Foresight Technology Regulatory News (FTV)

29 Aug 2008 10:21



Chairman's Statement

Summary

• Net asset value per Ordinary Share as at 30 June 2008 was 51.32p (compared to 60.51p as at 31 December).

• 5.0p per share dividend paid on 7 March 2008.

• Proceeds of £1,288,455 realised from the sale of Telecom Plus (£1,182,242) as well as partial realisations of Actimax (£100,010) and Mirada plc (£6,203).

• Two new investments were made in Lynwood Group Holdings (£250,000) and Silvigen Limited (£250,000).

• As a result of the Linked Offer, Foresight VCT raised gross proceeds of £1,979,376 as at 30 April 2008 when the offer closed.

• The Company made total follow-on investments totalling £324,948: Clarity Commerce Solutions plc (£100,000), Oled-T (£70,993), Alaric Systems (£66,454), Sarantel Group plc (£50,001), and High Integrity Solutions (£37,500).

Portfolio Review

During the first half of the year under review, stock markets continued to experience adverse conditions primarily as a result of 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 rising 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 AIM quoted holdings have suffered as a result of the general market decline. Against this background your Company's net asset value has fallen to 51.3p per share from 60.5p per share six months earlier, but 5.0p per share of this reduction in NAV is as a result of the dividend paid to shareholders in March 2008.

The performance of a number of portfolio companies continued to improve, reflecting growing demand and strong sales pipelines, most notably Datapoint, Infrared Integrated Systems (IRISYS) and SkillsMarket. Datapoint recently achieved record sales in excess of £7 million for the year ended 31 March 2008 and operating profits of some £0.5 million. The company has started its current year well with several new contract wins and expects to deliver significantly improved revenues and profits as a result. IRISYS core footfall business continues to grow and has recently closed a significant contract with a large supermarket chain. SkillsMarket has recently launched its new iProfile business, which is expected to contribute to revenues in the second half of 2008. At the same time the core recruitment business continues to develop and contract signings are progressing to plan. 

Despite announcing significantly higher revenues for 2008 (excluding the aborted Petrol Ofisi contract) than in 2007, reduced losses and reduced cash burn as a result of a successful cost-cutting exercise, Oxonica's share price has drifted from 24.0p to 21.0p per share. The company has a strong pipeline of customers for its efficient fuel additive, Envirox, which is being helped by higher oil prices and has seen an increase in sales of 49% over the prior year comparatives. Conversely, sales of Optisol, the company's UV absorber have been disappointing in the current year to date. Oxonica has also received orders of $2.15 million for its security products. The company recently announced that it was in discussions to identify strategic partners for its biodiagnostics division, and an announcement is expected shortly.

In its annual results announced on 28 February 2008, ANT stated that its performance in the second half of its financial year was much improved (sales up 92% and costs down 31%) and the company was seeing good growth in unit shipments demonstrating uptake from digital media subscribers. The company confirmed more recently that that this upturn in business had continued into 2008 with royalty income from licensees showing particularly strong growth. The company has a strong pipeline of new business opportunities and has recently announced further contract wins. The company's share price improved from 17.0p to 28.0p during the period under review.

As a result of a new funding round of £2 million in Nanotecture, in which Foresight VCT did not participate, a provision of approximately £500,000 has been made against the original value of the investment.

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 Limited. 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.

Several small follow-on investments were made during the six months under review: £100,000 into the rights issue of Clarity Commerce Solutions, to support the new management team and their plans to return the business to profitability. Initial signs of progress are positive and several new contract wins with large clients have been confirmed.

A total of £50,001 was invested in Sarantel Group plc, which raised £3.4 million in April 2008 from existing and new shareholders. Disappointing results have had a negative impact on its share price but the underlying business appears to be making progress in its core GPS antenna market.

Disappointingly, despite our ongoing support for High Integrity Solutions (£37,500 invested in the period) it was placed into administration during the period as a result of losing a major contract with BAE Systems.

Foresight contributed £66,454 to a small funding round in Alaric Systems as part of an ongoing plan to support the business through a period of transition. Early signs are that a significant cost-cutting exercise and increased focus on sales are having a positive effect on the business's underlying profitability, although a partial provision has been made against the previous value of the investment to reflect poorer recent trading.

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 sold its IPR assets to chemical company Merck and is in administration and being wound up. As a result Foresight has provided in full against the value of this investment.

Realisations

Unquoted

Actimax achieved 15% sales growth to £5.8 million in the year to 31 December 2007 with the operating profits increasing to £180,000. The company has continued to win new orders in the current year and is optimistic about its full year prospects. Following these results, Actimax has made £100,010 of loan repayments to Foresight VCT in the period.

Quoted

During January, the remaining holding in Telecom plus plc was sold for net proceeds of £1,182,242 representing a return in excess of five times the original cost of £233,259. In addition, there was a small realisation of £6,203 from a partial sale in Mirada plc (formerly YooMedia plc).

Results

The results for the period from 1 January 2008 to 30 June 2008 are set out below. The net asset value per Ordinary Share as at 30 June 2008 fell to 51.3p (31 December 2007: 60.5p) largely resulting from the payment of the 5.0p per share dividend, general falls in the AIM market and the provision against Nanotecture, Alaric Systems and OLED-T. The total return (after tax) attributable to Ordinary Shareholders was a loss of 4.88p (31 December 2007: loss of 19.92p).

Dividend

The Company's dividend policy is to aim to distribute a steady flow of dividends from income and realised capital gains to shareholders. As a result of recent successful portfolio company realisations, the Board paid a dividend of 5.0p per new ordinary shares on 7 March 2008 for the year ended 31 December 2007.

Valuation Policy

Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVC) 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 2008. The portfolio valuations are prepared by Foresight Group and are subject to approval by the Board.

Share Issues and Share Buy-backs

The linked offer for subscription between Foresight VCT, Foresight 2, Foresight 3 and Foresight 4 was successful and raised £7,917,503 when it closed on 30 April 2008. The proceeds of the offer were equally split with Foresight VCT receiving total gross proceeds of £1,979,376, following the issue of 3,102,896 ordinary shares at prices ranging between 61.0p and 72.0p per share. These funds will enable your Company to remain an active investor in the current market and take advantage of new opportunities currently being reviewed by Foresight Group.

The share issue was 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, 1,100,000 Ordinary Shares were purchased for cancellation at a cost of £420,003 during the six months under review.

Outlook

The 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 delayed or terminated as a result of potential acquirers failing to raise sufficient finance to complete transactions.

The market in which Foresight VCT 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 VCT 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

29 August 2008

For further information please contact:

Gary Fraser, Foresight Fund Managers Limited Tel: 01732 471800

Landsbanki, Tel: 020 7426 9000

  Unaudited Summary Income Statement

(incorporating the Revenue Account) for the six months to 30 June 2008

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 year should not be taken as a guide to results for the year.

  Unaudited Balance Sheet

at 30 June 2008

  Unaudited Summarised Statement of Cash flows

for the six months to 30 June 2008

Unaudited Reconciliation of Movements in Shareholders' Funds

for the six months to 30 June 2008

  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 31 December 2007. 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 31 December 2007 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 2007; their report was unqualified, and did not contain statements under s237(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. The net asset value per share is based on net assets at the end of the period and on 46,235,252 Ordinary Shares, being the number of Ordinary Shares in issue at that date.

5. 

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.

Earnings for the first six months should not be taken as a guide to the results for the full year.

6. Income

7. Current investments at 30 June 2008 represent funds invested in 3 Dublin-based OEIC money market funds managed by BlackRock Investment Managers, Insight Investment Management and Royal Bank of Scotland.

8. Related Party Transactions: Bernard Fairman is managing partner of Foresight Group, which acts as investment manager to the Company in respect of its venture capital investments and received fees of £356,683 including VAT during the period (31 December 2007: £833,907). Foresight Fund Managers Limited, a subsidiary of Foresight Group, received £29,375 during the period in respect of company secretarial fees (twelve months to 31 December 2007: £58,751).  

9. Investments

10. Capital and reserves 

END