TIDMFTF
FORESIGHT 4 VCT PLC
Financial Highlights
-- Diversified portfolio of 33 companies.
-- Net asset value per share decreased by 3.7% in the period from 67.8p
at 31 March 2019 to 65.3p. Including the payment of a 4.0p dividend made
on 16 August 2019, NAV per share at 30 September 2019 was 69.3p,
representing a positive total return 2.2%.
-- The Company completed two new investments, totalling GBP3.6 million.
-- A total of GBP51 million was raised under the offer for subscription
dated 14 June 2018, which closed on 7 June 2019.
-- The portfolio has seen an uplift in valuation of GBP4.3 million in
the last six months.
Chairman's Statement
I am pleased to present the Unaudited Half-Yearly Financial Report for
Foresight 4 VCT plc for the period ended 30 September 2019.
DIVIDS
In line with the Board's objective on dividend payments, an interim
dividend of 4.0p per share was declared on 18 July 2019 based on an
ex-dividend date of 25 July 2019 and a record date of 26 July 2019. The
dividend was paid on 16 August 2019. The cost of this dividend was
GBP7.8 million, including shares allotted under the dividend
reinvestment scheme.
The Board's objective is to maintain a sustainable level of dividend
payments from an increased NAV on an annual basis. The investment rule
changes will result in new investments taking longer to mature on
average and may impact NAV growth in the future. The intention of the
Board is to maintain dividends at a level of 5% of NAV plus special
dividends in the event of material realisations.
TOP-UP SHARE ISSUES AND SHARE BUY-BACKS
Share buybacks took place on 11 July 2019 (650,000 shares at 61.0p), 24
July 2019 (500,000 shares at 61.0p) and 30 September 2019 (736,153
shares at 57.75p), all of which have enabled the enlarged VCT to achieve
its target discount to NAV. In line with the Prospectus dated 14 June
2018 the Board has changed the buy back policy to buy back shares at a
7.5% discount to NAV, with a future aim of achieving a 5% discount to
NAV.
The dividend reinvestment scheme saw 1,192,686 shares being allotted on
16 August 2019.
FUNDRAISING
The offer for subscription dated 14 June 2018, which sought to raise up
to GBP50 million (with a GBP30m over-allotment facility), closed on 7
June 2019 having raised GBP51.1 million.
Funds raised under this offer have allowed the Company to take advantage
of attractive investment opportunities and to increase portfolio
diversification in line with the ongoing strategy of the Company.
PERFORMANCE AND PORTFOLIO ACTIVITY
During the period, the net asset value per share decreased by 3.7% from
67.8p at 31 March 2019 to 65.3p. Including the payment of a 4.0p
dividend made on 16 August 2019, NAV per share at 30 September 2019 was
69.3p, representing a positive total return of 2.2%.
At the end of the period the Company held 33 investments in UK based
businesses across a wide range of sectors. The performance of the
portfolio has been steady during the period, with an increase of GBP4.3
million in value. Positive progress made by companies including Ixaris
Group Holdings Limited has been offset by lower valuations for companies
like Biofortuna Limited, as detailed in the Investment Manager's Review
and the Top Ten Investment sections of this report.
Two new investments were completed during the period under review
amounting to GBP3.6 million. Namely, Fourth Wall Creative Limited (a
technology-led sports merchandising business) and Ten Health & Fitness
Limited (a group of boutique fitness studious offering physiotherapy,
massage therapy and fitness classes).
The Investment Manager, Foresight Group, continues to see a strong
pipeline of potential investments sourced through its regional networks
and well-developed relationships with advisors and the SME community.
Following both the successful fundraises launched in May 2017 and June
2018, the Company is in a position to fully exploit these attractive
investment opportunities.
SHAREHOLDER COMMUNICATION
As part of its ongoing commitment to high quality investor relations,
the Board encourages you to attend one of the popular Investor Forums
hosted by the Investment Manager, Foresight Group. In addition to the
annual event in London, the Manager has started to hold a series of
regional Investor Forums around the country. Details of regional events
will be sent to shareholders resident in the locality as and when they
are organised.
As communicated in the Annual Report, the Board offered shareholders the
opportunity to elect the method by which they receive shareholder
communications. I am pleased to announce that 99% of communications to
investors will now be provided electronically. The Board believe that in
addition to further promoting sustainability, a key objective of the
fund, this shift will result in some overall cost savings.
AUDITOR
The Board regularly reviews the Company's ongoing costs and launched a
tender for it's audit contract following the signing of the 2019 Annual
Report and Accounts. The previous auditor, KPMG LLP, was invited to
tender alongside several other firms. Following this competitive tender
process, I am pleased to confirm that Deloitte LLP has been appointed as
company auditor for the year ending 31 March 2020. The Board would like
to thank KPMG for their service over the last eight years. As announced
earlier today, KPMG's section 519 statement will be enclosed with this
report.
OUTLOOK
The persisting uncertainty over Brexit and worrying indicators for
various areas of world trade are unhelpful for business in general.
Foresight 4 VCT invests primarily in developing companies which by their
nature benefit from general economic growth, and the current environment
places additional demands upon them and their management teams.
Foresight Group's private equity team is well aware of the management
and business needs of each of the companies within the investment
portfolio and is working closely with them to ensure that they are able
to make progress during these testing times. The Board and the Manager
are optimistic that the existing portfolio has potential to grow further
during the current year and beyond and that the present pipeline of
potential investments includes some attractive opportunities.
Raymond Abbott
Chairman
29 November 2019
Manager's Review
Portfolio Summary
As at 30 September 2019 the Company's portfolio comprised 33 investments
with a total cost of GBP49.8 million and a valuation of GBP82.5 million.
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 10 to 14.
Foresight is pleased to report an uplift in the existing portfolio's
value of GBP4.3 million in the period, although NAV was reduced by
payment of a GBP7.8 million dividend and performance was therefore
behind target. Progress has been slower in regards new investments with
two completed in the six-month period, deploying GBP3.6 million.
Post-period end a GBP1.5 million investment has been made into one
company and a healthy pipeline of other opportunities are in due
diligence. Foresight continue to support the Board in management of the
Company's resources to ensure sufficient liquidity for new and follow-on
investments, dividends and regular buybacks, with the Company
repurchasing 1.9 million shares at an average discount of 10.1% in the
period under review. As the portfolio mix evolves in line with the new
VCT rules we believe the Board's new target dividend of 5% of NAV per
annum, enhanced by the opportunity for special dividends following
successful portfolio exits, more appropriately reflects likely returns
from the underlying portfolio.
NEW INVESTMENTS AND FOLLOW-ON FUNDING
The Company invested a total of GBP3.6 million during the six months to
30 September 2019. This was spread across two companies; Fourth Wall
Creative, a technology-led sports merchandising business, and Ten Health
& Fitness, a boutique group of health and fitness studios. Post-period
end a GBP1.5 million investment was made into Biotheraphy Services, a
pharmaceutical biotech company.
FOURTH WALL CREATIVE
In April 2019 the Company invested GBP2.0 million in Fourth Wall
Creative, a technology-led sports merchandising business. Founded in
2010, the core business is the design and distribution of membership
welcome packs on behalf of football clubs and a technology platform that
manages logistics and communications. The Company mainly serves premier
league teams with clients including Liverpool and Tottenham Hotspur. The
investment will fund growth through the development of new services,
expanding the customer base and exploring other sports opportunities.
TEN HEALTH & FITNESS
In June 2019 the Company invested GBP1.6 million in Ten Health & Fitness,
a group of boutique fitness studios offering a range of services
including physiotherapy, massage therapy and fitness classes. Founded in
2007, Ten Health was developed to bridge the gap in the market between
traditional healthcare and mainstream fitness. The investment will be
used to further develop Ten Health's non-fitness services and to support
a roll-out of new studios.
BIOTHERAPY SERVICES
Post-period end, in November 2019, the Company invested GBP1.5 million
in Biotheraphy Services, a pharmaceutical biotech company specialising
in wound treatment regenerative medicine, with a focus on chronic
diabetic foot ulcers and complex wounds. The investment will support the
completion of medical trials and facilitate product development.
FOLLOW-ON INVESTMENTS
There have been no follow-on investments during the six months to 30
September 2019.
EXITS AND REALISATIONS
Other than Evance Wind Turbines Limited and Autologic Diagnostics Group
Limited being dissolved in the period, there have been no exits during
the six months to 30 September 2019. Foresight Group 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.
PIPELINE
Foresight Group continues to see a strong pipeline of potential
investments and has a number of opportunities under exclusivity or in
due diligence. The investment team currently consists of 26 experienced
private equity professionals operating from seven offices in the UK. We
review nearly 1,500 business plans of potential investee companies per
year, with an increasing number of prospects originated directly by the
investment team. This approach allows us to seek off-market
opportunities which are often better value as there is less competition
in the process. Foresight Group are on track to review a record number
of businesses in 2019 thanks to our expanding regional footprint, having
opened the Edinburgh office this quarter. The Company focuses on SMEs in
all sectors across the UK, seeking funding of GBP1-5 million.
At 30 September 2019, the Company had cash in hand of GBP29.9 million,
which will be used to fund new and follow-on investments, buybacks and
running expenses. The Company remains well positioned to continue
pursuing the potential investment opportunities in the pipeline.
KEY PORTFOLIO DEVELOPMENTS
Overall, the value of investments held rose to GBP82.5 million, driven
by GBP3.6 million of deployment and an increase in the value of existing
investments by GBP4.3 million. Material changes in valuation, defined as
increasing or decreasing by GBP0.5 million or more since 31 March 2019,
are detailed below. Updates on these companies are included below, or in
the Top Ten Investments section of the half yearly report.
KEY VALUATION CHANGES IN THE PERIOD
Company Valuation (GBP) Valuation Change (GBP)
------------------------------ --------------- ----------------------
Ixaris Group Holdings Limited 13,818,721 3,261,738
------------------------------ --------------- ----------------------
Aerospace Tooling Holdings
Limited 3,297,692 878,114
------------------------------ --------------- ----------------------
FFX Group Limited 3,948,863 580,509
------------------------------ --------------- ----------------------
Clubspark Limited 1,383,465 523,464
------------------------------ --------------- ----------------------
Biofortuna Limited 293,652 (1,596,425)
------------------------------ --------------- ----------------------
CLUBSPARK
ClubSpark, a sports club management and reporting platform, has
increased revenues by over 150% compared with this time last year. The
pipeline of new clients continues to be encouraging, with several large
deals with international cricket associations entering the next stage of
the process.
BIOFORTUNA
Biofortuna, a molecular diagnostics business which develops and
manufactures DNA tests, has had a weak period of trading. A new sales
team is aiming to improve the company's fortunes.
OUTLOOK
Yet again the Brexit deadline has been extended, and there remains
ongoing uncertainty around the UK's withdrawal from the EU. It is likely
that economic growth will stay subdued, or even slip into negative
territory, as companies delay investment to build up a cash cushion in
anticipation of challenging economic conditions ahead. Contractions have
now been recorded in four of the past five months in the private sector,
marking the worst spell since 2009 during the global financial crisis.
There is a likely period of volatility ahead, nonetheless Foresight
Group remains positive about the prospects of the existing diversified
portfolio and continues to see encouraging levels of activity from
smaller UK companies seeking growth capital, as well as from potential
acquirers of portfolio companies.
Your investment management team remains focused on targeting companies
in markets with sound fundamentals, with attractive growth attributes
and strong management teams. Foresight Group has undertaken an in-depth
review of the impact of Brexit on the investment portfolio, with the aim
of pre-empting potential challenges that could arise as a result where
possible. Given the diverse nature of businesses in the portfolio, with
a combination of UK-centric and EU importers and exporters, Foresight
Group remains confident the Company is well positioned to endure
potential volatility. Nevertheless, the investment team are diligently
planning for all eventual outcomes. We will continue to monitor
investments closely and adapt to market changes to ensure the Company's
portfolio is well-placed to deliver returns to its investors.
Russell Healey
Head of Private Equity
Foresight Group
29 November 2019
Unaudited Half-Yearly Results and Responsibilities Statements
Principal Risks and Uncertainties
The principal risks faced by the Company are as follows:
-- Performance;
-- Regulatory;
-- Operational; and
-- Financial.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Accounts for the year ended 31 March
2019. A detailed explanation can be found on page 25 of the Annual
Report and Accounts which is available on Foresight 4 VCT's website:
www.foresight4vct.com 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 Half-Yearly Financial
Report and financial statements.
The Directors confirm to the best of their knowledge that:
1. the summarised set of financial statements has been prepared in
accordance with FRS 104;
2. the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first
six months and description of principal risks and uncertainties for the
remaining six months of the year);
3. the summarised set of financial statements gives a true and fair view of
the assets, liabilities, financial position and profit or loss of the
Company as required by DTR 4.2.4R; and
4. 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 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 2019 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 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.
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 nor reviewed by
the auditors.
On behalf of the Board
Raymond Abbott
Chairman
29 November 2019
Unaudited Income Statement
for the six months ended 30 September 2019
Six months ended
30 September 2019 Six months ended 30 Year ended 31 March
(Unaudited) September 2018 (Unaudited) 2019 (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
Investment holding
gains - 7,900 7,900 - 887 887 - 5,292 5,292
Realised (losses)/
gains on investments - (3,623) (3,623) - 1,201 1,201 - (514) (514)
Income 420 - 420 340 - 340 744 - 744
Investment management
fees (330) (991) (1,321) (223) (669) (892) (498) (1,494) (1,992)
Other expenses (315) - (315) (348) - (348) (568) - (568)
(Loss) /return
on ordinary activities
before taxation (225) 3,286 3,061 (231) 1,419 1,188 (322) 3,284 2,962
Taxation - - - - - - - - -
(Loss) /return
on ordinary activities
after taxation (225) 3,286 3,061 (231) 1,419 1,188 (322) 3,284 2,962
(Loss) /return
per share: (0.1)p 1.7p 1.6p (0.2)p 1.0p 0.8p (0.2)p 2.2p 2.0p
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 2019
Registered Number: 03506579
As at As at As at
30 September 30 September 31 March 2019
2019 GBP'000 2018 GBP'000 GBP'000
Fixed assets
Investments held at fair value
through profit or loss 82,488 68,552 74,615
Current assets
Debtors 15,874 13,205 10,331
Cash and cash equivalents 29,893 20,655 33,185
45,767 33,860 43,516
Creditors
Amounts falling due within one
year (497) (770) (506)
Net current assets 45,270 33,090 43,010
Net assets 127,758 101,642 117,625
Capital and reserves
Called-up share capital 1,957 1,438 1,736
Share premium account 79,466 42,856 63,676
Capital redemption reserve 494 459 475
Special distributable reserve 60,911 77,110 70,094
Capital reserve (47,720) (40,566) (43,106)
Revaluation reserve 32,650 20,345 24,750
Equity shareholders' funds 127,758 101,642 117,625
Net asset value per share: 65.3p 70.7p 67.8p
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 September 2019
Called-up Share Capital Special
share premium redemption Distributable Capital Revaluation
capital account reserve* reserve* reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2019 1,736 63,676 475 70,094 (43,106) 24,750 117,625
Share issues in the
period 240 16,480 - - - - 16,720
Expenses in relation
to share issues - (690) - - - - (690)
Repurchase of shares (19) - 19 (1,130) - - (1,130)
Realised losses on disposal
of investments - - - - (3,623) - (3,623)
Investment holding gains - - - - - 7,900 7,900
Dividend paid - - - (7,828) - - (7,828)
Management fees charged
to capital - - - - (991) - (991)
Revenue loss for the
period - - - (225) - - (225)
As at 30 September 2019 1,957 79,466 494 60,911 (47,720) 32,650 127,758
*Reserve is available for distribution, total distributable reserves at
30 September 2019 are GBP13,191,000 (31 March 2019: GBP26,988,000).
Unaudited Cash Flow Statement
for the six months ended 30 September 2019
Six months Six months
ended 30 ended 30 Year ended
September September 31 March
2019 2018 2019
GBP'000 GBP'000 GBP'000
Cash flow from operating activities
Investment income received 196 276 549
Dividends received from investments 28 7 35
Deposit and similar interest received 111 54 149
Investment management fees paid (1,267) (1,016) (2,104)
Secretarial fees paid (85) (83) (166)
Other cash payments (248) (322) (450)
Net cash outflow from operating activities (1,265) (1,084) (1,987)
Cash flow from investing activities
Purchase of investments (3,600) (3,947) (8,281)
Net proceeds on sale of investments - 1,267 2,082
Net proceeds on deferred consideration 31 134 513
Net cash outflow from investing activities (3,569) (2,546) (5,686)
Cash flow from financing activities
Proceeds of fund raising 10,021 19,960 43,562
Expenses of fund raising (314) (587) (972)
Repurchase of own shares (1,098) (5,739) (6,480)
Expenses in relation to tender offer - (38) -
Equity dividends paid (7,067) 34* (5,907)
Net cash inflow from financing activities 1,542 13,630 30,203
Net (decrease)/ increase in cash
in the period (3,292) 10,000 22,530
*Dividend unclaimed after twelve years, returned to the Company.
Analysis of changes in net debt
At 1 April At 30 September
2019 Cash Flow 2019
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 33,185 (3,292) 29,893
Notes to the Unaudited Half-Yearly Results
1. The Unaudited Half-Yearly Financial Report has been prepared on the basis
of the accounting policies set out in the statutory accounts of the
Company for the year ended 31 March 2019. Unquoted investments have been
valued in accordance with IPEV Valuation Guidelines.
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 2019 and 30 September 2018 has been neither audited nor
formally reviewed. Statutory accounts in respect of the year ended 31
March 2019 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 2019 have been reported on by the
Company's auditors or delivered to the Registrar of Companies.
3. Copies of the Unaudited Half-Yearly Financial Report will be sent to
Shareholders and will be available for inspection at the Registered
Office of the Company at The Shard, 32 London Bridge Street, London, SE1
9SG.
4. 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.
Shares in
Net assets Issue
30 September
2019 GBP127,758,000 195,726,224
30 September
2018 GBP101,642,000 143,783,031
31 March 2019 GBP117,625,000 173,570,806
1. Return per share
The weighted average number of shares used to calculate the respective
returns are shown in the table below.
Shares
Six months ended 30 September
2019 195,728,848
Six months ended 30 September
2018 135,704,832
Year ended 31 March 2019 147,007,155
Earnings for the period should not be taken as a guide to the results
for the full year.
6) Income
Six months Six months
ended 30 ended 30 Year ended
September September 31 March
2019 2018 2019
GBP'000 GBP'000 GBP'000
Loan stock interest 281 278 560
Dividends 28 7 35
Deposit and similar interest received 111 55 149
420 340 744
7) Investments held at fair value through profit or loss
GBP'000
Book cost as at 1 April 2019 49,892
Investment holding gains 24,723
Valuation at 1 April 2019 74,615
Movements in the period:
Purchases 3,600
Disposal proceeds -
Realised losses* (3,654)
Investment holding gains** 7,927
Valuation at 30 September 2019 82,488
Book cost at 30 September 2019 49,838
Investment holding gains 32,650
Valuation at 30 September 2019 82,488
*Realised losses on investments in the income statement include deferred
consideration of GBP31,000 received from the sale of Thermotech
Solutions Limited.
**Investment holding gains in the income statement have been reduced by
the offset in the deferred consideration debtor of GBP27,000, relating
to Thermotech Solutions Limited.
8) Related party transactions
No Director has an interest in any contract to which the Company is a
party other than their appointment and payment as directors.
9) Transactions with the Manager
Foresight Group CI Limited acts as manager to the Company. During the
period, services of a total cost of GBP1,321,000 (30 September 2018:
GBP892,000; 31 March 2019: GBP1,992,000) were purchased by the Company
from Foresight Group CI Limited. At 30 September 2019, the amount due to
Foresight Group CI Limited was GBPnil (30 September 2018: GBP470,000; 31
March 2019: GBPnil).
During the period, administration services of a total cost of GBP85,000
(30 September 2018: GBP83,000; 31 March 2019: GBP166,000) were delivered
to the Company by Foresight Group LLP, Company Secretary. At 30
September 2019, the amount due to Foresight Group LLP was GBPnil (30
September 2018: GBP41,000; 31 March 2019: GBPnil).
10) Post-Balance sheet events
On 1 October 2019 GBP15.6 million was received into the bank, being the
remaining balance from the June 2018 fund raise.
The Company made one new investment of GBP1.5 million into Biotherapy
Services Limited in November 2019.
END
(END) Dow Jones Newswires
November 29, 2019 09:17 ET (14:17 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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