Foresight Ent Regulatory News (FTF)

15 Nov 2005 09:38

Foresight 4 VCT PLC15 November 2005 Summary • As part of plans to raise up to £25m of new share capital, £832,000was raised from existing shareholders in March 2005 and the share capital wasrestructured in May 2005 (three ordinary shares of 5p each being consolidatedinto one new ordinary share of 1p each). An open offer for subscription toraise up to £24m was announced on 2 September 2005. • The Company invested £627,000 in follow-on funding rounds in threeportfolio companies, namely Advanced Visual Technology (£200,000 net of a£50,000 loan repayment), Elam-T (£300,000) and EnSeal Systems (£127,000). • Two new investments were made during the period; £200,000 in alwaysONGroup (VOiP telephony services) and £200,000 in Covion Holdings (facilitiesmanagement). • During the period INCA Digital Printers was sold realising £2.3m incash for Foresight 4 VCT, generating a return of three times the original costof investment. • During the period The Casella Group sold its principal operatingsubsidiary, enabling Casella to redeem all its bank borrowings and a significantpart of its shareholder loans, including £746,000 to Foresight 4 VCT. • Net asset value per share as at 31 August 2005 was 102.8p (comparedto the equivalent 102.0p as at 28 February 2005), adjusted for the shareconsolidation in May 2005. • The Company has a mature portfolio of investments which, depending ontheir progress, could generate further successful exits and capital dividends. • The Company continues to exceed the 70% requirement for investment inqualifying holdings set by HM Revenue & Customs. Chairman's Statement Offers for Subscription, Share Consolidation and Change of Chairman During the six months to 31 August 2005, your Company made significant progress.In line with Foresight Venture Partners' previously announced plans to raisefurther funds of up to £25 million for the Company via two offers, I am pleasedto report that £832,000 was raised in March 2005 through an initial offer forsubscription to existing shareholders. On 23 June 2005, as previously announced, I replaced Roger Brooke as Chairmanwho still remains as a director on the Board. I should like to take thisopportunity to thank Roger for all his commitment and effort to the Companysince inception. On 2 September 2005, following the three for one share consolidation, the secondoffer was formally announced, comprising a linked offer for subscription to theinvesting public with Foresight 3 VCT plc, another of the five VCTs managed byForesight Venture Partners, whereby the two companies would raise up to £48mbetween them. Under this linked offer, which is currently open and will remainopen till April 2006 (after which 40% income tax relief may be withdrawn),subscriptions will be divided equally between each company, thereby enablingeach to raise up to £24m. With such new funds, your Company will be able tostart a new phase in its life by participating in Foresight Venture Partners'strong deal flow and make new investments at a time in the economic cycle whichis considered attractive. I consider this offer to be particularly important asit will increase the size of the Company, facilitate further investment andshare buy backs, enhance liquidity in the Company's shares and spread risk andrunning costs over a larger asset base while also increasing the prospects fordividends to recommence. In line with customary practice within the venture capital industry, it isproposed that Foresight Venture Partners be granted a performance relatedincentive as part of the second offer. Because of Bernard Fairman's associationwith Foresight Venture Partners, your Company's Manager, the grant of thisperformance related incentive is subject to shareholder approval and a circularand notice of extraordinary general meeting was recently sent to shareholders toseek such approval. This incentive relates solely to the new monies raisedunder this second offer and the terms are in line with current venture capitalindustry practice. I should like to confirm that the prior performance relatedincentive over the Company's present assets will remain unchanged and unaffectedby this new proposed carried interest incentive. The prospects of a number of portfolio companies continue to improve, withstronger order books and sales pipelines, most notably Footfall and EQOS.Advanced Visual Technology's sales pipeline also continues to grow; its marketleading retail space planning software is now being used by 50 major retailersWorldwide. Vectorcommand, through its US partner, continues to make goodprogress in the USA with its leading emergency simulation and training software.Other portfolio companies continue to experience more difficult tradingconditions but are actively taking steps to improve their sales efforts orbroaden their ranges of products or services in order to enhance sales growth. Investment activity During this six-month period, £627,000 was invested in follow-on funding roundsin three portfolio companies, namely Advanced Visual Technology (£200,000 net ofa £50,000 loan repayment), Elam-T (£300,000) and EnSeal Systems (£127,000). InAugust 2005, Elam-T underwent a capital reorganisation, following whichForesight 4 VCT invested £300,000. The company raised the finance to continuethe commercialisation of its promising organic light emitting display (OLED)materials, which are forecast to grow rapidly with applications in mobilephones, car stereos and MP3 players. Two new investments were made during the period; £200,000 in alwaysON Group, aReading based provider of VOiP telephony services to small and medium sizedcompanies and £200,000 in Covion Holdings, a fast growing facilities managementgroup providing a range of outsourced services to large companies. In June 2005, INCA Digital Printers was acquired by Dai Nippon Screen Mfg. Co.of Kyoto, Japan for £30m in cash, realising £2.3m in cash for Foresight 4 VCTand generating a return of three times the original cost of investment of£756,000. In May, The Casella Group sold its principal operating subsidiary,Casella Consulting Limited, one of the UK's leading environmental consultancies,for £28.8m to Bureau Veritas, a major international environmental consultancy.This disposal enabled Casella to redeem all its bank borrowings and asignificant part of its shareholder loans, including £746,000 to Foresight 4VCT. The successful sale in October 2004 of DNA Research Innovations toInvitrogen Corporation of the USA realised £1.4m in cash at completion plus upto a further £1.4m if seven technical milestones are achieved, which will ifreceived represent a return of nearly three times the original cost ofinvestment of £1m. In August 2005, £144,000 was received on completion of thefirst milestone and work on the other six milestones is progressingsatisfactorily. During the six-month period, upward revaluations were made to four investmentstotalling £0.7m as a result of improved trading performance or exit prospects.These included Footfall (£333,000) which continues to trade well and is on trackfor a possible listing and also EQOS (£246,000) which continues to winsubstantial orders from major retailers Worldwide for its highly regardede-collaboration software. Provisions of £0.9m were made against the previousvaluations of six investments. Despite gaining several major customers overrecent years, Reqio finally succumbed to continuing slow market uptake for itshighly regarded database cataloguing software and was placed into administrationon 31 August, resulting in a provision of £37,000. Investment Objective Following shareholder approval granted on 28 February 2005, the objective ofForesight 4 VCT plc is now to provide private investors with attractive returnsfrom a portfolio of investments in fast growing unquoted largelytechnology-based companies in the United Kingdom. It is the intention tomaximise the tax-free income available to investors from a combination ofdividends and interest received on investments and the distribution of capitalgains arising from trade sales or flotations. Net asset value The net asset value per share as at 31 August 2005 was 102.8p, compared to theequivalent 102.0p as at 28 February 2005 (post the three for one shareconsolidation). Valuation policy Unquoted investments have been valued in accordance with guidelines issued bythe British Venture Capital Association (BVCA). Following changes to GenerallyAccepted Accounting Practice listed securities are now valued at the bid pricerather than the mid price as in previous periods with no discount applied. Dividend Over the last twelve months the Company has been successful in realisingsubstantial cash gains on the sale of DNA Research Innovations and INCA DigitalPrinters and the Board is now in a position to recommence dividend payments. Asa result it is proposed that subject to the approval of shareholders andsanction of the Court, the remaining share premium account be cancelled and adividend of 5.0p per share be paid during December 2005. Future dividendpayments are difficult to forecast but given the successful progress of theportfolio it is the Board's intention to pay regular dividends. Venture Capital Trust Status Foresight 4 VCT has been granted approval as a Venture Capital Trust (VCT) undersection 842AA of the Income and Corporation Taxes Act 1988 and it is intendedthat the business of the Company be carried on so as to maintain its VCT status. 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.With sufficient cash resources following the realisations referred to above, theCompany repurchased the equivalent of 406,667 shares at a cost of £349,600during this six-month period. Outlook The prospects of certain portfolio companies continue to improve, with strongerorder books and sales pipelines while others are actively taking steps toimprove their sales efforts or broaden their ranges of products or services inorder to enhance sales. This gives me confidence that the portfolio has thepotential to generate value over time provided that economic circumstancescontinue to be stable and corporate investment continues at its present level.Investor confidence continues to improve as evidenced by the recent performanceof the public markets. Approaches have been received from possible purchasersfor certain portfolio companies, a number of which are being pursued and whichcould lead to exits in due course. The Company's Manager, Foresight Venture Partners, is actively marketing thelinked offer with Foresight 3 VCT plc for subscription to the investing publicto raise up to £24m for your Company. As I indicated above, the success of thisoffer is important to the future of your Company as it will then be able tostart a new phase in its life. I wish them every success in this fund raisingand look forward to reporting the results of their efforts in early 2006. Peter DicksChairman15 November 2005 For further information please contact:Gary Fraser, VCF Fund Managers Limited Tel: 01732 471800Teather and Greenwood, Tel: 020 7426 9000 Profit and Loss Accountfor the six months to 31 August 2005 6 Months to 6 Months to Year to 31 August 2005 31 August 2004 28 February 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Investment income and deposit interest 97 44 47Investment management fees (124) (81) (273)Other expenses (134) (157) (298) Operating loss (161) (194) (524) Profit/(loss) on realisation of investments 1,666 25 (1,645) Profit/(loss) on ordinary activities before taxation 1,505 (169) (2,169) Tax on ordinary activities - - - Profit/(loss) on ordinary activities after taxation 1,505 (169) (2,169) Dividends - - - Balance transferred to/(from) reserves 1,505 (169) (2,169) Earnings per share (restated for the share 12.1p (1.4)p (18.1)pconsolidation) Statement of Total Recognised Gains and Lossesfor the six months to 31 August 2005 6 Months to 6 Months to Year to 31 August 2005 31 August 2004 28 February 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit/(loss) for the period 1,505 (169) (2,169)Unrealised losses on revaluation of investments (1,291) (4,828) (1,523) Total recognised gains/(losses) relating to the period 214 (4,997) (3,692) All items in the Profit and Loss account derive from continuing operations. Nooperations were acquired or discontinued in the period. 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 at 31 August 2005 As at As at As at 31 August 2005 31 August 2004 28 February 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000Fixed assetsInvestmentsQuoted 108 133 125Unquoted 9,672 11,788 11,354 9,780 11,921 11,479Current assetsDebtors 996 376 1,073Money market and other deposits 1,258 - -Cash 1,494 271 308 3,748 647 1,381Creditors:Amounts falling due within oneyearBank borrowings - (982) -Other creditors (726) (694) (663) Net current assets/ 3,022 (1,029) 718(liabilities) Net assets 12,802 10,892 12,197 Capital and reservesCalled-up share capital 125 1,793 1,793Share premium account 24,199 23,581 23,581Capital redemption reserve 1,813 9 9Revaluation reserve (8,891) (10,893) (7,588)Profit and loss account (4,444) (3,598) (5,598) Equity shareholders' funds 12,802 10,892 12,197 Net asset value per ordinary 102.8p 91.1p 102.0pshare(restated for 1 for 3 share consolidation) Summarised Statement of Cashflows for the six months to 31 August 2005 6 Months to 6 Months to Year to 31 August 2005 31 August 2004 28 February 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000Cashflow from operating activitiesInvestment income received 133 - 30Deposit and similar interest received 12 1 2Investment management fees paid (144) (36) (350)Secretarial fees paid (30) (30) (60)Other cash (payments)/receipts (72) (96) 59Net cash outflow fromoperating activities and returns on investment (101) (161) (319) - - - Taxation Financial investmentPurchase of unquoted investments and investments (1,077) (311) (613)quoted on AIMNet proceeds on sale of unquoted investments 2,946 - 1,479Net proceeds on deferred consideration 144 - -Net proceeds on sale of quoted investments - - -Net proceeds on liquidation of investments - 25 25Repurchase of own shares (222) - -Net capital inflow/(outflow) from financial 1,791 (286) 891investment Management of liquid resourcesLoans drawn down/(repaid) - 368 (614)Movement in money market and other deposits (1,258) - - (1,258) 368 (614)FinancingProceeds of fund raisings 832 - -Expenses of fund raisings (78) - - 754 - -Increase/(decrease) in cash 1,186 (79) (42) Reconciliation of net cashflow to movementin net cash/(debt)Increase/(decrease) in cash for the period 1,186 (79) (42)Net cash/(debt) at start of period 308 (264) (264)Loans (drawn down)/repaid - (368) 614Net cash/(debt) at end of period 1,494 (711) 308 Reconciliation of operating loss to netcashflow from operating activitiesOperating loss (161) (194) (524)Changes in working capital 60 33 205Net cash outflow from operating activities (101) (161) (319) Notes to the Interim Report 1. The unaudited interim results have been prepared on the basis of accountingpolicies set out in the statutory accounts of the Company for the year ended 28February 2005. Unquoted investments have been valued in accordance with BVCAguidelines. Quoted investments are stated at bid prices in accordance with theBVCA guidelines and Generally Accepted Accounting Practice. 2. These are not statutory accounts in accordance with section 240 of theCompanies Act 1985 and are neither audited nor reviewed. The full auditedaccounts for the year ended 28 February 2005, which were unqualified, have beenlodged with the Registrar of Companies. No statutory accounts in respect of anyperiod after 28 February 2005 have been reported on by the Company's auditors ordelivered to the Registrar of Companies. The audited accounts to 28 February2005 have been restated in this publication to reflect the changes inpresentation following the introduction of Financial Reporting Standard ('FRS')25 and FRS 26. 3. Copies of the Interim Report, which has been reviewed by the Company'sauditors, will be mailed to shareholders and will be available for inspection atthe Registered Office of the Company at Swiss Life House, South Park, Sevenoaks,Kent TN13 1DU. 4. The number of shares in issue at 31 August 2005 was 12,453,689 1p ordinaryshares (2004: 35,862,753 5p ordinary shares). The weighted average number ofshares in issue during the period was 12,435,810 1p ordinary shares (2004:35,862,753 5p ordinary shares). During the period, following shareholderapproval, the Company undertook a restructuring of its share capital whichresulted in three of ordinary 5p shares being consolidated into one new ordinary1p share. This effectively trebled the share price but, since shareholders thenheld only one third of their original number of shares, did not affect theoverall value of their shareholdings. 5. Earnings for the first six months should not be taken as a guide to theresults for the full year. 6. Impact of the introduction of FRS 25 and 26 The financial information for the six months ended 31 August 2005 has beenprepared in accordance with FRS 25 and FRS 26. The introduction of these newstandards has had the following impacts: Valuation: The assets held at fair value through the profit and loss by the Company arevalued at bid price rather than mid-market price as in prior periods. Six months to 31 Year to 28 February August 2005 2005 (unaudited) (unaudited) £'000 £'000 Valuation at bid price 108 113Valuation at mid-market price 118 125Difference (10) (12) Transaction costs: Transaction costs incurred when purchasing or selling assets have beenwritten-off to the profit and loss account in the period they occur since 1March 2004. 7. Movement in reserves Called- Share Capital Revaluation Profit and Total up share premium redemption reserve loss account capital account reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 28 February 2005 1,793 23,581 9 (7,588) (5,598) 12,197Opening balance adjustments:Quoted companies valued at bid price* - - - (12) - (12)As at 1 March 2005 1,793 23,581 9 (7,600) (5,598) 12,185Share issues in the period 136 696 - - 832Expenses on share issues - (78) - - - (78)Share re-organisation (1,777) 1,777 - - -Shares repurchased in the period (27) - 27 - (351) (351)Net decrease in the value of - - - (1,291) - (1,291)investmentsProfit for the period - - - - 1,505 1,505As at 31 August 2005 125 24,199 1,813 (8,891) (4,444) 12,802 * Due to the introduction of FRS 25 and FRS 26 the quoted investment at 28February 2005 was restated at bid price rather than the previously recordedmid-market price. The difference between the bid price and the mid-market pricehas led to a downwards revaluation of the quoted shares and this loss has beentaken to the revaluation reserve. 8. Summary of investments during the period Quoted Unquoted Total £'000 £'000 £'000 Book cost as at 28 February 2005 474 18,590 19,064Unrealised depreciation (349) (7,236) (7,585)Valuation at 28 February 2005 125 11,354 11,479Opening balance adjustment (12) - (12)Valuation at 1 March 2005 113 11,354 11,467Movements in the period:Purchases at cost - 1,077 1,077Disposal proceeds - (2,946) (2,946) realised gains - 1,522 1,522Unrealised depreciation (5) (1,335) (1,340)Valuation at 31 August 2005 108 9,672 9,780Book cost at 31 August 2005 474 18,243 18,717Unrealised depreciation (366) (8,571) (8,937)Valuation at 31 August 2005 108 9,672 9,780 This information is provided by RNS The company news service from the London Stock Exchange