Foresight VCT plc - Unaudited Half-Yearly Finan...

FORESIGHT VCT PLC
LEI: 213800GNTY699WHACF46

UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE PERIOD ENDED 30 JUNE 2022

FINANCIAL HIGHLIGHTS

• Total net assets £197.9 million
• A final dividend of 4.5p per share was paid on 24 June 2022, costing £10.0 million
• The value of the portfolio decreased by £9.8 million in the six months to 30 June 2022. This was driven by successful realisations of £19.9 million offset by £3.2 million of deployment and an increase of £6.9 million in the value of investments
• The Board has declared a special dividend of 4.0p per share to be paid on 21 October 2022 following the successful sales of TFC Europe Limited and Codeplay Software Limited
• Net Asset Value per share decreased by 1.8% from 90.1p at 31 December 2021 to 88.5p at 30 June 2022. After adding back the 4.5p dividend paid on 24 June 2022, NAV Total Return per share was 93.0p, which made the total return in the period 3.2%
• The offer for subscription launched in July 2021 was closed on 8 April 2022 and raised a total of £23.4 million after expenses

CHAIR’S STATEMENT

I am pleased to present the Company’s unaudited Half-Yearly Financial Report for the period ended 30 June 2022.

The year started positively as the economy continued to rebound from the pandemic and benefit from pent-up consumer demand, but this recovery was swiftly curtailed after Russia invaded Ukraine in February 2022. The war has continued to wreak death and destruction and displaced large numbers of Ukrainian refugees, with no signs of abating. Supply chains were already under strain from the pandemic but further disruption by the war and subsequent sanctions have particularly impacted food and energy supplies, causing inflation to rise rapidly worldwide. The war has also increased the potential for further market turmoil and cyber attacks. The Company’s portfolio has some limited direct exposure to Russia and Ukraine but this remains manageable.

During the six months to 30 June 2022, the value of investments held fell by £9.8 million as a result of £19.9 million of successful realisations, partially offset by new investments of £3.2 million and an increase in the value of the portfolio of £6.9 million. The increase in the valuation of the portfolio of £6.9 million was explained by 22 unrealised investments recording a combined uplift of £11.4 million, three realised investments achieving an uplift of £8.9 million and 19 unrealised investments experiencing a decrease in valuation of £13.4 million. The valuation of the remaining seven investments was unchanged in the period.

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

• Further development of Net Asset Value Total Return while continuing to grow the Company’s assets
• Payment of an annual dividend of at least 5% of the NAV per share (based on the last announced NAV per share) and at the same time endeavouring, at a minimum, 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
• Maintaining a programme of regular share buybacks 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 in more detail below.

Net Asset Value
As at 30 June 2022, the NAV of the Company was £197.9 million (31 December 2021: £185.1 million), which is in line with the Board’s objective of growing the Company’s assets.

At the start of the period, 90% of the Company’s assets were already invested and back in July 2021, the Board believed it would be in the Company’s best interest to raise further funds to provide liquidity for its activities in 2021 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. The offer was closed on 8 April 2022 having raised £23.4 million of capital net of expenses.

We would like to thank those existing shareholders who have supported this offer and welcome all new shareholders to the Company.

During the period the NAV per share decreased by 1.8% from 90.1p at 31 December 2021 to 88.5p at 30 June 2022. After adding back the payment of a dividend of 4.5p per share on 24 June 2022, which is detailed below, NAV Total Return per share for the period was 93.0p, representing a total return of 3.2%.

After paying the dividend of 5.0% of NAV, the Company has met its objective of maintaining the NAV per share on a year-on-year basis.

The total return per share from an investment made five years ago would be 36.0%, which is above the minimum target return set by the Board of 5% per annum. Exceeding this target is at the centre of the Company’s current and future portfolio management strategy.

Dividends
The final dividend for the year ended 31 December 2021 of 4.5p per share was paid on 24 June 2022 based on an ex-dividend date of 9 June 2022, with a record date of 10 June 2022. The total cost of this dividend was £10.0 million, including shares allotted under the dividend reinvestment scheme.

The Board has declared a special dividend of 4.0p per share to be paid on 21 October 2022 following the successful sales of TFC Europe Limited on 29 June 2022 and Codeplay Software Limited on 30 June 2022. The two exits together realised gains of £15.6 million since initial investment, including an uplift of £8.9 million in the six months to 30 June 2022 and returned £19.9 million of cash proceeds to the Company, an exceptional achievement from a combined investment of £4.3 million.

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.

Investment performance and portfolio activity
A detailed analysis of the investment portfolio performance over the year is given in the Manager’s Review.

During the period under review, the Manager completed two new investments, one in the healthcare sector and one in the media sector, costing £2.6 million in total, and one follow-on investment of £0.5 million. The Company also disposed of three investments, generating proceeds of £19.9 million with a further £0.9 million of deferred consideration included within debtors at the period end. Details of each of these new portfolio companies and disposals can be found in the Manager’s Review.

The Board and the Manager are confident that a more significant number of new and follow-on investments can be achieved in 2022 and beyond as the economy continues to open up and more opportunities emerge.

After the end of the reporting period, new investments of £1.7 million and £2.4 million were made into Strategic Software Applications Ltd and Copptech UK Limited respectively while a further follow-on investment of £0.7 million was made into Hexarad Group Limited.

The Company and Foresight Enterprise 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 and to satisfy the investment needs of both companies.

Responsible investing
The analysis of environmental, social and governance (“ESG”) issues is embedded in the Manager’s investment process and these factors are considered key in determining the quality of a business and its long-term success. Central to the Manager’s responsible investment approach are five ESG principles that are applied to evaluate investee companies, acquired since May 2018, throughout the lifecycle of their investment, from their initial review and acquisition to their final sale. Every year, these portfolio companies are assessed and progress measured against these principles. More detailed information about the process can be found on page 24 of the Manager’s Review in the Unaudited Half-Yearly Financial Report.

Buybacks
During the period the Company repurchased 4,840,841 shares for cancellation at an average discount of 10.0%, achieving its objective of maintaining regular share buybacks at a discount of around 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 10.0% 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
• December, prior to the end of the financial year

Management charges, co-investment and performance 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 2022 of 1.9% 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 £1.0 million alongside the Company’s investments of £74.1 million. The co-investment scheme requires that the individual members of the team invest in all of the Company’s investments from that date onwards and prohibits selective “cherry picking” of co-investments. If any individual team member opts out of co-investment, they cannot invest in anything during that year.

The performance incentive scheme only applies after an investment has been sold and the scheme incorporates three different hurdles, all of which need to be achieved at different stages before any performance fee can be paid: an 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. Despite continued improvement in the Company’s net asset performance and in its NAV Total Return per share, the increase in RPI of 11.8% in June 2022 has resulted in the initial NAV Total Return Hurdle under the arrangement no longer being met at 30 June 2022.

As at 30 June 2022, the individual Investment Growth Hurdles have been met for three realised and 16 unrealised investments out of the 33 new early-stage investments made since the introduction of the performance incentive arrangements and a contingent liability of £6.2 million in respect of this is disclosed in note 8. A realisation under the arrangement will only qualify for the payment of a performance fee if all three hurdles described above have been met.

More information on the performance incentive arrangements (including an explanation of terms used on the previous page) can be found in note 13 of the 2021 Annual Report and Accounts.

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 Nomination Committee will continue its plans to refresh the Board over the next two years and aims to achieve a sensible balance between continuity and reinvigoration in compliance with the AIC Code.

Shareholder communication
We were delighted to meet once again with some shareholders in person at the AGM on 31 May 2022, having long been unable to do so as a result of the travel restrictions due to COVID-19. Arrangements were also made to enable shareholders to attend online. However, very few took advantage of this facility and the Board has decided, in view of the considerable cost of providing it, not to repeat this in 2023. Additionally, the Manager is hoping to reintroduce in-person investor forum events in the winter which have proven popular with our shareholders in the past.

Outlook
The legacy of COVID-19, combined with the ongoing impact of Brexit and the current geopolitical conflict in Ukraine, will continue to raise challenges and create uncertainty for businesses. In particular, inflationary pressures, supply chain issues and staff shortages have all emerged and are likely to worsen over the coming months. The Bank of England is predicting a recession in the UK by the end of this year. In these deteriorating economic conditions, the Company’s investments in unquoted, small, early-growth businesses entail higher levels of risk, greater volatility in  valuation and lower liquidity than larger listed companies. It is unlikely, therefore, given these new global developments, that the Company will generate the same level of total return that has been achieved in 2021.

However, the Manager 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 adapt to, and grow within, this changing environment.

The Company’s current portfolio of investments is well diversified by number, business sector, size and stage of development and overall has demonstrated its relative resilience in the face of the pandemic and its repercussions. We anticipate that the portfolio in aggregate will also be able to withstand the increasing challenges and uncertainties arising from the current economic situation and will continue to prosper over time.

The fundraising referred to earlier provides additional resources to make new investments and enables the Company to take advantage of the increasing numbers of investment opportunities that are now emerging out of the recent disruption. We are cautiously optimistic that the existing portfolio and these new acquisitions will generate long-term value for shareholders.

Margaret Littlejohns
Chair
30 September 2022

MANAGER’S REVIEW

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

Portfolio summary
As at 30 June 2022, the Company’s portfolio comprised 48 investments with a total cost of £98.9 million and a valuation of £157.2 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 16 to 20 of the Manager’s Review in the Unaudited Half-Yearly Financial Report.

During the six months to 30 June 2022, the value of the portfolio fell by £9.8 million as a result of £19.9 million of successful realisations, partially offset by new investments of £3.2 million and an increase in the value of the investments of £6.9 million. The Company’s portfolio continues to recover following the impact of COVID-19 over the past 24 months. Many of the portfolio companies have successfully navigated the new economic landscape, with some performing extremely well, while others continue to adjust.

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

New investments
Since COVID-19 restrictions eased, there has been a shift towards more in-person events and meetings, and whilst not yet back to pre-pandemic levels, it is now easier for the private equity team to meet prospective companies and their teams face to face. This is an important part of assessing investments and developing relationships with management teams and other members of the local investment community. The Manager and SMEs have adjusted to this new landscape given companies still wish to grow their businesses and act on opportunities as they arise. The Manager continued to meet new companies and advisers throughout the period and build its reputation in each of the regions it operates in.

Two new investments were completed in the six months to 30 June 2022. 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 2022.

SO-SURE Limited
In May 2022, the Company invested £1.6 million into SO-SURE, a digital insurance platform for consumer mobile phones and home contents. The investment will be used to scale up operations and extend the product range, which has shown great potential beyond the existing lines.

HomeLink Healthcare Limited
In March 2022, the Company invested £1.1 million of growth capital into HomeLink, a specialist provider of clinical services to patients in their own homes, alleviating pressure on the NHS, freeing up vital bed space, saving time and reducing costs. The investment will be used to consolidate HomeLink’s position as a first mover in a sizeable and growing market.

Strategic Software Applications Ltd
Post-period end, in August 2022, the Company invested £1.7 million of growth capital into Strategic Software Applications, previously referred to as Axiom HQ but now trading as Ruleguard, a SaaS technology provider supporting regulatory compliance for financial institutions. The investment will be used to help the business maximise opportunities as its target market grows in line with the adoption of specialised technology as a result of increasing regulatory complexity.

Copptech UK Limited
Also in August 2022, the Company invested £2.4 million of growth capital into Copptech UK, an innovative anti-microbial technology company that uses a patented microparticle in polymers, plastics and building materials to kill bacteria, fungi and viruses on contact.

The investment will be used to help the business grow sales and market presence in new geographies.

Follow - on investments
The Manager expects to continue to deploy additional capital into both growing portfolio companies and those that require support to trade through more uncertain periods. Macro factors such as wage, commodity price and energy price inflation may impact some elements of the portfolio, but in general the Manager ensures at the time of initial investment that investee companies are well-capitalised to trade through periods of lower market demand or supply challenges. This is evidenced by the portfolio remaining relatively resilient over the COVID-19 period, supported by the Manager, with an active management style to ensure risks are identified and mitigated early.

The Company made one follow-on investment in the period, totalling £0.5 million, to support further growth opportunities. Further details are provided below.

Rovco Ltd
In March 2022, Rovco, a developer of 3D computer vision and AI technology for streamlining and ultimately automating the monitoring and management of marine infrastructure, received a £0.5 million follow-on investment from the Company as part of a £15.3 million funding round. The investment will be used to support the growing working capital needs in the contract business as well as the expansion of Rovco’s commercial, operational and technological capabilities.

Hexarad Group Limited
Post-period end, the Company completed a £0.7 million investment into Hexarad as part of a £2.1 million funding round. Hexarad is a high-growth healthcare technology company, delivering teleradiology services to NHS and private healthcare customers. It gives healthcare providers access to faster diagnosis of medical images (CT, MRI and X-Ray), using proprietary allocation tools to distribute scans to a pool of remote radiologists.

Pipeline
At 30 June 2022, the Company held cash of £28.6 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 has a number of opportunities under exclusivity or in due diligence. The Company remains well-positioned to continue pursuing these potential investment opportunities.

Exits and realisations
The M&A climate has remained buoyant during the period but it may be cooling.

In June 2022, the Company successfully realised investments in Codeplay Software Limited and TFC Europe Limited and sold its holding in Online Poundshop Limited. Codeplay is one of the leading solutions providers to the semiconductor industry. During the investment period, the Manager helped the business reframe its strategy to offer a suite of services rather than standalone products, which made it an important player in an ecosystem of high performance computing. It evolved its technology and developed new routes to market.

The Manager also introduced a chairperson and through the Manager's joint venture with Williams Advanced Engineering, the business was able to access the automotive market.

The business was sold to a leading computer chip developer in a transaction that generated proceeds of £9.6 million at completion, an exceptional return on an investment of £0.7 million. The sale of industrial fastener products supplier TFC generated proceeds of £10.3 million, another strong performance. Since the original investment, the Company helped to extend TFC’s network in the UK and Germany.

TFC also rapidly expanded its vendor managed inventory service, growing the customer base, so it now provides a market-leading service to SMEs and international global businesses operating across a range of industries. The Company supported three acquisitions as well as considerable investment in new and existing facilities, opening new sites in England, Northern Ireland and Europe.

Following a sustained period of difficult trading, the Company’s holding in discount e-tailer Online Poundshop was written down to nil and the business was sold to a trade buyer.

Disposals in the period ended 30 June 2022

		Accounting			Valuation at
		cost at date		Realised	31 December
		of disposal	Proceeds	gain/(loss)	2021
Company	Detail	(£)	(£)	(£)	(£)
TFC Europe Limited	Full disposal	3,614,612	10,271,922	6,657,310	6,887,033
Codeplay Software Limited	Full disposal	689,656	9,582,9781	8,893,322	4,099,278
Online Poundshop Limited	Full disposal	2,610,000	—	(2,610,000)	—
		6,914,268	19,854,900	12,940,632	10,986,311

1. A further £917,456 of 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 2021, as businesses adapt to the new economic climate.

The value of investments held reduced by £9.8 million in the six months to 30 June 2022, driven largely by realisations of £19.9 million, offset partially by deployment of £3.2 million and an increase in the value of existing investments of £6.9 million.

Material changes in valuation, defined as increasing or decreasing by £1.0 million or more since 31 December 2021, are detailed below. Updates on these companies are included below, or in the Top Ten Investments section on pages 16 to 20 of the Manager’s Review in the Unaudited Half-Yearly Financial Report.

Key valuation changes in the period

		Valuation
Company	Valuation (£)	change (£)
Hospital Services Group Limited	19,162,231	3,331,496
Spektrix Limited	8,511,330	1,642,436
Fresh Relevance Ltd	5,806,367	(1,049,432)
Cinelabs International Ltd	2,296,968	(1,436,619)
Datapath Group Limited	5,335,881	(1,745,882)
Innovation Consulting Group Limited	5,161,909	(1,964,780)
Ollie Quinn Limited	4,370,440	(2,370,322)

Cinelabs International Ltd
Cinelabs provides non-creative post-production services to film and TV production houses globally, primarily to those shooting on analogue film. It also offers film restoration, digitisation and archiving services to owners of film archives.

30 June 2022 update
Cinelabs’ performance at the start of the year was softer than anticipated, driven by an overall lower number of projects for both film and digital. As is common in the industry, the summer and autumn periods seem to have rebounded and the pipeline of contracted projects for the second half of the year is strong. Cinelabs has also recently won some new high-profile episodic series, which will support revenue visibility.

Ollie Quinn Limited
Ollie Quinn is a branded retailer of prescription glasses, sunglasses and non-prescription polarised sunglasses based in the UK and Canada. The company provides high-quality, branded, prescription glasses cheaper than other high-end opticians in order to satisfy a gap in the market for affordable luxury.

30 June 2022 update
Ollie Quinn’s performance has been impacted by COVID-19 lockdowns, particularly in Canada where regional restrictions persisted for longer than the UK, and by the beginnings of a squeeze on consumer discretionary spend. The business has taken advantage of economic conditions to open a number of new sites on favourable lease terms, targeting affluent towns including St Albans, Guildford and Richmond.

Outlook
The global and UK markets have experienced a volatile past 12 months following a strong recovery in consumer and business demand after the COVID-19 pandemic. At the same time, supply chains remained constrained by continued lockdowns in China and Europe and the cautious return of labour to the UK workforce, as lockdowns and furlough schemes altered people’s working patterns. All these factors began to drive price inflation in late 2021 – a symptom that was further compounded by the war in Ukraine – causing the prices of gas, electricity, precious metals and food, amongst other commodities, to soar in Q1 2022.

The Bank of England responded by raising the base interest rate from 0.1% in December 2021 to 2.25% in September 2022 to help reduce inflation, which has increased from 7.5% in December 2021 to 12.3%¹ by August 2022 and most analysts expect further increases to both inflation and interest rates in the medium term. The Bank of England now forecasts that the UK will enter a recession later in 2022.

Despite this backdrop, the Company’s portfolio is well positioned to withstand the market volatility. We have worked to balance risk, with the portfolio exposed to a broad base of both well-established and earlier-stage growth companies across a range of sectors. Over the past 12 months, the portfolio continued to perform well, with the Company realising six investments in this time.

Notable examples that demonstrate our ability to capitalise on high-quality regional opportunities in a variety of sectors are the sale of Codeplay, an Edinburgh‑based software tool developer, to a US corporate buyer delivering an impressive 16.1x return, and the sale of TFC, an East Sussex distributor of specialist fixings and industrial fasteners, that generated a 12.6x return on investment. The current portfolio has a good mix of earlier stage and more mature investments, which are expected to generate both income and capital returns for investors over time.

The Manager continues to leverage its regional offices to source the highest quality growth companies where we can employ our extensive advisory network and proactive portfolio management style to drive growth and add value to each investee company. There remains a strong appetite for funding from the smaller UK businesses with growth potential, which manifested itself in a number of exciting deals completed in the past year. Despite shifts in the investment landscape, we continue to see excellent opportunities to support small companies in many sub-sectors, such as health, technology and compliance systems, amongst others.

While the macro environment is precarious, we believe that the Company’s portfolio is well placed to cope with a period of uncertainty. The UK undoubtedly remains an exceptional place to start, fund and grow a small business, and the Manager remains committed to supporting the best UK entrepreneurs on their journey.

James Livingston
Foresight Group LLP
30 September 2022

1. Bank of England, RPI December 2021 to August 2022 www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23
   
   

UNAUDITED HALF-YEARLY RESULTS AND RESPONSIBILITIES STATEMENTS

Principal risks and uncertainties
The principal risks faced by the Company are as follows:

• Market risk
• Strategic and performance risk
• Internal control risk
• Legislative and regulatory risk
• VCT qualifying status risk
• Investment valuation and liquidity risk

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 2021. A detailed explanation can be found on pages 40 to 41 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 has been a further change to the fundamental nature of these risks since the previous report. The emerging risks identified in the previous report included that of climate change, inflationary pressures and the Russian invasion of Ukraine. These emerging risks continue to apply and be monitored. In addition, tensions are increasing in the relationship between the United States and China over the future of Taiwan, where a large proportion of sophisticated microchips are manufactured and exported to businesses in the West, including those in the Company’s portfolio. The Board and the Manager continue to follow all emerging risks closely with a view to identifying where changes affect the areas of the market in which portfolio companies operate. This enables the Manager to work closely with portfolio companies, preparing them to the best extent possible to ensure they are well positioned to endure potential volatility.

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 Half-Yearly Financial Report.

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
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 2021 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
30 September 2022

UNAUDITED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2022

	Six months ended			Six months ended			Year ended
	30 June 2022			30 June 2021			31 December 2021
		(Unaudited)			(Unaudited)			(Audited)
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Realised gains on investments	—	12,992	12,992	—	8,380	8,380	—	13,070	13,070
Investment holding (losses)/gains	—	(5,070)	(5,070)	—	14,123	14,123	—	30,424	30,424
Income	486	—	486	135	—	135	858	—	858
Investment management fees	(464)	(1,096)	(1,560)	(363)	(1,090)	(1,453)	(772)	(2,612)	(3,384)
Other expenses	(295)	—	(295)	(289)	—	(289)	(587)	—	(587)
(Loss)/return on ordinary activities before taxation	(273)	6,826	6,553	(517)	21,413	20,896	(501)	40,882	40,381
Taxation	—	—	—	—	—	—	—	—	—
(Loss)/return on ordinary activities after taxation	(273)	6,826	6,553	(517)	21,413	20,896	(501)	40,882	40,381
(Loss)/return per share	( 0.1)p	3.1p	3.0p	(0.2)p	10.4p	10.2p	(0.2)p	19.9p	19.7p

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 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
FOR THE SIX MONTHS ENDED 30 JUNE 2022

	Called-up	Share	Capital
	share	premium	redemption	Distributable	Capital	Revaluation
	capital	account	reserve	reserve1	reserve1	reserve	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
As at 1 January 2022	2,056	34,954	1,081	75,591	5,945	65,521	185,148
Share issues in the period	229	20,360	—	—	—	—	20,589
Expenses in relation to share issues	—	(622)	—	—	—	—	(622)
Repurchase of shares	(48)	—	48	(3,812)	—	—	(3,812)
Realised gains on disposal of investments	—	—	—	—	12,992	—	12,992
Investment holding losses	—	—	—	—	—	(5,070)	(5,070)
Dividends paid	—	—	—	(9,967)	—	—	(9,967)
Management fees charged to capital	—	—	—	—	(1,096)	—	(1,096)
Revenue loss for the period	—	—	—	(273)	—	—	(273)
As at 30 June 2022	2,237	54,692	1,129	61,539	17,841	60,451	197,889

1. Reserve is available for distribution; total distributable reserves at 30 June 2022 total £79,380,000 (31 December 2021: £81,536,000).
   
   

UNAUDITED BALANCE SHEET
AT 30 JUNE 2022

Registered Number: 03421340

	As at	As at	As at
	30 June	30 June	31 December
	2022	2021	2021
	(Unaudited)	(Unaudited)	(Audited)
	£’000	£’000	£’000
Fixed assets
Investments held at fair value through profit or loss	157,171	150,320	167,006
Current assets
Debtors	12,309	192	1,669
Cash and cash equivalents	28,565	14,070	17,521
Total current assets	40,874	14,262	19,190
Creditors
Amounts falling due within one year	(156)	(1,172)	(751)
Net current assets	40,718	13,090	18,439
Amounts falling due greater than one year	—	—	(297)
Net assets	197,889	163,410	185,148
Capital and reserves
Called-up share capital	2,237	2,031	2,056
Share premium account	54,692	68,935	34,954
Capital redemption reserve	1,129	1,041	1,081
Distributable reserve	61,539	39,406	75,591
Capital reserve	17,841	2,777	5,945
Revaluation reserve	60,451	49,220	65,521
Equity shareholders’ funds	197,889	163,410	185,148
Net Asset Value per share	88.5p	80.5p	90.1p

UNAUDITED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2022

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2022	2021	2021
	(Unaudited)	(Unaudited)	(Audited)
	£’000	£’000	£’000
Cash flow from operating activities
Loan interest received from investments	311	284	582
Dividends received from investments	96	42	384
Deposit and similar interest received	27	1	1
Investment management fees paid	(1,843)	(1,453)	(3,095)
Secretarial fees paid	(65)	(61)	(122)
Other cash payments	(168)	(252)	(462)
Net cash outflow from operating activities	(1,642)	(1,439)	(2,712)
Cash flow from investing activities
Purchase of investments	(3,170)	(6,274)	(15,111)
Net proceeds on sale of investments	10,272	11,056	22,810
Net proceeds on deferred consideration	51	—	—
Net cash inflow from investing activities	7,153	4,782	7,699
Cash flow from financing activities
Proceeds of fundraising	18,531	—	5,407
Expenses of fundraising	(455)	(37)	(164)
Repurchase of own shares	(4,468)	(2,023)	(5,496)
Equity dividends paid	(8,075)	(6,152)	(6,152)
Net cash inflow/(outflow) from financing activities	5,533	(8,212)	(6,405)
Net inflow/(outflow) of cash in the period	11,044	(4,869)	(1,418)
Reconciliation of net cash flow to movement in net funds
Increase/(decrease) in cash and cash equivalents for the period	11,044	(4,869)	(1,418)
Net cash and cash equivalents at start of period	17,521	18,939	18,939
Net cash and cash equivalents at end of period	28,565	14,070	17,521

Analysis of changes in net debt

	At 30 June		At 1 January
	2022	Cash flow	2022
	£’000	£’000	£’000
Cash and cash equivalents	28,565	11,044	17,521

NOTES TO THE UNAUDITED HALF-YEARLY RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2022

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 2021. Unquoted investments have been valued in accordance with IPEV Valuation Guidelines.

1. 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 2022 and 30 June 2021 has been neither audited nor formally reviewed. Statutory accounts in respect of the year ended 31 December 2021 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 2021 have been reported on by the Company’s auditors or delivered to the Registrar of Companies.

1. 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.

1. 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.

		Number of
	Net assets	shares in issue
30 June 2022	£197,889,000	223,678,255
30 June 2021	£163,410,000	203,113,554
31 December 2021	£185,148,000	205,591,087

1. 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 2022	215,848,355
Six months ended 30 June 2021	205,199,150
Year ended 31 December 2021	204,937,084

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

1. Income

	Six months	Six months
	ended	ended	Year ended
	30 June	30 June	31 December
	2022	2021	2021
	£’000	£’000	£’000
Loan stock interest	337	92	473
Dividends receivable	122	42	384
Deposit and similar interest received	27	1	1
	486	135	858

1. Investments at fair value through profit or loss

	£’000
Book cost as at 1 January 2022	102,687
Investment holding gains	64,319
Valuation at 1 January 2022	167,006
Movements in the period:
Purchases	3,170
Disposal proceeds1	(19,855)
Realised gains2	12,941
Investment holding losses3	(6,091)
Valuation at 30 June 2022	157,171
Book cost at 30 June 2022	98,943
Investment holding gains	58,228
Valuation at 30 June 2022	157,171

1. The Company generated £19,855,000 from the disposal of investments during the period. Proceeds of £9,583,000 million from the Codeplay Software Limited disposal were received post period end in early July 2022 and are shown in debtors as at the date of this report. The book cost of these investments when they were purchased was £6,914,000. 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.
2. Realised gains in the Income Statement includes deferred consideration of £51,000 received from Accrosoft Limited in the period.
3. Investment holding losses in the Income Statement include the deferred consideration debtor increase of £1,021,000. The debtor movement reflects the recognition of amounts receivable from Codeplay Software Limited (£917,000) and FFX Group Limited (£155,000), offset by a receipt from Accrosoft Limited (£51,000).
   
   

1. 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 13 of the Company’s 31 December 2021 Annual Report and Accounts (including an explanation of terms used below).

As at 30 June 2022, the NAV Total Return was 117.4p (being the aggregate of the NAV per share as at 30 June 2022 of 88.5p and dividends paid per share (rebased) since 18 December 2015 totalling 28.9p). This compares to the NAV Total Return Hurdle as at 30 June 2022 of 119.1p.

As at 30 June 2022, the Investment Growth Hurdle had been met for three realised and 16 unrealised investments out of the 33 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 13 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 £6.2 million. Included in this £6.2 million, there is a potential contingent liability of £3.1 million in relation to the realisations of Mologic, Accrosoft and Codeplay, the latter of which proceeds were received post period end in early July 2022.

The fee will only be paid after three years following the sale of a relevant investment, once the end NAV Total 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.

1. 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.

1. Transactions with the Manager

Foresight Group LLP was appointed as Manager on 27 January 2020 and earned fees of £1,857,000 up to 30 June 2022 (30 June 2021: £1,453,000, 31 December 2021: £3,087,000).

Foresight Group LLP is the Company Secretary (appointed in November 2017) and received, directly and indirectly, for accounting and company secretarial services, fees of £65,000 during the period (30 June 2021: £61,000, 31 December 2021: £122,000).

At the balance sheet date there was £nil due to Foresight Group LLP (30 June 2021: £nil, 31 December 2021: £nil). However, management fees of £7,000 have been accrued as at 30 June 2022 (30 June 2021: £nil, 31 December 2021: £nil).

END

For further information, please contact:

Company Secretary
Foresight Group LLP
Contact: Gary Fraser Tel: [phone]

Investor Relations
Foresight Group LLP
Contact: Ellie Kakoulli Tel: [phone]