Final Results
28/04/2023 16:05
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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 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 £6.9 million and three follow-on investments
costing £2.1 million were made during the year
* The Company fully exited its investments in TFC Europe Limited and Codeplay
Software Limited, realising gains of £17.3 million in the year and returning
proceeds of £19.7 million to the Company
* In the year, the valuation of investments increased by £8.7 million (2021:
£22.3 million)
* An interim dividend of 3.5p per share was paid on 30 June 2022, returning
£6.9 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 £8.1 million to Shareholders
* The offer for subscription launched in October 2022 was closed on 26 April
2023 and raised a total of £21.7 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 £20.0 million, offset by 14 companies
recording an aggregate fall in valuation of £11.3 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 £6.9 million and £2.1 million respectively. The Manager
also fully disposed of two investments, generating proceeds of £19.7 million
with a further £0.4 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 £5.0
million in Sprintroom Limited (£1.0 million), Firefish Software Limited
(£1.5 million), Five Wealth Limited (£0.7 million) and Red Flag Alert
Limited (£1.8 million). The Company also completed four follow-on investments
with an aggregate cost of £2.7 million in IMMJ Systems Limited (£0.7
million), NorthWest EHealth Limited (£1.5 million), Ten Health & Fitness
Limited (£0.4 million) and Additive Manufacturing Technologies Ltd (£0.1
million). Furthermore, the Company realised its holdings in Innovation
Consulting Group Limited and Datapath Group Limited. The two exits combined
generated proceeds of £17.0 million at completion with a further £2.3
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 £22.6
million, £21.7 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 £6.9 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
£8.1 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 £280,000 has been recognised as
at 31 December 2022 (2021: £nil).
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 £69.9 million and a valuation of £112.0 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 £8.7 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 £138.5 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 £6.9 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
£2.1 million were also made
Homelink Healthcare Limited
In March 2022, the Company invested £1.1 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 £1.6 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 £1.7 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 £2.5 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 £2.1 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 £0.5 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 £0.7 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 £0.9 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 £15.4 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 £4.3 million, representing an
exceptional return of 15.9x and an IRR
of nearly 100%.
Realisations in the year ended 31 December 2022
Accounting cost at date of disposal Proceeds Realised gain Valuation at 31 December 2021
Company Detail (£) (£) (£) (£)
TFC Europe Limited Full disposal 2,149,307 15,407,883 13,258,576 10,330,550
Codeplay Software Limited (1) Full disposal 300,000 4,300,599 4,000,599 1,697,425
Spektrix Limited Loan repayment 618,000 618,000 — 618,000
Specac International Limited Loan repayment 500,000 500,000 — 500,000
Positive Response Corporation Ltd Loan repayment 125,000 125,000 — 125,000
Total disposals 3,692,307 20,951,482 17,259,175 13,270,975
1. A further £418,000 of deferred consideration has been reflected in the
accounts.
Pipeline
At 31 December 2022, the Company had cash reserves of £24.8 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, £1.0 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, £0.7 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 £1.5 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 £1.5 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 £0.4
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 £0.7 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 £1.8 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 £0.1 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 £6.8 million
at completion. When added to £0.7 million of cash returned to date, this
implies a total cash-on-cash return of 4.5 times the capital of £1.65 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 £10.2 million at completion with an additional £2.3 million
payable over the next 24 months. When added to £10.8 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 £7 million
to £25 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 £8.7 million.
Material changes in valuation, defined as increasing or decreasing by £1.0
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 (£)
Callen-Lenz Associates Limited Discounted revenue multiple 2,865,819
Hospital Services Group Limited Discounted earnings multiple 1,174,683
Spektrix Limited Price of last funding round 1,047,483
Innovation Consulting Group Limited (1) Discounted offer received (1,702,886)
Biofortuna Ltd Discounted revenue multiple (1,845,281)
Biotherapy Services Limited Nil value (2,378,376)
Datapath Group Limited (2) Discounted offer received (3,672,136)
1. £904,000 of this valuation decrease was recovered upon final exit in March
2023.
2. £1,941,000 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 2022 Year ended 31 December 2021
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’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 share (0.2)p 3.3p 3.1p 0.1p 11.1p 11.2p
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
Year ended 31 December Called-up share capital Share premium account Capital redemption reserve Distributable reserve (1) Capital reserve (1) Revaluation reserve Total
2022 £’000 £’000 £’000 £’000 £’000 £’000 £’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
Year ended 31 December Called-up share capital Share premium account Capital redemption reserve Distributable reserve (1) Capital reserve (1) Revaluation reserve Total
2021 £’000 £’000 £’000 £’000 £’000 £’000 £’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 £24,516,000 (2021: £26,283,000).
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 December 2022 As at 31 December 2021
£’000 £’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 31 December 2022 Year ended 31 December 2021
£’000 £’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 2022 Cash flow At 31 December 2022
£’000 £’000 £’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: 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 £138,450,000 £133,246,000
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
£’000 £’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 www.foresightenterprisevct.com.
1. Income
Year ended Year ended
31 December 31 December
2022 2021
£’000 £’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
£’000 £’000
Unquoted investments 111,966 115,238
£’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 £20,951,000 (2021: £12,700,000) from the disposal of
investments during the year. The book cost of these investments when they were
purchased was £3,692,000 (2021: £6,937,000). 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 (£1,000), Accrosoft Limited (£23,000), FFX
Group Limited (£79,000) and Ixaris Systems Ltd (£131,000).
3. Investment holding losses in the Income Statement include the deferred
consideration debtor increase of £102,000. The debtor movement reflects the
recognition of amounts receivable in respect of Codeplay Software Limited
(£418,000) and FFX Group Limited (£79,000), offset by receipts in respect of
Accrosoft Limited (£23,000), FFX Group Limited (£79,000) and Ixaris Systems
Ltd (£131,000) and provisions made against balances in respect of Mologic
Ltd. (£157,000) and Accrosoft Limited (£5,000).
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 £2,724,000 in the year ended 31 December 2022 (2021: £2,416,000).
Although no performance fee was paid in the year (2021: £nil), a liability of
£280,000 has been recognised as at the year end (2021: £nil).
Foresight Group LLP is the Company Secretary (appointed in November 2017) and
received accounting and company secretarial services fees of £178,000 during
the year (2021: £161,000).
At 31 December 2022, the amount due to Foresight Group LLP was £nil (2021:
£nil).
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