Foresight VCT plc - Half-year report

FORESIGHT VCT PLC

FINANCIAL HIGHLIGHTS

•        Total net assets £163.4 million.

•        A final dividend of 3.7p per share was paid on 25 June 2021, costing £7.5 million.

•      The value of the investment portfolio rose by £17.6 million in the six months to 30 June 2021. This was driven by deployment of £6.3 million, an increase in the value of existing investments of £22.4 million offset by a realisation of £11.1 million.

•      Net Asset Value per share increased by 9.2% from 73.7p at 31 December 2020 to 80.5p at 30 June 2021. Including the payment of a 3.7p dividend made on 25 June 2021, NAV total return per share was 84.2p, which increased the total return in the period to 14.2%.

•      An offer for subscription was launched in July 2021 to raise up to £20 million with an over-allotment facility to raise a further £10 million.

CHAIR’S STATEMENT
I am pleased to present the Company’s Unaudited Half-Yearly Financial Report for the period ended 30 June 2021.

THE CONTINUING IMPACT OF COVID-19
Since the end of last year, the successful roll-out of the vaccination programme in the UK has begun to generate more positive news, as hospitalisations and deaths from COVID-19 have fallen significantly, albeit that the emergence of new variants, particularly the Delta variant, has raised new concerns.

Whilst the pandemic and the ensuing market conditions made 2020 a challenging and unpredictable year, overall the companies within the portfolio have coped relatively well in these testing times. After a sharp drop in portfolio value in the quarter to March 2020 at the peak of uncertainty around COVID-19, the Company’s portfolio, in aggregate, experienced a recovery which has continued into the first half of 2021. Many of the portfolio companies have successfully adapted to the new economic landscape, with some performing extremely strongly. A minority continue to be adversely impacted by COVID-19 and the resulting lockdowns, particularly those companies in the travel, retail and hospitality sectors.

At the start of the crisis, the Manager reacted swiftly, providing the portfolio companies with a useful toolkit in response to their immediate difficulties. From then on, the Manager has continued to work very closely with all the businesses within the portfolio to help them minimise the damage to their operations from the COVID-19 pandemic. I would like to express the Board’s thanks to the Manager’s private equity team for their dedication and diligence during this difficult period. It is also a credit to the high quality of the management teams within the portfolio companies that their businesses were protected from the worst of the fallout.

STRATEGY
The Board and the Manager continue to pursue a strategy for the Company which includes the following four key objectives:

•         further development of the net assets of the Company to maintain a level in excess of £150 million;
•         payment of an annual dividend of at least 5% of the NAV per share and at the same time endeavouring to maintain the NAV per share on a year on year basis;
•         the implementation of a significant number of new and follow-on qualifying investments every year; and
•         maintaining a programme of regular share buy backs at a discount in the region of 10% to the prevailing NAV per share.

The Board and the Manager believe that these key objectives remain appropriate and the Company’s performance in relation to each of them over the past six months is reviewed more fully below.

NET ASSET VALUE
As at 30 June 2021 the NAV of the Company was £163.4 million (31 December 2020: £151.8 million), which is in line with the Board’s objective of maintaining the net assets of the Company at a level in excess of £150 million.

At the start of the year 87% of the Company’s assets were already invested and the Board believed it would be in the Company’s best interest to raise further funds to provide liquidity for its activities over the remainder of this year and beyond. On 26 July 2021 the Company launched an offer for subscription to raise up to £20 million, with an over-allotment facility to raise up to a further £10 million, through the issue of new shares.

During the period the NAV per share increased by 9.2% from 73.7p at 31 December 2020 to 80.5p at 30 June 2021. Including the payment of a 3.7p per share dividend made on 25 June 2021, which is detailed below, NAV total return per share for the six-month period was 84.2p, representing a total return of 14.2%.

After the payment of a dividend of 5.0% of NAV which is detailed below, the Company has exceeded its objective of maintaining NAV per share on a year on year basis.

The total return per share from an investment made five years ago would be 28.9%.

DIVIDENDS
The final dividend for the year ended 31 December 2020 of 3.7p per share was paid on 25 June 2021 based on an ex-dividend date of 10 June 2021, with a record date of 11 June 2021. The total cost of this dividend was £7.5 million, including shares allotted under the dividend reinvestment scheme.

The Company continues to achieve its target dividend yield of 5% of NAV, which was set in 2019 in light of the change in portfolio towards earlier stage, higher risk companies, as required by the current VCT rules. The Board and the Manager hope that this performance may be enhanced by additional ‘special’ dividends as and when particularly successful portfolio disposals are achieved.

INVESTMENT PERFORMANCE AND PORTFOLIO ACTIVITY
A detailed analysis of the investment portfolio performance over the period is given in the Manager’s Review.

During the period under review the Manager completed three new investments and two follow-on investments costing £4.0 million and £2.2 million respectively. Details of each of these new portfolio companies can be found in the Manager’s Review.

This level of new investment was somewhat behind the Company’s original forecast, as the Manager focussed more on supporting the existing portfolio through the various stages of the pandemic. The Board and the Manager are confident that a more significant number of new and follow-on investments can be achieved during the rest of the year as the economy opens up again and more opportunities emerge.

After the period end a new investment was made into Callen-Lenz Associates Limited and further follow-on investments were made into Biotherapy Services Limited and Fertility Focus Limited. We are pleased to announce that in July 2021, the Company sold its investment in Mologic Ltd, generating a return of 3.1x on the original investment. Also in August 2021 the Company sold its investment in Ixaris Group Holdings Limited.

The Company and Foresight Enterprise VCT plc (formerly Foresight 4 VCT plc) have the same Manager and share similar investment policies. The Board closely monitors the extent and nature of the pipeline of investment opportunities and is reassured by the Manager’s confidence in being able to deploy funds without compromising quality, so as to be in a position to satisfy the investment needs of both companies.

BUYBACKS
During the period the Company repurchased 4.6 million shares for cancellation at an average discount of 10.0%, achieving its objective of maintaining regular share buybacks at a discount of 10.0%, as noted above. The Board and the Manager consider that the ability to offer to buy back shares at a target discount of approximately 10% is fair to both continuing and selling shareholders and is an appropriate way to help underpin the discount to NAV at which the shares trade.

Share buybacks are timed to avoid the Company’s closed periods. Buybacks will generally take place, subject to demand, during the following times of year:

•         April, after the Annual Report has been published;
•         June, prior to the Half-Yearly reporting date of 30 June;
•         September, after the Half-Yearly Report has been published; and
•         December, prior to the end of the financial year.

MANAGEMENT CHARGES, CO-INVESTMENT AND INCENTIVE
The annual management fee is an amount equal to 2.0% of net assets, excluding cash balances above £20 million, which are charged at a reduced rate of 1.0%. This has resulted in ongoing charges for the period ended 30 June 2021 of 2.1% of net assets, which is at the lower end of the range when compared to competitor VCTs.

Since March 2017, co-investments made by the Manager and individual members of the Manager’s private equity team have totalled £0.9 million alongside the Company’s investments of £62.1 million. With regard to the performance incentive fee arrangement, the continued improvement in the Company’s net asset performance has resulted in its NAV Total Return per share meeting the NAV Total Return Hurdle under the arrangement for the first time. I would like to remind shareholders that an actual payment for the performance of each realised investment will only be made when three different hurdles have been achieved: the Investment Growth Hurdle for the individual investment at exit and also two NAV Total Return Hurdles, the first upon the exit of the investment and the second three years later. The NAV Total Return Hurdle increases each year so the second NAV Total Return Hurdle will be higher than the first.

As at 30 June 2021 the Investment Growth Hurdle had been met for 14 unrealised investments out of the 27 new early stage investments made since the introduction of the performance incentive arrangements and for the sake of prudence there is a contingent liability of £3.9 million disclosed in note 8. An investment under the arrangement will only qualify for the payment of a performance fee if all three hurdles described above have been met. This has not yet occurred and therefore no such payments have yet been made or accrued as due.

More information on the performance incentive arrangements (including an explanation of terms used above) can be found in note 8 of these accounts and in note 14 of our Annual Report for the year ended 31 December 2020.

BOARD COMPOSITION
The Board continues to review its own performance and undertakes succession planning to maintain an appropriate level of independence, experience, diversity and skills in order to be in a position to discharge its responsibilities. The current year saw some planned changes to the composition of the Board.

The Board was delighted to appoint Patricia (Patty) Dimond as a non-executive director with effect from 1 February 2021. Patty is an experienced non-executive director currently on the Board of LXI REIT plc and English National Opera. She is a qualified chartered accountant and has a wide experience of investing in early stage technology businesses particularly those in FinTech and Consumer & Retail.

After nearly 11 years as Chairman, John Gregory retired at the AGM on 27 May 2021, as planned. On behalf of the Company, I would like to thank John for his significant contribution and commitment to the Company, which has benefited enormously from his wisdom and guidance during his service as Chairman. I and my fellow directors wish John a happy retirement.

SHAREHOLDER COMMUNICATION
We were disappointed that so far this year we still have not been able to meet with shareholders in person as a result of the travel restrictions imposed due to COVID-19. As an alternative, we invited shareholders to a virtual AGM in May, followed at the beginning of June by an online investor forum facilitated by the Manager. We appreciate how popular such events are with our investors and will continue to hold similar events remotely until it is considered safe to meet in person. Details of any such future events will be communicated to investors.

OUTLOOK
The unknown legacy of COVID-19 and the impact of Brexit continue to challenge both our economy and society and create uncertainty for every business. In particular, the risk of inflationary pressures, supply chain issues and staff shortages are beginning to emerge and impact some of the portfolio companies. The Manager’s private equity team understands well the management and business requirements of each of the companies within the investment portfolio and is working closely with them to help them to adapt to the changing environment. The UK is not safe until the world is safe, so until COVID-19 has been contained globally, some negative effects of the pandemic on many UK based businesses are likely to linger. Nonetheless, the current portfolio of investments is well diversified by business sector and by age and overall has demonstrated its relative resilience in the face of COVID- 19’s challenges. Hoping that the worst of the pandemic is now behind us, the Board and the Manager are optimistic that the existing portfolio will resume its growth and that the pipeline of investments will yield further attractive and profitable opportunities for the Company.

Margaret Littlejohns
Chair
14 September 2021

MANAGER’S REVIEW
The Board has appointed Foresight Group LLP (“the Manager”) to provide investment management and administration services.

The investment management and administration arrangements were previously with Foresight Group CI Limited (the Manager’s parent undertaking), and Foresight Group CI Limited appointed the Manager as its investment adviser and delegated administration services to it.

The investment management and administration arrangements were novated and amended to be directly with the Manager on 27 January 2020. References to the Manager’s activities in this report include those activities of Foresight Group CI Limited prior to the change in arrangements.

PORTFOLIO SUMMARY
As at 30 June 2021 the Company’s portfolio comprised 48 investments with a total cost of £100.9 million and a valuation of £150.3 million. The portfolio is diversified by sector, transaction type and maturity profile. Details of the ten largest investments by valuation, including an update on their performance, are provided on pages 12 to 16.

During the six months to June, the value of investments held rose by £17.6 million. This was driven by deployment of £6.3 million, an increase in the value of investments of £22.4 million offset by a realisation of £11.1 million. The Company’s portfolio continues to recover following the impact of COVID-19 over the past 18 months. Many of the portfolio companies have successfully navigated the new economic landscape, with some performing extremely strongly while others continue to adjust.

In line with the Board’s strategic objectives, the investment team remains focused on maintaining NAV above £150 million whilst paying an annual dividend to shareholders of at least 5% of the NAV per share at the year end. The Company has so far achieved this target for the current year and this objective remains the Manager’s focus.

NEW INVESTMENTS
The Manager has taken a prudent approach to investing since the onset of COVID-19. Repeated lockdowns have made it challenging for the private equity team to meet prospective companies and their teams face to face, an important part of assessing investments and developing relationships with management teams. However, the Manager and SMEs have adjusted to this new landscape given companies still wish to grow their businesses despite the economic uncertainty. The Manager continued to meet new companies and advisors throughout this period. Relationships are now forged virtually with deals being introduced and completed entirely online.

As a result, three new investments were completed in the six months to 30 June 2021. Further details of each of these are provided below. Behind these, there is a strong pipeline of opportunities that the Manager expects to convert during the second half of 2021.

NORTHWEST EHEALTH
In June 2021, the Company invested £1.5 million into NorthWest EHealth, which provides software and services to the clinical trials market, allowing pharmaceutical companies and contract research organisations to conduct feasibility studies, recruit patients and run trials. The investment will be used to expand the current data network, enabling the company to support a larger number of trials at a global level, increase product development and expand the sales and marketing team to help build long term, strategic relationships.

HEXARAD GROUP
Also in June 2021, the Company invested £0.8 million into Hexarad Group, an early stage, high growth healthcare services company, providing teleradiology services to NHS Trusts and UK private healthcare customers. Headquartered in London, the company was founded in 2016 by a group of NHS consultant radiologists and differentiates itself through its clinical leadership and technology-led proposition. The investment into Hexarad Group will enable the company to support more NHS and private healthcare customers and further improve how they use the technology which is core to its customer and radiologist experience.

ADDITIVE MANUFACTURING TECHNOLGIES
Finally, in June 2021, the Company invested £1.7 million into Additive Manufacturing Technologies, which manufactures systems that automate the post-processing of 3D printed parts. Additive Manufacturing Technologies originally received seed funding from Foresight Williams EIS in September 2019. The additional investment, made alongside further investment from Foresight Williams, will be used to further commercialise its products now they have achieved commercial traction.

CALLEN-LENZ ASSOCIATES
Post period end, in August 2021, £2.5 million growth capital was invested into Callen-Lenz Associates, a provider of innovative technology solutions and engineering design services for high performance Uncrewed Air Systems (“UAS”) and the Urban Air Mobility (“UAM”) market. Based near Salisbury, Wiltshire, the company develops, designs and produces air vehicles, vehicle components, and navigation and communication software for high performance UASs globally.

FOLLOW ON INVESTMENTS
The Manager had expected that more portfolio companies would need additional capital to support them through difficult trading conditions resulting from the various lockdowns, driving an increase in follow-on investment. However, the portfolio has remained relatively resilient, supported by the Manager, which has increased oversight of the portfolio and provided guidance to portfolio management teams throughout the pandemic. The Company made two follow-on investments in the period, totalling £2.2 million, both to support further growth opportunities post-COVID restrictions lifting. Further details of each of these are provided below.

Many companies used forms of Government support, such as the furlough scheme and the Coronavirus Business Interruption Loan Scheme, which reduced the need for additional equity injections in the period. However, as these schemes unwind, the Manager anticipates some requirements for follow-on investment in the next six months.

CLUBSPARK
In March 2021, Clubspark, a software platform that provides sports clubs and centres with the ability to manage operations such as court and equipment booking, received a £1.5 million follow-on investment from the Company. The investment will be used to expand into other sports and push further into international markets, such as the US.

FRESH RELEVANCE
In May 2021, a £0.7 million follow-on investment was made into Fresh Relevance, a SaaS email marketing and web personalisation platform providing online retailers with personalised customer experiences and real-time marketing tools. The investment will be used to further support growth and accelerate the product rollout.

BIOTHERAPY SERVICES
Post period end, in July 2021 a follow-on investment of £0.7 million was also made into Biotherapy Services Limited (“BTS”), a leading pharmaceutical biotech company. BTS has developed a wound care treatment for diabetic foot ulcers and the additional funds will be used to support its clinical development through trials.

FERTILITY FOCUS
In August 2021, post-period end, a £0.4 million follow-on investment was made into Fertility Focus, a leading fertility monitoring technology company that has developed registered medical devices that enable women to predict ovulation. The funding will be used to support a new product launch over the next 12 months.

PIPELINE
At 30 June 2021, the Company held cash of £14.1 million and in July launched an offer for subscription to raise a further £20 million (with an over-allotment facility to raise an additional £10 million). This will be used to fund new and follow-on investments, buybacks and running expenses and support the Company’s dividend objectives. The Manager is seeing a recovery in the pipeline of potential investments and has a number of opportunities under exclusivity or in due diligence. The Company remains well-positioned to continue pursuing these potential investment opportunities. As the economy recovers from the worst effects of COVID-19, the Manager expects demand for funding to increase, driving some particularly interesting opportunities for investment.

EXITS AND REALISATIONS
The M&A climate has remained surprisingly buoyant during the last 18 months. At first, most trade acquirers focused on their core business and private equity investors focused on their existing portfolios or on distressed acquisitions. However, since the second half of last year, the Manager has seen acquisition interest returning, particularly in the healthcare, technology and e-commerce sectors, with numerous investment opportunities being presented for consideration.

In January 2021 the Company successfully sold its investment in FFX Group, one of the UK’s largest multi-channel, independent suppliers of high-quality power tools, fixings and building supplies. The transaction generated proceeds of £11.1 million at completion and the Company will receive up to £0.3 million of deferred consideration after 18 months, subject to certain conditions. This implies a cash on cash return of 4.3x the initial investment of £2.7 million, made in October 2015, which is equivalent to an IRR of c.32%. During the investment period, FFX opened a new 60,000 sq ft distribution centre and a new head office in Kent. The business updated its brand and launched an extensive range of its own products. Since the Company’s investment, FFX more than tripled revenues and increased headcount by over 125.

Post-period end, the Company successfully sold its investment in Mologic, a health diagnostics company providing both contract research services for clients and developing its own range of proprietary point-of-care diagnostics products. It was sold to Global Access Health, a not-for-profit company financed by the Soros Economic Development Fund, the impact investing arm of the Open Society Foundations and a group of other philanthropic organisations and investors. The return multiple of 3.1x includes deferred consideration, which is equivalent to an IRR of c.38%. During the investment period, the Mologic team had worked with the Manager to strengthen the business, advancing the product portfolio, increasing turnover by over 165% and increasing employee numbers by over 40%. The business has also developed a presence in the US, opening an office on the East Coast, and developed a manufacturing partnership in West Africa.

The Company’s investment in Ixaris Group Holdings was sold in August 2021 to Nium, a global B2B payments platform headquartered in Singapore.

DISPOSALS IN THE PERIOD ENDED 30 JUNE 2021

Company	Detail	Accounting Cost at Date of Disposal	Proceeds	Realised Gain	Valuation at 31 December 2020
		(£)	(£)	(£)	(£)
FFX Group Limited	Full disposal	2,676,426	11,056,074*	8,379,648	11,196,564
Total disposals		2,676,426	11,056,074	8,379,648	11,196,564

* A further £140,490 in deferred consideration has been reflected in the accounts.

KEY PORTFOLIO DEVELOPMENTS
In the first six months of the year, the portfolio has shown further recovery, which started in the second half of 2020, as businesses adapt to the new economic climate combined with the gradual easing of restrictions.

The value of investments held rose by £17.6 million in the six months to 30 June 2021. This was driven by deployment of £6.3 million, an increase in the value of existing investments of £22.4 million offset by a realisation of £11.1 million. A disciplined approach to investment valuations has been maintained in light of COVID-19. During the prior year, the value of investments held rose by £12.2 million, driven by deployment of £7.7 million, an increase in the value of existing investments of £4.8 million, offset by a realisation of £0.3 million.

Material changes in valuation, defined as increasing or decreasing by £1.0 million or more since 31 December 2020, are detailed below. Updates on these companies are included below, or in the Top Ten Investments section on pages 12 to 16.

KEY VALUATION CHANGES IN THE PERIOD

Company	Valuation (£)	Valuation Change (£)
Hospital Services Group Limited	11,966,837	3,004,099
Nano Interactive Group Limited	7,696,845	2,638,706
Mologic Ltd	7,472,577	2,418,317
Dhalia Limited	3,471,609	2,057,442
Spektrix Limited	7,137,764	1,440,721
Fresh Relevance Ltd	6,996,636	1,173,409
Ollie Quinn Limited	6,544,780	1,133,927

Dhalia holds investments in smaller companies, most notably True Lens Services Limited (“TLS”), a specialist provider of lens manufacturing, refurbishment and servicing to the film and television markets. TLS continues to trade positively, returning to pre-COVID-19 levels.

OUTLOOK
The United Kingdom has now lifted most of its COVID-19 restrictions, marking a milestone as the country moves into a new phase. However, this newfound freedom has brought with it a raft of challenges, including a sharp rise in new COVID-19 cases and the consequential increase in the percentage of the population isolating. This has led to staff shortages across the country, leading to either reductions in capacity or the temporary closure of businesses. The rules are changing constantly, and it is clear that COVID-19 will still continue to impact trading in the medium term and businesses must remain cautious through this transition to the ‘new normal’. The Manager will continue to provide added support to its portfolio companies and, if the situation worsens, will be on standby to administer the same ‘toolbox’ of support as in prior lockdowns.

On a positive note, the International Monetary Fund believes that the UK economy will grow faster than previously expected this year, upgrading the UK’s forecast to 7% growth. Despite this, the Manager has taken a prudent view, encouraging companies to revise budgets to manage creditor stretch and debt build-up, particularly due to the reduction of Government support. The Manager is ensuring that finance directors at the portfolio companies continue to tightly manage overheads and critically assess capital expenditure given the uncertain macro environment.

While COVID-19 has brought unprecedented disruption, it has also prompted many organisations to reassess their business models and take action to adapt to a new economic landscape. A number of the Manager’s portfolio companies have used this as an opportunity to review their overall strategy, venture into a new market or launch a new product or service. For example, to supplement lost revenues from their core business some portfolio companies have procured and provided PPE or other protective equipment, such as hand sanitising stations or screens. Healthcare and life science investments have also contributed to national efforts to defeat the virus by manufacturing COVID-19 testing kits.

Some of the portfolio companies used this time as an opportunity to improve online activity and have seen an uptick in revenues as a consequence. With the trend towards e-commerce accelerating during COVID-19, retail businesses will need to continue embracing this channel fully and make it a core part of the overall growth strategy. The Manager is working closely with portfolio companies to ensure they are well-positioned to capitalise on this opportunity.

Beyond COVID-19, the end of the Brexit transition period on 31 December 2020 has also created some economic uncertainty. The Manager has worked closely with portfolio companies to prepare them to the best extent possible as some of them encounter supply chain challenges and experience staffing issues. Thanks to the diverse nature of the portfolio, with a combination of businesses focused on the domestic UK market and some that export and source worldwide, the Manager remains confident that the Company is well-positioned to endure potential volatility.
Notwithstanding this uncertain economic backdrop, the Manager continues to see encouraging levels of activity from smaller UK companies seeking growth capital. The Manager expects this to increase as companies begin to recover from the impact of COVID-19, with requirements for permanent funding to working capital. VCTs are still viewed by many entrepreneurs as an attractive source of capital that provide scale-up funding to businesses at an early stage of their growth, when other sources of funding may not be readily available or alongside other sources of capital, including government measures for supporting businesses during COVID-19. Despite the challenges of COVID-19 in the medium and long term, the UK remains an excellent place to start, scale and sell a business, with broad pools of talent and an entrepreneurial culture.

Russell Healey, on behalf of Foresight Group LLP
Head of Private Equity
Foresight Group LLP
14 September 2021

UNAUDITED HALF-YEARLY RESULTS AND RESPONSIBILITIES STATEMENTS

PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks faced by the Company are as follows:

• Strategic and Performance;
• Legislative and Regulatory;
• Operational, including Internal Controls;
• Valuation of Unquoted Investments; 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 2020. A detailed explanation can be found on page 31 of the Annual Report and Accounts which is available on the Company’s website www.foresightvct.com or by writing to Foresight Group at The Shard, 32 London Bridge Street, London, SE1 9SG.

In the view of the Board, there have been no 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 FRS 104;
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 gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.2.4R; 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).

GOING CONCERN
The Company’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report of the Annual Report. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the Chair’s Statement, Strategic Report and Notes to the Accounts of the 31 December 2020 Annual Report. In addition, the Annual Report includes the Company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.

The Company has considerable financial resources together with investments and income generated therefrom across a variety of industries and sectors. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully.

The Directors have reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

The Half-Yearly Financial Report has not been audited nor reviewed by the auditors.

On behalf of the Board

Margaret Littlejohns
Chair
14 September 2021

UNAUDITED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2021

	Six months ended 30 June 2021 (Unaudited)			Six months ended 30 June 2020 (Unaudited)			Year ended 31 December 2020 (Audited)
	Revenue £’000	Capital £’000	Total £’000	Revenue £’000	Capital £’000	Total £’000	Revenue £’000	Capital £’000	Total £’000
Realised gains/(losses) on investments	-	8,380	8,380	-	13	13	-	(1,415)	(1,415)
Investment holding gains/(losses)	-	14,123	14,123	-	(13,227)	(13,227)	-	6,250	6,250
Income	135	-	135	2,014	-	2,014	1,844	-	1,844
Investment management fees	(363)	(1,090)	(1,453)	(353)	(1,057)	(1,410)	(680)	(2,039)	(2,719)
Other expenses	(289)	-	(289)	(283)	-	(283)	(580)	-	(580)
(Loss)/return on ordinary activities before taxation	(517)	21,413	20,896	1,378	(14,271)	(12,893)	584	2,796	3,380
Taxation	-	-	-	-	-	-	-	-	-
(Loss)/return on ordinary activities after taxation	(517)	21,413	20,896	1,378	(14,271)	(12,893)	584	2,796	3,380
(Loss)/return per share:	(0.2)p	10.4p	10.2p	0.7p	(7.5)p	(6.8)p	0.3p	1.4p	1.7p

The total columns of this statement are the profit and loss account of the Company and the revenue and capital columns represent supplementary information.

All revenue and capital items in the above Income Statement are derived from continuing operations. No operations were acquired or discontinued in the period.

The Company has no recognised gains or losses other than those shown above, therefore no separate statement of total recognised gains and losses has been presented.

The Company has only one class of business and one reportable segment, the results of which are set out in the Income Statement and Balance Sheet.

There are no potentially dilutive capital instruments in issue and, therefore, no diluted earnings per share figures are relevant. The basic and diluted earnings per share are, therefore, identical.

UNAUDITED BALANCE SHEET
AT 30 JUNE 2021        

Registered Number: 03421340

	As at 30 June 2021 £’000	As at 30 June 2020 £’000	As at 31 December 2020 £’000
Fixed assets
Investments held at fair value through profit or loss	150,320	107,118	132,739
Current assets
Debtors	192	797	239
Cash and cash equivalents	14,070	29,079	18,939
	14,262	29,876	19,178
Creditors
Amounts falling due within one year	(1,172)	(290)	(99)
Net current assets	13,090	29,586	19,079
Net assets	163,410	136,704	151,818
Capital and reserves
Called-up share capital	2,031	2,078	2,060
Share premium account	68,935	103,319	67,634
Capital redemption reserve	1,041	975	994
Distributable reserve	39,406	16,815	50,546
Capital reserve	2,777	(2,103)	(4,513)
Revaluation reserve	49,220	15,620	35,097
Equity shareholders’ funds	163,410	136,704	151,818
Net asset value per share	80.5p	65.8p	73.7p

UNAUDITED RECONCILITION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
FOR THE SIX MONTHS ENDED 30 JUNE 2021

	Called-up share capital £’000	Share premium account £’000	Capital redemption reserve £’000	Distributable reserve^ £’000	Capital reserve^ £’000	Revaluation reserve £’000	Total £’000
As at 1 January 2021	2,060	67,634	994	50,546	(4,513)	35,097	151,818
Share issues in the period	18	1,338	-	-	-	-	1,356
Expenses in relation to share issues	-	(37)	-	-	-	-	(37)
Repurchase of shares	(47)	-	47	(3,115)	-	-	(3,115)
Realised gains on disposal of investments	-	-	-	-	8,380	-	8,380
Investment holding gains	-	-	-	-	-	14,123	14,123
Dividends paid	-	-	-	(7,508)	-	-	(7,508)
Management fees charged to capital	-	-	-	-	(1,090)	-	(1,090)
Revenue loss for the period	-	-	-	(517)	-	-	(517)
As at 30 June 2021	2,031	68,935	1,041	39,406	2,777	49,220	163,410

^Reserve is available for distribution, total distributable reserves at 30 June 2021 total £42,183,000 (31 December 2020: £46,033,000).

UNAUDITED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2021

	Six months ended 30 June 2021 £’000	Six months ended 30 June 2020 £’000	Year ended 31 December 2020 £’000
Cash flow from operating activities
Loan interest received on investments	284	230	478
Dividends received from investments	42	1,437	1,437
Deposit and similar interest received	1	29	34
Investment management fees paid	(1,453)	(1,364)	(2,719)
Secretarial fees paid	(61)	(60)	(120)
Other cash payments	(252)	(312)	(449)
Net cash outflow from operating activities	(1,439)	(40)	(1,339)
Cash flow from investing activities
Purchase of investments	(6,274)	-	(7,680)
Net proceeds on sale of investments	11,056	188	296
Net proceeds on deferred consideration	-	13	13
Net cash inflow/(outflow) from investing activities	4,782	201	(7,371)
Cash flow from financing activities
Proceeds of fund raising	-	24,203	24,203
Expenses of fund raising	(37)	(594)	(637)
Repurchase of own shares	(2,023)	(1,442)	(2,668)
Equity dividends paid	(6,152)	(5,573)	(5,573)
Net cash (outflow)/inflow from financing activities	(8,212)	16,594	15,325
Net (outflow)/inflow in cash in the period	(4,869)	16,755	6,615
Reconciliation of net cash flow to movement in net funds
(Decrease)/increase in cash and cash equivalents for the period	(4,869)	16,755	6,615
Net cash and cash equivalents at start of period	18,939	12,324	12,324
Net cash and cash equivalents at end of period	14,070	29,079	18,939

Analysis of changes in net debt

	At 1 January 2021 £’000	Cash Flow £’000	At 30 June 2021 £’000
Cash and cash equivalents	18,939	(4,869)	14,070

NOTES TO THE UNAUDITED HALF-YEARLY RESULTS

1)        The Unaudited Half-Yearly Financial Report has been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2020. Unquoted investments have been valued in accordance with IPEV Valuation Guidelines.

2)        These are not statutory accounts in accordance with S436 of the Companies Act 2006 and the financial information for the six months ended 30 June 2021 and 30 June 2020 has been neither audited nor formally reviewed. Statutory accounts in respect of the year ended 31 December 2020 have been audited and reported on by the Company’s auditors and delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under S498(2) or S498(3) of the Companies Act 2006. No statutory accounts in respect of any period after 31 December 2020 have been reported on by the Company’s auditors or delivered to the Registrar of Companies.

3)        Copies of the Unaudited Half-Yearly Financial Report will be sent to shareholders via their chosen method and will be available for inspection at the Registered Office of the Company at The Shard, 32 London Bridge Street, London, SE1 9SG.

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 the number of shares in issue at the date.

	Net assets £	Number of Shares in Issue
30 June 2021	163,410,000	203,113,554
30 June 2020	136,704,000	207,824,856
31 December 2020	151,818,000	205,954,017

5)         RETURN PER SHARE


The weighted average number of shares used to calculate the respective returns are shown in the table below.

	Shares
Six months ended 30 June 2021	205,199,150
Six months ended 30 June 2020	191,020,332
Year ended 31 December 2020	199,164,754

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

6)         INCOME

	Six months ended 30 June 2021 £’000	Six months ended 30 June 2020 £’000	Year ended 31 December 2020 £’000
Loan stock interest	92	548	370
Dividends receivable	42	1,437	1,437
Deposit and similar interest received	1	29	34
Other income	—	—	3
	135	2,014	1,844

7)         INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

	£’000
Book cost as at 1 January 2021	97,316
Investment holding gains	35,423
Valuation at 1 January 2021	132,739
Movements in the period:
Purchases	6,274
Disposal proceeds^	(11,056)
Realised gains	8,380
Investment holding gains*	13,983
Valuation at 30 June 2021	150,320
Book cost at 30 June 2021	100,914
Investment holding gains	49,406
Valuation at 30 June 2021	150,320

^The Company received £11,056,074 from the disposal of investments during the period. The book cost of these investments when they were disposed was £2,676,426. These investments have been revalued over time and until they were sold any unrealised gains or losses were included in the fair value of the investments.
*Investment holding gains in the income statement include the deferred consideration debtor of £140,490, relating to FFX Group Limited.

8)         CONTINGENT ASSETS AND LIABILITIES


In order to incentivise the Manager to generate enhanced returns for shareholders, the Manager will potentially be entitled to performance incentive payments in respect of investments made in new investee companies on or after 31 March 2017 (including follow-ons in such investee companies), as described in note 14 of the Company’s Annual Report and Accounts (including an explanation of terms used below).

As at 30 June 2021, the NAV Total Return was 107.4p (being the aggregate of the NAV per share as at 30 June 2021 of 80.5p and dividends paid per share (rebased) since 18 December 2015 totalling 26.9p). This compares to the NAV Total Return Hurdle as at 30 June 2021 of 105.3p and is the first time this hurdle has been met.

As at 30 June 2021 the Investment Growth Hurdle had been met for 14 unrealised investments out of the 27 new early stage investments made since the introduction of the performance incentive arrangements.

ESTIMATION OF THE FINANCIAL EFFECT
Should all the hurdles detailed in note 14 of the Annual Report and Accounts be met in the future, the Manager will receive a fee equal to 20% of the amount by which the cash proceeds received by the Company exceed the Investment Growth Hurdle. Based on the current investments made on or after 31 March 2017 the contingent liability, if investments were sold at their current carrying value, would be £3.9 million.

The fee will only be paid after three years following the exit of a relevant investment, once the End Total NAV Return can be measured. As the payment is conditional on meeting the hurdles and payment would only occur three years after the relevant exit, this contingent liability is not provided for in the financial statements.

No performance fees have been paid or were accrued as due during the period (2020: nil).

9)         RELATED PARTY TRANSACTIONS


No Director has an interest in any contract to which the Company is a party other than their appointment and payment as directors.

10)         TRANSACTIONS WITH THE MANAGER


Foresight Group CI Limited, which acted as Manager to the Company until 27 January 2020, earned fees of £nil (30 June 2020: £192,000, 31 December 2020: £192,000) during the period. Foresight Group LLP was appointed as Manager on 27 January 2020 and earned fees of £1,453,000 up to 30 June 2021 (30 June 2020: £1,218,000, 31 December 2020: £2,527,000).

Foresight Group LLP is the Company Secretary (appointed in November 2017) and received, directly and indirectly, for accounting and company secretarial services fees of £61,000 (30 June 2020: £60,000, 31 December 2020: £120,000) during the period.

At the balance sheet date there was £nil (30 June 2020: £nil, 31 December 2020: £nil) due to Foresight Group CI Limited and £nil (30 June 2020: £7,000, 31 December 2020: £nil) due to Foresight Group LLP.

For further information please contact
Gary Fraser, Foresight Group                0203 667 8181

END