Last checked at 
30 Oct 2008 11:44
Chairman's Statement
Summary
• Net asset value per Ordinary Share as at 31 August 2008 was 104.4p (compared to 110.2p as at 29 February).
• An interim dividend of 5.0p per share dividend will be paid on 19 December 2008.
• Two new investments totalling £500,000 were made in Lynwood Group Holdings Limited (£250,000) and Silvigen Limited (£250,000).
• Proceeds of £2,103,110 were realised from two investments: £1,952,800 from the sale of Utarget and a further £150,310 from the ongoing realisation of Casella Group's assets.
• As a result of the Linked Offer, Foresight 4 VCT raised gross proceeds of £1,979,376 as at 30 April 2008 when the offer closed.
• The Company made seven follow-on investments totalling £1,311,961: Closed Loop London (£503,333), Advanced Visual Technology (£300,000), O-Gen (£210,000), The Bunker Secure Hosting (£118,700), Global Immersion (£66,670), Vectorcommand (£60,000) and Oled-T (£53,258).
• The Company continues to exceed the 70% requirement for investment in Qualifying Holdings as set by HM Revenue & Customs.
Portfolio Review
During the six months under review, stock markets continued to experience adverse conditions primarily as a result of the unprecedented difficulties in the US and UK banking sectors and the resulting effect this had on both businesses and consumers. These financial difficulties when combined with volatile commodity prices, principally due to record prices for oil and gas as well as increased food prices have resulted in a particularly difficult backcloth for trading for many sectors of the economy. Whilst this market turmoil has not materially affected the unquoted holdings within our investments, several investments have suffered indirectly as a result of the fallout from uncertain trading conditions. Against this background your Company's net asset value has fallen to 104.4p per share from 110.2p per share six months earlier, as a result of fair value adjustments against companies whose results were poorer than expected.
After several years of building revenues and investment in product development, Eqos has had a difficult 2008 as customers delay capital expenditure on large software systems. The company is considering moving from large one-off sales to a subscription usage model for its software to counter the current downturn in trading. This would require additional funding as the subscription usage model would take some time to build up.
OLED-T has not made the necessary commercial progress with its proprietary chemicals for improving the colour and life of displays on mobile phones and similar electronic equipment as quickly as had originally been envisaged or to support further investment. The company has recently sold its IPR assets to chemical company Merck and is in administration and being wound up. As a result Foresight 4 has provided in full against the value of this investment.
Despite the difficult trading conditions, the performance of a number of portfolio companies continues to improve, reflecting growing demand and strong sales pipelines, most notably Adeptra, Datapath, Probability, Infrared Integrated Systems (IRISYS) and Ixaris. Adeptra is enjoying
growing sales for its automated alert services, in particular winning more contracts from major financial institutions in the USA, UK and now Europe. Adeptra achieved sales of £5 million in the 6 months to 30 June 2008 and EBITDA of £278k. Datapath achieved profits in excess of £2.5 million for the year ended 31 March 2008 and is on track for another very profitable year to 31 March 2009. Probability recently announced its annual results which showed a 152% increase in revenues, a doubling of its customer base to 414,000 and monthly profitability towards the end of the current year. Probability is forecasting that its next financial year to 30 June 2009 will show, in aggregate, a profit for the full year. IRISYS core footfall business continues to grow and has recently closed a significant contract with a large supermarket chain.
Ixaris's sales progress has continued throughout the seven months of the current year showing an increase of over 180% on the previous year as well as achieving a reduction in underlying losses. The company is focusing on growing its sales team to continue its recent progress and diversify into new markets.
Investment Activity
The level of new investment activity has started to pick up again, with two new investments being made totaling £500,000: £250,000 in Lynwood Group Holdings and £250,000 in Silvigen. This is in line with Foresight's increasing focus on investing in the environmental
infrastructure and sustainable sectors.
Lynwood is an established business in the plastic building products market in the UK and has made the transition to using waste plastic streams as its raw material. Lynwood has acquired a small business with specialist expertise in manufacturing wood profile and wood replacement products from waste plastic and it is now one of the best equipped plastic recycling manufacturing operations in the UK. The company is well positioned in a growing market for recycled and sustainable products such as wood replacement, which offer considerable economic and environmental advantages.
Silvigen has positioned itself to supply the urgent biomass fuel needs of the UK power generation sector and the developing industrial heat sector, both of which are driven by a number of regulatory incentives.
The Company made seven follow-on investments totaling £1,311,961: Closed Loop London (£503,333), Advanced Visual Technology (£300,000), O-Gen (£210,000), The Bunker Secure Hosting (£118,700), Global Immersion (£66,670), Vectorcommand (£60,000) and Oled-T (£53,258).
Advanced Visual Technology (AVT) required ongoing funding while progressing its sales process. After the period end AVT was sold to Oracle for an undisclosed amount. A further investment was made into O-Gen in April to fund the latest stage of the company's biomass to energy plant. The plant has already produced some electricity with full commissioning expected later in 2008.
The Bunker Secure Hosting is experiencing strong demand for its ultra secure IT hosting services and is currently planning for a substantial increase in its capacity. Closed Loop London has completed its first plant in Dagenham and is in the early stages of developing a second plant in the north-west of England.
Global Immersion and Vectorcommand required further investment due to a shortfall in working capital as a result of poorer trading, whereas the investment in OLED-T was to finance the company on the anticipation of an impending strategic investment by a large chemicals company. Unfortunately, the strategic investment did not materialise and OLED-T's IP was sold for €450,000.
Realisations
Utarget, a provider of Internet subsite advertising, was sold to Fox International in March 2008 for total proceeds of £1,952,800 compared to an original cost of £1,000,000. This represented an uplift of almost 100% on cost in little over a year, following the original investment in December 2006.
Additionally, further proceeds of £150,310 were received from the ongoing sale of the assets of The Casella Group. A final payment from the completion of the liquidation process is expected in the next few months.
Net Asset Value
The net asset value per share as at 31 August 2008 decreased to 104.4p compared to 110.2p as at 29 February 2008.
Dividend
The Company's dividend policy is to aim to distribute to shareholders a steady flow of dividends from income and realised capital gains. Reflecting recent realised gains, an interim dividend of 5.0p per share for the year ending 28 February 2009 will be paid on 19 December 2008, making 17.5p per share of cumulative dividend payments in the last three years. The ex dividend date will be 10 December 2008 and the record date will be 12 December 2008.
Valuation policy
Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital (IPEVC) guidelines developed by the British Venture Capital Association and other organisations under which investments are valued, as defined in the guidelines, at "fair value". Ordinarily, unquoted investments will be valued at cost for the 12 months following the date of acquisition as the most suitable approximation of fair value unless there is an impairment or significant accretion in value during the period. Quoted investments and investments traded on AIM and PLUS are valued at the bid price as at 31 August 2008. The portfolio valuations are prepared by Foresight Group and are subject to approval by the Board.
Share Issues and Share Buy-backs
During the period year the Company issued 787,662 Ordinary Shares at prices ranging from 109.0p to 116.0p per share. These funds enable your Company to remain an active investor in the current market and take advantage of new opportunities currently being reviewed by Foresight Group.
It continues to be the Company's policy to consider purchasing shares in the market when they become available in order to help provide liquidity for the Company's shareholders. During the period, the Company repurchased 80,332 shares at a cost of £72,700.
Landsbanki Securities, Foresight 4's incumbent market maker, as a result of the financial difficulties of its parent company, terminated its market making activities during October 2008.
It is currently unclear whether the termination of its market making activities is temporary or permanent and once this becomes apparent, which is expected to be in the very near future, Foresight Group and the Board will be in a position to update shareholders accordingly.
Top-up Offer
Foresight 4, alongside Foresight VCT, Foresight 2 and Foresight 3, will shortly be launching a series of top-up offers to each raise up to approximately £2 million.
The requirement to raise new funds is to enable Foresight Group to continue to make new investments in the environmental infrastructure and management buyout sectors and, generally, to take advantage of the ongoing pipeline of new opportunities being considered.
Existing Foresight 4 shareholders will shortly be sent details of the top-up offer.
Outlook
The extreme volatility of the financial markets as well as the increasing inability of companies to raise debt finance has proved a double edged sword for the Company. On the one hand Foresight Group's deal flow of companies seeking investment, specifically in the environmental infrastructure sector, is stronger than ever as potential investee companies are finding banks less inclined to lend to them now than in the recent past. On the other hand, we have also seen some evidence of trade sales within the portfolio being subject to less attractive terms, delayed or terminated as a result of potential acquirers failing to raise sufficient finance to complete transactions.
While we continue to look forward with cautious optimism, we are at the same time conscious that we are likely to be entering a period of economic slowdown and tighter credit conditions. In this environment we will encourage all of our investee companies to keep a tight control on costs and conserve cash.
The market in which Foresight 4 operates continues to be encouraging in terms of potential new investment opportunities, as evidenced by the current deal flow being reviewed by Foresight Group. Foresight 4 will have access to this deal flow of new opportunities as it invests new funds raised as well as reinvesting some of the proceeds from successful realisations.
Peter Dicks
Chairman
October 2008
For further information please contact:
Gary Fraser, Foresight Fund Managers Limited Tel: 01732 471800
Unaudited Summary Profit and Loss Account
(incorporating the Revenue Account) for the six months to 31 August 2008
| 6 Months to | 6 Months to | Year to | |||||||
| 31 August 2008 | 31 August 2007 | 29 February 2008 | |||||||
| (unaudited) | (unaudited) | (audited) | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Investment income and deposit interest | 409 | - | 409 | 243 | - | 243 | 559 | - | 559 |
| Investment management fees * | (27) | (83) | (110) | (84) | (252) | (336) | (169) | (506) | (675) |
| Other expenses | (127) | - | (127) | (135) | - | (135) | (258) | - | (258) |
| Unrealised (loss)/gain on revaluation of investments | - | (1,968) | (1,968) | - | 312 | 312 | - | 1,387 | 1,387 |
| Operating profit/(loss) | 255 | (2,051) | (1,796) | 24 | 60 | 84 | 132 | 881 | 1,013 |
| Gain on realisation of investments | - | 436 | 436 | - | 262 | 262 | - | 2,017 | 2,017 |
| Profit/(loss) on ordinary activities before taxation | 255 | (1,615) | (1,360) | 24 | 322 | 346 | 132 | 2,898 | 3,030 |
| Tax on ordinary activities | - | - | - | - | - | - | - | - | - |
| Profit/(loss) on ordinary activities after taxation | 255 | (1,615) | (1,360) | 24 | 322 | 346 | 132 | 2,898 | 3,030 |
| Balance transferred to/(from) reserves | 255 | (1,615) | (1,360) | 24 | 322 | 346 | 132 | 2,898 | 3,030 |
| Earnings/(loss) per share | 1.1p | (6.9)p | (5.8)p | 0.1p | 1.5p | 1.6p | 0.6p | 13.1p | 13.7p |
All revenue and capital items in the profit and loss account derive from continuing operations. There were no other recognised gains or losses for the period other than those recognised in the unaudited profit and loss account above and accordingly no statement of total recognised gains or losses has been prepared.
Earnings for the period should not be taken as a guide to the results for the year.
* VAT recovered and recoverable from HM Revenue & Customs following the decision to treat investment management fees for VCTs as exempt has been included under investment management fees above. The split of recovered and recoverable VAT is £57,160 revenue and £171,480 capital.
Unaudited Balance Sheet
at 31 August 2008
| As at | As at | As at | ||||||||||
| 31 August 08 | 31 August 07 | 29 February 08 | ||||||||||
| (unaudited) | (unaudited) | (audited) | ||||||||||
| £'000 | £'000 | £'000 | ||||||||||
| Non-current assets | ||||||||||||
| Assets held at fair value through profit and loss - Investments | 17,078 | 18,562 | 18,836 | |||||||||
| Current assets | ||||||||||||
| Debtors | 1,994 | 253 | 1,835 | |||||||||
| Money market and other deposits | 3,789 | 3,607 | 4,387 | |||||||||
| Cash | 1,745 | 389 | 121 | |||||||||
| 7,528 | 4,249 | 6,343 | ||||||||||
| Creditors | ||||||||||||
| Amounts falling due within one year | (117) | (150) | (118) | |||||||||
| Net current assets | 7,411 | 4,099 | 6,225 | |||||||||
| Net assets | 24,489 | 22,661 | 25,061 | |||||||||
| Capital and reserves | ||||||||||||
| Called-up share capital | 235 | 220 | 228 | |||||||||
| Share premium account | 11,030 | 9,173 | 10,177 | |||||||||
| Capital redemption reserve | 1,827 | 1,824 | 1,826 | |||||||||
| Profit and loss account | 11,397 | 11,444 | 12,830 | |||||||||
| Equity shareholders' funds | 24,489 | 22,661 | 25,061 | |||||||||
| Net asset value per share | 104.4p | 103.2p | 110.2p | |||||||||
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months to 31 August 2008
| 6 months to | 6 months to | Year to | |
| 31 August 08 | 31 August 07 | 29 February 08 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Opening shareholders' funds | 25,061 | 22,681 | 22,681 |
| Net proceeds from share issues | 861 | (3) | 1,011 |
| Shares repurchased in the period/year | (73) | (363) | (563) |
| (Loss)/profit for the period/year | (1,360) | 346 | 3,030 |
| Dividend | - | - | (1,098) |
|
| |||
| Closing shareholders' funds | 24,489 | 22,661 | 25,061 |
Unaudited Summarised Statement of Cash flows
for the six months to 31 August 2008
| 6 months to | 6 months to | Year to | |
| 31 August 08 | 31 August 07 | 29 February 08 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Cash flow from operating activities | |||
| Investment income received | 189 | 70 | 176 |
| Deposit and similar interest received | 111 | 133 | 212 |
| Investment management fees paid | (365) | (167) | (639) |
| Secretarial fees paid | (38) | (37) | (37) |
| Other cash payments | (99) | (103) | (166) |
| Net cash outflow from operating activities and returns on investment | (202) | (104) | (454) |
| Taxation | - | - | - |
| Financial investment | |||
| Purchase of unquoted investments and investments quoted on AIM | (1,812) | (3,417) | (4,863) |
| Net proceeds on sale of unquoted investments | 2,103 | - | 3,725 |
| Net proceeds on sale of quoted investments | - | 539 | 394 |
| Purchase of own shares | (64) | (363) | (500) |
| Net capital inflow/(outflow) from financial investment | 227 | (3,241) | (1,244) |
| Equity dividends paid | - | - | (1,098) |
| Net cash inflow/(outflow) before financing and liquid resource management | 25 | (3,345) | (2,796) |
| Management of liquid resources | |||
| Movement in money market and other deposits | 598 | 3,728 | 2,948 |
| 598 | 3,728 | 2,948 | |
| Financing | |||
| Proceeds of fund-raisings | 1,058 | - | - |
| Expenses of fund-raisings | (57) | (3) | (40) |
| 1,001 | (3) | (40) | |
| Increase in cash | 1,624 | 380 | 112 |
| Realisation of net cash flow to movement in net cash | |||
| Increase in cash for the period | 1,624 | 380 | 112 |
| Net cash at start of period | 121 | 9 | 9 |
| Net cash at end of period | 1,745 | 389 | 121 |
| Reconciliation of operating profit/(loss) to net cash flow from operating activities | |||
| Operating (loss)/profit | (1,796) | 84 | 1,013 |
| Unrealised losses/(gains) on investments | 1,968 | (312) | (1,387) |
| (Decrease)/increase in creditors | (8) | 89 | (7) |
| (Increase)/decrease in debtors | (366) | 35 | (73) |
| Net cash outflow from operating activities | (202) | (104) | (454) |
Notes to the Interim Results
1. The unaudited interim results have been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the year ended 29 February 2008. Unquoted investments have been valued in accordance with IPEVC guidelines. Quoted investments are stated at bid prices in accordance with the IPEVC guidelines and Generally Accepted Accounting Practice.
2. These are not statutory accounts in accordance with section 240 of the Companies Act 1985 and are neither audited nor reviewed. Statutory accounts in respect of the period to 29 February 2008 have been audited and reported on by the Company's auditors and delivered to the Registrar of Companies. No statutory accounts in respect of any period after 29 February have been reported on by the Company's auditors or delivered to the Registrar of Companies. The Auditors have reported on the statutory accounts for the year ended 29 February 2008; their report was unqualified, and did not contain statements under s237(2) or (3) Companies Act 1985.
3. Copies of the Half-Yearly Financial Report will be sent to shareholders and will be available for inspection at the Registered Office of the Company at ECA Court, South Park, Sevenoaks, Kent TN13 1DU.
4. The net asset value per share is based on net assets at the end of the period and on 23,462,434 Ordinary Shares, being the number of Ordinary Shares in issue at that date.
5. Earnings per share
| 6 months to | 6 months to | Year to | |
| 31 August 08 | 31 August 07 | 29 February 08 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Total earnings after taxation | (1,360) | 346 | 3,030 |
| Basic earnings per share (note a) | (5.8)p | 1.6p | 13.7p |
| Net revenue from ordinary activities after taxation | 255 | 24 | 132 |
| Revenue return per share (note b) | 1.1p | 0.1p | 0.6p |
| Net realised capital gains/(losses) | 436 | 262 | 2,017 |
| Net unrealised capital gains | (1,968) | 312 | 1,387 |
| Net capital expenses | (83) | (252) | (506) |
| Total capital return | (1,615) | 322 | 2,898 |
| Capital return per share (note c) | (6.9)p | 1.5p | 13.1p |
| Weighted average number of shares in issue in the period | 23,399,796 | 22,165,199 | 22,130,708 |
Notes:
a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue.
b) Revenue return per share is net revenue after taxation divided by the weighted average number of shares in issue.
c) Capital return per share is total capital return divided by the weighted average number of shares in issue.
6. Income
| 6 months to | 6 months to | Year to | |
| 31 August 08 | 31 August 07 | 29 February 08 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Loan stock interest | 300 | 123 | 356 |
| Bank deposits | 109 | 120 | 203 |
| Total Income | 409 | 243 | 559 |
7. Foresight Group, as Investment Manager of the Company, is considered to be a related party by virtue of its management contract with the Company. During the period, services of a total value of £338,000 (31 August 2007: £336,000, 29 February 2008: £675,000) were purchased by the Company from Foresight Group. At 31 August 2008, the amount due to Foresight Group disclosed under creditors was £nil.
Foresight Fund Managers Limited, as Secretary of the Company and as a subsidiary of Foresight Group, is also considered to be a related party of the Company. During the period, services of a total value of £32,024 (31 August 2007: £31,427, 29 February 2008: £63,550) were purchased by the Company from Foresight Fund Managers Limited. At 31 August 2008, the amount due to Foresight Fund Managers Limited disclosed under creditors was £4,773.
No Director has, or during the period had, a contract of service with the Company. Bernard Fairman is Managing Partner of Foresight Group, the Company's investment manager. Subject to these exceptions, no Director was party to, or had an interest in, any contract or arrangement with the Company at any time during the period under review or as at the date of this report.
8. Investments
| Quoted | Unquoted | Total | |
| £'000 | £'000 | £'000 | |
| Book cost as at 1 March 2008 | 1,600 | 21,302 | 22,902 |
| Unrealised depreciation | (185) | (3,881) | (4,066) |
| Valuation at 1 March 2008 | 1,415 | 17,421 | 18,836 |
| Purchases at cost | - | 1,812 | 1,812 |
| Disposal proceeds | - | (2,103) | (2,103) |
| Realised gains | - | 501 | 501 |
| Unrealised depreciation | (159) | (1,809) | (1,968) |
| Valuation at 31 August 2008 | 1,256 | 15,822 | 17,078 |
| Book cost as at 31 August 2008 | 1,600 | 21,512 | 23,112 |
| Unrealised depreciation | (344) | (5,690) | (6,034) |
| Closing valuation at 31 August 2008 | 1,256 | 15,822 | 17,078 |
In addition, deferred consideration of £65,502 was written off during the period
9. Capital and reserves
| Called-up share capital | Share premium account | Capital redemption reserve | Profit and loss account | Total | |||
| £'000 | £'000 | £'000 | £'000 | £'000 | |||
| As at 1 March 2008 | 228 | 10,177 | 1,826 | 12,830 | 25,061 | ||
| Share issues in the period | 8 | 903 | - | - | 911 | ||
| Expenses on share issues | - | (50) | - | - | (50) | ||
| Shares repurchased in the period | (1) | - | 1 | (73) | (73) | ||
| Retained profit for the period | - | - | - | (1,360) | (1,360) | ||
| As at 31 August 2008 | 235 | 11,030 | 1,827 | 11,397 | 24,489 | ||
END