Half-year report
25/09/2024 15:39
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FORESIGHT VCT PLC
LEI: 213800GNTY699WHACF46
UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE PERIOD ENDED 30 JUNE 2024
Financial Highlights
* Total net assets £218.0 million
* Following a successful recent period of realisations, a special dividend of
7.0p per share was paid on 28 June 2024 in addition to the final dividend for
the year ended 31 December 2023 of 4.4p per share, costing £30.7 million
* Successful realisations of £34.5 million were offset by £8.9 million of
deployment and an increase of £10.6 million in the value of investments,
resulting in a decrease in the value of the investment portfolio of £15.0
million
* Net Asset Value per share decreased by 7.9% from 85.9p at 31 December 2023
to 79.1p at 30 June 2024. After adding back the 11.4p dividend paid on 28 June
2024, NAV Total Return per share was 90.5p, which made the total return for
the half-year 5.4%
* The offer for subscription launched in November 2023 was closed on 9 April
2024 and raised a total of £23.9 million after expenses
Chair’s Statement
I am pleased to present the Company’s unaudited Half‑Yearly Financial
Report for the period ended 30 June 2024.
The Company’s Net Asset Value (“NAV”), including dividends of 11.4p paid
during the period, increased by 4.6p per share to 90.5p. This represents a NAV
Total Return of 5.4% for the six months to 30 June 2024.
The UK economy showed some early signs of recovery in the first half of 2024
following the technical recession recorded in the second half of last year.
This year, two quarters of strong GDP growth have now been reported and the
headline annual inflation rate for May fell to 2%, finally reaching the Bank
of England’s target rate, before nudging up again slightly for July. The
Bank of England made its first interest rate cut at the beginning of August
and more cuts are expected this year but their timing is still unclear.
Although this period under review included the run-up to the UK general
election, the Labour victory was seen as a foregone conclusion and the markets
were relatively relaxed about this outcome, not anticipating radical changes
to fiscal or monetary policy.
The Company’s portfolio in aggregate performed well against this improving
backdrop, although some individual investee companies are still struggling
with weak consumer demand, high interest rates, inflation, supply chain issues
and labour shortages. The Manager continues to work closely with such
companies to help them manage through these difficulties. On the other hand,
other investee companies are flourishing and we are encouraged by some very
profitable exits recently as the M&A market has begun to pick up.
The overall solid performance of the Company in the first half of 2024
demonstrates the advantages of a generalist and well‑diversified portfolio.
Strategy
The Board and the Manager continue to pursue a strategy for the Company which
includes the following four key objectives:
* Growth in Net Asset Value Total Return each year above a 5% target
* Payment of annual ordinary dividends of at least 5% of the NAV per share per
annum (based on the latest announced NAV per share)
* The 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 no less
than 7.5% to the prevailing NAV per share
The Board and the Manager believe that these key objectives remain appropriate
and the Company’s performance in relation to each of them over the past six
months is reviewed in more detail below.
Net Asset Value and dividends
The NAV of the Company marginally fell over the period from £219.1 million at
31 December 2023 to £218.0 million at 30 June 2024. This was following the
payment of both an ordinary and special dividend costing the Company £30.7
million in total (including shares allotted under the dividend reinvestment
scheme).
After the successful realisations of Callen-Lenz Associates Limited and Specac
International Limited, the Board declared a special interim dividend of 7.0p
per share in addition to the final dividend for the year ended 31 December
2023 of 4.4p per share. The combined dividend of 11.4p per share was paid on
28 June 2024.
At the end of 2023, nearly four-fifths of the Company’s assets were invested
and the Board believed it would be in the Company’s best interest to raise
further funds to provide liquidity for its activities in 2024 and beyond. On
15 November 2023, the Company launched an offer for subscription to raise up
to £20 million, with an over‑allotment facility to raise up to a further
£5 million, through the issue of new shares. The offer was closed on 9 April
2024 having raised gross proceeds of £25.0 million, £23.9 million after
expenses. We would like to thank those existing shareholders who supported the
offer and welcome all new shareholders to the Company.
Callen-Lenz Associates Limited and Specac International Limited generated
proceeds of £34.2 million at completion. Since initial investment, the two
exits combined have returned to the Company a total of £35.7 million, with a
further £3.6 million of deferred consideration included within debtors as at
the period end. This is an exceptional achievement from a combined initial
investment of £6.2 million and represents a cash-on-cash multiple of 6.4
times.
The Company continues to achieve its target dividend yield of 5% of NAV, which
was set in 2019 in light of the change in portfolio towards earlier-stage,
higher-risk companies, as required by the VCT rules.
The Board and the Manager hope that this level may continue to be exceeded in
future by payment of additional “special” dividends as and when
particularly successful portfolio disposals are achieved.
Investment performance and portfolio activity
A detailed analysis of the investment portfolio performance over the period is
given in the Manager’s Review.
In brief, during the six months under review, the Manager completed three new
investments, in a range of sectors, and three follow-on investments costing
£6.4 million and £2.5 million respectively. The Company also disposed of two
investments very successfully, as described above, as well as the disposal of
three challenged businesses within the portfolio. Furthermore, the Company
received two loan principal repayments totalling £0.4 million.
The Board and the Manager are confident that a significant number of new and
follow-on investments can be achieved in 2024.
The Company and Foresight Enterprise VCT plc have the same Manager and share
similar investment policies. The Board closely monitors the extent and nature
of the pipeline of investment opportunities and is reassured by the
Manager’s confidence in being able to deploy funds without compromising
quality and to satisfy the investment needs of both companies.
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, the portfolio
companies are assessed and progress is measured against these principles. More
detailed information about the process can be found on pages 25 and 26 of the
Manager’s Review in the Unaudited Half-Yearly Financial Report.
Buybacks
During the period the Company repurchased 3,510,012 shares for cancellation at
an average discount of 7.5%, in line with its revised objective of maintaining
regular share buybacks at a discount of no less than 7.5% to the prevailing
NAV per share. The Board and the Manager consider that the ability to offer to
buy back shares at this level of discount is fair to both continuing and
selling shareholders and continues to help underpin the discount to NAV at
which the shares trade.
Share buybacks are timed to avoid the Company’s closed periods. Buybacks
will generally take place, subject to demand, during the following times of
the year:
* April, after the Annual Report has been published
* June, prior to the Half-Yearly reporting date of 30 June
* September, after the Half-Yearly Report has been published
* December, prior to the end of the financial year
Management charges, co-investment and performance incentive
The annual management fee is an amount equal to 2.0% of net assets, excluding
cash balances above £20 million, which are charged at a reduced rate of 1.0%.
This has resulted in ongoing charges for the period ended 30 June 2024 of
2.2%, which is at the lower end of the range when compared to recent cost
ratios of competitor VCTs.
Since March 2017, co-investments made by the Manager and individual members of
the Manager’s private equity team have totalled £1.3 million alongside the
Company’s investments of £110.2 million.
The co-investment scheme requires that the individual members of the team
invest in all of the Company’s investments from that date onwards and
prohibits selective “cherry picking” of co‑investments. If any
individual team member opts out of co-investment, they cannot invest in
anything during that year. The Board believes that the co‑investment scheme
aligns the interests of the Manager’s team with those of shareholders and
has contributed to the gradual improvement in the Company’s investment
performance.
In addition to the co-investment scheme, a new performance incentive scheme
was formally approved by shareholders at a general meeting of the Company held
on 15 June 2023. This scheme, in brief, is based on the Company’s investment
performance over a rolling five-year period, over which the movement in NAV
Total Return per share needs to exceed a hurdle of 25% before any performance
fee each year can be earned. The annual fee is subject to a cap of 1% of the
closing NAV at the end of the five-year period. More details on the
calculation of the performance fee can be found in note 8 of this report.
A total of £1.7 million has been accrued as an estimate of the performance
fee due in respect of this financial year, based on the Company’s
performance over the last four and a half years. Over this period I am very
pleased to report that the NAV Total Return per share has increased by 38.5p
(50.3%) before any performance incentive provision.
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 its
responsibilities. 2024 has seen some planned changes to the composition
of the Board.
After more than eight years as a Non-Executive Director, Jocelin Harris did
not stand for re-election at the AGM on 4 June 2024. On behalf of the
Company, I would once again like to thank Jocelin for his significant
contribution and dedication to the Company, which has benefited enormously
from his wise counsel during his many years of service. We will miss Jocelin
and we wish him the very best for the future.
Shareholder communication
We were delighted to meet with some shareholders in person at the AGM on 4
June 2024. We hope many of you will be available to attend our next in-person
investor forum event which will be announced in due course. These events have
proven very popular with our shareholders in the past and provide the
opportunity to learn first-hand about some of our investee companies from
their founders and management.
VCT Sunset Clause
I am pleased to report that new regulations have been made to extend the
UK’s VCT scheme by ten years to April 2035, following the European
Commission’s confirmation that they would not oppose the continuation of the
scheme. This now removes any recent uncertainty and will help support further
investment by the VCT sector in early stage companies.
Outlook
The UK economy is now improving after some challenging years, with GDP showing
relatively strong growth again in the first two quarters of this year and
headline inflation finally falling to more acceptable levels. The election of
a majority Labour government in July introduced some political stability and
its economic agenda is expected to be fiscally prudent. Consumer confidence
and business investment may now start to pick up, particularly as interest
rates begin to fall. There are also encouraging signs of more M&A activity.
While the Bank of England has recently begun to cut its base rate, the path of
future monetary loosening is still unclear, as service prices have remained
high and wage inflation stickier than previously anticipated. Any positive
economic growth for the remainder of 2024 is expected to be
modest. In addition, the first budget of the new Labour government is due at
the end of October and its impact on small businesses is not yet known. There
is also still considerable uncertainty for the global economy and geopolitical
tensions persist. Markets have recently been unsettled and skittish, and we
await the results of the US election in November which to date looks too
close to call.
Our investee companies are unquoted, small, early-growth businesses and by
their nature entail higher levels of risk and lower liquidity than larger
listed companies. Nonetheless, the Company’s current portfolio of
investments is highly diversified by number, business sector, size and stage
of development and overall has already demonstrated its relative resilience in
recent difficult economic and geopolitical circumstances. We are confident
that this approach will continue to provide some protection in future volatile
market conditions.
The Manager is continuing to see a promising pipeline of potential
investments, both new and follow-on, which are sourced nationally through its
established regional network. In addition to the funds raised earlier in the
year, we have recently announced our intention to raise further funds in the
coming months. These combined funds will provide the necessary resources to
make selective acquisitions from an increasing number of emerging investment
opportunities. Although economic growth may be subdued, and markets
potentially turbulent, in the months ahead, we believe the Company’s
generalist and diversified portfolio continues to be well positioned to
generate long-term value for shareholders.
Margaret Littlejohns
Chair
25 September 2024
Manager’s Review
James Livingston
on behalf of Foresight Group LLP Co-Head of Private Equity
Portfolio summary
As at 30 June 2024, the Company’s portfolio comprised 51 investments with a
total cost of £97.1 million and a valuation of £156.3 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 18 to 21 in the Unaudited Half-Yearly
Financial Report.
During the six months to 30 June 2024, the value of the investment portfolio
decreased by £15.0 million as a result of successful realisations of several
investments, generating £34.5 million. This was partially offset by an
increase of £10.6 million in the valuation of the remaining investments,
plus £8.9 million of new and follow-on investments.
Overall, the portfolio has performed well despite uncertainty in the market
with ongoing conflicts in Ukraine and Gaza, numerous elections taking place
worldwide, fears of a potential recession in the US and continued domestic
price inflation, coupled with high interest rates.
In line with the Board’s strategic objectives, we remain focused on growing
the Company through further development of Net Asset Value Total Return. For
the six months to 30 June 2024, Net Asset Value Total Return was 5.4% and net
assets marginally decreased by 0.5% to £218.0 million following the payment
of an 11.4p per share dividend costing the Company £30.7 million, meaning
that the Company has successfully met this objective in the period under
review.
New investments
Three new investments were completed in the six months to 30 June 2024,
investing a total of £6.4 million. The new investments were across
children’s play centres, engineering solutions and cybersecurity. Follow-on
investments totalling £2.5 million were also made in three existing investee
companies. There is a strong pipeline of opportunities that we expect to
convert during the second half of 2024.
Family Adventures Group Limited
In January 2024, the Company invested £2.5 million of growth capital into
Family Adventures Group, a provider of daycare nurseries and children’s
leisure sites that combines soft play areas with theatrical role play
facilities. All inspected sites have been rated “Good” by Ofsted and have
an average score of 9.9/10 on daynurseries.co.uk; whilst the leisure sites
have market-leading Net Promoter Scores and high repeat visits.
The investment will be used to aid the business with a continued rollout of
nursery and leisure sites across the South West and the Midlands.
Evolve Dynamics Limited
In March 2024, the Company completed a £2.0 million investment into Evolve
Dynamics. Founded in 2016, the company designs and manufactures smaller
Unmanned Aerial Systems (“UAS”) with capabilities for intelligence,
surveillance and reconnaissance. The company’s UAS products are also widely
deployed within UK and international police forces, fire services, energy
inspection and search & rescue organisations. The investment will help scale
the business and aid in new product launches.
Lepide Group Holding Company Limited
In March 2024, the Company invested £1.9 million into Lepide, a cyber
security software solution that helps organisations to protect their
unstructured data. Lepide actively monitors event logs within Windows Active
Directory in order to detect suspicious activity and help organisations to
manage over‑exposure of data. The investment will help scale the business
and accelerate growth initiatives.
Follow-on investments
The Company has made follow-on investments in three companies during the six
months to 30 June 2024, totalling £2.5 million. Further details of each of
these are provided opposite.
The additional equity injections in the period were used to support further
growth plans, such as launching new products and expansion of commercial
capabilities. We continue to successfully navigate the volatility that has
been felt across the markets over the course of the year, and remain vigilant
about the health of the portfolio and the need for follow-on funding during
the second half of 2024. Given the size of the portfolio, further
opportunities to deploy capital into growing existing investments are
expected.
HomeLink Healthcare Limited
In March 2024, the Company completed a £1.0 million follow‑on investment
into HomeLink Healthcare. The Company first invested into HomeLink in March
2022. Contracting with the NHS, the business provides patients with wound
care, physiotherapy and intravenous therapies in their own home. HomeLink is
also a leader in remote patient monitoring practices, offers a virtual ward
solution and has now saved the NHS over 150,000 hospital bed days. The
investment will support the organic expansion of the company.
Hexarad Group Limited
In June 2024, the Company completed a £0.7 million follow-on investment into
Hexarad Group. The Company initially invested £0.8 million into Hexarad in
June 2021, which preceded a £0.7 million follow-on in August 2022. Hexarad is
a teleradiology company, supporting NHS and private healthcare providers with
access to a diversified pool of radiologists in order to provide fast,
accurate diagnosis and enable more timely and higher quality patient care. The
latest investment forms part of a larger funding round, including a new
third-party investor, to support the ongoing development of the technology, as
well as the expansion of the commercial and operational teams.
Sprintroom Limited
In March 2024, the Company completed a £0.8 million follow‑on investment
into 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 drive continued revenue growth and
develop further iterations of the new product range.
Post period end activity
After the period end, the Company completed three follow‑on investments
totalling £2.2 million into NorthWest EHealth Limited, which provides
software and services to the clinical trials market; Strategic Software
Applications Ltd, a London-based SaaS technology provider supporting financial
institutions in meeting their regulatory compliance obligations; and Red Flag
Alert Technology Group Limited, a Manchester-based proprietary SaaS
intelligence platform with modular capabilities spanning compliance,
prospecting, risk management and financial health assessments.
Realisations
The M&A climate has proven more challenging in recent years in light of
macroeconomic conditions, including higher interest rates and geopolitical
uncertainty alluded to above. Despite this, we are pleased to report the
particularly strong realisations of Callen-Lenz Associates Limited and Specac
International Limited, as well as the disposal of three challenged businesses
within the portfolio: Ollie Quinn Limited, Crosstown Dough Limited and So-Sure
Limited. We continue to engage with a range of potential acquirers of several
portfolio companies and to carefully consider the timing of exit for each.
Demand from both private equity and trade buyers remains for high-quality,
high‑growth businesses.
Callen-Lenz Associates Limited
In May 2024, the Company achieved the successful exit of Callen-Lenz
Associates, returning £23.0 million to the Company. Including a further £2.9
million of earnout recognised at the period end, the sale implies a 5.4 times
cash-on-cash return on the total investment made of £4.8 million, equivalent
to an IRR of 123%. Since investment, we have worked with the board to expand
both non-executive and executive leadership, which led to successful product
launches and a significant increase in headcount and revenue. With the
business focus successfully transitioned from R&D to commercial sales, the
exit will facilitate continued growth.
Ollie Quinn Limited
In January 2024, following a period of challenging trading driven by continued
wage inflation and a squeeze on consumer discretionary spend, the Company
exited the UK division of Ollie Quinn, a branded retailer of prescription
glasses, sunglasses and non‑prescription polarised sunglasses based in the
UK and Canada. The exit returned £0.2 million on completion. A sale of the
remaining Canadian business to its management team was completed in February
2024, with us negotiating a retained interest which may deliver future upside
for the Company.
Specac International Limited
In March 2024, the Company announced the sale of Specac International, a
leading manufacturer of high-specification sample analysis and preparation
equipment used in testing and research laboratories worldwide, primarily
supporting infrared spectroscopy. The transaction generated proceeds of £11.2
million at completion. When added to £1.5 million of cash returned pre-exit,
this implies a total cash-on-cash return of 9.4x, equivalent to an IRR of 33%,
with a further £704,000 of deferred consideration recognised at the period
end. Since investment, the business has grown to sell globally through both
original equipment manufacturers (“OEMs”) and distributors. We also
engaged with the team to support management team changes, improvements in
governance, headcount and numerous product launches, as well as a major site
move. The exit will facilitate the continued growth of the business.
Crosstown Dough Ltd
In June 2024, the Company realised its investment in Crosstown Dough, a
doughnut vendor operating from 31 sites including a mix of bricks and mortar,
food trucks and market stalls. Crosstown’s core products are made at its
central production unit in Battersea. The sale of Crosstown to Karali Group, a
large franchise operator of Burger King in the UK and US, allowed
distributions to be made to creditors whilst facilitating the continuation of
the business. Like Ollie Quinn, the business had been impacted by wage and
supply chain inflation.
So-Sure Limited
In March 2024, the investment in So-Sure was fully written off as it failed to
perform in line with the management plan proposed at the Manager’s
Investment Committee. So-Sure Limited is a technology company acting as
“Managing General Agent” for insurers. The company’s mission is to offer
a more trusted proposition, greater pricing transparency and improved customer
experience through its customer-centric digital platform.
Realisations in the period ended 30 June 2024
Accounting Exit proceeds
cost at date and deferred
Total invested of disposal consideration Total return
Company Detail (£) (£) (£) (£)
Callen-Lenz Associates Limited (1) Full disposal 4,826,733 4,826,733 25,919,367 25,919,367
Specac International Limited (2) Full disposal 1,345,000 800,000 11,876,787 13,377,031
Ollie Quinn Limited (3) Full disposal 6,684,016 6,684,016 580,451 584,615
Crosstown Dough Ltd Full disposal 1,485,149 1,485,149 — —
So-Sure Limited (4) Full disposal 1,584,158 1,584,158 11,429 11,429
Spektrix Limited Loan repayment 263,371 263,371 263,371 263,371
Positive Response Corporation Ltd Loan repayment 100,000 100,000 100,000 100,000
16,288,427 15,743,427 38,751,405 40,255,813
1. Includes £2.9 million of deferred consideration which has been recognised
within debtors.
2. Includes £704,000 of deferred consideration which has been recognised
within debtors.
3. Includes £385,000 of deferred consideration which has been recognised
within debtors. The Company has retained a 25% stake in the company’s
remaining Canadian business.
4. Includes £11,000 of deferred consideration which has been recognised
within debtors.
Pipeline
As at 30 June 2024, the Company had cash reserves of £59.0 million, which
will be used to fund new and follow‑on investments, buybacks, dividends and
corporate expenditure. We are seeing a strong pipeline of new opportunities,
with several opportunities in due diligence or in exclusivity, with further
deal completions expected to be announced in the months to follow.
The outlook for the UK economy is more favourable during the year to date,
with inflation returning to historic norms over the last 12 months. Consumer
spending remains squeezed however, resulting from stubbornly higher interest
rates and the effects of recent high inflation still being felt. Conflicts in
Ukraine and Gaza continue to impact supply chains and erode confidence. Global
markets have proven to be exceptionally volatile so far in 2024, which
recently gave rise to some concern within the market about a US recession
which would have far-reaching consequences globally.
Against this unsettled backdrop, the UK economy is performing reasonably well
and UK companies continue to seek both the capital and experience to help
deliver growth in uncertain times.
With a broad network of deal introducers across the UK and internationally,
and through its growing network of regional offices, we continue to see a
large volume of attractive investment opportunities. This is not expected to
change in the medium term. We continue to pursue a balanced strategy,
targeting companies from a range of sectors and at different stages of
maturity to combat market volatility.
Key portfolio developments
Material changes in valuation, defined as increasing or decreasing by £1.0
million or more since 31 December 2023, are detailed below. Updates on
these companies are included on page 13 and in the Top Ten Investments
section on pages 18 to 21 in the Unaudited Half-Yearly Financial Report.
Key valuation changes in the period
Valuation Net movement
Company methodology (£)
TLS Management Limited Discounted earnings multiple 2,135,763
Spektrix Limited Price of last funding round 1,664,010
Hexarad Group Limited Price of last funding round 1,639,897
Hospital Services Group Limited Discounted earnings multiple 1,567,046
Itad (2015) Limited Discounted earnings multiple 1,018,565
Nano Interactive Group Limited Discounted revenue multiple (1,038,058)
Aerospace Tooling Corporation Limited Discounted earnings multiple (1,062,824)
Outlook
2024 has so far been a year of market volatility. Global markets performed
strongly in the first six months of the year, with US indexes such as the S&P
500 and NASDAQ delivering consistent gains, albeit largely driven by a handful
of high‑performing technology companies. Increasing unemployment rates
created a sense of anxiety in the US whilst volatility across the market is
expected to continue in the medium term as a result of the ongoing wars in
Europe and Gaza, which threaten to morph into global conflicts. In addition,
nations representing approximately half of the global population are holding
or have held elections in 2024, with the polarising US election taking place
later in the year. This political uncertainty deepens the sense of instability
in the markets.
Despite this challenging backdrop, the UK economy continues to perform
relatively well. The FTSE 100 has shown steady gains throughout the year,
rather than the significant gains and losses driven by highly valued
technology companies seen in the US. GDP growth forecasts for the year are
modest but exceed the expectations set earlier in 2024. Inflation has returned
to historic levels, despite evidence which suggests that increased costs
continue to be passed on to consumers, eroding spending power. As a result,
the base interest rate has been held at over 5% until August, with further
reductions likely to be measured. The first Labour government in over a decade
appears relatively moderate and business-friendly, but is yet to announce its
first budget, which could have wide‑ranging consequences for small
businesses in the UK.
In light of the volatile global economy and geopolitical environment, and a UK
economy that is showing moderate signs of growth, the Company has performed
well in the year to date. NAV Total Return in the year to date is 5.4%. Strong
exits from Specac and Callen-Lenz have significantly contributed to the 11.4p
dividend paid in June, with a very attractive dividend yield of 15.7%. The
disappointing exits of So-Sure, Ollie Quinn and Crosstown, however, exemplify
the current challenges faced by businesses linked to consumer spending. The
Company maintains a balanced portfolio across different sectors and stages of
the business lifecycle, which should stand it in good stead to face the
volatility ahead. The Manager’s hands-on approach to challenges and exit
planning continues to add value to its portfolio companies.
Looking to the remainder of 2024 and beyond, it would be reasonable to expect
further volatility given the geopolitical and economic environment. The US
election could have far-reaching consequences, while few concrete details have
yet emerged on the new UK government's first budget. Interest rates are likely
to remain relatively high in the medium term, although this may create
opportunities for equity investors to support SMEs put off by the cost of
debt.
On the optimistic side, the UK’s relatively low market volatility and
moderate government should mean it remains an attractive place to do business.
We expect to see continuing interest in UK companies as acquisition targets
for overseas corporations. The UK continues to invest heavily in innovation
through world-class universities and support networks, generating a good flow
of attractive investment opportunities for the Manager.
The Manager is pleased with the performance in the year to date, with a
successful fundraising, high-potential new investments and attractive exits.
With inflation returning to historic norms and consumer confidence hopefully
improving, there is cause for some optimism looking to the future. Crucially,
the portfolio remains diversified across sectors and with a mix of
higher-growth and cash-generative businesses, the Company is resilient to
headwinds and challenges. The Company has further strengthened its position in
the VCT market, which remains an important source of capital for UK
entrepreneurs.
James Livingston
on behalf of Foresight Group LLP
Co-Head of Private Equity
25 September 2024
Unaudited Half-Yearly Results And Responsibilities Statements
Principal risks and uncertainties
The principal risks faced by the Company are as follows:
* Market risk
* Strategic and performance risk
* Internal control risk
* Legislative and regulatory risk
* VCT qualifying status risk
* Investment valuation and liquidity risk
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Accounts for the year ended 31 December
2023. A detailed explanation can be found on pages 50 to 52 of the Annual
Report and Accounts, which is available on the Company’s website
www.foresightvct.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. The emerging risks identified in the
previous report included those of climate change, inflationary pressures,
interest rates, supply chain issues, energy prices, the Russian invasion of
Ukraine, conflict in the Middle East and increased tension between the United
States and China over the future of Taiwan. These emerging risks continue to
apply and be monitored. The Board and the Manager continue to follow all
emerging risks closely with a view to identifying where changes affect the
areas of the market in which portfolio companies operate. This enables the
Manager to work closely with portfolio companies, preparing them so far as
possible to ensure they are well positioned to endure potential volatility.
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.
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
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 Chair’s Statement, Strategic Report and Notes to the Accounts of the 31
December 2023 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
Margaret Littlejohns
Chair
25 September 2024
Unaudited Income Statement
For the six months ended 30 June 2024
Six months ended 30 June 2024 (Unaudited) Six months ended 30 June 2023 (Unaudited) Year ended 31 December 2023 (Audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Realised gains on investments — 20,950 20,950 — 3,595 3,595 — 14,573 14,573
Investment holding (losses)/gains — (6,372) (6,372) — 5,048 5,048 — 2,833 2,833
Income 2,173 — 2,173 1,915 — 1,915 5,372 — 5,372
Investment management fees (541) (3,340) (3,881) (503) (2,619) (3,122) (1,004) (4,481) (5,485)
Other expenses (374) — (374) (438) — (438) (817) — (817)
Return on ordinary activities before taxation 1,258 11,238 12,496 974 6,024 6,998 3,551 12,925 16,476
Taxation (263) 263 — (93) 93 — (476) 476 —
Return on ordinary activities after taxation 995 11,501 12,496 881 6,117 6,998 3,075 13,401 16,476
Return per share 0.4p 4.3p 4.7p 0.4p 2.6p 3.0p 1.3p 5.6p 6.9p
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
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.
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.
Unaudited Reconciliation Of Movements In Shareholders’ Funds
For the six months ended 30 June 2024
Called-up Share Capital
share premium redemption Distributable Capital Revaluation
capital account reserve reserve (1) reserve (1) reserve Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 January 2024 2,552 92,766 1,263 24,876 27,170 70,492 219,119
Share issues in the period 238 20,216 — — — — 20,454
Expenses in relation to share issues — (637) — — — — (637)
Repurchase of shares (35) — 35 (2,748) — — (2,748)
Realised gains on disposal of investments — — — — 20,950 — 20,950
Investment holding losses — — — — — (6,372) (6,372)
Dividends paid — — — (30,714) — — (30,714)
Management fees charged to capital — — — — (3,340) — (3,340)
Revenue return for the period before taxation — — — 1,258 — — 1,258
Taxation for the period — — — (263) 263 — —
As at 30 June 2024 2,755 112,345 1,298 (7,591) 45,043 64,120 217,970
1. Reserve is available for distribution; total distributable reserves at 30
June 2024 total £37,452,000 (31 December 2023: £52,046,000).
Unaudited Balance Sheet
At 30 June 2024
Registered number: 03421340
As at As at As at
30 June 30 June 31 December
2024 2023 2023
(Unaudited) (Unaudited) (Audited)
£’000 £’000 £’000
Fixed assets
Investments held at fair value through profit or loss 156,332 171,153 171,348
Current assets
Debtors 5,495 4,545 3,510
Cash and cash equivalents 58,984 36,938 46,200
Total current assets 64,479 41,483 49,710
Creditors
Amounts falling due within one year (2,841) (1,632) (1,939)
Net current assets 61,638 39,851 47,771
Net assets 217,970 211,004 219,119
Capital and reserves
Called-up share capital 2,755 2,455 2,552
Share premium account 112,345 81,297 92,766
Capital redemption reserve 1,298 1,222 1,263
Distributable reserve (7,591) 35,652 24,876
Capital reserve 45,043 17,671 27,170
Revaluation reserve 64,120 72,707 70,492
Equity shareholders’ funds 217,970 211,004 219,119
Net Asset Value per share 79.1p 85.9p 85.9p
Unaudited Cash Flow Statement
For the six months ended 30 June 2024
Six months Six months Year ended
ended ended 31 December
30 June 2024 30 June 2023 2023
(Unaudited) (Unaudited) (Audited)
£’000 £’000 £’000
Cash flow from operating activities
Loan interest received from investments 532 850 2,212
Dividends received from investments 206 580 1,525
Other income received from investments — — 284
Deposit and similar interest received 1,233 487 1,326
Investment management fees paid (2,168) (2,011) (4,014)
Performance incentive fee paid (1,467) — —
Secretarial fees paid (33) (65) (130)
Other cash payments (238) (340) (631)
Net cash (outflow)/inflow from operating activities (1,935) (499) 572
Cash flow from investing activities
Purchase of investments (8,880) (8,721) (19,352)
Net proceeds on sale of investments 34,526 14,515 33,566
Net proceeds on deferred consideration 2,168 — 1,171
Net cash inflow from investing activities 27,814 5,794 15,385
Cash flow from financing activities
Proceeds of fundraising 14,604 23,692 33,547
Expenses of fundraising (521) (589) (599)
Repurchase of own shares (1,992) (2,313) (5,755)
Equity dividends paid (25,186) (8,672) (16,475)
Net cash (outflow)/inflow from financing activities (13,095) 12,118 10,718
Net inflow of cash in the period 12,784 17,413 26,675
Reconciliation of net cash flow to movement in net funds
Increase in cash and cash equivalents for the period 12,784 17,413 26,675
Net cash and cash equivalents at start of period 46,200 19,525 19,525
Net cash and cash equivalents at end of period 58,984 36,938 46,200
Analysis of changes in net debt
At 1 January At 30 June
2024 Cash flow 2024
£’000 £’000 £’000
Cash and cash equivalents 46,200 12,784 58,984
Notes To The Unaudited Half-Yearly Results
For the six months ended 30 June 2024
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 December 2023. 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 June 2024 and
30 June 2023 has been neither audited nor formally reviewed. Statutory
accounts in respect of the year ended 31 December 2023 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 December 2023
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 via their chosen method 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.
Number of
Net assets shares in issue
30 June 2024 £217,970,000 275,478,783
30 June 2023 £211,004,000 245,495,673
31 December 2023 £219,119,000 255,218,477
5 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 June 2024 268,125,349
Six months ended 30 June 2023 232,668,471
Year ended 31 December 2023 240,044,732
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 ended Year ended
30 June 30 June 31 December
2024 2023 2023
£’000 £’000 £’000
Loan stock interest 734 848 2,237
Dividends receivable 206 580 1,525
Deposit and similar interest received 1,233 487 1,326
Other income — — 284
2,173 1,915 5,372
7 Investments at fair value through profit or loss
£’000
Book cost as at 1 January 2024 103,944
Investment holding gains 67,404
Valuation at 1 January 2024 171,348
Movements in the period:
Purchases 8,880
Disposal proceeds (1) (34,526)
Realised gains (2) 18,782
Investment holding losses (3) (8,152)
Valuation at 30 June 2024 156,332
Book cost at 30 June 2024 97,080
Investment holding gains 59,252
Valuation at 30 June 2024 156,332
1. The Company received £34,526,000 from the disposal of investments during
the period. The book cost of these investments when they were purchased was
£15,744,000. 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 Codeplay Software Limited (£1,030,000), Mowgli Street Food
Group Limited (£824,000), Datapath Group Limited (£292,000) and Mologic Ltd
(£22,000).
3. Investment holding losses in the Income Statement include the deferred
consideration debtor increase of £1,780,000. The debtor movement reflects the
recognition of amounts receivable from Callen-Lenz Associates Limited
(£2,853,000), Specac International Limited (£704,000), Ollie Quinn Limited
(£386,000) and So-Sure Limited (£11,000) offset by receipts from Codeplay
Software Limited (£1,030,000), Mowgli Street Food Group Limited (£824,000),
Datapath Group Limited (£292,000) and Mologic Ltd (£22,000) and a provision
made against the balance potentially due from Ixaris Systems Ltd (£6,000).
8 Performance incentive fee
In order to incentivise the Manager to generate enhanced returns for
shareholders, the Manager will potentially be entitled to performance
incentive payments in respect of each financial year commencing on or after 1
January 2023 where the Company achieves an average annual NAV Total Return per
share, over a rolling five-year period, in excess of an average annual hurdle
of 5% (simple not compounded). If the hurdle is met, the Manager would be
entitled to an amount equal to 20% of the excess over the hurdle subject to a
cap of 1% of the closing Net Asset Value for the relevant financial year (and
no fee will be due in excess of this cap).
Where there is a negative return in the relevant financial year, no fee shall
be payable even if the hurdle is exceeded. However, the potential fee will be
carried forward and will become due at the end of the next financial year if
the performance hurdle described above for that next financial year is
achieved and the negative return in the preceding financial year is recovered
in that next financial year. Any such catch-up fees shall be paid alongside
any fee payable for the next financial year subject to the 1% cap applying to
both fees in aggregate. Any such catch-up fees cannot be rolled further
forward to subsequent financial years.
The new performance incentive scheme, as described above and in the Chair’s
Statement of the Company’s 31 December 2023 Annual Report and Accounts, was
formally approved by shareholders at the General Meeting held on
15 June 2023. The first performance incentive payment under this scheme of
£1,467,000 relating to the year ended 31 December 2023 was made on 30 April
2024.
Estimation of the financial effect
As at 30 June 2024, the NAV Total Return since 31 December 2019 was 38.5p
(being the aggregation of NAV per share as at 30 June 2024, before any
performance incentive provision, of 79.7p and dividends paid per share in the
period totalling 35.3p less the NAV per share as at 31 December 2019 of
76.5p) giving an average annual NAV Total Return per share of 7.7p. This
compares to the average annual hurdle of 3.8p based on the opening NAV per
share of 76.5p as at 31 December 2019 and therefore an excess of 3.9p over the
hurdle.
If NAV Total Return for the year ending 31 December 2024, the Net Asset Value
of the Company as at 31 December 2024 and the weighted average number of
shares in issue over the five‑year period to 31 December 2024 remained
unchanged from their positions as at 30 June 2024, the Manager would be
entitled to a performance incentive payment of £1.7 million, which has been
provided for in the financial statements.
9 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.
10 Transactions with the Manager
Foresight Group LLP was appointed as Manager on 27 January 2020 and earned
fees of £2,165,000 up to 30 June 2024 (30 June 2023: £2,011,000, 31 December
2023: £4,018,000). Performance incentive fees of £1,716,000 have been
accrued as at 30 June 2024 (30 June 2023: £1,111,000, 31 December 2023:
£1,467,000).
Foresight Group LLP is the Company Secretary (appointed in November 2017) and
received, directly and indirectly, for accounting and company secretarial
services, fees of £65,000 during the period (30 June 2023: £65,000, 31
December 2023: £130,000).
At the balance sheet date there was £33,000 due to Foresight Group LLP (30
June 2023: £nil, 31 December 2023: £4,000).
A copy of the Unaudited Half-Yearly Financial Report will be submitted to the
National Storage Mechanism in accordance with UK Listing Rules
(“UKLR”)11.4.1 / UKLR 6.4.1 and UKLR 6.4.3.
END
For further information, please contact:
Company Secretary
Foresight Group LLP
Contact: Stephen Thayer Tel: 0203 667 8100
Investor Relations
Foresight Group LLP
Contact: Andrew James Tel: 0203 667 8181