives, however, we do not believe that even following
Brexit that changing VCT legislation will be a priority for the UK
Government and therefore we do not expect any changes to the existing
legislation in the short to medium term.
Merger Consideration
The Board has been closely monitoring the successful merger of Foresight
VCT plc and Foresight 2 VCT plc following Shareholder approval in
December 2015. Although the Board has not formally engaged with another
company at this time, it is considering whether a merger and the
benefits therefrom would be in Shareholders long term interests and
hopes to provide a further update in that regard in due course.
Restatement of reserves
The Company completed a cancellation of GBP30,963,251 and GBP1,750,587
of the amounts standing to the credit of share premium account and
capital redemption reserve respectively on 29 November 2012. The amounts
so cancelled created additional distributable reserves which could be
used to support dividend payments or distributions, buy-backs, set off
losses against and for other corporate purposes. The cancellation has
not been reflected in the financial statements for the years ended 31
March 2013 to 31 March 2015 and has now been corrected in the enclosed
financial statements.
Annual General Meeting
The Company's Annual General Meeting will take place on 30 September
2016 at 1.00pm. I look forward to welcoming you to the Meeting, which
will be held at the offices of Shakespeare Martineau LLP in London.
Details can be found on page 62 of the Annual Report and Accounts.
Prior to the formal business of the Annual General Meeting, Foresight
Group, the investment Manager and two investee companies will give
presentations between 12.00pm and 1.00pm.
Outlook
Although there is still considerable uncertainty in continental Europe
as a result of stresses within the Euro area the UK economy is in
reasonable health and many businesses are making steady progress. The
recent decision resulting from the referendum on 23 June, for the UK to
begin negotiations to leave the European Union has also given rise to
further uncertainty and it will take time to gauge the full effect that
this may have for the Company. Many of the familiar risks, both
financial and political, remain and there can be no grounds for
complacency as all of our investments operate in competitive
environments.
We hope that the effect of the improvement in the economy over the last
few years continues, as this has been reflected in the improving
performance of the private equity part of the portfolio. Within the
portfolio, there is an ongoing focus on performance and realisations,
refinancings, dividends and loan repayments which underpin the Board's
dividend commitment to Shareholders. It has also enabled several new
investments to be made which we anticipate will further enhance
Shareholder returns.
Philip Stephens
Chairman
29 July 2016
Manager's Report
In the year under review for 31 March 2016, the net asset value per
Ordinary Share decreased by 11.3% to 70.4p per share from 83.9p per
share as at 31 March 2015 (after taking into account the 4.0p per share
dividend paid in December 2015). During the year the Company was
negatively impacted in particular by a GBP4.6 million reduction in the
valuation of one investment, Aerospace Tooling Holdings, due to a lower
level of orders from its two largest customers, but benefitted from good
performances by several portfolio companies and the receipt of a GBP2.1
million dividend from Datapath and a recapitalisation of GBP710,000 from
TFC.
On 10 August 2015, the merger of the Ordinary Share and C Share classes
was completed. A special dividend of 25.0p per C Share was paid on 6
August 2015 reflecting the performance of the C Share class portfolio
and, in particular, the sale of Defaqto Group Limited on 30 March 2015
for GBP9.5 million. The merger was effected by converting the C Shares
into new Ordinary Shares on a relative net asset value basis using the
audited NAVs of the Ordinary Share and C Share as at 31 March 2015,
adjusted for any material movements up to the date of conversion. Based
on the audited net asset value as at 31 March 2015 of 85.8p per C share
(being the audited NAV per C Share of 110.8p as at 31 March 2015,
adjusted to take into account of the above mentioned 25.0p per share
dividend) and the NAV per Ordinary Share as at 31 March 2015 of 83.9p,
the conversion ratio was 1.022646.
An interim dividend of 4.0p per Ordinary Share was paid on 18 December
2015 to shareholders on the Register on 3 December 2015.
Having realised a significant number of investments over recent years,
the principal focus in the year under review was making new investments.
Seven new investments were made, several of which are already making
encouraging progress, particularly Itad and Specac. Further details of
these new investments can be found in the Portfolio Review later in this
report.
Foresight Group continues to see a number of high quality private equity
investment opportunities. Foresight believes that, with the UK and US
economies slowly recovering, investing in growing, well managed private
companies should, based on past experience, generate attractive returns
over the longer term. Based on its current deal flow, Foresight believes
that attractive deals are currently available.
The recent Brexit referendum results on the United Kingdom leaving the
European Union is not expected to result in any immediate material
changes to the overall portfolio. Any prolonged weakness in Sterling
will benefit those companies in the portfolio with a high proportion of
exports.
Impact of recent changes to VCT legislation
The budget in July 2015 introduced a number of significant changes to
VCT legislation. Following receipt of EU State Aid approval, these
regulatory changes took effect from 18 November 2015, the date of Royal
Assent to the Finance Act 2015. Two of these changes in particular are
expected to impact the future management of all VCTs. First the
restriction on the age of a company that is eligible for investment by a
VCT (generally no more than seven years from the date of the company's
first commercial sale) and second, restrictions on VCT funds being used
in acquiring an interest in another company or existing business. By
precluding replacement capital transactions, such as shareholder
recapitalisations, management buy-outs or buy-ins and funding
acquisitions by investee companies, the restrictions are designed to
encourage more development capital transactions and investment in
generally younger, less mature companies.
Foresight VCTs already invest in all these types of transactions so,
although the proposed changes will result in a change of investment
emphasis, they are not expected to have a material impact. Foresight
VCTs will continue to focus on investing in established, growing,
profitable companies with an attractive risk/return profile as at
present but will change emphasis from replacement capital transactions
to development capital investments, including investing in earlier stage
companies with a clear path to profitability. It will not be the policy,
except in exceptional circumstances, to invest in start up companies.
Foresight Group has a strong track record in development capital
transactions, having invested in both growth capital and replacement
capital transactions since its formation over 30 years ago. For example,
40% of all investments made since 2010 were development capital
transactions. Since then, 14 of these investments have been successfully
realised, generating an average return of 2.2 times original cost.
With this long and successful track record, Foresight's marketing
efforts have been refocused towards finding suitable, later stage
development capital investment opportunities, with the aim of
accelerating their growth. A number of such opportunities are currently
under active consideration. Foresight remains confident that sufficient,
suitable new and attractive investment opportunities can be sourced
which will meet its return criteria and comply with the VCT rules.
While the full implications of the new rules have yet to be established,
it is clear that, over the medium term, as existing investments are
realised, this change in investment emphasis and the nature of new
investments may lead to an increase in the VCTs' risk profile. Over the
medium term, however, any such increase in risk profile could be
tempered by a favourable outcome to the proposed VCT policy review, as
mentioned below. The rule changes will, however, make the VCTs'
operating environment more complicated and could limit the number of
opportunities available for investment. Similarly, the Company may not
necessarily be able to provide further investment funds for companies
already in its portfolio.
Proposed VCT Policy Review
Although the recent rule changes preclude VCTs investing in replacement
capital transactions, the Treasury and HMRC have since agreed to review
this policy following representations from inter alia the British
Venture Capital Association, the Association of Investment Companies and
a number of legal firms and consider relaxing the current rules to
enable VCTs to invest an element of replacement capital alongside a
significant element of growth capital in any particular transaction. At
this stage, it is not possible to forecast the outcome of the review,
and Shareholders will be kept informed of any significant developments.
If this review concludes satisfactorily, the range of potential
investment opportunities for VCTs would be widened, compared to the more
restrictive regime that currently applies.
Portfolio Review
1. New Investments
Company GBP
ABL Investments Limited 1,000,000
FFX Group Limited 1,372,000
Hosital Services Limited 1,200,000
Itad Limited 1,000,000
Protean Software Limited 1,000,000
Specac International Limited 650,000
The Business Advisory Limited 1,000,000
Total 7,222,000
During the year, GBP7.2 million was invested in the above seven
companies, each well established, growing and profitable.
In September 2015, as part of a GBP4.2 million round alongside other
Foresight VCTs, the Company invested GBP1.0 million in ABL Investments
Limited ("ABL") to support its continuing growth.
ABL, based in Wellingborough, Northants and with a manufacturing
subsidiary in Serbia, manufactures and distributes office power supplies
and distributes monitor arms, cable tidies and CPU holders to office
equipment manufacturers and distributors across the UK.
In September 2015, as part of a GBP3.9 million round alongside other
Foresight VCTs, the Company invested GBP1.4 million in FFX Group Limited
to support the continuing growth of this Folkestone based multi- channel
distributor of power tools, hand tools, fixings and other building
products. Since launching its ecommerce channel in 2011, FFX has grown
rapidly supplying a wide range of tools to builders and tradesmen
nationally.
In September 2015, as part of a GBP4.5 million round alongside other
Foresight VCTs, the Company invested GBP1.2 million in Hospital Services
Limited (HSL) to support its continuing growth. Based in Belfast and
Dublin, HSL distributes, installs and maintains high quality healthcare
equipment supplied by global partners such as Hologic, Fujifilm and
Shimadzu, as well as supplying related consumables.
In September 2015, as part of a GBP4.0 million round alongside other
Foresight VCTs, the Company invested GBP1.0 million in Itad Limited, a
long established consulting firm which monitors and evaluates the impact
of international development and aid programmes, largely in developing
countries. Customers include the UK Government's Department for
International Development, other European governments, philanthropic
foundations, charities and international NGOs. Most contracts are long
term, providing good revenue visibility, while more than half of the
employees being experienced consultants.
In July 2015, the Company invested GBP1.0 million as part of a GBP4.0
million round alongside other Foresight VCTs to finance a management
buy-in/buy-out of Coventry based Protean Software Limited ("Protean")
and fund planned growth. Protean develops and sells business management
and field service management software for organisations involved in the
supply, installation and maintenance of equipment, across sectors
including facilities management, HVAC and elevator installation.
Foresight has introduced two experienced software executives as CEO and
Chairman respectively, who are working alongside three of the current
directors to drive the business forward and execute growth plans.
In April 2015, the Company and Foresight 3 VCT each invested
GBP650,000 in shares and loan notes, alongside a further a GBP1.3
million investment by Foresight VCT, in Specac International Limited
("Specac") to finance a GBP2.6 million management buy-out of Specac
Limited from Smiths Group plc. The three Foresight VCTs together
acquired a majority equity shareholding with the management team holding
the remaining equity.
Specac, based in Orpington, Kent, is a long established, scientific
instrumentation accessories business, manufacturing high specification
sample analysis and sample preparation equipment used across a broad
range of applications in testing, research and quality control
laboratories and other end markets worldwide. The company's products are
primarily focused on supporting IR Spectroscopy, an important analytical
technique widely used in research and commercial/ industrial
laboratories.
In September 2015, as part of a GBP3.3 million round alongside other
Foresight VCTs, the Company invested GBP1.0 million in The Business
Advisory Limited. This company provides a range of advice and support
services to UK based small businesses seeking to gain access to
Government tax incentives, largely on a contingent success fee basis.
With a large number of small customers signed up under medium term
contracts, the company enjoys a high level of recurring income and good
visibility on future revenues.
1. Follow-on funding
Company GBP
The SkillsGroup (formerly AtFutsal Group) 34,000
Autologic diagnostics Group Limited* 160,000
Total 194,000
*Representing capitalised interest.
1. Realisations
In July 2015, TFC Europe effected a successful recapitalisation and
share reorganisation, through which the Foresight VCTs were repaid all
their outstanding loans, together with all accrued interest and a
redemption premium. The Company was repaid GBP710,000 and increased its
shareholding from 17.87% to 22.23%.
An amount of GBP58,000 was received from the administrators of i-Plas
Group during the year.
During the year, 62,982 ordinary shares in AIM listed Zoo Digital were
sold, realising GBP7,000.
In November 2015, the Company received a dividend of GBP2.1 million from
Datapath.
In March 2016 the Company's interest in O-Gen Acme Trek was sold to
Blackmead Infrastructure Limited, a subsidiary of Foresight's
Inheritance Tax Solution, at book value for an initial cash
consideration of GBP107,000 and a deferred consideration of GBP516,000.
1. Material provisions to a level below cost in the year
Company GBP
Aerospace Tooling Corporation Limited 4,560,000
AlwaysOn Group Limited 182,000
Autologic Diagnostics Group Limited 306,000
Trilogy Communications Holdings Limited 60,000
The SkillsGroup (formerly named AtFutsal Group) 412,000
VectorCommand Limited 302,000
Total 5,822,000
The valuation of the investment in Aerospace Tooling Holdings Limited
was reduced by GBP4.6 million to GBP987,000 during the year due to a
lower level of orders from its two largest customers. The cost of
investment at the year-end was GBP150,000. The full original cost of the
investment has already been repaid to Foresight 4 VCT plc.
1. Performance Summary
The net asset value per Ordinary Share decreased by 11.3% to 70.4p per
share as at 31 March 2016 from 83.9p per share as at 31 March 2015
(after incorporating the 4.0p per share dividend paid in December 2015).
As explained below, the net asset value was negatively impacted by a
GBP4.6 million reduction in the valuation of Aerospace Tooling Holdings.
However, during the year the Company benefitted from good performances
by several portfolio companies. Together with Itad and Specac, Blackstar
Amplificiation Holdings Limited, CoGen Limited, Ixaris Systems Limited,
Positive Response Communications Limited, and The Bunker Secure Hosting
limited all performed well, supporting an increase in their aggregate
valuation of over GBP2.3 million. Seven new investments totalling GBP7.2
million were made during the year and are already making encouraging
progress, particularly Itad and Specac. Itad has won several large long
term contracts, providing good revenue visibility for the current and
future years, while Specac successfully launched new products and
increased sales, particularly in the important US market.
TFC's valuation was reduced by GBP706,000 during the year reflecting
reduced demand from the Oil & Gas sector in marked contrast to positive
signs of improvement across a variety of other industry sectors. As a
consequence of the VCT rule changes referred to above, Foresight's
marketing efforts have already been refocused towards finding more
suitable, later stage development capital investment opportunities, with
the aim of accelerating the growth of established, profitable companies.
A number of such opportunities are currently under active consideration.
The M&A market continues to be active, providing opportunities for
future realisations.
Portfolio Company Highlights
In September 2015, as part of a GBP4.2 million round alongside other
Foresight VCTs, the Company invested GBP1.0 million in ABLInvestments
Limited ("ABL") to support further growth. ABL, based in Wellingborough,
Northants and with a manufacturing subsidiary in Serbia, manufactures
and distributes office power supplies and distributes monitor arms,
cable tidies and CPU holders to office equipment manufacturers and
distributors across the UK. Founded in 2003, ABL has grown strongly over
the last five years, achieving an EBITDA of GBP1.9 million on sales of
GBP5.5 million in its financial year to 31 August 2015, reflecting a
strong focus on customer service, speed of delivery and value for money.
Growth is forecast to be achieved by broadening the product range and
customer base in the UK, improving efficiency, marketing materials and
the website and, in due course, expanding internationally. A new
Chairman with experience of the office supplies market has been
appointed to the Board, alongside a new Finance Director, with plans in
hand to recruit a COO. A Financial Controller and additional salesmen
have been recruited.
In June 2013, the Company invested GBP1.5 million alongside other
Foresight VCTs in a GBP3.5 million investment in Dundee-based Aerospace
Tooling Holdings ("ATL"), a well-established specialist engineering
company. ATL provides repair, refurbishment and remanufacturing services
to large international companies for components in high-specification
aerospace and turbine engines. With a heavy focus on quality assurance,
the company enjoys well established relationships with companies serving
the aerospace, military, marine and industrial markets. In the year to
30 June 2014, a number of large orders underpinned exceptional growth,
with turnover doubling and EBITDA profits increasing significantly to a
record GBP4.3 million.
Reflecting particularly strong cash generation, the company effected a
recapitalisation and dividend distribution in September 2014, returning
the entire GBP3.5 million cost of the Foresight VCTs' investments made
only 15 months previously. Having received full repayment of its loan of
GBP1.4 million and dividends of GBP150,000 equal to the cost of its
equity investment, the Company retained its original 23% equity
shareholding in the company, effectively at nil cost.
Although sales and profitability were expected to be lower in the year
to 30 June 2015, the actual trading results were weaker than budgeted,
EBITDA of GBP2.5 million being achieved on sales of GBP8.1 million,
reflecting weak trading in the final quarter of the year due to a
premature reduction of work under a major defence contract. This
unexpected early contract termination was subsequently followed by a
significant reduction in work for an important customer in the Oil and
Gas industries, as a consequence of the falling oil price. With poor
order visibility, costs were reduced, management changes made and sales
efforts increased substantially.
Trading in the first half to December 2015 continued to be weak, with
EBITDA losses being incurred on significantly lower sales. A new
experienced CEO was appointed in January 2016 and the company has since
seen improving sales, winning new customers and is now returning to
profitability.
Following a merger with Data Continuity Group in April 2014, AlwaysOn
Group implemented a major reorganisation, involving significant cost
reductions and a subsequent change in the year end to June 2015. The
merged business now provides data backup services, connectivity and
Microsoft's Skype for Business (formerly known as Lync) collaboration
software (AlwaysOn being a Microsoft Gold partner) to SMEs and larger
enterprises. For the year to 31 March 2015, losses were successfully
stemmed, with a small EBITDA profit being achieved on sales of GBP8.0
million and reasonable cash balances at that date. In the current year,
trading continues at a similar level with small losses being incurred.
Revenues for the merged entity were slightly behind budget, due to
weaker product sales and data back-up renewals, while managed services
performed ahead of expectations. Further cost reductions were also
implemented. To improve the company's digital presence and channel sales
of Lync (to be rebranded Skype for Business), a new Head of Marketing
was recruited, who has had a beneficial impact on sales. With a number
of significant pipeline opportunities being generated through partners
for Skype for Business, performance is expected to improve significantly
as these convert into orders. In view of the overall weak trading
performance, a provision of GBP182,000 was made against the cost of the
investment during the period.
Following the GBP48.0 million secondary buy-out of Autologic Diagnostics
Group, an automotive diagnostics software company, by Living Bridge
(formerly ISIS Private Equity) in January 2012, the Company retained
investments in equity and loan stock valued at GBP2.0 million. For the
year to 31 December 2014, Autologic reported an EBITDA of GBP5.4 million
on sales of GBP19.7 million, with relatively stronger sales in the UK
and Europe compared with the USA. In May 2015, a new business model was
launched to generate recurring revenues and improve the quality of the
company's earnings from a new product, Assist Plus, and associated
Assist Plus service. This change in strategy towards a pure recurring
revenue model has resulted in certain exceptional costs being incurred
impacting EBITDA which fell to, GBP4.0 million on revenues of GBP18.5
million for the year to 31 December 2015, in line with expectations. At
31 March 2016, the company had cash balances of over GBP6.0 million.
Management are transitioning the existing customer base onto the new
support service platform and growing sales of the new product and
service to both new and existing customers. Depending on the number of
existing customers transitioning onto the new product and service and
along with the level of new customer sales, this change in strategy will
also impact EBITDA in 2016 but is expected to increase shareholder value
over the longer term. Initial signs are promising, with largely positive
feedback from customers.
Biofortuna, established in 2008, is a molecular diagnostics business
based in the North West, which has developed unique expertise in the
manufacture of freeze dried, stabilised DNA tests. Biofortuna develops
and sells both its own proprietary tests as well as a comprehensive
range of contract manufacturing services. A GBP1.3 million round to
finance capital expenditure and working capital was completed in August
2013, in which the Company invested GBP198,000 in the first tranche and
a further GBP102,000 in the second, final tranche in April 2014. For the
year to March 2015, a substantially reduced operating loss of GBP528,000
was incurred on higher sales of GBP1.1 million (2014: an operating loss
of GBP1.1 million on sales of GBP325,000). Trading in the year to 31
March 2016 was well ahead of budget and the previous year, with an
improved, reduced EBITDA loss, the profitable Contract Manufacturing
division helping to offset investment in the proprietary products being
developed by the Molecular Diagnostics division.
To finance the development of new products, a GBP1.6 million round was
concluded in January 2015, of which GBP890,000 was committed by the
Foresight VCTs. The Company committed to invest GBP429,000, of which
GBP256,000 was invested as the first tranche. With a lower than planned
cash outflow, the second, final tranche is now expected to be drawn down
during late 2016.
In July 2012, the Company invested GBP1.0 million in Northampton based
Blackstar Amplification Holdings alongside GBP2.5 million from Foresight
VCT to finance a management buy-out and provide growth capital.
Blackstar was founded in 2004 by four senior members of the new product
development team at Marshall Amplification to design and manufacture a
range of innovative guitar amplifiers. Following commercial launch in
2007, sales grew rapidly, reflecting new product launches, entry into
new markets, and a global brand was soon established. In the year to 30
April 2015, the company achieved an EBITDA of GBP537,000 on sales of
GBP8.6 million (2014: GBP323,000 EBITDA on sales of GBP8.6 million).
Trading in the current year to 30 April 2016 resulted in an increased
EBITDA on slightly lower sales, reflecting increased margins and the
full impact of cost reductions made in 2014. The budget for future
contracts for the current year shows further growth in profits and
higher sales. Blackstar continues to be the number two guitar amplifier
brand by units sold in the UK and USA. Management are focused on
increasing sales, albeit in a price sensitive market, while improving
margins, as well as selectively replacing distributors where
appropriate.
In the first eleven months or 1 May 2015 to 31 March 2016 of the
financial year ending 30 April 2016, the company recorded sales of
GBP6.9 million and an EBITDA of GBP407,000. On a like-for-like basis,
sales were slightly behind of the prior year and EBITDA was flat. The
decline in sales is primarily a direct result of SJE, one of the
Company's key Korean based suppliers, effectively entering
administration. While the Company has dual and tri-source supplier
arrangements in place, SJE's failure led to short term supply chain
disruption. Looking ahead, the company is forecasting sales of GBP9.5
million and EBITDA of GBP900,000 for the financial year commencing 1 May
2016. Encouraging progress continues to be made into the consumer
products market.
The company currently has a presence in over 35 countries worldwide and
its products are stocked in over 2,500 stores globally, including
Maplins and Argos stores in the UK. New product development remains a
key focus. A new division, Dist-X, has been established to leverage
Blackstar's UK distribution capabilities by distributing other,
non-competition Music Instrument brands.
Building on the success of its GBP48.0 million, 10MW Birmingham Bio
Power Limited project ("BBPL") with Carbonarius (a 50:50 joint venture
with Plymouth-based Una Group), O-Gen UK has become the UK's leading
independent developer of Advanced Conversion Technology waste to energy
projects. In March 2015, O-Gen UK and Una Group combined their two teams
into a new company, CoGen Limited, to further develop their substantial,
combined pipeline of projects. In order to accelerate growth and provide
additional working capital, a new investor subscribed GBP750,000 for
equity in CoGen, alongside a loan of GBP500,000 from Una Group. Funds
managed by Foresight hold 22.13% of CoGen's equity, including Foresight
VCT (3.53%), Foresight 3 VCT (7.73%), Foresight 4 VCT (8.55%) and the
Foresight UK Sustainable EIS fund (2.32%). O-Gen UK remains the
shareholder in BBPL.
In March 2015, CoGen reached financial close on a GBP53.0 million, 10MWe
waste wood to energy plant in Welland, Northamptonshire, using the same
technology and partners as BBPL. This latest project was funded with
investment from Balfour Beatty plc, Equitix and Noy (an Israeli
investment fund), with CoGen earning development fees on the transaction
while retaining a 12.5% shareholding in the project. Also in March,
CoGen completed the acquisition of the entire O-Gen Plymtrek site in
Plymouth, originally developed by Carbonarius and MITIE plc, on which an
GBP8.0 million 4.5MW waste to energy plant is planned to be built
utilising much of the footprint of the existing plant. The funding for
this transaction was provided by Aurium Capital
Markets, with CoGen owning 50% of the acquisition vehicle and Aurium 50%
but with a prior ranking return on the latter's invested capital.
In October 2015, CoGen reached financial close on a GBP97.0 million,
21.5MW project in Ince Park, Merseyside to be fuelled with circa 160,000
tonnes per annum of recycled wood fibre. All of the funding was provided
by the Bioenergy Infrastructure Group ("BIG", of which Foresight Group
is a co-sponsor) through a combination of shareholder loan and shares
which receive a preferential return.
Cogen is developing its pipeline of projects and funding relationships,
with active support from Foresight and BIG. The market has become more
uncertain with the Government's changes in renewables policy, in
particular uncertainty relating to future CfD auctions. Cogen's primary
deal pipeline comprises four projects in Northern England and it plans
to bid in the CfD auction due at the end of 2016, with the aim of
closing projects, if successful in that auction, during 2017. BIG is
expected to jointly fund this process, requiring a total of GBP5.0
million of investment.
Year of financial
Project Name Project Size (GBPm) close Shareholding
Birmingham Bio Power
Limited 48 2013 20.0%
Plymouth 20 2015 50.0%
Welland 53 2015 12.5%
Ince Park 97 2015 20.0%
It is unlikely that full value will be secured for Foresight VCT's
stakes in Cogen and O-Gen UK until the portfolio of plants is fully
operational. However, Foresight will keep this situation under review.
In February 2014, the O-Gen Acme Trek facility in Stoke-on-Trent was
granted planning permission for an enlarged 8MW waste wood to energy
plant. It was not possible, however, to finance and redevelop the site
as a project qualifying for ROCs in time for the ROC deadline. In March
2016 the Company's interest in O-Gen Acme Trek was sold to Blackmead
Infrastructure Limited, a subsidiary of Foresight's Inheritance Tax
Solution, at book value for an initial cash consideration and a deferred
consideration element.
Derby-based Datapath Group is a world leading innovator in the field of
computer graphics and video-wall display technology utilised in a number
of international markets. The company is increasing its market share in
control rooms, betting shops and signage and entering other new markets
such as medical. For the year to 31 March 2015, an operating profit of
GBP6.8 million was achieved on sales of GBP19.3 million, with the North
American division trading ahead of budget (2014: record operating
profits of GBP7.4 million on sales of GBP18.7 million). In November
2015, Datapath paid dividends of GBP6.3 million, comprising GBP2.1
million to the Company and the same amount to Foresight 2 VCT and
Foresight 3 VCT. This was met principally from the company's own cash
resources and short term loans which are expected to be repaid from
internally generated cash flow over the next year. For the year to March
2016, the company made an operating profit of GBP5.9 million on sales of
GBP19.9 million.
In September 2015, as part of a GBP3.9 million round alongside other
Foresight VCTs, the Company invested GBP1.4 million in FFX Group Limited
to support the continuing growth of this Folkestone based multi- channel
distributor of power tools, hand tools, fixings and other building
products. Since launching its ecommerce channel in 2011, FFX has grown
rapidly supplying a wide range of tools to builders and tradesmen
nationally. For the year to 31 March 2015, the company achieved an
EBITDA of GBP1.3 million on sales of GBP23.0 million. The management
team has been strengthened by the appointment of two new Joint Managing
Directors and a new Chairman, each with experience of successfully
developing similar businesses. The relocation into a nearby, much larger
warehouse at Lympne in early 2016 was completed successfully.
In May 2012, the Company invested GBP693,000 in Flowrite Refrigeration
Holdings alongside other Foresight VCTs to finance the GBP3.2 million
management buy-out of Kent-based Flowrite Services Limited. Flowrite
Refrigeration Holdings provides refrigeration and air conditioning
maintenance and related services nationally, principally to leisure and
commercial businesses such as hotels, clubs, pubs and restaurants. In
the year to 31 October 2014, the company traded well, achieving an
operating profit of GBP740,000 on sales of GBP10.8 million after
substantial investment in new engineers and systems.
In July 2015, the company completed another recapitalisation, returning
GBP156,000 of accrued interest to the Foresight VCTs, including
GBP78,000 to the Company, taking total cash returned on this investment
to 85% of cost. For the 14 months to 31 December 2015, the company
achieved a disappointing operating profit of GBP404,000 on sales of
GBP12.8 million, reflecting difficulties arising from installing a new
workflow IT system to improve operational efficiency and optimise
profitability. To drive the business forward, steps were taken in August
2015 to broaden the management team through the appointment of a new
Chairman and a new Finance Director.
In September 2015, as part of a GBP4.5 million round alongside other
Foresight VCTs, the Company invested GBP1.2 million in Hospital Services
Limited (HSL) to support its continuing growth. Based in Belfast and
Dublin, HSL distributes, installs and maintains high quality healthcare
equipment supplied by global partners such as Hologic, Fujifilm and
Shimadzu, as well as supplying related consumables. HSL has particular
expertise in the radiology, ophthalmic, endoscopy and surgical sectors.
For the year to 31 March 2015, the company achieved EBITDA of GBP1.7
million on revenues of GBP7.2 million. A new, experienced Non-Executive
Chairman and a Commercial Director have been appointed to the Board.
In September 2015, as part of a GBP4.0 million round, alongside other
Foresight VCTs, the Company invested GBP1.0 million in Itad Limited, a
long established consulting firm which monitors and evaluates the impact
of international development and aid programmes, largely in developing
countries. Customers include the UK Government's Department for
International Development, other European governments, philanthropic
foundations, charities and international NGOs. For the year to 31
January 2015, Itad achieved an EBITDA of
GBP1.5 million on revenues of GBP8.8 million with significant future
growth forecast. A number of significant contracts have been won
recently and, as most contracts are long term, this provides good
revenue visibility for the current and future years.
Ixaris Systems has developed and operates Entropay, a web-based global
prepaid payment service using the VISA network. Ixaris also offers its
IxSol product on a 'Platform as a Service' basis to enable enterprises
to develop their own customised global applications for payments over
various payment networks. During 2013, the company invested in
developing and marketing its Ixaris Payment System, the platform that
runs IxSol, to financial institutions. The platform enables financial
institutions to offer payment services to customers based on prepaid
cards. This division continues to make good progress. The first
deployment went live in late 2015, the second in early 2016 and a third
expected shortly. Ixaris was awarded an EU grant of EUR2.5 million, of
which EUR1.6 million will be received over three years, to help fund the
existing platform technology roadmap, which highlights the innovative
nature of the Payment System.
For part of the year to 31 December 2015, the company operated at around
EBITDA and cash flow break even while continuing to invest further in
Ixsol and Ixaris Payment System. For the full year to 31 December 2015,
reflecting strong trading and continuing investment in software and
systems, an EBITDA loss of GBP501,000 was incurred on sales of GBP10.8
million, ahead of budget (2014: EBITDA loss of
GBP622,000 on sales of GBP9.5 million).
In December 2014, the Company invested GBP500,000 alongside other
Foresight VCTs in a GBP2.0 million round to finance a shareholder
recapitalisation of Positive Response Communications. Established in
1997, the company monitors the safety of people and property from its 24
hour monitoring centre in Dumfries, Scotland. Customers include several
major restaurant and retail chains. For the year ended 31 March 2015, an
EBITDA of GBP637,000 was achieved on sales of GBP2.0 million. In the
financial year to 31 March 2016, sales grew modestly with reduced EBITDA
profits, reflecting investment in improving efficiency and systems and
recruitment of more sales staff. The management team has been
strengthened with the appointment of three experienced executives as
Chairman, CEO and Finance Director respectively.
In April 2013, the Company invested GBP650,000 alongside other Foresight
VCTs in a GBP1.8 million round to finance a management buy- out of
Procam Television Holdings. Procam is one of the UK's leading broadcast
hire companies, supplying equipment and crews for UK location TV
production to broadcasters, production companies and other businesses
for over 20 years. Headquartered in Acton, London, with additional
facilities in Manchester, Edinburgh and Glasgow, Procam is a preferred
supplier to BSkyB and an approved supplier to the BBC and ITV. Revenues
and profits have grown strongly, following the introduction of new
camera formats, acquisitions in both the UK and USA and increased sales
and marketing efforts.
In December 2014, Procam acquired True Lens Services, based in Leicester,
which specialises in the repair, refurbishment and supply of camera
lenses with further support from the Foresight VCTs. In March 2015, in
order to service the requirements of many of its existing UK customers
and enter the large US market, Procam acquired HotCam New York City
which provides camera, audio and lighting rental for TV production, plus
crew and related production services. These two acquisitions were
supported by a further investment of GBP1.3 million from the Foresight
VCTs, of which the Company invested GBP451,385. Other acquisition
opportunities are under active consideration.
In February 2016, ProCam acquired the trading assets of the film
division of Take 2 Films which provides digital and film camera
equipment for Film and TV. This was funded by bank debt and asset
finance facilities.
For the year to 31 December 2014, the company achieved an EBITDA of
GBP2.3 million on revenues of GBP8.1 million, ahead of the prior year,
reflecting organic growth and the integration of the Hammerhead
acquisition. Trading in the year to 31 December 2015 was strong with an
EBITDA of GBP3.3 million being achieved on sales of GBP11.5 million,
reflecting both organic growth, driven principally by the strong
performance of the London office, and impact of the acquisitions.
In July 2015, as part of a GBP4.0 million round alongside other
Foresight VCTs, the Company invested GBP1.0 million in Coventry-based
Protean Software. Protean develops and sells business management and
field service management software, together with related support and
maintenance services, to organisations involved in the supply,
installation and maintenance of equipment, across a number of sectors
including facilities management, HVAC and elevator installation.
Protean's software suite offers both desktop and mobile variants used on
engineers' Android devices. A new CEO and an experienced Chairman were
appointed at completion and a new Financial Controller recruited
subsequently. For the year to 31 March 2015, EBITDA of
GBP900,000 was achieved on sales of GBP3.0 million. Trading in the year
to 31 March 2016 was ahead of the previous year while profits were in
line with the previous year, reflecting increased investment.
In April 2015, Foresight funds invested GBP2.6 million in shares and
loan notes in Specac International ("Specac") to finance a management
buy-out of Specac Limited from Smiths Group plc. The Company invested
GBP650,000, alongside GBP1.3 million from Foresight VCT and
GBP650,000 from Foresight 3 VCT, together acquiring a majority equity
shareholding with the management team holding the remaining equity.
Based in Orpington, Kent, Specac is a long established, leading
scientific instrumentation accessories business, manufacturing high
specification sample analysis and sample preparation equipment used for
a broad range of applications in testing, research and quality control
laboratories and other end markets Worldwide. The company's products are
primarily focused on supporting IR Spectroscopy, an important analytical
technique widely used in research and commercial/ industrial
laboratories.
For the year to 31 July 2015, the company achieved EBITDA of GBP906,000
on sales of GBP6.9 million. Trading in the current year has exceeded
expectations with profit growth ahead of forecast, reflecting greater
focus on sales and costs. The company has accelerated new product
development and successfully launched new products. A non- executive
Chairman has also been appointed with a strong sales and marketing
background in the scientific instrumentation market who will complement
the existing management team and assist in developing the business.
TFC Europe, a leading distributor of technical fasteners in the UK and
Germany, performed satisfactorily during the year to 31 March 2015,
achieving an operating profit of GBP2.8 million on sales of GBP20.3
million (2014: operating profit of GBP2.8 million on sales of GBP19.5
million). Trading in the year to 31 March 2016, however, was appreciably
weaker than budgeted due to a general downturn in the UK manufacturing
sector, particularly the Oil and Gas sector.
In July 2015, the company effected a successful recapitalisation, as a
result of which GBP2.4 million was received by the Foresight VCTs,
repaying all their outstanding loans, together with accrued interest and
a redemption premium. The overall Foresight shareholding increased from
53.6% to 66.7%. The Company received GBP710,000 and increased its
shareholding from 17.87% to 22.23%. A number of senior management
changes and promotions were made to facilitate the planned retirement of
the Chairman, helping the CEO to drive strategic growth projects,
particularly in Germany and to focus on new customer targets within the
aerospace sector. In April 2015, two senior managers were promoted to
Sales Director and Commercial Director roles. A Group Operations Manager
has been appointed to drive cost efficiencies and introduce best
operational practice across the Group. A new, experienced Chairman
joined the Board in January 2016 and is evaluating TFC's sales strategy
and industry focus.
The Bunker Secure Hosting, which operates two ultra-secure data centres,
continues to generate substantial profits at the EBITDA level. For the
year to 31 December 2015, an EBITDA of GBP2.2 million was achieved on
sales of GBP9.6 million (2014: EBITDA of GBP2.2 million on sales of
GBP9.1 million). Recurring annual revenues presently exceed GBP9.3
million while cash balances remain healthy. On 31 March 2015, The Bunker
repaid all its shareholder loans and outstanding interest totalling
GBP6.5 million, financed through a GBP5.7 million secured medium term
bank loan plus GBP1.0 million from its own cash resources. In total,
GBP5.1 million was repaid to the Foresight VCTs, comprising GBP3.0
million of loan principal and GBP2.1 million of interest. The Company
received GBP2.0 million, comprising GBP1.5 million of loan principal and
GBP503,000 of interest. The company has now commenced a trial with a
large distributor which serves many value added resellers. A new,
experienced Sales Manager has been recruited to lead channel sales. A
number of acquisitions have been reviewed with a view to increasing the
scale of operations.
In September 2015, as part of a GBP3.3 million round alongside other
Foresight VCTs, the Company invested GBP1.0 million in The Business
Advisory Limited. This company provides a range of advice and support
services to UK-based small businesses seeking to gain access to
Government tax incentives, largely on a contingent success fee basis.
With a large number of small customers signed up under medium term
contracts, the company enjoys a high level of recurring income and good
visibility on future revenues.
For the year to 30 September 2015, the Company achieved a net profit
before tax of GBP1.4 million on sales of GBP4.2 million, well ahead of
the prior year. Management has been strengthened by the appointment of a
new COO in January 2016 and a new experienced, non-executive Chairman.
In August 2013, the Company invested GBP1.0 million alongside Foresight
VCT in a GBP2.5 million shareholder recapitalisation of Stockport based
Thermotech Solutions (formerly Fire and Air Services). Thermotech is a
hard facilities management provider with two divisions, Mechanical
Services and Fire Protection, which designs, installs and services air
conditioning and fire sprinkler systems for retail, commercial and
residential properties through a national network of engineers. The
company focusses primarily on the retail sector and enjoys long term
customer relationships and multi-year preferred supplier contracts with
various blue chip high street retailers, giving good revenue visibility.
Since investment, good progress has been made in diversifying and
rebalancing the spread of revenues, with greater emphasis on service and
maintenance. For the year to 31 March 2015, an EBITDA of GBP1.1 million
was achieved on sales of GBP7.8 million, some 40% ahead of the previous
year (2014: an EBITDA of GBP714,000 on sales of GBP5.6 million),
reflecting significant contract wins and resultant strong cash
generation.
For the year to 31 March 2016, both the Fire Protection and Mechanical
Services divisions experienced good performances. However, the
Mechanical Services first quarter was lower than expected due to delays
on three projects. EBITDA for the year was slightly behind last year as
a consequence but the project pipeline for the current year is
encouraging.
Good progress has been made in further developing the business,
including revamping the brand, optimising the website, introducing
telesales and strengthening various functions. A new non-executive
Chairman has been appointed, bringing extensive experience from the
facilities management and business services sectors. Terms have been
agreed on an attractively priced acquisition and a large proportion of
the consideration will be paid on a deferred basis. Bank funding is
currently being sought to finance the acquisition.
Trilogy Communications continues to face a difficult trading environment,
with both broadcast market and defence revenues weaker than twelve
months ago. Despite strong trading results up to 2012 reflecting large
defence contract orders from partners such as Northrop Grumman and
Raytheon, the company's trading has since been badly affected by delays
in long-term US defence programme orders. For the year to February 2015,
an EBITDA loss of GBP509,000 was incurred on sales of GBP3.9 million.
For the year to February 2016, revenues of GBP2.9 million were incurred
on a normalised EBITDA loss of GBP537k reflecting a fall in defense
revenues.
The departure of the CEO, who was already under review by Foresight, has
not adversely impacted the business, but has facilitated the appointment
of a new Sales Director. Between them they have secured the first of
five expected $900k orders, to be placed throughout calendar 2016. If
received this would underpin a profitable result for FY 2017. Additional
orders from Lockheed Martin and Northrop Grumman indicate a strong
defence pipeline, with the Company being confident that a total of
GBP4.8m of defence orders will be placed during the current financial
year.
A provision of GBP60,000 was made against the cost of the investment
during the period reflecting, poor results.
Reflecting continued difficult trading conditions and reducing sales of
its fire and emergency simulation software, Vector Command, an
investment inherited from the acquisition of Advent VCT in August 2004,
was placed into administration in May 2016, with no prospect of any
recoveries. A full provision of GBP302,000 was accordingly made against
this investment.
Russell Healey
Head of Private Equity
Foresight Group
29 July 2016
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. The Company mitigates this risk by investing in a diversified
portfolio of companies across a variety of sectors which provides
protection against such events.
-- 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 corporation 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 in the hands of
investors. The Company would also lose its exemption from corporation tax
on capital gains. To mitigate this risk the company employs specialists
lawyers to monitor and advise on matters that may impact qualifying
status.
-- Investment and strategic - inappropriate strategy, poor asset allocation
or consistently weak stock selection leading to under performance and
poor returns to shareholders. To mitigate this risk the Company ensures
its directors have the appropriate qualities and experience to make
decisions that maximise shareholder benefit.
-- Regulatory - the Company is required to comply with the Companies Acts
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. To mitigate this risk the company ensures the staff of the
Investment Manager have the appropriate knowledge and experience to
prevent breaches of any required standards and where appropriate will
seek professional advice on regulatory matters concerning the company.
-- Reputational - inadequate or failed controls might result in breaches of
regulations or loss of shareholder trust. To mitigate this risk the
Company maintains a transparent relationship with its shareholders and
regularly solicits their views.
-- Operational - failure of the Manager's or Company Secretary's accounting
systems or disruption to its business leading to an inability to provide
accurate reporting and monitoring. To mitigate this risk the Company has
a business continuity plan in place and regularly reviews all third party
service providers to ensure they have similar plans and procedures in
place.
-- Financial - inadequate controls might lead to misappropriation or loss 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 later in this
note.
-- Market risk - investment in AIM traded, ISDX Growth Market traded 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 small 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 that it can be realised.
The spread between the buying and selling price of such shares may not
reflect the price that any realisation is actually made.
The Board regularly reviews the principal risks and uncertainties facing
the Company which the Board and the Manager have identified and the
Board sets out delegated controls designed to manage those risks and
uncertainties. Key risks within investment strategy are managed by the
Board through a defined investment policy, with guidelines and
restrictions, and by the process of oversight at each Board meeting.
Operational disruption, accounting and legal risks are also covered at
least annually and regulatory compliance is reviewed at each Board
meeting. The Directors have adopted a robust framework of internal
controls which is designed to monitor the principal risks and
uncertainties facing the Company and provide a monitoring system to
enable the Directors to mitigate these risks as far as possible. Details
of the Company's internal controls are contained in the Corporate
Governance and Internal Control sections.
The Company's financial instruments comprise:
-- Equity shares, debt securities and fixed interest securities that are
held in accordance with the Company's investment objective as set out in
the Directors' Report.
-- Cash, liquid resources, short-term debtors, creditors and derivatives
that arise directly from the Company's operations.
Audited Income Statement
for the year ended 31 March 2016
Year ended Year ended
31 March 2016 31 March 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment holding
gains - 3,931 3,931 - 9,322 9,322
Realised losses on
investments - (10,434) (10,434) - (1,701) (1,701)
Income 2,570 - 2,570 1,147 - 1,147
Investment
management fees (279) (839) (1,118) (265) (794) (1,059)
Transaction costs - - - (11) - (11)
Other expenses (499) - (499) (426) - (426)
Return/(loss) on
ordinary activities
before taxation 1,792 (7,342) (5,550) 445 6,827 7,272
Taxation - - - (61) 61 -
Return/(loss) on
ordinary activities
after taxation 1,792 (7,342) (5,550) 384 6,888 7,272
Return per share:
Ordinary Share 3.1p (12.7)p (9.6)p 0.4p (3.2)p (2.8)p
C Share n/a n/a n/a 1.3p 43.5p 44.8p
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
Called-up Share Capital Profit
share premium redemption and loss
capital account reserve account Total
Year ended 31 March 2016
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2015 570 4,847 261 47,165 51,469
Share issues in the year 8 347 - - 355
Expenses in relation to
previous share issues** - (47) - - (47)
Repurchase of shares (4) - 4 (266) (266)
Dividends - - - (6,970) (6,970)
Loss for the year - - - (5,550) (5,550)
As at 31 March 2016 574 5,147 265 34,379*** 40,365
Called-up
share Share premium account Capital redemption reserve Profit and loss account
Restated capital (restated) (restated) (restated) Total
Year ended 31 March 2015
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2014 573 4,918* 258* 40,056* 45,805
Expenses in relation to
previous years share
issues** - (71) - - (71)
Repurchase of shares (3) - 3 (163) (163)
Return for the year - - - 7,272 7,272
As at 31 March 2015 570 4,847 261 47,165*** 52,843
* Refer to note 10
**Trail commission payable to financial advisors in the year.
*** Of this amount GBP20,949,000 (2015: GBP37,665,000) is realised and
distributable.
Audited Balance Sheet
at 31 March 2016
Registered Number: 03506579
Restated
As at As at
31 March 2016 31 March 2015
GBP'000 GBP'000
Fixed assets
Investments held at fair value through
profit or loss 37,738 38,223
Current assets
Debtors 959 736
Money market securities and other
deposits 1,773 4,400
Cash 62 9,632
2,794 14,768
Creditors
Amounts falling due within one year (167) (148)
Net current assets 2,627 14,620
Net assets 40,365 52,843
Capital and reserves
Called-up share capital 574 570
Share premium account 5,147 4,847*
Capital redemption reserve 265 261*
Profit and loss account 34,379 47,165*
Equity shareholders' funds 40,365 52,843
Net asset value per share:
Ordinary Share 70.4p 83.9p
C Share n/a 110.8p
*Refer to Note 10
Audited Cash Flow Statement
for the year ended 31 March 2016
Year ended Year ended
31 March 31 March
2016 2015
GBP'000 GBP'000
Cash flow from operating activities
Investment income received 563 1,000
Dividends received from investments 2,117 150
Deposit and similar interest received 24 4
Investment management fees paid (1,118) (1,059)
Secretarial fees paid (157) (117)
Other cash payments (379) (260)
Net cash inflow/(outflow) from operating activities
and returns on investment 1,050 (282)
Returns on investment and servicing of finance
Purchase of unquoted investments (7,256) (1,766)
Net proceeds on sale of investments 717 13,742
Net proceeds on deferred consideration 7 87
Net proceeds on liquidation of investments 58 -
Net capital (outflow)/inflow from financial
investment (6,474) 12,063
Equity dividends paid (6,970) -
Management of liquid resources
Movement in money market funds 2,627 (3,763)
2,627 (3,763)
Financing
Proceeds of fund raising 355 -
Expenses of fund raising for previous years (47) (71)
Repurchase of own shares (111) (163)
197 (234)
Net (outflow)flow/inflow of cash for the year (9,570) 7,784
Reconciliation of net cash flow to movement in net
funds
(Decrease)/increase in cash for the year (9,570) 7,784
Net cash at start of year 9,632 1,848
Net cash at end of year 62 9,632
Analysis of changes in net
debt
At 1 April 2015 Cash flow At 31 March 2016
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 9,632 (9,570) 62
Notes to the accounts
1. These are not statutory accounts in accordance with S436 of the
Companies Act 2006. The full audited accounts for the year ended 31
March 2016, which were unmodified 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 2016 including an unmodified audit report and
containing no statements under the Companies Act 2006 will be delivered
to the Registrar of Companies in due course.
2. The disclosures in this announcement have been prepared on the basis
of accounting policies set out in the statutory accounts of the Company
for the year ended 31 March 2016. All investments held by the Company
are classified as 'fair value through the profit and loss'. 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.
3. Copies of the Annual Report will be sent to shareholders and will be
available for inspection at the Registered Office of the Company at The
Shard, 32 London Bridge Street, London, SE1 9SG and can be accessed on
the following website: www.foresightgroup.eu
4.
Net asset value per share
Net asset value per Ordinary Share is based on net assets at the year
end of GBP40,364,641 (2015: GBP32,139,000) and on 57,375,499 (2015:
38,284,414) Ordinary Shares, being the number of Ordinary Shares in
issue at that date.
5. Return per share
Year ended Year ended
31 March 2016 31 March 2015
Ordinary Ordinary
Shares Shares C Shares
GBP'000 GBP'000 GBP'000
Total return/(loss) after taxation (5,550) (1,091) 8,363
Total return/(loss) per share (note a) (9.6)p (2.8)p 44.8p
Revenue return/(loss) from ordinary activities after
taxation 1,792 149 235
Revenue return/(loss) per share (note b) 3.1p 0.4p 1.3p
Capital return/(loss) from ordinary activities after
taxation (7,343) (1,240) 8,128
Capital return/(loss) per share (note c) (12.7)p (3.2)p 43.5p
Weighted average number of shares in issue in the
period* 57,567,321 38,445,770 18,680,907
* The weighted average number of shares has been adjusted to take
account of the O and C Share fund merger on 10 August 2015.
Notes:
a) Total return/(loss) per share is total return after taxation divided
by the weighted average number of shares in issue during the year.
b) Revenue return/(loss) per share is revenue return after taxation
divided by the weighted average number of shares in issue during the
year.
c) Capital return/(loss) per share is capital return after taxation
divided by the weighted average number of shares in issue during the
year.
6. Annual General Meeting
The Company's Annual General Meeting will take place on 30 September
2016 at 1.00pm at the offices of Shakespeare Martineau LLP in London.
Details can be found on page 62 of the Annual Report and Accounts.
Prior to the formal business of the Annual General Meeting, Foresight
Group, the investment Manager and two investee companies will give
presentations between 12.00pm and 1.00pm.
7. Income
Year ended
31 March 2016 Year ended 31 March 2015
GBP'000 GBP'000
Loan stock interest 428 993
Dividends receivable 2,117 150
Overseas based Open Ended
Investment Companies ("OEICS") 24 4
Bank deposits 1 -
2,570 1,147
8. Investments held at fair value through profit or loss
2016
2015
GBP'000
GBP'000
Quoted investments
282
289
Unquoted investments
37,456
37,934
37,738
38,223
Company
Quoted Unquoted Total
GBP'000 GBP'000 GBP'000
Book cost as at 1 April 2015 847 31,311 32,158
Investment holding (losses)/gains (558) 6,623 6,065
Valuation at 1 April 2015 289 37,934 38,223
Movements in the year:
Purchases at cost* - 7,416 7,416
Disposal proceeds *** (7) (875) (882)
Realised losses**** (13) (10,414) (10,427)
Investment holding gains ** 13 3,395 3,408
Valuation at 31 March 2016 282 37,456 37,738
Book cost at 31 March 2016 827 27,438 28,265
Investment holding (losses)/gains (545) 10,018 9,473
Valuation at 31 March 2016 282 37,456 37,738
Ordinary Shares Fund
Quoted Unquoted Total
GBP'000 GBP'000 GBP'000
Book cost as at 1 April 2015 847 24,474 25,321
Investment holding (losses)/gains (558) 4,709 4,151
Valuation at 1 April 2015 289 29,183 29,472
Movements in the year:
Purchases at cost* - 6,016 6,016
Disposal proceeds *** (7) (875) (882)
Realised losses**** (13) (10,414) (10,427)
Investment holding gains ** 13 4,308 4,321
Transfer of C Shares fund - book cost - 8,237 8,237
Transfer of C Shares fund - investment holding
gains - 1,001 1,001
Valuation at 31 March 2016 282 37,456 37,738
Book cost at 31 March 2016 827 27,438 28,265
Investment holding (losses)/gains (545) 10,018 9,473
Valuation at 31 March 2016 282 37,456 37,738
C Shares Fund
Quoted Unquoted Total
GBP'000 GBP'000 GBP'000
Book cost as at 1 April 2015 - 6,837 6,837
Investment holding gains - 1,914 1,914
Valuation at 1 April 2015 - 8,751 8,751
Movements in the year:
Purchases at cost - 1,400 1,400
Investment holding losses - (913) (913)
Transfer to Ordinary Shares fund - book cost - (8,237) (8,237)
Transfer to Ordinary Shares fund - investment holding
gains - (1,001) (1,001)
Valuation at 31 March 2016 - - -
Book cost at 30 September 2015 - - -
Investment holding gains - - -
Valuation at 31 March 2016 - - -
* Capitalised interest of GBP160,000 was recognised by the Ordinary
Shares fund in the year and is included within purchases at cost.
** Investment holding gains in the income statement includes GBP516,000
of deferred consideration recognised in the year by the Ordinary Shares
fund and GBP7,000 that was received and transferred from investment
holding gains in the period.
*** Disposal proceeds includes GBP107,000 not within the cashflow
statement as this amount is within debtors.
**** Realised losses in the income statement includes GBP7,000 that was
received and transferred from investment holding gains in the period.
9. Transactions with the manager
Foresight Group, which acts as investment manager to the Company in
respect of its investments earned fees of GBP1,118,000 during the year
(2015: GBP1,059,000).
Foresight Fund Managers Limited, Company Secretary, received fees of
GBP157,000 (2015: GBP157,000) during the year. The annual secretarial
fee (which is payable together with any applicable VAT) is adjusted
annually in line with the UK Retail Prices Index.
At the balance sheet date there was GBP1,000 due from (2015: GBP20,000
due to) Foresight Group and GBPNil (2015: GBP40,000) due to Foresight
Fund Managers Limited. No amounts have been written off in the year in
respect of debts due to or from related parties.
10. Restatement of capital and reserves
On 28 November 2012, GBP30,963,251 of share premium, and GBP1,750,587 of
capital redemption reserve were cancelled by order of the High Court.
However, the balances were not moved to the profit and loss account at
31 March 2013. The share premium, capital redemption reserve and profit
and loss account have been restated to adjust for this. There is no
impact on the profit and loss account or the net asset value of the
Company in this or any earlier period. The impact of this is shown in
the table below:
31 March 2015 31 March 2015 1 April 2014 1 April 2014
(as reported) (as restated) (as reported) (as restated)
GBP'000 GBP'000 GBP'000 GBP'000
Share premium
account 35,810 4,847 35,881 4,918
Capital
redemption
reserve 2,012 261 2,009 258
Profit and
loss account 14,451 47,165 7,342 40,056
END
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Foresight 4 VCT PLC via Globenewswire
HUG#2032046
http://www.foresightgroup.eu/
(END) Dow Jones Newswires
July 29, 2016 11:22 ET (15:22 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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