Last checked at 
28 Aug 2009 14:01
Summary
Net asset value per Ordinary Share as at 30 June 2009 was 39.2p compared to 42.2p as at 31 December 2008.
An interim dividend of 1.0p per Ordinary Share was paid on 29 May 2009.
Top-up offer launched in October 2008 closed on 31 May 2009 having raised £1.3 million.
Three new investments were made in: @Futsal (£29,012), a growth capital opportunity; Land Energy (£110,000), an environmental opportunity; and Diagnos Holdings (£750,000), a management buy-out opportunity.
The Company made five follow-on investments during the period totalling £495,526. These were Silvigen (£171,633), ANT (£128,400), smartFOCUS (£86,250), Clarity Commerce Solutions (£74,900) and SkillsMarket (£34,343).
Chairman's Statement
Introduction and Results
During the six months under review, stock markets stabilised as a result of the belief that the worst of the banking crisis may be over and the positive effects of Governmental stimulus packages around the world, which have started to filter through the economy. Although stock market sentiment is improving, trading and credit conditions remain difficult in many sectors of the economy. While these market conditions have had an, albeit limited, effect on the unquoted holdings within our portfolio, several AIM quoted holdings have seen an increase in share price as a result of the recent market improvement.
Against this background your Company's net asset value fell to 39.2p per share from 42.2p per share six months earlier. The net asset value at 30 June 2009 was after the payment of a 1.0p per share dividend paid to shareholders in May 2009.
Portfolio Review
During the six months under review the performance of a number of portfolio companies continued to improve, reflecting growing demand and strong sales pipelines, most notably Alaric Systems, Actimax, Aquasium and Diagnos Holdings.
Alaric is progressing with the refocusing of its sales efforts and increased outsourcing. Sales have increased, costs have been reduced and importantly the company has moved into profitability. Alaric has a strong sales prospect list and the outlook for the year to March 2010 is promising.
Actimax continued its sales growth in the first six months of 2009 with revenues in excess of £3.1 million and operating profits close to £162,000. This is seen as a particularly strong performance given very difficult markets as a consequence of the recession. Importantly, the business continues to increase its proportion of contracted revenues.
Aquasium generated a group operating profit of £1.15 million on sales of £11.4 million for the year ended 31 December 2008 and revenues have grown in the six months to 30 June 2009 to £6.3 million.
The investment in Diagnos Holdings was only made in February this year and it is trading well both in terms of revenues and profitability. The company is currently working on a new range of automotive diagnostic products for the garage market, due to launch in September, as well as launching its existing products in France and Germany later this year.
To reduce costs, its Board is transitioning Oxonica towards a low cost, profitable pure royalty business model. Oxonica delisted from AIM on 4 August 2009 and made several redundancies. Partnership discussions are being held for all of its businesses, with the aim of establishing profitable relationships, based primarily on royalties from partners' product sales. Unfortunately, the Court of Appeal's decision in favour of Neuftec with regard to the payment by Oxonica of past Envirox royalties has in the short term clouded potential discussions on partnering Envirox.
In its annual results announced on 2 March 2009, ANT announced significantly improved results for the year ended 31 December 2008. The company confirmed that royalty income from licensees continued to grow and, in addition to recently announced contract wins, the company has a strong pipeline of new business opportunities and is seeing encouraging growth in trading in its target markets. The company's share price has increased from 27.5p per share as at 31 December 2008 to 49.0p per share as at 19 August 2009.
Sarantel, an AIM-listed company, announced that revenues for the six months to 31 March 2009 were £1.7 million, which was a 64% increase over the same period a year earlier resulting in a pre-tax loss of £1.3 million, a 35% reduction in the corresponding period in 2008. Its investment in high value markets such as military and satellite antennas has resulted in these areas providing 50% (2008: 16%) of sales at higher margins. Despite the current economic climate, consumer GPS revenues remain stable.
Reflecting poorer first half trading, a provision of £205,000 (34%) has been made against the previous carrying value of Aigis Blast Protection. Management has taken rapid action to reduce its cost base through redundancies, senior management pay cuts as well as other cost-cutting measures in order to see the company though to break-even.
As a result of a new funding round of £3 million at a reduced price in Nanotecture, in which Foresight VCT did not participate, a further provision of approximately £250,000 has been made against the original value of the investment.
Across all of the portfolio companies we have, where appropriate, ensured management are focused on cash conservation and cost reductions in light of the current trading climate. The actions taken over the last few months should better place the majority of companies to ride out the current downturn and benefit from an improvement in trading conditions in due course.
Investment Activity
Three new investments totalling £889,012 were made in the period in @Futsal (£29,012), a growth capital opportunity; Land Energy (£110,000), an environmental opportunity; and Diagnos Holdings (£750,000), a management buy-out opportunity.
@Futsal Limited has been established by the founding team of Covion (the successful Foresight investment sold to Balfour Beatty in 2007 for £33 million at a multiple of over four times cost) to roll out a chain of indoor football centres. Futsal is the fastest growing indoor sport in the World with 30 million people playing internationally. The sport has not yet developed in the UK but, as the only form of small sided football supported by the FA, UEFA and FIFA and with the support of major sports brands, it is rapidly gaining momentum.
Land Energy has been set up to generate renewable power from virgin wood and to exploit the growing demand for wood pellets as a renewable fuel, through a series of plants countrywide. These plants will generate electricity for sale to the grid and either use heat for pellet production or to supply heat to a nearby user. The company will therefore be both a combined heat and power ("CHP") generation operator and a pellet producer. The UK Government has identified CHP as a highly efficient form of energy use, which was further incentivised in April 2009 when it became eligible for double Renewable Obligation Certificates.
Diagnos Holdings develops and sells sophisticated automotive diagnostic software and hardware to independent mechanics and garages to allow them to service and repair vehicles. As cars have become increasingly sophisticated, they have become more reliant on electronic systems to run functions such as fuel injection and engine management systems. To fix any fault a mechanic needs to be able to 'talk to' the computer running the process or system. Diagnos Holdings specialises in providing the sophisticated software analysis tools necessary for these tasks.
Several small follow-on investments totalling £495,526 were also made during the half-year under review. These were Silvigen (£171,633), ANT (£128,400), smartFOCUS (£86,250), Clarity Commerce Solutions (£74,900) and SkillsMarket (£34,343).
Several small market purchases were made in some AIM listed companies currently held in the portfolio which we believe were trading significantly below their underlying real value. These include the amounts invested in ANT plc, smartFOCUS Group plc and Clarity Commerce Solutions plc noted above.
Demand from recruitment companies for SkillsMarket's products and services has suffered as a consequence of general trading conditions within the recruitment industry and a further provision of £1,026,000 has been made against this investment. A further £1 million was successfully raised from existing shareholders in two tranches in December 2008 and February 2009, in which Foresight VCT participated, to provide ongoing working capital. We continue to carefully monitor the progress of this investment.
Silvigen has positioned itself to supply the important 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 raised £1.2 million in June 2009, of which Foresight VCT invested £171,633, to provide ongoing working capital for the business as a result of operational delays.
Valuation Policy
Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital ("IPEVC") Valuation 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 in value during the period. Quoted investments and investments traded on AIM and PLUS Markets are valued at the bid price as at 30 June 2009. The portfolio valuations are prepared by Foresight Group and are subject to approval by the Board.
Share Issues and Share Buy-backs
The recent top-up offer raised gross proceeds of £1.3 million between its launch in October 2008 until its close on 31 May 2009. Of this total, £1.1 million was raised in the current period through the issue of 2,648,830 Ordinary Shares at prices ranging from 42.0p to 47.0p per share. These funds enable your Company to remain an active investor in the current market and take advantage of new opportunities.
Additionally, 58,335 shares were issued under the dividend reinvestment scheme at 39.1p per share raising proceeds of £23,000.
All of these share issues were under the new VCT provisions that commenced on 6 April 2006, namely: 30% upfront income tax relief which can be retained by qualifying investors if the shares are held for the minimum five year holding period.
As part of the Company's active buy-back programme, during the period 317,510 Ordinary Shares were purchased for cancellation at a cost of £103,000.
Outlook
The volatility and poor sentiment of the financial markets as well as the increasing difficulty in raising debt finance have proved a double edged sword for the Company. On the one hand Foresight Group's deal flow of companies seeking investment, particularly in the environmental infrastructure sector, is stronger than ever as potential investee companies are finding financial institutions currently less inclined to invest than in the recent past. On the other hand, there is evidence of trade sales within the portfolio being delayed or terminated as a result of the lack of finance available to potential acquirers.
The Board and Foresight Group are conscious that we are in a period of economic slowdown and tight credit conditions. In this environment all investee companies have been and will continue to be encouraged to keep a tight control on costs and conserve cash.
Peter Dicks
Chairman
28 August 2009
For further information please contact:
Gary Fraser, Foresight Fund Managers Limited Tel: 01732 471800
Principal Risks and Uncertainties
The principal risks faced by the Company can be divided into various areas as follows:
Performance
Regulatory
Operational; and
Financial
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 2008. A detailed explanation can be on found on page 15 of the Annual Report and Accounts which is available on www.foresightgroup.eu or by writing to Foresight Group at ECA Court, South Park, Sevenoaks, Kent, TN13 1DU.
In the view of the Board, there have not been any changes to the fundamental nature of these risks since the previous report and these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the six months under review.
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 Interim Report and financial statements. The Directors confirm to the best of their knowledge that:
(a) the summarised set of financial statements has been prepared in accordance with the pronouncement on interim reporting issued by Accounting Standards Board;
(b) 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);
(c) the summarised set of financial statements give a true and fair view in accordance with UK GAAP of the state of affairs of the Company and of the profit and loss of the Company for that period and comply with UK GAAP and Companies Act 1985; and
(d) 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).
The half-yearly Financial Report has not been audited or reviewed by the auditors.
By order of the Board
Peter Dicks
Chairman
28 August 2009
Unaudited Income Statement
for the six months ended 30 June 2009
| Six months ended 30 June 2009 | Six months ended 30 June 2008 | Year ended 31 December 2008 | |||||||
| (unaudited) | (unaudited) | (audited) | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Investment holding gains/(losses) | - | 3,280 | 3,280 | - | (1,659) | (1,659) | - | (6,332) | (6,332) |
| Realised losses on investments | - | (4,089) | (4,089) | - | (301) | (301) | - | (487) | (487) |
| Income | 181 | - | 181 | 243 | - | 243 | 490 | - | 490 |
| Investment management fees | (53) | (159) | (212) | (89) | (267) | (356) | 44 | 131 | 175 |
| Other expenses | (154) | - | (154) | (171) | - | (171) | (336) | - | (336) |
| (Loss)/return on ordinary activities before taxation | (26) | (968) | (994) | (17) | (2,227) | (2,244) | 198 | (6,688) | (6,490) |
| Taxation | - | - | - | - | - | - | - | - | - |
| (Loss)/return on ordinary activities after taxation | (26) | (968) | (994) | (17) | (2,227) | (2,244) | 198 | (6,688) | (6,490) |
| Return per share | (0.1)p | (2.0)p | (2.1)p | (0.1)p | (4.8)p | (4.9)p | 0.4p | (14.5)p | (14.1)p |
The total column of the income statement is the profit and loss account of the Company. All revenue and capital items in the income statement derive from continuing operations. There were no recognised gains or losses for the period other than those recognised in the unaudited income statement above and accordingly no statement of total recognised gains and losses has been prepared.
Unaudited Balance Sheet
at 30 June 2009
| 30 June 2009 | 30 June 2008 | 31 December 2008 | ||||
| (unaudited) | (unaudited) | (audited) | ||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Non-current assets | ||||||
| Assets held at fair value through profit or loss - Investments | 16,037 | 18,353 | 15,512 | |||
| Current assets | ||||||
| Debtors | 1,610 | 1,675 | 1,423 | |||
| Money market and other investments | 692 | 4,124 | 2,750 | |||
| Cash | 945 | 44 | 94 | |||
| 3,247 | 5,843 | 4,267 | ||||
| Creditors: amounts falling due within one year | (177) | (466) | (209) | |||
| Net current assets | 3,070 | 5,377 | 4,058 | |||
| Net assets | 19,107 | 23,730 | 19,570 | |||
| Capital and reserves | ||||||
| Called-up share capital | 488 | 462 | 464 | |||
| Share premium account | 11,915 | 10,631 | 10,817 | |||
| Capital redemption reserve | 17 | - | 14 | |||
| Special distributable reserve | 18,631 | 18,942 | 19,225 | |||
| Capital reserve | (11,618) | (5,790) | (10,650) | |||
| Revenue reserve | (326) | (515) | (300) | |||
| Equity shareholders' funds | 19,107 | 23,730 | 19,570 | |||
| Net asset value per share | 39.2p | 51.3p | 42.2p | |||
Unaudited Cash Flow Statement
for the six months ended 30 June 2009
| Six months ended | Six months ended | Year ended | |
| 30 June 2009 | 30 June 2008 | 31 December 2008 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Operating activities | |||
| Investment income received | 86 | 25 | 213 |
| Deposit and similar interest received | 57 | 105 | 248 |
| Investment management fees paid | (189) | (357) | (272) |
| Secretarial fees paid | (58) | (29) | (59) |
| Other cash payments | (109) | (177) | (252) |
| Net cash outflow from operating activities and returns on investment | (213) | (433) | (122) |
| Taxation | - | - | - |
| Returns on investment and servicing of finance | |||
| Purchase of unquoted investments and investments quoted on AIM | (1,385) | (825) | (2,827) |
| Net proceeds on sale of unquoted investments | - | 100 | 133 |
| Net proceeds on sale of quoted investments | - | 1,188 | 1,190 |
| Net proceeds on deferred consideration | 110 | - | - |
| Net capital (outflow)/inflow from financial investment | (1,275) | 463 | (1,504) |
| Equity dividends paid | (491) | (2,282) | (2,282) |
| Management of liquid resources | |||
| Movement in money market and other deposits | 2,058 | 1,228 | 2,470 |
| 2,058 | 1,228 | 2,470 | |
| Financing | |||
| Proceeds of fund raisings net of expenses | 960 | 1,000 | 1,884 |
| Dividends reinvested | 23 | 127 | 127 |
| Repurchase of own shares | (106) | (100) | (520) |
| 877 | 1,027 | 1,491 | |
| Increase in cash | 956 | 3 | 53 |
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2009
| Called-up share capital | Share premium account | Capital redemption reserve | Special distributable reserve | Capital reserve | Revenue reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 January 2009 | 464 | 10,817 | 14 | 19,225 | (10,650) | (300) | 19,570 |
| Share issues in the period | 26 | 1,145 | - | - | - | - | 1,171 |
| Expenses on share issues | - | (69) | - | - | - | - | (69) |
| Shares repurchased in the period | (3) | - | 3 | (103) | - | - | (103) |
| Dividend paid | - | - | - | (491) | - | - | (491) |
| Dividend reinvested | 1 | 22 | - | - | - | - | 23 |
| Retained loss for the period | - | - | - | - | (968) | (26) | (994) |
| As at 30 June 2009 | 488 | 11,915 | 17 | 18,631 | (11,618) | (326) | 19,107 |
Notes
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 31 December 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 435 of the Companies Act 2006 and are neither audited nor reviewed. Statutory accounts in respect of the period to 31 December 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 31 December 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 31 December 2008; their report was unqualified, and did not contain statements under s498(2) or (3) Companies Act 1985.
3. Copies of the Interim 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. Net asset value per share
The net asset value per share is based on net assets at the end of the period and on 48,765,445 Ordinary Shares, being the number of Ordinary Shares in issue at 30 June 2009 (30 June 2008: 46,235,252 Ordinary Shares, 31 December 2008: 46,375,790 Ordinary Shares).
5. Return per share
| Six months ended | Six months ended | Year ended | |
| 30 June 2009 | 30 June 2008 | 31 December 2008 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Total return after taxation | (994) | (2,244) | (6,490) |
| Basic return per share (note a) | (2.1)p | (4.9)p | (14.1)p |
| Revenue return from ordinary activities after taxation | (26) | (17) | 198 |
| Revenue return per share (note b) | (0.1)p | (0.1)p | 0.4p |
| Capital return from ordinary shares after taxation | (968) | (2,227) | (6,688) |
| Capital return per share (note c) | (2.0)p | (4.8)p | (14.5)p |
| Weighted average number of shares in issue in the period | 46,574,328 | 46,032,534 | 46,155,407 |
Notes:
a) Total return per share is total return after taxation divided by the weighted average number of shares in issue during the period.
b) Revenue return per share is net revenue after taxation divided by the weighted average number of shares in issue during the period.
c) Capital return per share is total capital return after taxation divided by the weighted average number of shares in issue during the period.
Earnings for the period should not be taken as a guide to the results for the full year.
6. Income
| Six months ended | Six months ended | Year ended | |
| 30 June 2009 | 30 June 2008 | 31 December 2008 | |
| (unaudited) | (unaudited) | (audited) | |
| £'000 | £'000 | £'000 | |
| Loan stock interest | 159 | 105 | 225 |
| Overseas based OEICS | 7 | 133 | 210 |
| Bank deposits | 7 | 1 | 18 |
| Interest received on VAT refunded | - | - | 28 |
| Other | 8 | 4 | 9 |
| 181 | 243 | 490 |
7. Assets held at fair value through profit or loss - Investments
| Quoted on AIM | Unquoted | Total | |
| £'000 | £'000 | £'000 | |
| Book cost at 1 January 2009 | 11,631 | 18,505 | 30,136 |
| Investment holding losses | (8,136) | (6,488) | (14,624) |
| Valuation at 1 January 2009 | 3,495 | 12,017 | 15,512 |
| Purchases at cost | 290 | 1,095 | 1,385 |
| Sale proceeds | - | - | - |
| Realised losses | - | (4,199) | (4,199) |
| Investment holding gains | 301 | 3,038 | 3,339 |
| Closing valuation at 30 June 2009 | 4,086 | 11,951 | 16,037 |
| Book cost at 30 June 2009 | 11,921 | 15,401 | 27,322 |
| Investment holding losses | (7,835) | (3,450) | (11,285) |
| Valuation at 30 June 2009 | 4,086 | 11,951 | 16,037 |
8. Related Parties
Bernard Fairman is the managing partner of Foresight Group, which acts as investment manager to the Company in respect of its venture capital investments and received fees of £211,841 during the period (12 months to 31 December 2008: £600,496, 6 months to 30 June 2008: £303,560 excluding VAT). Foresight Fund Managers Limited, a subsidiary of Foresight Group, received £50,000 excluding VAT during the period in respect of accounting and secretarial services (12 months to 31 December 2008: £87,965, 6 months to 30 June 2008: £25,000).
END