TIDMFTF
FORESIGHT 4 VCT PLC
Summary
-- Net asset value per Ordinary Share at 30 September 2016 was 72.6p (31
March 2016: 70.4p).
-- The fund provided follow-on funding totalling GBP1.0 million to two
portfolio companies.
-- The fund realised GBP0.9 million from sales and loan redemptions from
three portfolio companies.
Chairman's Statement
Board Composition
Following the Annual General Meeting, where a number of the resolutions,
including that of Director re-election, were passed by a narrow majority
the following changes will be made in the coming weeks and months:
With respect to my own position as Chairman and Director, I intend to
retire from the Board on the earlier of a new independent Chairman being
appointed, the completion of a corporate action or 31 March 2017.
Peter Dicks has also indicated his intention to retire from the Board on
the earlier of a corporate action or the annual general meeting in 2017.
A specialist recruitment firm has been engaged by the Board to assist in
identifying suitable candidates for appointment.
The intention would be to have only the independent Directors, including
any new appointments to the Board, to consider the options available to
the Company before any recommendations are made to Shareholders.
Performance
I am pleased to report a third successive quarter of growth in
underlying net asset value representing an increase of 5.7% over the
nine months and more specifically, for the six months under review to 30
September 2016, the net asset value per Ordinary Share increased by 3.1%
to 72.6p from 70.4p at 31 March 2016.
Overall, the Board is pleased with the positive increase in net asset
value during the six months under review and believes that the
composition of the existing portfolio in the last twelve months will
provide the new Board with the platform to deliver growth, underpin
future dividends and enhance Shareholder returns. The seven most recent
new investments had combined revenues of approximately GBP62.5m and
EBITDA of approximately GBP8.5m at the time of acquisition and have
continued to grow since.
The Company benefitted from good performances by several portfolio
companies, principally Datapath, Protean, Specac, TFC and The Business
Advisory, supporting an increase in their aggregate valuation of over
GBP2.3 million. Reflecting weaker than expected trading, the valuations
of Autologic, Blackstar and Positive Response were reduced by GBP468,000
in aggregate.
Although the six months under review saw little activity with respect to
new or follow-on investments, this has been a wider trend within the VCT
sector as both Boards and Investment Managers digested the new VCT
regulations published in November 2015. Following the much delayed
publication of HMRC's VCT Guidance Manual in May 2016, setting out the
new regulations, the wider VCT industry has recently started to see an
increase in the completion of new and follow-on deals. Foresight 4 VCT
plc is unlikely, in the short term, to invest in any new deals until it
has greater liquidity.
More detailed information on the investment portfolio is included within
the Investment Manager's Report on page 5.
Dividends
It is 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
largely on successful realisations, refinancings and other forms of cash
generation.
The recent success in generating cash from investments within the fund
gives the Board confidence that it will be able at least to maintain the
same level of dividend and increase future payments of dividends to
Shareholders when prudent to do so.
Top-up Share Issues and Share Buy-backs
During the period under review there were no share buybacks or share
issues.
Potential Merger with Foresight 3 VCT plc
In the annual report and accounts I mentioned that the Board had been
considering whether a merger and the benefits therefrom would be in
Shareholders' long term interests. As an update, the Board announced on
20 October 2016 that it had been in discussions with Foresight 3 VCT plc
('Foresight 3') regarding a potential merger and the principal details
of a potential merger, should it proceed and be approved by Shareholders,
are set out below:
-- A combined VCT with assets of approximately GBP70 million;
-- Based on the costs of the merger being in the region of GBP450,000, a
payback period of approximately 12 months is expected;
-- A reduction in the aggregate number of Board directors from six to four,
possibly to three over time;
-- A reduction in the annual management fee from 2.25% to 2.0% of net
assets;
-- A portfolio of over 25 companies, many of which are making good progress
and are profitable and which have delivered the recent improvements in
NAV in the Company;
-- A reduction in the annual expenses cap from 3.5% to 2.95% of net assets;
-- An enlarged entity better positioned to raise further funds and continue
with the current investment strategy; and
-- The ability to consider realisations within an enlarged entity to assist
with creating liquidity events for Shareholders and support dividend
payments.
A merger will create an enlarged VCT with enough critical mass which
should generate sufficient income and realisations to meet an attractive
dividend target, as well as maintaining a regular program of share
buybacks aimed at maintaining a discount to NAV in the region of 10%.
It should be noted that a tri-partite merger between Foresight VCT plc,
Foresight 3 and the Company would not be possible without the divestment
of significant holdings including many of the new investments which,
together, being over 50%, would otherwise be non-qualifying under the
VCT rules.
The Board anticipates that the following would also be put in place for
all Shareholders of the enlarged VCT, following the completion of a
merger:
Tender Offer post-Merger
The Board recognises that the discount to NAV at which the Company's
shares trade has been too wide for a prolonged period of time. In that
regard, the Board anticipates that the enlarged VCT will undertake a
tender offer as soon as possible after a merger.
Buyback Commitment post-Merger
In addition to the proposed tender offer referred to above, over time
the Board also expects to be in a position following a merger to
implement a series of share buybacks to enable the enlarged VCT to
achieve its target of a discount to NAV in the region of 10%.
Dividend post-Merger
In addition to the tender offer and share buyback objective noted above,
the Board also expects that the enlarged VCT would be in a position to
pay a post-merger dividend.
With respect to a potential merger with Foresight 3, the Board wishes to
seek Shareholders' views before incurring any significant merger costs
and has enclosed with these interim accounts details of a simple online
advisory vote open to all Shareholders, which will be carefully
considered by the Board in addition to all other options.
Following the advisory vote a recommendation on the preferred option of
the independent Directors of the Board will be sent to Shareholders for
their consideration.
Brexit
There are two principal areas where the implementation of Brexit could
impact the VCT:
-- 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
-- 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.
Shareholder Survey Results
Throughout the calendar year, indirectly through investor forums and
directly through a survey, we solicited Shareholder views. We have used
these results to help inform the key points we believe are important in
the merger considerations. The results of the survey are presented on
page 22.
Outlook
The recent result in the Presidential election in the US combined with
the Brexit vote in the UK and the potential for this to have a knock-on
effect in the political environment in other European countries will
cause uncertainty in markets in which our portfolio companies operate
but it will take time to gauge the full effect that this may have on the
Company.
Currently the UK economy is in reasonable health and we hope that the
improvement over the last few years continues, as has been reflected in
the improving performance 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 over the last 12 months or so, which are delivering robust
performance and enhancing Shareholder returns.
Philip Stephens
Chairman
30 November 2016
Investment Manager's Report
During the six months to 30 September 2016, the Net Asset Value
increased by 3.1% to 72.6 per share as at 30 September 2016 from 70.4p
per Ordinary Share as at 31 March 2016.
The Company benefitted from good performances by several portfolio
companies, principally Datapath, Protean, Specac, TFC and The Business
Advisory, supporting an increase in their aggregate valuation of over
GBP2.3 million. Reflecting weaker than expected trading, the valuations
of Autologic, Blackstar and Positive Response were reduced by GBP468,000
in aggregate.
Outlook
The referendum on the United Kingdom leaving the European Union is not
expected to have any immediate material effect to the overall portfolio.
Any prolonged weakness in Sterling is likely to benefit those portfolio
companies with a high proportion of exports.
Foresight Group continues to see a number of high quality private equity
investment opportunities. Foresight Group 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
Group believes that attractive deals are currently available and a
number are currently in exclusivity.
Portfolio review
1. New investments
No new investments were made during the period to 30 September 2016.
2. Follow-on funding
Company GBP
Biofortuna Limited 189,000
Iphigenie Limited 800,000
Total 989,000
In July 2016, the second, final tranche of GBP189,000 into Biofortuna
Limited was drawn down as part of a GBP1.6 million funding round
alongside other Foresight VCTs and other co-investors, to finance
continuing new product development. GBP800,000 was also invested into
Iphigenie Limited.
3. Exits and realisations
Company GBP
Amberfin Holdings Limited 723
Thermotech Solutions Limited 800,000
Trilogy Communications Limited 138,382
Zoo Digital Group plc 1,511
Total 940,616
On 4 August 2016 deferred consideration of GBP723 was received from
Amberfin Holdings Limited.
On 1 July 2016 Thermotech Solutions Limited repaid loans of GBP800,000.
On 4 August 2016 the Company sold its investment in Trilogy
Communications Limited realising GBP138,382.
During the period the Company sold a small number of shares in AiM
listed Zoo Digital, realising GBP1,511.
4. Material provisions to a level below cost in the period
Company GBP
Quantel Holdings (2010) Limited 167,549
Total 167,549
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 ABL Investments
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.
Trading in the current year is in line with budget. Good progress has
been made in shaping the new team following the appointment of a new
Chairman and Finance Director in September 2015.
Production facilities have largely been brought in house, enabling the
Serbian operations to expand its production offering. The company has
relaunched its website to include a greater level of functionality and
product detail which will be supported by a new marketing campaign to
existing and potential customers.
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"). 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
GBP450,000 and dividends of GBP50,000 equal to the cost of its equity
investment, the Company retained its original 7.7% 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,
an 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 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.
In the financial year ended 30 June 2016, the company recorded
significantly lower sales and incurred EBITDA losses. In the last
quarter, sales were in line with the revised budget for the year and
EBITDA losses were slightly reduced reflecting an improvement in
trading.
The company has since made good progress in the three months to
September 2016, generating a modest EBITDA profit. The recently
appointed CEO is having a positive impact on ATL with a key focus on
sales growth with the team also making progress in diversifying the
customer base.
In April 2014, the two Foresight portfolio companies, AlwaysOn Group and
Data Continuity Group (together now known as AlwaysOn Group), merged and
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 financial year to 30 June 2016 a small EBITDA loss
was incurred on reduced sales of GBP5.5 million (compared to an EBITDA
of GBP53,000 on sales of GBP8.0 million in the prior year). Whilst
revenues were behind budget, improved operational efficiency and higher
margin mix resulted in a lower budgeted EBITDA loss over the financial
year. In the current year, trading continues at a similar level, with
small losses being incurred.
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, an EBITDA of GBP5.4 million was achieved 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
and this impacted EBITDA during 2015, reducing to GBP4.0 million on
revenues of GBP18.5 million for the year to 31 December 2015.
Following the appointment of a new Chairman, the Company continues to
make good progress. A long term licence agreement with a major motor
manufacturer has been won while the Autologic Assist App has also been
launched.
Reflecting increased competition in the US market along with a slower
than expected transition to the new business model, trading in the
current year to date is behind budget, although cash balances currently
total over GBP6.2 million.
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 and contract develops and
manufactures on behalf of customers. A GBP1.3 million round to finance
capital expenditure and working capital was completed in August 2013, in
which the Company invested GBP198,132 in the first tranche and a further
GBP101,859 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 incurred 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 helped 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
completed in January 2015, of which GBP890,000 was committed by the
Foresight VCTs. The Ordinary Shares fund invested GBP256,000 as the
first tranche. The second, final tranche of GBP189,000 was drawn down in
July 2016. In the six months to September 2016, the company is performed
ahead of the previous year. Owing to the need for more regulatory
testing, the launch of the new blood typing product range is now
expected in Q3 2017.
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 and 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). In
the financial year ended 30 April 2016, Blackstar generated sales of
GBP8.2m and EBITDA of GBP702,000, reflecting improved gross margins and
tight management of overheads. New product development remains a key
strategic priority for Blackstar and in the current financial year alone,
the Company is launching 15 new products. Blackstar continues to be the
number two guitar amplifier brand by units sold in the UK and USA. The
company currently has a presence in over 35 countries worldwide and its
products are stocked in over 2,500 stores globally.
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
4 VCT (8.55%).
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 GBP98.0 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 less
certain 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 in April 2017, with the aim of closing
projects successful in that auction during 2017. BIG is expected to
jointly fund this process, requiring a total of GBP5.0 million of
investment.
Project size Year of financial
Project Name (GBPm) close Cogen 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%
Cogen has recently signed a teaming agreement with Lockheed Martin to
develop energy from waste projects in the UK using a new advanced
gasification technology. Lockheed Martin and Cogen have identified their
first potential site for this technology in Cardiff which would convert
municipal solid waste and commercial and industrial waste into
electricity.
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 each of 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.
Product development continues, with further new products or product
variants expected to be launched during 2017. The new sales manager has
strengthened the sales team with account managers in the US. For the
year to 30 September 2016, operating profit and revenues are ahead of
budget and the previous year. This has been supported by the new
products which have helped secure two major international projects.
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 e-commerce 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 GBP26.9 million. The management
team was strengthened by the appointment of two new Joint Managing
Directors and a new Chairman, each with experience of successfully
developing similar businesses. For the year to September 2016, revenues
and gross profit were ahead of budget and the previous year. For the
year to 31 March 2016 the company achieved an EBITDA of GBP940,000 on
sales of GBP29.8 million following the successful relocation into a
nearby, much larger warehouse at Lympne in early 2016.
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 (2013: operating
profit of GBP1.1 million on sales of GBP10.0 million).
In July 2015, the company completed another recapitalisation, returning
GBP156,000 of accrued interest to the Foresight VCTs, including
GBP23,000 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 with the aim of improving operational efficiency and
optimising 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 order to
improve profitability, the new management team have focused on reducing
costs, delivering operational improvements, stabilising and improving
relationships with the customer base and increasing sales efforts.
Trading in the current year has been weaker than expected but the new
management team are making good progress in improving sales and
profitability.
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 were appointed to the Board. Trading
in the current year in line with budget and cash at end of June was a
healthy GBP1.6 million.
Following the period end, the company acquired the trade and assets of
Eurosurgical for EUR600,000 plus stock at valuation, from the
liquidator. Eurosurgical specialises in sales and marketing of surgical
equipment, instruments and devices into the medical sector with offices
in Dublin and Belfast. Following rationalisation of the Eurosurgical
cost base, this acquisition is expected to make a significant
contribution to profit.
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 2016, Itad achieved an EBITDA of GBP1.9 million on revenues of
GBP12.0 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, Ixaris being
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, highlighting the innovative nature of the Payment System.
During 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 the current year, while investment continues in
developing the two platforms, EntroPay continues to perform well with a
strong sales pipeline in prospect.
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 through 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 to GBP2.1m,
generating a reduced EBITDA of GBP209,000, reflecting investment in
improving efficiency and systems and recruitment of more sales staff.
Trading in the current year continues to be weaker than expected and, as
a consequence, costs have been reduced and management changes
implemented.
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 Battersea, 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. These
two acquisitions were supported by a further investment of GBP1.3
million from the Foresight VCTs, of which the Company invested
GBP451,385.
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 also strong, 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 during
the year. 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. In the current year the company continues to perform
well, with further growth in sales and profitability and two senior
projects executives recently joining from a competitor.
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, an 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 at a similar level, reflecting increased
investment and overheads while cash remained strong. In the current year,
Protean continues to trade ahead of budget with cash continuing to
strengthen, currently totaling over GBP1 million. Further development of
Protean Lite, a new SaaS product, continues with the first release
planned for Q1 2017.
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. Specac, based in
Orpington, Kent, is a long established, leading 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.
For the year to 31 July 2015, the company achieved an EBITDA of
GBP906,000 on sales of GBP6.9 million. Trading in the year to 31 March
2016 exceeded expectations with profit growth ahead of forecast,
reflecting greater focus on sales and costs, an EBITDA of GBP1.28
million being achieved on sales of GBP8.1 million. The company has
accelerated new product development and successfully launched new
products. A non-executive Chairman was also appointed with a strong
sales and marketing background in the scientific instrumentation market
who will complement the existing management team and assist them to
further develop the business. Trading in the current year has continued
to perform ahead of budget.
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). However, trading in the year to 31 March 2016 was weaker than
expected due to a general downturn in the UK manufacturing sector and
particularly the Oil and Gas industry with an EBITDA of GBP2 million
being achieved on sales of GBP19.3 million.
In July 2015, the company effected a successful recapitalisation and
share reorganisation, 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%. A number of senior
management changes and promotions were made to facilitate the planned
retirement of the current Chairman, to enable the CEO to drive strategic
growth projects, particularly in Germany and focus on new customer
targets within Aerospace. In April 2015, two senior managers were
promoted to the 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 with the aim of improving
TFC's sales strategy and industry focus. TFC has continued to trade well
in the current financial year, achieving above budget revenues and
EBITDA and ahead of the corresponding period in the previous year.
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. In
the current year to date, the company is trading in line with budget.
Focus continues on improving the sales strategy and completion of new
existing and new customer signups alongside assessing new service
offerings.
In September 2015, as part of a GBP3.3 million round alongside other
Foresight VCTs, the Company invested GBP650,000 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 NPBT of GBP1.4
million on sales of GBP4.2 million, well ahead of the prior year. The
company continues to trade strongly and has increased its staff
reflecting accelerated sales growth.
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: EBITDA of GBP717,000 on sales of GBP4.0 million) reflecting
significant contract wins and resultant strong cash generation. Trading
in the year to 31 March 2016 resulted in an EBITDA of GBP706,000 on
sales of GBP6.5 million reflecting delays in winning expected contracts.
A new, non-executive Chairman has been appointed, bringing extensive
experience from the facilities management and business services sectors.
On 1 July 2016, Thermotech acquired Oakwood, a well-respected local
competitor which provides HVAC services. The combined Group will benefit
from greater scale, a national footprint and a reduction in customer
concentration. The company also repaid the GBP2.0 million of Foresight
loan note principal, of which the Company received GBP800,000. Combined
with interest received, the investment in Thermotech has now returned
over 1x cost with the Company still retaining a 10.0% equity stake.
Russell Healey
Head of Private Equity
Foresight Group
30 November 2016
Unaudited Half-Yearly Results and Responsibility Statements
Principal Risks and uncertainties
The principal risks faced by the Company can be divided into various
areas as follows:
-- Performance;
-- Regulatory;
-- Operational; and
-- Financial.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Accounts for the year ended 31 March
2016. A detailed explanation can be found on page 52 of the Annual
Report and Accounts which is available on www.foresightgroup.eu or by
writing to Foresight Group at The Shard, 32 London Bridge Street, London,
SE1 9SG.
In the view of the Board, there have been no changes to the fundamental
nature of these risks since the previous report and these principal
risks and uncertainties are equally applicable to the remaining six
months of the financial year as they were to the six months under
review.
Directors' responsibility statement
The Disclosure and Transparency Rules ('DTR') of the UK Listing
Authority require the Directors to confirm their responsibilities in
relation to the preparation and publication of the Interim Report and
financial statements.
The Directors confirm to the best of their knowledge that:
(a) the summarised set of financial statements has been prepared in
accordance with the pronouncement on interim reporting issued by the
Accounting Standards Board;
(b) the Unaudited Half-Yearly Financial Report for the six month period
ended 30 September 2016 includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first
six months of the year and a description of principal risks and
uncertainties that the Company faces for the remaining six months of the
year);
(c) the summarised set of financial statements give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company as required by DTR 4.2.4R; and
(d) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
Going concern
The Company's business activities, together with the factors likely to
affect its future development, performance and position, are set out in
the Strategic Report of the 31 March 2016 Annual Report. The financial
position of the Company, its cash flows, liquidity position and
borrowing facilities are described in the Chairman's Statement,
Strategic Report and Notes to the Accounts of the 31 March 2016 Annual
Report. In addition, the Annual Report includes the Company's objectives,
policies and processes for managing its capital; its financial risk
management
objectives; details of its financial instruments and hedging activities;
and its exposures to credit risk and liquidity risk.
The Company has considerable financial resources together with
investments and income generated therefrom across a variety of
industries and sectors. As a consequence, the Directors believe that the
Company is well placed to manage its business risks successfully despite
the current uncertain economic outlook.
The Directors have reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future. Thus they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
The Half-Yearly Financial Report has not been audited or reviewed by the
auditors.
On behalf of the Board
Philip Stephens
Chairman
30 November 2016
Unaudited Income Statement
for the six months ended 30 September 2016
Six months ended Six months ended Year ended
30 September 2016 30 September 2015 31 March 2016
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Realised
losses on
investments - (3,901) (3,901) - (4,659) (4,659) - (10,434) (10,434)
Investment
holding
gains - 5,555 5,555 - 1,168 1,168 - 3,931 3,931
Income 316 - 316 102 - 102 2,570 - 2,570
Investment
management
fees (112) (338) (450) (147) (441) (588) (279) (839) (1,118)
Other expenses (183) - (183) (254) - (254) (499) - (499)
Return/(loss)
on ordinary
activities
before
taxation 21 1,316 1,337 (299) (3,932) (4,231) 1,792 (7,342) (5,550)
Taxation (4) 4 - - - - - - -
Return/(loss)
on ordinary
activities
after
taxation 17 1,320 1,337 (299) (3,932) (4,231) 1,792 (7,342) (5,550)
Return/(loss)
per share:
Ordinary Share 0.0p 2.3p 2.3p (0.5)p (6.9)p (7.4)p 3.1p (12.7)p (9.6)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 period.
The Company has no recognised gains or losses other than those shown
above, therefore no separate statement of total recognised gains and
losses has been presented
Unaudited Balance Sheet
at 30 September 2016
Registered Number: 03506579
As at As at As at
31 March
30 September 2016 30 September 2015 2016
(restated)
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Fixed assets
Investments held at
fair value through
profit or loss 39,410 40,348 37,738
Current assets
Debtors 888 392 959
Money market
securities and
other deposits 1,236 3,369 1,773
Cash 193 367 62
2,317 4,128 2,794
Creditors
Amounts falling due
within one year (49) (314) (167)
Net current assets 2,268 3,814 2,627
Net assets 41,678 44,162 40,365
Capital and
reserves
Called-up share
capital 574 576 574
Share premium 5,125 5,170 5,147
Capital redemption
reserve 265 263 265
Profit and loss
account 35,714 38,183 34,379
Equity
shareholders'
funds 41,678 44,162 40,365
Net asset value per
share:
Ordinary Share 72.6p 76.6p 70.4p
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 September 2016
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
As at 1 April
2016 574 5,147 265 34,379 40,365
Expenses in
relation to
previous
years share
issues* - (22) - - (22)
Repurchase of
shares - - - (2) (2)
Return for
the period - - - 1,337 1,337
As at 30
September
2016 574 5,125 265 35,714 41,678
* Trail commission payable to financial advisors
Unaudited Cash Flow Statement
for the six months ended 30 September 2016
Six months Six months Year
ended ended ended
30 30
September September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Investment income received 300 357 563
Dividends received from investments 8 - 2,117
Deposit and similar interest received - 1 24
Investment management fees paid (453) (588) (1,118)
Secretarial fees paid (78) (118) (157)
Other cash payments (162) (199) (379)
Net cash (outflow)/inflow from operating activities
and returns on investment (385) (547) 1,050
Returns on investment and servicing of finance
Purchase of unquoted investments (989) (6,134) (7,256)
Net proceeds on sale of investments 1,047 717 717
Net proceeds on deferred consideration 1 7 7
Net proceeds on liquidation of investments - - 58
Net capital inflow/(outflow) from investing
activities 59 (5,410) (6,474)
Equity dividends paid - (4,670) (6,970)
Management of liquid resources
Movement in money market funds 537 1,031 2,627
537 1,031 2,627
Financing
Proceeds of fund raising - 355 355
Expenses of fund raising (22) (24) (47)
Repurchase of own shares (58) - (111)
Net cash (outflow)/inflow from financing activities (80) 331 197
Increase/(decrease) in cash 131 (9,265) (9,570)
Reconciliation of net cash flow to movement in net
cash
Increase/(decrease) in cash for the period 131 (9,265) (9,570)
Net cash at start of the period 62 9,632 9,632
Net cash at end of period 193 367 62
Notes to the Half-Yearly Financial Report
for the six months ended 30 September 2016
1. The Unaudited Half-Yearly results have been prepared on the basis of
accounting policies set out in the statutory accounts of the Company for
the year ended 31 March 2016. Unquoted investments have been valued in
accordance with IPEVCV guidelines. Quoted investments are stated at bid
prices in accordance with IPEVC guidelines and UK Generally Accepted
Accounting Practice.
2. These are not statutory accounts in accordance with S436 of the Companies
Act 2006 and the financial information for the six months ended 30
September 2016 and 30 September 2015 has been neither audited nor
reviewed. Statutory accounts in respect of the year ended 31 March 2016
have been audited and reported on by the Company's auditors and delivered
to the Registrar of Companies and included the report of the auditors
which was unqualified and did not contain a statement under S498(2) or
S498(3) of the Companies Act 2006. No statutory accounts in respect of
any period after 31 March 2016 have been reported on by the Company's
auditors or delivered to the Registrar of Companies.
3. Copies of the Half-Yearly Financial Report have been sent to shareholders
and are available for inspection at the Registered Office of the Company
at The Shard, 32 London Bridge Street, London SE1 9SG.
Copies of the Unaudited Half-Yearly Financial Report are also available
electronically at www.foresightgroup.eu.
1. Net asset value per share
The net asset value per share is based on net assets at the end of the
period and on the number of shares in issue at the date.
Number of
Net Assets shares
GBP'000 in issue
30 September 2016 41,678 57,375,499
30 September 2015 44,162 57,631,147
31 March 2016 40,365 57,375,499
1. Return per share
Six months Six months
ended 30 ended 30 Year ended
September September March
2016 2015 2016
GBP'000 GBP'000 GBP'000
Total return/(loss) after taxation 1,337 (4,231) (5,550)
Basic return/(loss) per Ordinary Share (note a) 2.3p (7.4)p (9.6)p
Revenue return/(loss) from ordinary activities after
taxation 17 (299) 1,792
Revenue return/(loss) per Ordinary Share (note b) 0.0p (0.5)p 3.1p
Capital return/(loss) from ordinary activities after
taxation 1,320 (3,932) (7,343)
Capital return/(loss) per Ordinary Share (note c) 2.3p (6.9)p (12.7)p
Weighted average number of Ordinary Shares in issue
in the
period 57,375,499 57,505,869 57,567,321
Notes:
a) Total return/(loss) per Ordinary Share is total
return after taxation divided by the weighted average
number of shares in issue during the period.
b) Revenue return/(loss) per Ordinary Share is revenue
return after taxation divided by the weighted average
number of shares in issue during the period.
c) Capital return/(loss) per Ordinary Share is capital
return after taxation divided by the weighted average
number of shares in issue during the period.
1. Income
Six months ended Six months ended Year ended
30 September 2016 30 September 2015 31 March 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Loan stock interest 305 83 428
Dividends receivable 8 - 2,117
Overseas based Open Ended
Investment Companies
("OEIC's") 3 18 24
Bank deposits - 1 1
316 102 2,570
1. Investments held at fair value through profit or loss
Company
Quoted Unquoted Total
GBP'000 GBP'000 GBP'000
Book cost at 1 April 2016 827 27,438 28,265
Investment holding (losses)/gains (545) 10,018 9,473
Valuation at 1 April 2016 282 37,456 37,738
Movements in the period:
Purchases at cost - 989 989
Disposal proceeds (2) (939) (941)
Realised losses (4) (3,897) (3,901)
Investment holding (losses)/gains* (42) 5,567 5,525
Valuation at 30 September 2016 234 39,176 39,410
Book cost at 30 September 2016 821 23,591 24,412
Investment holding (losses)/gains (587) 15,585 14,998
Valuation at 30 September 2016 234 39,176 39,410
* Investment holding gains in the Income Statement includes deferred
consideration of GBP30,000 from the sale of Trilogy Communications.
1. Transactions with the manager
Foresight Group, which acts as investment manager to the Company in
respect of its venture capital investments earned fees of GBP450,000
during the period (30 September 2015: GBP588,000; 31 March 2016:
GBP1,118,000). Fees excluding VAT of GBP78,000 (30 September 2015:
GBP78,000; 31 March 2016: GBP157,000) were received during the period
for company secretarial, administrative and custodian services to the
Company.
At the balance sheet date there was GBP4,000 due from Foresight Group
(30 September 2015: GBP10,000 due to Foresight Group; 31 March 2016:
GBP1,000 due from Foresight Group) and GBPnil due to Foresight Fund
Managers Limited (30 September 2015: GBPnil; 31 March 2016: GBPnil). No
amounts have been written off in the period in respect of debts due to
or from related parties.
END
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq 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
http://www.foresightgroup.eu/
(END) Dow Jones Newswires
November 30, 2016 11:05 ET (16:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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