Foresight Ent Regulatory News (FTF)

26 Apr 2005 15:59

Foresight 4 VCT PLC26 April 2005 Foresight 4 VCT plc Chairman's Statement Investment Objective The objective of Foresight 4 VCT plc (formerly Advent 2 VCT plc) is to provideprivate investors with attractive returns from a portfolio of investments infast growing unquoted technology-based companies in the United Kingdom. It isthe intention to maximise the tax-free income available to investors from acombination of dividends and interest received on investments and thedistribution of capital gains arising from trade sales or flotations. Summary • The Company's Manager was changed to Foresight Venture Partners in July 2004,the investment policy changed and the Company's name became Foresight 4 VCT plc. • New funds are being raised to enable the Company to participate in newinvestment opportunities generated from Foresight Venture Partners' strong dealflow. • To date the Company has raised £0.75 million from existing shareholders. A newoffer will be extended to the general public on or around 1 July 2005 to raisethe balance of up to £25 million. • Realisations of two investments were achieved during the year, DNA ResearchInnovations (£1.5m in November 2004 plus an earn out over the next 18 months ofup to £1.4m) and PrismTech (£0.2m). • As a result of these realisations the Company's bank borrowings of £1 millionhave been repaid. • The Company invested some £613,000 in follow on funding rounds in sixportfolio companies, namely Adeptra (£7,000), Advanced Visual Technology(£50,000), EnSeal Systems (£250,000), IPV (£42,000), Nomad Software (£246,000)and Reqio (£18,000). • The net asset value per share fell from 44.3p per share as at 29 February 2004to 30.1p per share at 30 September 2004 and then increased to 34.0p per share asat 28 February 2005. Venture Capital Trust Status Foresight 4 VCT plc has been granted approval as a Venture Capital Trust (VCT)under section 842AA of the Income and Corporation Taxes Act 1988 and it isintended that the business of the Company be carried on so as maintain its VCTstatus. Change of Manager, Name, Directors and Investment Policy On 30 July 2004, following shareholders' approval, Foresight Venture Partnerstook over the management of the Company from Advent Fund Managers Limited andthe name of the Company was changed to Foresight 4 VCT plc from Advent 2 VCTplc. Sir Peter Williams and Sir David Cooksey resigned as Directors whilePhilip Stephens and I agreed to remain as a Director and Chairman respectively.Bernard Fairman and Peter Dicks joined the Board. Bernard is one of the twofounder partners of Foresight Venture Partners which has been a successfultechnology sector investor for over 20 years. Foresight Venture Partnerslaunched and manage Foresight Technology VCT plc, the most successful VCT sincelaunch in 1997, has recently launched Foresight 2 VCT plc, they also took overthe management of Foresight 3 VCT plc (formerly Advent VCT plc) at the same timeas taking over the management of this Company, and they currently co-manageTriVest VCT plc. Peter was a founder director in 1973 of Abingworth plc, aventure capital company, and is a director of a number of listed and unquotedcompanies, including Chairman of Foresight Technology VCT plc, Foresight 2 VCTplc and Unicorn AIM VCT plc. Following the Annual General Meeting, I shall relinquish the Chairmanship infavour of Peter Dicks but will remain on the Board as a Director. Having spentmany years in the venture capital industry, Peter is highly experienced both asa director and chairman and I wish him every success as the new Chairman ofForesight 4 VCT plc. After taking over the management of the Company, Foresight Venture Partnerscarried out a detailed review of portfolio valuations as at 31 August 2004 and,reflecting their prudent basis of valuation and the impact of current tradingconditions, a considerable number of changes were made to previous valuations -both upwards as well as downwards - with the overall effect of reducing the netasset value of the Company from 44.3p per share as at 29 February 2004 to 30.4pper share as at 31 August 2004. Reflecting inter alia the impact ofrealisations and terms of proposed funding rounds, the net asset value hasincreased subsequently to 34.0p per share as at 28 February 2005. I believe Foresight Venture Partners have already started to improve theprospects for the portfolio and to increase the likelihood of generatingpositive returns for shareholders. After more than three difficult years,certain of our portfolio companies are now enjoying improved trading conditions,are winning orders and also have limited projected funding requirements.However, despite these conditions, others have still found current tradingconditions to be difficult. Offers for Subscription to raise up to £25m Following shareholder approval at an Extraordinary General Meeting on 28February, the Board announced its intention, to raise up to £25m through offersfor subscription of new shares and to restructure the share capital to createshares of 1p each. The first offer was formally made on 18 March to existingshareholders, offering the opportunity to subscribe up to £5m for new shares ata price which was a 10% discount to the latest published net asset value. Todate £0.75 million has been raised from existing shareholders. This offer closeson 30 April 2005. A further offer will be made to the general public to raisethe balance of up to £25m by issuing new shares at the prevailing net assetvalue (but without such a discount) plus related issue expenses. New capital from the offer for subscription will enable the Company to startmaking new investments, including co-investing alongside other funds managed oradvised by Foresight Venture Partners. Additional capital is expected to begenerated from the realisation of existing portfolio investments, which willalso be used to make new investments, but this may take some time. The restructuring approved at the Extraordinary General Meeting will becompleted following the close of the current offer to shareholders as thefurther offer to the general public will now not be made until on or around 1July 2005. The net effect of the restructuring will ultimately be to consolidatethree existing shares of 5p each into one new share of 1p each but this will notaffect the value of your aggregate shareholding in the Company. Borrowing During 2003, the Company became increasingly constrained by its lack of cash tomeet its various operating and investment requirements and consequently aborrowing facility was arranged with the Company's bankers, of which some £1million was drawn down as at 31 August 2004. However, I am pleased to notethat, as a consequence of the realisations of the investments in DNA ResearchInnovations in October 2004 and PrismTech in February 2005, these borrowingshave been fully repaid, leaving sufficient cash resources for operating andsupporting the existing portfolio. The Company still retains access to a £0.5million bank facility if required. Investment Activity During the year to 28 February 2005, some £613,000 was invested in follow-onfunding rounds in six portfolio companies, namely Adeptra (£7,000), AdvancedVisual Technology (£50,000), EnSeal Systems (£250,000), IPV (£42,000), NomadSoftware (£246,000) and Reqio (£18,000). No new investments were made. In October 2004, the investment in DNA Research Innovations was acquired byInvitrogen Corporation of the USA for £1.5m in cash rising to £2.9m if certaintechnical milestones are achieved by April 2006, nearly three times the £1m costof the original investment. The prospects of several other portfolio companies are continuing to improve.Footfall, INCA Digital and Casella have produced good trading performances;Healthgain continues to develop successfully in a tough market; and in March2005, Vectorcommand secured significant new investment which is expected toaccelerate growth, particularly from US sales. Balance Sheet The net asset value per share as at 28 February 2005 was 34.0p compared with44.3p as at 29 February 2004. The Company continues to exceed the 70% minimumrequirement set by the Inland Revenue for qualifying holdings, therebymaintaining continued Venture Capital Trust status. The outstanding loan of £1million was repaid on 23 November 2004. Valuation Policy Unquoted investments have been valued in accordance with guidelines issued bythe British Venture Capital Association except that listed securities are valuedat mid-market prices with no discount applied. Investments are carried on thebasis of fair value after applying the most appropriate method of valuation,reflecting all factors considered material by the Manager. International Financial Reporting Standards ("IFRS") The Board notes that the EC Regulation No. 1606/2002 requiring all listedcompanies which prepare consolidated accounts to produce these under IFRS mayhave an impact on the Company's financial reporting requirements. These elementswill be monitored and assessed with regard to their likely impact. Dividend Although the Company successfully realised a gain on the sale of the investmentin DNA Research Innovations, the Company utilised the cash generated to repayborrowings. The Board is therefore not recommending a dividend. The netdividends paid since the inception of the Company total 19.95p. Purchase of Own Shares It continues to be the Company's policy to consider repurchasing shares whenthey become available in order to provide liquidity for the Company's shares andit is hoped that this may become possible once the outcome of the offers forsubscription are known. However, the existence of a bank loan for most of theyear and the need to maintain cash resources for follow-on investments precludedsuch repurchases during the year. Outlook Most of the portfolio companies are now benefiting from the prevailing stableeconomic environment and improved trading conditions. The Manager continues towork with the Boards of portfolio companies to ensure they are focusing theirsales and marketing efforts to increase revenues. A number of companies in theportfolio have the potential to generate value provided these conditionscontinue, particularly the levels of corporate spending on IT and services.This potential has been recognised as a number of approaches have been receivedfrom possible purchasers or merger partners for certain portfolio companies,which should lead to realisations being achieved in due course. Although the net asset value has declined during the year, the Board believesthat this represents the application by the Manager of robust and prudentvaluations in line with BVCA guidelines. The appointment of Foresight VenturePartners, a VCT manager with a strong performance record, has marked a turningpoint in building and realising value from the portfolio and taking the Companyforward. The offers for subscription to raise up to £25m of new capital will representthe start of a new phase of the Company's life. Foresight Venture Partners has astrong deal flow of interesting opportunities and new capital will enable theCompany to start making new investments at a phase of the economic cycle thatboth the Board and the Manager expects to be advantageous for investment. 26 April 2005For further information please contact:Foresight Venture Partners, Tel:01732 471800Teather and Greenwood, Tel: 020 7426 9000 Profit and Loss Account Unaudited figures for the year ended 28 February 2005 2005 2004 £'000 £'000 Investment income and deposit interest 47 137Investment management fees (273) (309)Other expenses (298) (247) Operating loss (524) (419) Loss on realisation of investments (1,645) (5,636) Loss on ordinary activities before taxation (2,169) (6,055) Tax on ordinary activities - - Loss on ordinary activities after taxation (2,169) (6,055) Dividends - - Balance transferred from reserves (2,169) (6,055) Earnings per share (6.0)p (16.9)p Statement of Total Recognised Gains and Losses Unaudited figures for the year ended 28 February 2005 2005 2004 £'000 £'000 Loss for the year (2,169) (6,055)Unrealised (loss)/profit on revaluation of investments (1,523) 3,643 Total recognised loss relating to the year (3,692) (2,412) All items in the above statements derive from continuing operations. Nooperations were acquired or discontinued in the year. The Company has only one class of business and derives its income frominvestments made in shares, securities and bank deposits. Income frominvestments is recognised on an accruals basis. Balance Sheet Unaudited figures at 28 February 2005 2005 2004 £'000 £'000 Fixed assetsVenture capital investmentsQuoted 125 182Unquoted 11,354 16,256 11,479 16,438Current assetsDebtors 1,073 438Cash 308 350 1,381 788 Creditors: amounts falling due within one year (663) (1,337) Net current assets/(liabilities) 718 (549) Net assets 12,197 15,889 Capital and reservesCalled-up share 1,793 1,793capitalShare premium account 23,581 23,581Capital redemption reserve 9 9Revaluation reserve (7,588) (6,065)Profit and loss (5,598) (3,429)account Equity shareholders' funds 12,197 15,889 Net asset value per share 34.0p 44.3p Cashflow Statement Unaudited figures for the year ended 28 February 2005 2005 2004 £'000 £'000Cashflow from operating activitiesInvestment income received 30 53Deposit and similar interest received 2 1Investment management fees paid (350) -Secretarial fees paid (60) -Other cash receipts/(payments) 59 (78)Net cash outflow fromoperating activities and returns on investment (319) (24) Taxation - - Returns on investment and servicing of financePurchase of unquoted investments and (613) (1,079)investmentsquoted on AIMNet proceeds on sale of unquoted investments 1,479 25Net proceeds on sale of quoted investments - 622Net proceeds on liquidation of investments 25 - Net capital inflow/(outflow) from financial 891 (432)investment Management of liquid resourcesLoans (repaid)/drawn down (614) 614 (Decrease)/increase in cash (42) 158 Reconciliation of net cashflow to movementin net cash/(debt)(Decrease)/increase in cash for the year (42) 158Movement in money market and other deposits - 2Net (debt)/cash at start of (264) 190yearLoans repaid/(drawn down) 614 (614) Net cash/(debt) at end of 308 (264)year Reconciliation of operating loss to netcashflow from operating activitiesOperating loss (524) (419)Changes in working capital 205 395 Net cash outflow from operating activities (319) (24) Notes1. The unaudited preliminary results have been prepared on the basis of accounting policies set out inthe statutory accounts of the Company for the year ended 29 February 2004. Unquoted investments have beenvalued in accordance with BVCA guidelines. Quoted investments are stated at middle market prices. 2. These are not statutory accounts in accordance with section 240 of the Companies Act 1985 and areunaudited. The full audited accounts for the year ended 29 February 2004, which were unqualified, have beenlodged with the Registrar of Companies. No statutory accounts in respect of any period after 29 February2004 have been reported on by the Company's auditors or delivered to the Registrar of Companies. 3. Copies of the Annual Report will be sent to shareholders and will be available for inspection at theRegistered Office of the Company at Swiss Life House, South Park, Sevenoaks, Kent TN13 1DU. 4. Number of shares in issue 35,862,753 (2004: 35,862,753). 5. Post Balance Sheet Events An offer for subscription of new shares to raise up to £5 million to existingshareholders has to date raised £0.75 million. This offer closes on 30 April2005. A further offer will be made to the general public to raise the balanceof up to £25m by issuing new shares at the prevailing net asset value plusrelated issue expenses. This information is provided by RNS The company news service from the London Stock Exchange