Foresight Technology Regulatory News (FTV)

28 Sep 2006 07:01

Foresight Technology VCT PLC28 September 2006 FORESIGHT TECHNOLOGY VCT PLC PRELIMINARY ANNOUNCEMENT OF RESULTS CHAIRMAN'S STATEMENT During the first six months of 2006 markets in general have experiencedincreased volatility as a result of a number of factors including interest rateand inflation concerns and geopolitical uncertainties. The Company's quotedtechnology stocks have suffered from this volatility with several companiesdropping in value during the interim period. Overall the net asset value of theOrdinary Shares fund fell to 51.3p per Ordinary Share (31 December 2005: 58.7p)and to 79.8p per "C" Share (31 December 2005: 91.7p). Both of these falls arelargely attributable to a reduction in the value of a number of quoted stocks. There has been considerable downward pressure on the prices of certain of theAIM listed investments, in particular YooMedia, Sarantel, Oxonica and ANT.YooMedia has been undertaking a restructuring programme aimed at rationalisingthe business, strengthening the balance sheet and re-positioning the Company'sproduct offering. During this period of uncertainty the company's share pricehas suffered but management expects the Company will achieve an operating profitin 2006. Sarantel recently announced sales of £2.3m for the six months ended 31March 2006 (2005: £1 million). Despite this improvement, the company reportedthat revenues for the remainder of the year are likely to be substantially belowmarket expectations and its share price has fallen as a result. ANT has alsosuffered a decline in share price as the commercial adoption of internetprotocol television (IPTV) has been slower than anticipated. Nevertheless, a number of the portfolio companies have made encouraging progressand entered into or improved profitability in the period. Following theacquisition of Blue Curve in January 2006 Mondas' new joint offering of softwaresolutions to the financial services and education markets has proved popularwith customers. The company recently announced that it has generated a profitfor the six months ended 30 June 2006. The Company sees an increased level ofconfidence from its financial sector clients across all business areas and thisis reflected in the higher level of new business wins and strengthening prospectpipeline. SmartFOCUS recently announced a substantial increase in revenue in thefirst half of 2006 compared to the same reporting period in 2005 and it hastraded profitably during the first six months of 2006. At the same time it hascontinued to invest significantly in additional sales, marketing andimplementation resources. During the period, smartFOCUS acquired Email ReactionLimited, an on-line marketing software vendor. This business has beenintegrated into the group with the resulting combined offering being positivelyreceived by clients. Alaric Systems and iCore experienced significant salesincreases as a result of contracts with large multinational companies, whichresulted in Alaric moving into profitability and a significant increase inprofits at iCore. Covion continues to win new orders for its facilitiesmanagement services and both sales and profits continue to grow. During the period the Company made one follow-on investment of £250,000 inTheSkillsMarket. The company's product offering has been further developed sincethe original investment in 2005 and as a consequence the prospects for revenuegrowth and profitability in the medium term have improved. Results The results for the period from 1 January 2006 to 30 June 2006 are set outbelow. The net asset value per Ordinary Share as at 30 June 2006 was 51.3p (31December 2005: 58.7p restated). The total return (after tax) attributable toOrdinary Shareholders was a loss of 7.1p (31 December 2005: loss of 16.1p),mainly due to the fall in the share price of YooMedia plc. The net asset value per "C" Share as at 30 June 2006 was 79.8p (31 December2005: 91.7p restated) and the attributable return was a loss of 11.9p per "C"Share (31 December 2005: loss of 1.2p). Nearly all of the fall in the net assetvalue per share of the "C" Shares fund resulted from share price declines withinthe AIM portfolio companies. Dividend The Company paid a final dividend of 0.50p per Ordinary Share ("C" Shares: nil)for the year ended 31 December 2005 to Ordinary Shareholders on 26 May 2006 (31December 2004: "C" Shares 0.50p; Ordinary Shares: nil). The Company's dividendpolicy is to distribute to shareholders income earned and capital gains realisedas soon as is practicable. The Board is not recommending an interim dividend for the six months ended 30June 2006. Ordinary Shares fund YooMedia, as a result of a number of acquisitions over the past two years, hasdeveloped from a small business with revenues of less than £1 million to morethan £84 million for the year ended 31 December 2005. Following theannouncement of several disappointing trading statements its share price hasperformed poorly falling from 7p as at 31 December 2005 to 2.5p as at 30 June2006 resulting in a net decrease of approximately £900,000 in the value of theOrdinary Shares fund since 31 December 2005 or 6.0p per Share. During the period one follow-on investment was made in TheSkillsMarket(£80,000). "C" Shares fund Oxonica, which engineers the properties of materials at the nano-scale level forapplication in fuel additives, UV protection and other products, has continuedto make encouraging progress. Sales of Oxonica Energy's fuel bornenanocatalyst, Envirox, continue to increase in line with expectations andinclude a recent sale (after 30 June 2006) to an overseas national oil companyestimated to be worth $12.7m in the period to December 2006. In addition tosales to Boots, Oxonica's UV absorbing product, Optisol, has been incorporatedinto Tesco's Finest range of sunscreens and into products launched by Coreana, aleading South Korean cosmetics company resulting in strong sales growth ofOptisol. Nanoplex Technologies Inc, acquired in February, has been successfullyintegrated into the group and is already generating initial revenues fromco-development agreements with leading companies concerned withanti-counterfeiting and brand protection markets. Despite these developments thecompany's valuation fell from £9.4 million to ££7.1 million resulting in a fallof £2.3 million in the Company's carrying value. During January 2006, Mondas formally completed the acquisition of Blue Curve inan all share deal. Following the acquisition the company has seen a markedimprovement in both revenues and profit growth from its enlarged product suite.As a result Mondas' share price has improved by over 50% in the periodrepresenting an uplift of £220,000 in the Company's carrying value. Wire-e was subject to a management buyout during May 2006, with ForesightTechnology receiving £240,000 in cash and a small stake in the new business,Rapide Communications. This resulted in a write down of £27,000 in the carryingvalue. During the period one follow-on investment was made in TheSkillsMarket(£170,000). Change of Auditor During the period the Company changed its auditor from KPMG Audit plc to Ernst &Young LLP and I would like to take this opportunity to thank KPMG for theirservice over the last 8 years. Valuation Policy The investments held by the company have been valued in accordance with theInternational Private Equity and Venture Capital Guidelines developed by theBritish Venture Capital Association ("BVCA") and other organisations under whichinvestments are valued, as defined in the guidelines, at "fair value".Ordinarily, unquoted investments will be valued at cost for the 12 monthsfollowing the date of acquisition unless there is an impairment in value duringthe period. Quoted investments and investments traded on AIM and OFEX arevalued at the bid price as at 30 June 2006. The portfolio valuations areprepared by Foresight Venture Partners and are subject to approval by the Board. Dividend Investment Scheme and Share Buybacks During the period, the Company issued 26,468 Ordinary Shares under the dividendinvestment scheme raising approximately £14,000 in aggregate. These shares wereissued 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 theshares are held for the minimum 5 year holding period. As part of the Company's active buyback programme, 339,412 Ordinary Shares werepurchased for cancellation at an approximate cost of £163,000, and at anapproximate discount to NAV of 10%. Furthermore, 830,000 "C" Shares werepurchased for cancellation at an approximate cost of £ 701,000, also at anapproximate discount to NAV of 10%. Ordinary Shares and "C" Shares Fund Merger The Board is currently considering, in accordance with the Company's articles ofassociation, proposals for the merger of the Ordinary and "C" Shares funds anddetails of these proposals will be forwarded to Shareholders in due course. Outlook As noted earlier although the market in which the Company operates continues tobe buoyant in terms of potential new investment opportunities, both the Ordinaryand "C" Shares funds are currently considered to be fully invested. As aresult, while your manager continues to monitor new opportunities it iscurrently limiting any further commitments to existing portfolio companies. Despite volatile stock markets, merger and acquisition activity remains buoyantand Foresight Venture Partners will actively investigate any sensible liquidityopportunities which may arise or can be originated. Peter DicksChairman Unaudited Non-Statutory Analysis between the Ordinary Shares and "C" Sharesfunds Unaudited Income Statement for the six months ended 30 June 2006 Ordinary "C" Shares Shares fund fund Revenue Capital Total Revenue Capital Total £ £ £ £ £ £Unrealised gains and losses on investments - (981,611) (981,611) - (3,938,371) (3,938,371)Realised gains on investments - 8,903 8,903 - 203,316 203,316Cost of investment transactions - - - - - -Income 82,464 - 82,464 154,097 - 154,097Investment Management Fees (27,156) (81,467) (108,623) (106,172) (318,517) (424,689)Other Expenses (64,215) - (64,215) (233,510) - (233,510) Loss before tax (8,907) (1,054,175) (1,063,082) (185,585) (4,053,572) (4,239,157)Taxation - - - - - - Profit for the year (8,907) (1,054,175) (1,063,082) (185,585) (4,053,572) (4,239,157) Return per share (0.06)p (7.01)p (7.07)p (0.52)p (11.38)p (11.90)p Unaudited Reconciliation of Movements in Shareholders' Fundsfor the six months ended 30 June 2006 Income Other Total Income Other Total Statement Reserves Reserves Statement Reserves Reserves £ £ £ £ £ £ Opening shareholders' funds 1,229,859 7,640,753 8,870,612 480,815 32,444,256 32,925,071 Shares issued/(bought back) - (148,913) (148,913) - (700,949) (700,949)Loss for the period (81,471) (981,611) (1,063,082) (300,786) (3,938,371) (4,239,157)Gains/(losses) previously unrealised transferred between reserves 24,228 (24,228) - (1,392,899) 1,392,899 -Losses written off to cancelled share premium account 81,467 (81,467) - 2,158,012 (2,158,012) -Dividends paid (75,521) - (75,521) - - - Closing shareholders' funds 1,178,562 6,404,534 7,583,096 945,142 27,039,823 27,984,965 Unaudited Balance Sheetas at 30 June 2006 Ordinary "C" Shares fund Shares fund £ £ £ £Non-current assetsAssets held at fair value through profit and loss -investments 5,862,109 26,339,340 Current assetsDebtors and prepayments 216,206 785,071Current investments 1,597,365 1,276,078Cash at bank (4,311) 11,930 1,809,260 2,073,079Current Liabilities: amountsfalling duewithin one year (88,273) (427,454)Net current assets 1,720,987 1,645,625 Net assets 7,583,096 27,984,965 CapitalCalled up share capital 147,913 350,761ReservesShare premium account 4,060,624 2,953,685Cancelled share premium account 4,010,594 20,197,970Revaluation reserve (1,814,597) 3,537,407Revenue reserve 1,178,562 945,142 7,583,096 27,984,965 No of shares in issue 14,791,348 35,076,091 Net asset value per 1p share: 51.27p 79.78p Unaudited Income StatementFor the six months ended 30 June 2006 Six months Six months Year to 31 to 30 June to 30 June December 2006 2005 2005 (unaudited) Restated (unaudited) (audited) Revenue Capital Total Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ £ £ £Unrealised gains - (4,919,982) (4,919,982) - (3,112,906) (3,112,906) - (2,358,802) (2,358,802)and losses oninvestmentsRealised gains/ - 212,219 212,219 - 25,412 25,412 - 25,161 25,161(losses) oninvestmentsCosts of - - - - (90) (90) - (25,491) (25,491)investmenttransactionsIncome 236,561 - 236,561 526,536 - 526,536 931,592 - 931,592Investment (133,328) (399,984) (533,312) (129,204) (387,613) (516,817)(263,824) (791,471) (1,055,295)management feesOther expenses (297,725) - (297,725) (212,098) - (212,098)(443,869) - (443,869) Loss before (194,492) (5,107,747) (5,302,239) 185,234 (3,475,197) (3,289,963) 223,899 (3,150,603) (2,926,704)taxationTaxation - - - (21,972) 21,972 - (28,935) 28,935 - (Loss)/Profit for the period (194,492) (5,107,747) (5,302,239) 163,262 (3,453,225) (3,289,963) 194,964 (3,121,668) (2,926,704) Earnings per share Ordinary Shares (7.07)p (15.13)p (16.12)p "C" Shares (11.90)p (2.48)p (1.15)p Balance Sheetas at 30 June 2006 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (audited) £ £ £ £ £ £Non-Current AssetsAssets held at fair 32,201,449 35,635,628 37,926,957 value through profit andloss - Investments Current AssetsDebtors and prepayments 898,876 841,395 1,227,718Current investments 2,873,443 5,577,731 2,749,170Cash at bank 7,619 42,511 161,923 3,779,938 6,461,637 4,138,811Current LiabilitiesOther creditors 250,194 23,219 133,549Accruals 163,132 199,544 136,536 (413,326) (222,763) (270,085)Net current assets 3,366,612 6,238,874 3,868,726 Net assets 35,568,061 41,874,502 41,795,683 Capital and reservesCalled up share capital 498,674 516,304 510,104Share premium account 7,014,309 7,000,652 7,000,652Distributable reserve 24,208,564 28,279,426 27,300,132 1,722,810 4,662,658 5,274,121 Capital reserve -unrealisedRevenue reserve 2,123,704 1,415,462 1,710,674Equity shareholders' 35,568,061 41,874,502 41,795,683 funds Net asset value pershare of 1 pence each: Ordinary Shares 51.27p 59.45p 58.73p "C" Shares 79.78p 90.37p 91.70p Unaudited Cashflow Statement for the six months ended 30 June 2006 Six months to Six months to Year to 31 30 June 2006 30 June 2005 December 2005 (unaudited) (unaudited) (audited) £ £ £Operating activitiesDividends received - - 71,610Deposit and similar interest 223,042 423,140 655,076Other cash receipts - - 7,360Investment management fees paid (503,156) (562,801) (1,097,933)Other cash payments (233,349) (170,478) (472,437) Net cash outflow from operating activities (513,463) (310,139) (836,324) Investing activitiesPurchase of non-current investments (250,000) (5,085,575) (7,090,800)Sale of non-current investments 1,562,743 25,412 198,163 Net cash intflow/(outflow) from investing activities 1,312,743 (5,060,163) (6,892,637) Net cash inflow/(outflow) before financing and liquid 799,280 (5,370,302) (7,728,961)resource management Management of liquid resourcesIncrease in current investments (124,273) 6,629,280 9,457,841 (124,273) 6,629,280 9,457,841 FinancingPurchase of own shares (767,712) (1,095,561) (1,446,051)Issue of shares - 10,791 10,791Equity dividends paid (61,599) (185,241) (185,241) (829,311) (1,270,011) (1,620,501) Net (decrease)/increase in cash (154,304) (11,033) 108,379 Unaudited Reconciliation of Movementsin Shareholders' Fundsfor the six months ended 30 June 2006 Cancelled Called up Share share Retained share premium premium Revaluation Revenue capital account account reserve reserve Total £ £ £ £ £ £ At 31 December 2005 510,104 7,000,652 27,300,132 5,274,121 1,710,674 41,795,683 Shares issued/(bought back) (11,430) 13,657 (852,089) - - (849,862) Loss for the period - - - (4,919,982) (382,257) (5,302,239) Losses previously unrealised transferred between reserves - - - 1,368,671 (1,368,671) - Losses written off to cancelled share premium account - - (2,239,479) - 2,239,479 - Dividends - final paid for year ended 31 December 2005 - - - - (75,521) (75,521) At 30 June 2006 498,674 7,014,309 24,208,564 1,722,810 2,123,704 35,568,061 Notes to the Unaudited Financial Statements 1. Principal accounting policies The following accounting policies have been applied consistently throughout the period. Full details of accounting policies will be disclosed in the Annual Report and Financial Statements for the year ended 31 December 2006. a) Basis of Accounting The accounts have been prepared under the historical cost convention, modified to include the revaluation of investments, and in accordance with applicable accounting standards and to the extent that it does not conflict with the Companies Act 1985, the Statements of Recommended Practice, "Financial Statements of Investment Trust Companies". The revenue and capital columns of the Income Statement are presented as supplementary information. b) Investments Investments are stated at fair value, in accordance with the International Private Equity and Venture Capital Valuation ('IPEVCV') guidelines published in 2005, which are consistent with the British Venture Capital Association guidelines previously followed. Quoted investments are stated on a bid price basis in accordance with FRS 26. Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with IPEVCV guidelines: i Recent investments which have been made in the last 12 months are at fair value, which unless another methodology gives a better indication of fair value, will be at cost. ii Investments in companies at an early stage of their development are also valued at fair value, which unless another methodology gives a better indication of fair value, will be at cost. iii. Investments which have been held for more than 12 months and which have gone beyond the stage of their development in 2 above are valued, in the absence of overriding factors, using a suitable price-earnings ratio discounted to reflect the lack of marketability. Where overriding factors apply alternative methods of valuation will be used. These will include the application of a material arms length transaction by an independent third party, cost, cost less provision for impairment, discounted cash flow, or a net asset basis. Unrealised capital gains and losses on investments are dealt with in the revaluation reserve and any movements are reflected through the income statement. The only exception to this rule occurs when the Directors believe that there has been a permanent diminution in the value of an investment. In such circumstances, the associated write down in the value of the investment is charged directly through the face of the income statement. 2. All revenue and capital items in the Income Statement derive from continuing operations. There were no other recognised gains or losses for the period. 3. In accordance with the policy statement published under "Management and Administration" in the Company's prospectuses dated 1 October 1997 and 14 October 1999, the Directors have charged 75% of the investment management expenses to the capital reserve. 4. Earnings for the six months should not be taken as a guide to the results for the full year. 5. The Ordinary Shareholders or the "C" Shareholders will be entitled to receive any dividends paid out of the net income from the net assets attributable to the Ordinary Shares, or the "C" Shares respectively. 6. The Company revoked its status as an investment company in March 2000, so that it can regard capital reserves as profits of the Company available for distribution. The Company has not reapplied and does not intend to re-apply for investment company status. 7. Income Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £ £ £ Dividends 4,024 71,610 71,610 Overseas based OEICS 73,626 221,487 316,324 Loan stock interest 150,825 227,317 528,658 Bank deposits 2,963 1,587 2,765 Other 5,123 4,535 12,235 Total Income 236,561 526,536 931,592 8. The Ordinary Shares current investments and the "C" Shares current investments represent the balance of the net proceeds from the issues of Ordinary Shares and "C" Shares. These funds are invested in 3 Dublin based OEIC money market funds managed by Merrill Lynch Investment Managers, Insight Investment Management and Royal Bank Scotland. 9. Earnings and return per share The basic earnings, revenue return and capital return per share shown below for each period are respectively based on numerators i)-iii), each divided by the weighted average number of shares in issue in the period - see iv) below Ordinary Shares fund Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £ £ £ Total earnings after taxation (1,063,082) ( 2,378,484) ( 2,508,285) i) Basic earnings per share (pence) (7.07)p (15.13)p (16.12)p Net revenue from ordinary activities after taxation ( 8,907) 105,601 113,631 ii) Revenue return per share (pence) (0.06)p 0.67p 0.73p Capital loss ( 1,054,175) ( 2,484,085) ( 2,621,916) iii) Capital loss per share (pence) (7.01)p (15.80)p (16.85)p iv) Weighted average number of shares in issue in the period 15,724,816 15,560,442 15,037,434 C Shares fund Six months ended Six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £ £ £ Total earnings after taxation (4,239,157) ( 911,479) ( 418,419) i) Basic earnings per share (pence) (11.90)p (2.48)p (1.15)p Net revenue from ordinary activities after taxation (185,585) 57,661 81,333 ii) Revenue return per share (pence) (0.52)p 0.16p 0.22p Capital loss (4,053,572)) ( 969,140) ( 499,752) iii) Capital loss per share (pence) (11.38)p (2.64)p (1.37)p iv) Weighted average number of shares in issue in the period 35,632,610 36,722,361 36,381,420 10. The net asset value per share for both the Ordinary Shares and the C Shares has been calculated on the appropriate allocation of the Company's assets and liabilities. Other than expenses specifically attributable to one fund or the other, one quarter of costs incurred since 1 January 2006 has been allocated to the Ordinary Shares fund. 11. Dividends Six months Six months ended Year ended ended 30 June 30 June 2005 31 December 2005 2006 £ £ £ Ordinary shares Final dividend of 0.5p paid for the year ended 31 December 2005 75,521 - - 75,521 - - "C" shares Final dividend of 0.5p paid for the year ended 31 - 185,272 185,272 December 2004 - 185,272 185,272 Total dividends paid in period 75,521 185,272 185,272 12. Summary of investments during the period Unlisted Company Listed Traded or traded Qualifying investments on AIM on OFEX loans Total £ £ £ £ £ Cost/valuation at 31 December 2005 878,850 15,532,730 15,116,749 6,398,628 37,926,957 Reclassifications - 546,678 366,650 (913,328) - Purchases at cost - - 250,000 - 250,000 Disposals at cost/2005 valuations (33,750) (870,921) - (150,855) (1,055,526) Change in unrealised gains/(losses) (137,720) (3,601,987) (948,353) (231,922) (4,919,982) Cost/valuation at 30 June 2006 707,380 11,606,500 14,785,046 5,102,523 32,201,449 Book cost at 30 June 2006 238,406 10,377,774 15,514,274 6,848,185 32,978,639 Unrealised gains/(losses) at 30 June 2006 468,974 1,228,726 1,270,772 (1,245,662) 1,722,810 Permanent impairment - - (2,000,000) (500,000) (2,500,000) 707,380 11,606,500 14,785,046 5,102,523 32,201,449 Summary of investments during the period Ordinary Shares fund Cost/valuation at 31 December 2005 878,850 1,798,612 3,311,809 808,198 6,797,469 Reclassifications - - - - - Purchases at cost - - 80,001 - 80,001 Disposals at cost/2005 valuations (33,750) - (33,750) - - Change in unrealised gains/(losses) (137,720) (964,747) 120,856 - (981,611) Cost/valuation at 30 June 2006 707,380 833,865 3,512,666 808,198 5,862,109 238,406 1,835,357 5,197,245 1,905,698 9,176,706 Book cost at 30 June 2006 Unrealised gains/(losses) at 30 June 2006 468,974 (1,001,492) (684,579) (597,500) (1,814,597) Permanent impairment - - (1,000,000) (500,000) (1,500,000) 707,380 833,865 3,512,666 808,198 5,862,109 Summary of investments during the period "C" Shares fund Cost/valuation at 31 December 2005 - 13,734,118 11,804,940 5,590,430 31,129,488 Reclassifications - 546,678 366,650 (913,328) - Purchases at cost - - 169,999 - 169,999 Disposals at cost/2005 valuations - (870,921) - (150,855) (1,021,776) Change in unrealised gains/(losses) - (2,637,240) (1,069,209) (231,922) (3,938,371) Cost/valuation at 30 June 2006 - 10,772,635 11,272,380 4,294,325 26,339,340 - 8,542,417 10,317,029 4,942,487 23,801,933 Book cost at 30 June 2006 Unrealised gains/(losses) at 30 June 2006 - 2,230,218 1,955,351 (648,162) 3,537,407 Permanent impairment - - (1,000,000) - (1,000,000) - 10,772,635 11,272,380 4,294,325 26,339,340 13. The financial information for the six months ended 30 June 2006 has not been audited or previously published. The information for the year ended 31 December 2005 does not comprise full financial statements within the meaning of Section 240 of the Companies Act 1985. The financial statements for the year ended 31 December 2005 have been filed with the Registrar of Companies. The auditors at that time, KPMG Audit plc, have reported on these financial statements and that report was unqualified and did not contain a statement under Section 237(2) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange