TIDMFTF
FORESIGHT ENTERPRISE VCT PLC
LEI: 213800MWJNR3WZZ3ZP42
28 April 2023
Final results
31 December 2022
Foresight Enterprise VCT plc, managed by Foresight Group LLP,
today announces the final results for the year ended 31 December
2022.
These results were approved by the Board of Directors on 28
April 2023.
The Annual Report will shortly be available in full at
https://www.globenewswire.com/Tracker?data=fhW6Jz-KJsa24mQSjKJc0RKWRExWAmrMDUT3BfH1107KzRH2bNrQiwxv0I5cQUGshJq9MCDEagt3TGYwyTUHQCfiDcHDlN3R_z0wBZTQqnDixg_hx1f6Z_uE8LzNeM-Q
www.foresightenterprisevct.com. All other statutory information can
also be found there.
Highlights
-- After adding back the payments of a 3.5p dividend made on 30 June 2022
and a 3.8p dividend made on 30 December 2022, NAV Total Return per share
at 31 December 2022 was 72.2p, representing a positive total return of
4.5% in the year
-- Four new investments costing GBP6.9 million and three follow-on
investments costing GBP2.1 million were made during the year
-- The Company fully exited its investments in TFC Europe Limited and
Codeplay Software Limited, realising gains of GBP17.3 million in the year
and returning proceeds of GBP19.7 million to the Company
-- In the year, the valuation of investments increased by GBP8.7 million
(2021: GBP22.3 million)
-- An interim dividend of 3.5p per share was paid on 30 June 2022, returning
GBP6.9 million to Shareholders
-- A special interim dividend of 3.8p per share was paid on 30 December 2022
following successful realisations of TFC Europe and Codeplay Software,
returning GBP8.1 million to Shareholders
-- The offer for subscription launched in October 2022 was closed on 26
April 2023 and raised a total of GBP21.7 million after expenses
Chair's statement
I am pleased to present the audited Annual Report and Accounts
for the year ended 31 December 2022 and to report a Net Asset Value
Total Return of 4.5% for the year including a dividend yield of
12.5%.
Overview of 2022
The business environment remains challenging after the
substantial impact of the COVID-19 pandemic receded, with the war
in Ukraine, supply chain issues, rapidly rising inflation and
energy prices, and the threat of recession the new economic
reality. I believe that the careful planning, help and advice the
Manager provided the portfolio companies during the pandemic will
continue to be relevant to the current and future economic
situations. While there will be bumps in the road, the Board
believes that the portfolio is in good shape to withstand what we
currently see ahead.
The Company's portfolio in aggregate has remained resilient amid
economic and political turmoil that has plagued 2022. Many of the
portfolio companies have successfully adapted to the new economic
landscape, with some performing extremely well and demonstrating
the strength of their management teams. A minority struggled as a
result of a fall in consumer demand, inflationary pressures and a
surge in the cost of energy prices. However, these businesses are
now beginning to show signs of recovery.
In the year ended 31 December 2022, 23 companies in the
portfolio recorded a combined increase in valuation of GBP20.0
million, offset by 14 companies recording an aggregate fall in
valuation of GBP11.3 million.
Strategy
The Board believes that it is in the best interests of
Shareholders to continue to pursue a strategy of:
-- Growth in Net Asset Value Total Return above a 5% target while continuing
to grow the Company's assets
-- Payment of annual dividends of at least 5% of the NAV per share per annum
based on the opening NAV of that financial year
-- Implementation of a significant number of new and follow-on qualifying
investments every year, exceeding deployment requirements to maintain VCT
status
-- Maintaining a programme of regular share buybacks at a discount of 7.5%
Central to the Company being able to achieve these objectives is
the ability of the Manager to source and complete attractive new
qualifying investment opportunities.
Whilst this task has not been made easier by the changes to VCT
legislation since 2015, which (amongst other requirements) place
greater emphasis on growth or development capital investment into
younger companies, the Company is fortunate in that it has pursued
a policy of seeking growth capital investments for several years
prior to the rule changes and the Manager has an established track
record in this area.
Performance and portfolio activity
During the year Net Asset Value per share decreased by 6.1% from
69.1p at 31 December 2021 to 64.9p at 31 December 2022. After
adding back the payments of a 3.5p dividend made on 30 June 2022
and a 3.8p dividend made on 30 December 2022, NAV Total Return per
share at 31 December 2022 was 72.2p, representing a positive total
return of 4.5%. This positive movement is a result of the strategy
and business changes throughout the portfolio alluded to above.
During the year the Manager completed four new investments and
three follow-on investments costing GBP6.9 million and GBP2.1
million respectively. The Manager also fully disposed of two
investments, generating proceeds of GBP19.7 million with a further
GBP0.4 million of deferred consideration included within debtors at
the year end, representing a combined return multiple of 13.0x.
After the year end, the Company made four new investments
totalling GBP5.0 million in Sprintroom Limited (GBP1.0 million),
Firefish Software Limited (GBP1.5 million), Five Wealth Limited
(GBP0.7 million) and Red Flag Alert Limited (GBP1.8 million). The
Company also completed four follow-on investments with an aggregate
cost of GBP2.7 million in IMMJ Systems Limited (GBP0.7 million),
NorthWest EHealth Limited (GBP1.5 million), Ten Health &
Fitness Limited (GBP0.4 million) and Additive Manufacturing
Technologies Ltd (GBP0.1 million). Furthermore, the Company
realised its holdings in Innovation Consulting Group Limited and
Datapath Group Limited. The two exits combined generated proceeds
of GBP17.0 million at completion with a further GBP2.3 million of
deferred consideration due over the next 24 months. Including cash
returned to the date of this report, the exits have delivered an
impressive aggregate return multiple of 8.4 times the original
investment. Further details of these investments and realisations
can be found in the Manager's Report.
The Board and the Manager are confident that a number of new and
follow--on investments can be achieved this year, particularly with
the increased investment activity noted above. Details of each of
these new, existing and former portfolio companies can be found in
the Manager's Review.
The Manager continues to see a strong pipeline of potential
investments sourced through its regional networks and
well-developed relationships with advisers and the SME community;
however, it is also focused on supporting the existing portfolio
through the current economic climate. Following the successful
fundraise launched in October 2022, the Company is in a position to
fully support the portfolio, where appropriate, and exploit
potential attractive investment opportunities.
The offer was closed on 26 April 2023 having raised gross
proceeds of GBP22.6 million, GBP21.7 million after expenses, as
detailed in the post-balance sheet events in note 20 of the Annual
Report and Accounts. The Board would like to thank those existing
Shareholders who have already supported this offer and welcome all
new Shareholders to the Company.
Responsible investing
The analysis of environmental, social and governance ("ESG")
issues is embedded in the Manager's investment process and these
factors are considered key in determining the quality of a business
and its long-term success. Central to the Manager's responsible
investment approach are five ESG principles that are applied to
evaluate investee companies, acquired since May 2018, throughout
the lifecycle of their investment, from their initial review and
acquisition to their final sale. Every year, these portfolio
companies are assessed and progress measured against these
principles. More detailed information about the process can be
found on pages 42 to 44 of the Manager's Review of the Annual
Report and Accounts.
Dividends
An interim dividend of 3.5p per share was declared on 27 May
2022 based on an ex-dividend date of 16 June 2022 and a record date
of 17 June 2022. The dividend was paid on 30 June 2022, returning
GBP6.9 million to Shareholders.
Following the successful realisations of TFC Europe and Codeplay
Software, a special interim dividend of 3.8p per share was declared
on 8 November 2022 based on an ex-dividend date of 15 December 2022
and a record date of 16 December 2022. The dividend was paid on 30
December 2022, returning GBP8.1 million to Shareholders.
As noted in the prior Annual Report and Accounts and in light of
the change in portfolio towards earlier-stage, higher-risk
companies as required by the VCT rules, the Board felt it prudent
to adjust the dividend policy towards a targeted annual dividend
yield of 5% of NAV per annum. The Board and the Manager continue to
hope that this may be enhanced by additional "special" dividends as
and when particularly successful portfolio exits are made.
Buybacks
The Board is pleased to have achieved an average discount across
all buybacks of 7.5% to the Net Asset Value per share in the year,
but continues to have an objective of achieving and maintaining
buybacks at a discount of 5% over the medium term, subject to
market conditions.
Management charges and performance incentive
The annual management fee is an amount equal to 2.0% of net
assets. This has resulted in ongoing charges for the period ended
31 December 2022 of 2.30% after adding back special dividends paid
during the year to the year end net assets and adding back the
performance incentive accrual to total expenses for the year, which
is at the lower end of the range when compared to competitor
VCTs.
As explained in note 13 of the Annual Report and Accounts, the
Directors have prepared a calculation incorporating estimated
future dividends over the vesting period and expect a performance
incentive fee to become payable during the vesting period.
Therefore, a liability of GBP280,000 has been recognised as at 31
December 2022 (2021: GBPnil).
Shareholder communication
We were delighted to meet once again with some Shareholders in
person at the AGM on 9 June 2022, having long been unable to do so
as a result of the travel restrictions due to COVID-19. Following
the disappointing remote attendance at the hybrid event, the Board
will be reverting to an in-person event only in the future.
Additionally, the Manager once again reintroduced in-person
investor forum events in the year which have proven popular with
our Shareholders in the past.
Board composition
The Board continues to review its own performance and undertakes
succession planning to maintain an appropriate level of
independence, experience, diversity and skills in order to be in a
position to discharge all its responsibilities. We are in the
process of adding new Board members in view of the retirement of
Simon Jamieson at the AGM and we hope to be able to make an
announcement at that time.
I thank Simon for his dedication to the Company and the Board
over the last nine years, having overseen a transformation of the
Company strategy through previously difficult times. I wish him all
the best for the future.
Annual General Meeting
The Company's Annual General Meeting will take place on 8 June
2023 at 1.00pm and we look forward to meeting as many of you as
possible in person. Please refer to the formal notice on pages 96
to 99 of the Annual Report and Accounts for further details in
relation to the format of this year's meeting. We would encourage
you to submit your votes by proxy ahead of the deadline of 1.00pm
on 6 June 2023 and to forward any questions by email to
InvestorRelations@foresightgroup.eu in advance of the meeting.
Sunset clause
The "Sunset Clause" for EIS and VCT reliefs has to be reviewed
by the government by 6 April 2025. The clause provides that income
tax relief will no longer be given to subscriptions made on or
after 6 April 2025, unless the legislation is amended to make the
scheme permanent, or the "sunset clause" is extended. The
government has the power to extend or remove the sunset clause
through secondary legislation, which would allow the VCT & EIS
schemes to operate in their current form beyond the current expiry
date of the scheme. The then Chancellor Kwasi Kwarteng announced
during his mini-budget of 23 September 2022 that venture capital
schemes will be safeguarded beyond 2025 but no further details were
given as to how this will be implemented. To date, the now
Chancellor Jeremy Hunt has yet to clarify. However, through
correspondence with the Treasury Select Committee, the Chancellor
has stated that it is the government's firm intention to extend the
VCT and EIS schemes beyond the sunset on 6 April 2025 and that
further details will be provided in due course. The Treasury Select
Committee also notes that the UK should be able to extend the
scheme without European Commission approval, clarified by the
recently announced Northern Ireland Protocol, the Windsor
Framework.
Outlook
As mentioned in my introduction, while the impact of the
pandemic has lessened, other economic impacts are being seen after
Russia invaded Ukraine, including, but not limited to, the
significant rise in energy prices, rapid inflation, the cost of
living crisis and the potential for a global recession. Supply
chains remain under pressure post-Brexit and pandemic, and after
the Russian invasion, such issues are unlikely to be resolved soon.
While the Company's portfolio has not been materially exposed to
either Russia or Ukraine, it is very likely that the economic
impacts we are currently experiencing will raise issues and
concerns for the individual investee company management teams and
the Manager.
However, the portfolio is showing signs of resilience and the
Manager has been working with management teams to assess business
plans, consider funding requirements and help navigate through
these difficult times. The portfolio is well diversified in terms
of sector, size and number and the Manager's approach through the
pandemic will continue to be valuable to tackle the challenges
ahead.
The Company is well positioned to continue to support the
portfolio and the fundraising that we are making will also provide
the opportunity to seek new investments and take advantage of the
opportunities that will emerge from the current economic
situation.
Raymond Abbott
Chair
28 April 2023
Manager's review
As at 31 December 2022 the Company's portfolio comprised 41
investments with a total cost of GBP69.9 million and a valuation of
GBP112.0 million.
Portfolio summary
The portfolio is diversified by sector, transaction type and
maturity profile. Details of the ten largest investments by
valuation, including an update on their performance, are provided
on pages 26 to 30 of the Annual Report and Accounts.
In the year, the valuation of investments increased by GBP8.7
million. Overall, the portfolio has performed well despite
uncertainty in the markets following the impact of COVID-19 and
subsequent geopolitical uncertainty and price inflation.
In line with the Board's strategic objectives, the Investment
Manager remains focused on growing the Company through further
development of NAV whilst paying an annual dividend to Shareholders
of at least 5% of the NAV per share. In the year, net assets
increased 3.9% to GBP138.5 million and an annual dividend of at
least 5% of the NAV per share as at 31 December 2021 was paid,
meaning that the Company successfully met these objectives.
New investments
2022 was a mixed year in the markets, with the technology sector
in particular performing strongly early in 2022 but then seeing a
significant softening. Many investee management teams have
successfully steered their businesses through the uncertainty of
2022, whilst developing clearer medium and longer-term growth
plans. The Manager has invested further in its origination
capabilities and identified a large number of potentially
attractive investment opportunities during the year.
Over the course of 2022, four new investments were completed; a
total investment of GBP6.9 million. New investments were across
compliance technology, health services, advanced materials and
insure-tech. Behind these, there continues to be a strong pipeline
of opportunities that the Manager expects to convert during the
next 12 months. Follow-on investments totalling GBP2.1 million were
also made
Homelink Healthcare Limited
In March 2022, the Company invested GBP1.1 million in Homelink
Healthcare, a specialist provider of hospital--at--home and virtual
ward services. The business employs highly qualified and
experienced nurses and rehabilitation teams to provide services to
patients in their own homes through contracts with the NHS. These
services deliver a range of clinical interventions, including wound
care, intravenous therapies, physiotherapy and rehabilitation. The
nurses are paid in-line with NHS remuneration and the clinical
services offered alleviate pressure on the NHS by freeing up vital
bed space, saving time and reducing costs.
So-Sure Limited
In May 2022, the Company invested GBP1.6 million in So--Sure, a
digital tech platform that operates across the entire insurance
supply chain, automating much of the process from distribution and
policy administration to fraud detection and claim management. The
investment will be used to scale up the business by investing into
marketing, technology and to improve platform automation.
Strategic Software Applications Ltd
In August 2022, the Company invested GBP1.7 million in Strategic
Software Applications, which trades under the name Ruleguard, a
London-based SaaS technology provider supporting financial
institutions in meeting their regulatory compliance obligations.
The platform enables customers to navigate the ever--growing
challenges of increasing regulatory compliance requirements with
efficiency, reduced risk and lower audit compliance costs. The
investment will help the company to develop additional platform
capabilities while scaling up sales and marketing functions to
capitalise on a large and growing market opportunity.
Copptech UK Limited
In August 2022, the Company made a GBP2.5 million investment in
Copptech, a developer of environmentally friendly antimicrobial
technologies that kill bacteria, fungi and viruses. Applications
for the technology are wide ranging and include diminishing the
transmission of viruses in medical facilities, extending the shelf
life of perishable goods, reducing discolouration and odour in
clothing and providing mould, fungi and termite--resistant
properties to building materials. The business has proven itself to
be highly scalable across Latin America and is already seeing
meaningful traction in the large North American and European
markets, where it is expanding its sales teams and operations. The
investment will enable Copptech to scale the business and operate
globally.
Follow-on investments
The Manager had expected that more portfolio companies would
need additional capital to support them through continued difficult
trading conditions resulting from macroeconomic challenges and
political uncertainty affecting energy and supply prices. However,
the portfolio has remained relatively resilient.
The Company made follow-on investments in three companies during
2022, totalling GBP2.1 million. Further details of each of these
are provided below.
The additional equity injections in the year were mainly used to
support each company's further growth plans, such as launching new
products or to expand into new markets. In view of the difficult
economic outlook, the Manager remains vigilant about the health of
the rest of the portfolio and the need for follow-on funding over
the coming months.
Rovco Ltd
In March 2022, Rovco, a leading provider of autonomous and
cloud-managed robotics for subsea surveys in offshore wind and oil
field decommissioning, received a GBP0.5 million follow-on
investment from the Company as part of a larger round with various
new institutional investors. The investment will be used to further
develop Rovco's technical capabilities and alleviate pressure on
working capital requirements.
Hexarad Group Limited
In August 2022, a GBP0.7 million follow-on investment was made
in Hexarad Group, an early-stage, high-growth healthcare technology
company, providing teleradiology services to NHS Trusts and UK
private healthcare customers. The investment will be used to
accelerate the company's growth plans in response to significant
market demand.
Spektrix Limited
In November 2022, a follow-on investment of GBP0.9 million was
made in Spektrix, alongside a US institutional investor. Spektrix
is an enterprise software company providing ticketing, CRM,
marketing and fundraising software to companies in the performing
arts sector. The investment will be used to support growth plans
for the business.
Realisations
The M&A climate was robust, particularly in the first half
of 2022 and the Manager was pleased to report some particularly
strong realisations. The Manager continues to engage with a range
of potential acquirers of several portfolio companies, with demand
for these high-growth businesses demonstrated by both private
equity and trade buyers.
TFC Europe Limited
In June 2022, the Company sold its holding in TFC, a
market-leading manufacturing operations services provider, to AFC,
an Ohio-based distributor of fasteners backed by Bertram Capital, a
California--based mid--market private equity house. This resulted
in proceeds of GBP15.4 million at completion, representing a
particularly strong return of 12.4x the original investment made by
the Company and Foresight 3 VCT plc, which merged in June 2017.
With offices in the UK and Germany, TFC is predominantly a
supplier of technical fasteners across Europe. Since the original
investment, the Manager had taken a proactive approach to
supporting TFC, helping to extend its network in the UK and
Germany. TFC rapidly expanded its vendor managed inventory service,
grew its customer base, and became a market-leading service
provider to SMEs and international global brands operating across a
range of industries. The Manager supported three acquisitions as
well as considerable investment in new and existing facilities,
opening new sites in England, Northern Ireland and Czechia.
Codeplay Software Limited
In June 2022, the Company completed the sale of Codeplay, one of
the UK's leading providers of solutions for the semiconductor
industry, to a leading US chip manufacturer.
Since the Manager's investment in 2018, Codeplay continued to
develop a suite of high-performance software assets and is
positioned at the centre of an increasingly important ecosystem
that improves the performance of chips, used in high-performance
and low-power environments, from supercomputers to self-driving
cars. It has also developed new routes to market, selling its
solutions to chip companies and downstream users, such as
manufacturers of diagnostic healthcare equipment.
This transaction generated proceeds of GBP4.3 million,
representing an exceptional return of 15.9x and an IRR
of nearly 100%.
Realisations in the year ended 31 December 2022
Accounting Valuation
cost at at 31
date of Realised December
disposal Proceeds gain 2021
Company Detail (GBP) (GBP) (GBP) (GBP)
TFC Europe Full
Limited disposal 2,149,307 15,407,883 13,258,576 10,330,550
Codeplay
Software Full
Limited(1) disposal 300,000 4,300,599 4,000,599 1,697,425
Spektrix Loan
Limited repayment 618,000 618,000 -- 618,000
Specac
International Loan
Limited repayment 500,000 500,000 -- 500,000
Positive
Response
Corporation Loan
Ltd repayment 125,000 125,000 -- 125,000
Total disposals 3,692,307 20,951,482 17,259,175 13,270,975
1. A further GBP418,000 of deferred consideration has been reflected in the
accounts.
Pipeline
At 31 December 2022, the Company had cash reserves of GBP24.8
million, which will be used to fund new and follow--on investments,
buybacks and running expenses. The Manager is seeing its pipeline
of potential investments grow and has a number of opportunities
under exclusivity or in due diligence, which continue to
progress.
The volatility caused by political uncertainty, rising energy
costs and broader price inflation resulted in a challenging period
for many companies, with staff retention and exaggerated wage
expectations causing concern for many. This does, however, create
opportunities, and the Manager is well placed to consider these as
they arise, whilst supporting existing portfolio companies with
follow-on investments as needed.
In the medium term and long term, the Manager expects that
current unpredictability will present attractive investment
opportunities. It is able to access these opportunities through its
wide and proprietary network of contacts around the country, and
considers the Company's strategy to be well-suited to market
volatility, due to its balanced mix of companies across sectors and
stages, experienced investment team and network of high--quality
chairs.
Post-year end activity
Sprintroom Limited
In January 2023, GBP1.0 million of growth capital was invested
in Sprintroom, which trades as Sprint Electric. The business
designs and manufactures drives for controlling electric motors in
light and heavy industrial applications, as well as recovering and
reusing otherwise lost energy. The investment will be used to
further develop and commercialise novel alternating current
variable speed drive technology.
IMMJ Systems Limited
In February 2023, GBP0.7 million was invested in IMMJ, a
clinical electronic document management solution supplier to the
NHS. The investment will be used to grow the leadership team and
bolster the business' abilities to support the digitisation of
records, providing easy and efficient access to patient records for
clinical care across the NHS.
Firefish Software Limited
In March 2023, the Company invested GBP1.5 million in Firefish
Software Limited, a Glasgow based customer relationship management
and marketing software platform targeting the recruitment sector.
The funding will be used to further develop the platform in order
to attract a larger enterprise level customer base and expand its
outbound sales team.
NorthWest EHealth Limited
In March 2023, the Company invested GBP1.5 million in NorthWest
EHealth, which provides software and services to the clinical
trials market, allowing pharmaceutical companies and contract
research organisations to conduct feasibility studies, recruit
patients and run trials. The investment will be used to support the
delivery of a 100% growth in real world trial delivery in FY23,
while completing building the company's Connexon platform; to be
compatible with all UK healthcare data sources by year end.
Ten Health & Fitness Limited
In March 2023, Ten Health, a multi-site operator in the boutique
health, wellbeing and fitness market, received an additional
investment of GBP0.4 million. The funding will enable the company
to complete its new flagship Kings Cross site and support the
company's transition to profitability from Q1 2023.
Five Wealth Limited
In March 2023, the Company invested GBP0.7 million in Five
Wealth, an established boutique financial planning business
operating across the North West of England, headquartered in
Manchester. This growth capital investment will be used to support
increased marketing and advertising to drive top line growth and
greater regulatory and compliance costs which are forecast to
increase commensurately with AUM.
Red Flag Alert Limited
In March 2023, the Company invested GBP1.8 million in Reg Flag
Alert, a Manchester based proprietary SaaS intelligence platform
with modular capabilities spanning compliance, prospecting, risk
management and financial health assessments. The growth capital
will be used to expand the sales team and alongside an increased
marketing budget is expected to accelerate new client
acquisition.
Additive Manufacturing Technologies Ltd ("AMT")
In April 2023, the Company invested GBP0.1 million in AMT, which
manufactures systems that automate the post-processing of 3D
printed parts. The investment will be used to cover short-term
working capital requirements, as the business continues to grow
sales and pushes towards sustainable profitability.
Innovation Consulting Group Limited ("GovGrant")
In March 2023, the Company announced the impressive exit of
GovGrant to Source Advisors, a US corporate buyer backed by BV
Investment Partners. GovGrant is one of the UK's leading providers
of R&D tax relief, patent box relief and other innovation
services. The transaction generated proceeds of GBP6.8 million at
completion. When added to GBP0.7 million of cash returned to date,
this implies a total cash-on-cash return of 4.5 times the capital
of GBP1.65 million invested in October 2015, equivalent to an IRR
of 25%.
Since the original investment in 2015, the Manager had helped
GovGrant through a period of material growth during which it
supported the R&D activities of a growing number of customers.
GovGrant's high levels of service and innovative products, such as
the growing patent box offering, have contributed to driving
innovation in the UK economy. The Manager had taken a proactive
approach to supporting the exceptional senior management team, all
of whom were introduced to the business during the investment
period.
Datapath Group Limited
In March 2023, the Company announced the notable exit of
Datapath, a global leader in the provision of visual solutions. The
transaction generated proceeds of GBP10.2 million at completion
with an additional GBP2.3 million payable over the next 24 months.
When added to GBP10.8 million of cash returned to date, this
implies a total cash-on-cash return of 11.7 times the original
investment, equivalent to an IRR of 38% since the initial
investment in 2007.
Since the original investment, the Manager had supported
Datapath through a period of material growth with revenues growing
from approximately GBP7 million to GBP25 million. Datapath has
developed a market leading hardware and software product suite for
the delivery of multi-screen displays and video walls which are
sold globally to a diverse customer base across a range of
sectors.
Key portfolio developments
In the year, the valuation of investments increased by GBP8.7
million.
Material changes in valuation, defined as increasing or
decreasing by GBP1.0 million or more since 31 December 2021, are
detailed below. Updates on these companies are included below, or
in the Top Ten Investments section on pages 26 to 30 of the Annual
Report and Accounts.
Key valuation changes in the year
Company Valuation methodology Valuation change (GBP)
Callen-Lenz Associates Discounted revenue
Limited multiple 2,865,819
Hospital Services Group Discounted earnings
Limited multiple 1,174,683
Price of last funding
Spektrix Limited round 1,047,483
Innovation Consulting
Group Limited(1) Discounted offer received (1,702,886)
Discounted revenue
Biofortuna Ltd multiple (1,845,281)
Biotherapy Services
Limited Nil value (2,378,376)
Datapath Group Limited(2) Discounted offer received (3,672,136)
1. GBP904,000 of this valuation decrease was recovered upon final exit in
March 2023.
2. GBP1,941,000 of this valuation decrease was recovered upon final exit in
March 2023.
Biotherapy Services Limited
Biotherapy Services is an early-stage biopharma company that has
developed a platform treatment for use in wound healing, initially
for the treatment of diabetic foot ulcers but with additional use
in cardiac issues and lung treatments. The company had been
progressing a clinical trial.
31 December 2022 update
Recruitment into the RAPID gel trial has now been stopped as a
result of continued slow progress. The trial will be formally
closed to allow the publication of positive interim data. The
company is still attempting to raise funds; however, despite
several positive meetings, no heads of terms have been received and
there is a substantial risk that no additional funding can be
secured. If no funding is received, the company will pursue a
sale.
Outlook
2022 has been a year of volatility for most asset classes, as
rising inflation, increased energy costs and higher interest rates
impacted business performance, particularly in the second half of
the year. In global equity markets, the MSCI World Index fell by
10% over the 12 months, while the tech-heavy NASDAQ fell by more
than 30%.
In the UK, business and consumer confidence was dented by
political uncertainty and broader price inflation. Russia's
invasion of Ukraine had a particularly acute effect on the UK
economy as the price of electricity rose sharply due to the
country's reliance on natural gas for power generation. In many
markets, businesses began to invest in growth after an uncertain
COVID-19 period at the same time that global supply chain issues
resulted in long lead times for products, weighing on sales and
increasing working capital requirements. Many businesses in the
Company's portfolio faced challenges with both staff retention and
hiring, as the number of vacancies and wage inflation drove staff
churn. This required careful attention from management teams and
the Manager's board members, but often presented an opportunity to
focus on efficiency by retaining the best talent.
Despite this backdrop, the Company's portfolio performed
strongly in the year, achieving a 4.5% NAV Total Return for its
Shareholders, with exceptional exits from the likes of TFC and
Codeplay contributing in the Company's dividend of 7.3p per share
for the year, representing an attractive 12.5% dividend yield. The
Company's strategy is well-suited to market volatility, given its
diverse sector allocation and the mix of later and earlier--stage
growth companies in the portfolio, many of which are profitable and
so typically more resilient in a downturn.
Looking forward to 2023, the UK market is likely to remain
unpredictable. While some forecasters are expecting interest rates
to peak in the summer, the labour market remains stubbornly tight
and inflation persistent, meaning that rates may remain elevated
for a longer period. While a recession has been avoided to date,
balancing rate increases with current low growth and productivity
rates is a difficult task for politicians and rate-setters. The
range of outcomes for SMEs is likely to be wide, and so a balanced
approach to portfolio construction is prudent, alongside providing
hands-on support for management teams as they navigate this
environment.
This is not a reason to be pessimistic. The UK remains a dynamic
economy, attracting some of the best global talent in technology,
life sciences, engineering and financial services among many
others, while its cities remain a destination for workers and
tourists alike. The Manager believes that the UK has great
potential in the medium and long term with many competitive
advantages over its neighbours and more distant trading partners,
and this temporary pullback is already presenting unique investment
opportunities, which we are able to access through our wide and
proprietary network of contacts around the country. A weaker
sterling also attracts overseas acquirers to the UK, such as the US
trade buyers for Codeplay, TFC and other exits.
The Manager is pleased with the overall performance of the
portfolio over the past 12 months, especially in these challenging
times, and looks forward to a further improvement as labour markets
loosen, inflation reduces and interest rates peak and reverse.
While the market remains uncertain, the Manager expects to see a
sustained high level of activity from UK companies seeking growth
capital and expects VCTs to remain an attractive source of capital
for entrepreneurs. This is driven by good relative performance of
the Company, supported by its diverse portfolio and high-touch
approach to supporting management teams and SMEs in achieving their
full potential.
James Livingston
on behalf of Foresight Group LLP
Co-Head of Private Equity
28 April 2023
Income statement
for the year ended 31 December 2022
Year ended 31 December
Year ended 31 December 2022 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-----------------
Realised gains on
investments -- 17,493 17,493 -- 5,763 5,763
Investment
holding
(losses)/gains -- (8,465) (8,465) -- 17,449 17,449
Income 871 -- 871 1,408 -- 1,408
Investment
management fees (681) (2,323) (3,004) (604) (1,812) (2,416)
Other expenses (673) -- (673) (627) -- (627)
-----------------
(Loss)/return on
ordinary
activities
before taxation (483) 6,705 6,222 177 21,400 21,577
-----------------
Taxation -- -- -- -- -- --
(Loss)/return on
ordinary
activities after
taxation (483) 6,705 6,222 177 21,400 21,577
-----------------
(Loss)/return per (0.2)p 3.3p 3.1p 0.1p 11.1p 11.2p
share
-----------------
The total columns of this statement are 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 comprehensive
income has been presented.
The Company has only one class of business and one reportable
segment, the results of which are set out in the Income Statement
and Balance Sheet.
There are no potentially dilutive capital instruments in issue
and, therefore, no diluted earnings per share figures are relevant.
The basic and diluted earnings per share are, therefore,
identical.
The notes on pages 80 to 95 of the Annual Report and Accounts
form part of these financial statements.
Reconciliation of movements in shareholders' funds
Capital
Year ended Called-up Share premium redemption Distributable Capital Revaluation
31 December share capital account reserve reserve(1) reserve(1) reserve Total
2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1
January
2022 1,928 52,996 549 74,246 (47,963) 51,490 133,246
Share issues
in the
year(2) 229 15,681 -- -- -- -- 15,910
Expenses
in relation
to share
issues(3) -- (474) -- -- -- -- (474)
Repurchase
of shares (24) -- 24 (1,471) -- -- (1,471)
Realised
gains on
disposal
of investments -- -- -- -- 17,493 -- 17,493
Investment
holding
losses -- -- -- -- -- (8,465) (8,465)
Dividends
paid -- -- -- (14,983) -- -- (14,983)
Management
fees
charged
to capital -- -- -- -- (2,323) -- (2,323)
Revenue
loss for
the year -- -- -- (483) -- -- (483)
As at 31
December
2022 2,133 68,203 573 57,309 (32,793) 43,025 138,450
Capital
Year ended Called-up Share premium redemption Distributable Capital Revaluation
31 December share capital account reserve reserve(1) reserve(1) reserve Total
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1
January
2021 1,939 67,458 523 68,307 (51,914) 34,041 120,354
Share issues
in the
year(2) 15 918 -- -- -- -- 933
Expenses
in relation
to share
issues(3) -- (51) -- -- -- -- (51)
Repurchase
of shares (26) -- 26 (1,481) -- -- (1,481)
Cancellation
of share
premium -- (15,329) -- 15,329 -- -- --
Realised
gains on
disposal
of investments -- -- -- -- 5,763 -- 5,763
Investment
holding
gains -- -- -- -- -- 17,449 17,449
Dividends
paid -- -- -- (8,086) -- -- (8,086)
Management
fees charged
to capital -- -- -- -- (1,812) -- (1,812)
Revenue
return
for the
year -- -- -- 177 -- -- 177
As at 31
December
2021 1,928 52,996 549 74,246 (47,963) 51,490 133,246
1. Reserve is available for distribution; total distributable reserves at 31
December 2022 total GBP24,516,000 (2021: GBP26,283,000).
2. Includes the dividend reinvestment scheme.
3. Expenses in relation to share issues includes trail commission for prior
years' fundraising.
The notes on pages 80 to 95 of the Annual Report and Accounts
form part of these financial statements.
Balance sheet
At 31 December 2022
Registered number: 03506579
As at 31 As at 31
December December
2022 2021
GBP'000 GBP'000
------------------------------------------------------
Fixed assets
Investments held at fair value through profit or loss 111,966 115,238
------------------------------------------------------
Current assets
Debtors 2,152 1,028
Cash and cash equivalents 24,814 17,113
------------------------------------------------------
26,966 18,141
Creditors
Amounts falling due within one year (482) (133)
------------------------------------------------------
Net current assets 26,484 18,008
------------------------------------------------------
Net assets 138,450 133,246
------------------------------------------------------
Capital and reserves
Called-up share capital 2,133 1,928
Share premium account 68,203 52,996
Capital redemption reserve 573 549
Distributable reserve 57,309 74,246
Capital reserve (32,793) (47,963)
Revaluation reserve 43,025 51,490
------------------------------------------------------
Equity Shareholders' funds 138,450 133,246
------------------------------------------------------
Net Asset Value per share 64.9p 69.1p
------------------------------------------------------
The financial statements were approved by the Board of Directors
and authorised for issue on 28 April 2023 and were signed on its
behalf by:
Raymond Abbott
Chair
28 April 2023
The notes on pages 80 to 95 of the Annual Report and Accounts
form part of these financial statements.
Cash flow statement
For the year ended 31 December 2022
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
-----------------------------------------------------
Cash flow from operating activities
Loan interest received from investments 653 346
Dividends received from investments 38 1,022
Deposit and similar interest received 202 2
Investment management fees paid (2,766) (2,416)
Secretarial fees paid (178) (161)
Other cash payments (433) (447)
-----------------------------------------------------
Net cash outflow from operating activities (2,484) (1,654)
-----------------------------------------------------
Cash flow from investing activities
Purchase of investments (9,987) (13,163)
Proceeds on sale of investments 20,951 12,700
Proceeds on deferred consideration 234 --
-----------------------------------------------------
Net cash inflow/(outflow) from investing activities 11,198 (463)
-----------------------------------------------------
Cash flow from financing activities
Proceeds of fundraising 13,987 --
Expenses of fundraising (361) (36)
Repurchase of own shares (1,467) (1,444)
Equity dividends paid (13,172) (7,152)
-----------------------------------------------------
Net cash outflow from financing activities (1,013) (8,632)
-----------------------------------------------------
Net inflow/(outflow) of cash for the year 7,701 (10,749)
-----------------------------------------------------
Reconciliation of net cash flow to movement in net
funds
Increase/(decrease) in cash and cash equivalents for
the year 7,701 (10,749)
Net cash and cash equivalents at start of year 17,113 27,862
-----------------------------------------------------
Net cash and cash equivalents at end of year 24,814 17,113
-----------------------------------------------------
Analysis of changes in net debt
At 1 January At 31 December
2022 Cash flow 2022
GBP'000 GBP'000 GBP'000
--------------------------
Cash and cash equivalents 17,113 7,701 24,814
--------------------------
The notes on pages 80 to 95 of the Annual Report and Accounts
form part of these financial statements.
Notes
1. These are not statutory accounts in accordance with S436 of the Companies
Act 2006. The full audited accounts for the year ended 31 December 2022,
which were unqualified and did not contain statements under S498(2) of
the Companies Act 2006 or S498(3) of the Companies Act 2006, will be
lodged with the Registrar of Companies. Statutory accounts for the year
ended 31 December 2022 including an unqualified audit report and
containing no statements under the Companies Act 2006 will be delivered
to the Registrar of Companies in due course.
1. The audited Annual Financial Report has been prepared on the basis of
accounting policies set out in the statutory accounts of the Company for
the year ended 31 December 2022. All investments held by the Company are
classified as 'fair value through the profit and loss'. Unquoted
investments have been valued in accordance with IPEV guidelines. Quoted
investments are stated at bid prices in accordance with the IPEV
guidelines and Generally Accepted Accounting Practice.
1. Copies of the Annual Report will be sent to shareholders and can be
accessed on the following website: http://www.foresightenterprisevct.com
www.foresightenterprisevct.com
1. Net Asset Value per share
The Net Asset Value per share is based on net assets at the end
of the year and on the number of shares in issue at that date.
31 December 31 December
2022 2021
--------------------------
Net assets GBP138,450,000 GBP133,246,000
No. of shares at year end 213,316,422 192,806,963
Net Asset Value per share 64.9p 69.1p
--------------------------
1. Return per share
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
-----------------------------------------------------
Total return after taxation 6,222 21,577
Total return per share (note a) 3.1p 11.2p
-----------------------------------------------------
Revenue (loss)/profit from ordinary activities after
taxation (483) 177
Revenue (loss)/profit per share (note b) (0.2)p 0.1p
-----------------------------------------------------
Capital profit from ordinary activities after
taxation 6,705 21,400
Capital profit per share (note c) 3.3p 11.1p
-----------------------------------------------------
Weighted average number of shares in issue in the
year (note d) 198,639,819 193,445,500
-----------------------------------------------------
Notes:
1. Total profit per share is total profit after taxation divided by the
weighted average number of shares in issue during the year.
2. Revenue (loss)/profit per share is revenue (loss)/profit after taxation
divided by the weighted average number of shares in issue during the
year.
3. Capital profit per share is capital profit after taxation divided by the
weighted average number of shares in issue during the year
4. The weighted average number of shares is calculated by taking the number
of shares issued and bought back during the year, multiplying each by the
percentage of the year for which that share number applies and then
totalling with the number of shares in issue at the beginning of the
year.
1. Annual General Meeting
The Annual General Meeting of the Company will be held at the
offices of Foresight Group LLP, The Shard, 32 London Bridge Street,
SE1 9SG on 8 June 2023 at 1.00pm. Details will be published on both
the Company's and the Manager's website at
https://www.globenewswire.com/Tracker?data=fhW6Jz-KJsa24mQSjKJc0RKWRExWAmrMDUT3BfH1105xEBrkCKwPd_hdPNdsYkL6Kq--NJAAASj7Wlc5UvlUcyMZsYV-eGe5avcSI8f0HiVEXCA7GzfbkJmHZ_DmGiFY
www.foresightenterprisevct.com.
1. Income
Year ended Year ended
31 December 31 December
2022 2021
GBP'000 GBP'000
--------------------------------------
Loan stock interest 631 381
Deposit and similar interest received 202 2
Dividends receivable 38 1,025
--------------------------------------
871 1,408
--------------------------------------
1. Investments held at fair value through profit or loss
31 December 31 December
2022 2021
GBP'000 GBP'000
---------------------
Unquoted investments 111,966 115,238
---------------------
GBP'000
---------------------------------
Book cost at 1 January 2022 64,626
Investment holding gains 50,612
---------------------------------
Valuation at 1 January 2022 115,238
Movements in the year:
Purchases at cost 8,987
Disposal proceeds(1) (20,951)
Realised gains(2) 17,259
Investment holding losses(3) (8,567)
---------------------------------
Valuation at 31 December 2022 111,966
---------------------------------
Book cost at 31 December 2022 69,921
Investment holding gains 42,045
---------------------------------
Valuation at 31 December 2022 111,966
---------------------------------
1. The Company received GBP20,951,000 (2021: GBP12,700,000) from the
disposal of investments during the year. The book cost of these
investments when they were purchased was GBP3,692,000 (2021:
GBP6,937,000). These investments have been revalued over time and until
they were sold any unrealised gains or losses were included in the fair
value of the investments.
2. Realised gains in the Income Statement include deferred consideration
receipts from Hallmarq Limited (GBP1,000), Accrosoft Limited (GBP23,000),
FFX Group Limited (GBP79,000) and Ixaris Systems Ltd (GBP131,000).
3. Investment holding losses in the Income Statement include the deferred
consideration debtor increase of GBP102,000. The debtor movement reflects
the recognition of amounts receivable in respect of Codeplay Software
Limited (GBP418,000) and FFX Group Limited (GBP79,000), offset by
receipts in respect of Accrosoft Limited (GBP23,000), FFX Group Limited
(GBP79,000) and Ixaris Systems Ltd (GBP131,000) and provisions made
against balances in respect of Mologic Ltd. (GBP157,000) and Accrosoft
Limited (GBP5,000).
1. Related party transactions
No Director has an interest in any contract to which the Company
is a party other than their appointment and remuneration as
Directors.
1. Transactions with the Manager
Foresight Group LLP was appointed as Manager in January 2020 and
earned fees of GBP2,724,000 in the year ended 31 December 2022
(2021: GBP2,416,000). Although no performance fee was paid in the
year (2021: GBPnil), a liability of GBP280,000 has been recognised
as at the year end (2021: GBPnil).
Foresight Group LLP is the Company Secretary (appointed in
November 2017) and received accounting and company secretarial
services fees of GBP178,000 during the year (2021: GBP161,000).
At 31 December 2022, the amount due to Foresight Group LLP was
GBPnil (2021: GBPnil).
No amounts have been written off in the year in respect of debts
due to or from the Manager.
END
For further information please contact:
Gary Fraser, Foresight Group: 020 3667 8181
(END) Dow Jones Newswires
April 28, 2023 11:05 ET (15:05 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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