Final Results

RNS Number : 7534X

Foresight 4 VCT PLC

27 June 2008

 

Summary

• Net Asset Value per share as at 29 February 2008 was 110.2p (compared to 101.5p as at 28 February 2007).

• An interim dividend of 5.0p per share paid on 28 December 2007.

• Five new investments totalling £3,147,000 were made: TFC Europe (£500,000), Iskra Wind Turbines (£750,000), O-Gen (UK) (£630,000), Global Immersion (£267,000) and Datapath (£1,000,000).

• Ten follow-on investments totalling £1,717,000 were made: Trilogy Communications (£325,000), The Bunker Secure Hosting (£346,000), ClockWorx (formerly Auctioning4U) (£220,000), Closed Loop London (£250,000), Adeptra (£47,000), Advanced Visual Technology (£25,000), ZOO Digital Group plc (£300,000), SkillsMarket (£140,000), Oled-T (£54,000) and alwaysON (£10,000).

• Proceeds of £4,640,000 were realised from three investments, the sale of Oasis Healthcare plc (£539,000), Nomad Payments (£3,245,000) and Covion Holdings (£823,000).

• A final dividend is not being recommended.

• The Company continues to exceed the 70% requirement for investment in Qualifying Holdings as set by HM Revenue & Customs.

	Year to 29 February 2008	Year to 28 February 2007
Earnings/(loss) per ordinary share	13.7p	(0.6p)
Net asset value per ordinary share	110.2p	101.5p
Net asset value per ordinary share (includes all dividends paid)	182.6p	168.8p

Chairman's Statement

During the latter half of the year under review, stock markets experienced extreme volatility primarily as a result of difficulties in the US Sub-prime mortgage market and in the UK as a result of the problems surrounding the lending activities of Northern Rock. I am pleased to report that this market turmoil has not directly affected the unquoted holdings within our investments and that your Company is pleased with recent progress made during the year under review and is continuing with its active new investment programme as well as realising both legacy and more recent investments from within the portfolio. Reflecting recent investment gains, an interim dividend of 5.0p per share was paid to shareholders on 28 December 2007.

The largest success during the period was the sale of Nomad Payments to Metavante for $59 million. Foresight 4 received total proceeds of £3,245,000 compared to an original cost of £1,769,968. The sale of Nomad Payments reflects a remarkable turnaround for the company, which only three years ago was valued at £736,000. Nomad Payments has in recent years enjoyed increasing demand for its market leading debit and prepaid card processing services while Nomad CORTEX, its original card authorisation software business, has performed particularly strongly. It has been on the back of this improved performance that a successful sale of the company was achieved.

Another notable success during the year was the sale of Covion Holdings ('Covion'). Foresight 4 invested £200,000 in the management buy-out of Covion in May 2005. This was the first new investment by your Company following Foresight Group's appointment as Investment Manager in July 2004. In the period since the investment was made, Covion has grown its turnover from £10 million per annum to a current annualised rate in excess of £30 million. Covion was sold to Balfour Beatty for total proceeds of £33 million, of which Foresight 4 received some £823,000- over 4 times, its original investment of £200,000.

Although Foresight 4's holding in Oasis Healthcare was relatively small, when combined with the holdings of other Foresight VCTs, Foresight Group funds held over 10% of Oasis's share capital, enabling significant influence to be exerted on the sales process which ultimately resulted in the achievement of a particularly attractive final offer. In my report 12 months ago, Oasis was valued at 28p per share but was sold during July for 94p per share, generating proceeds of approximately £539,000 for Foresight 4.

The performance of a number of portfolio companies continues to improve, reflecting growing demand and strong sales pipelines, most notably Adeptra, Trilogy, Probability and Ixaris. Adeptra is enjoying growing sales for its automated alert services, in particular winning more contracts from major financial institutions in the USA, UK and now Europe. Trilogy is also enjoying increasing demand for its Internet Protocol ('IP') based command and control communication system, Mercury, particularly from the defence and Homeland Security sectors in the USA. Probability recently announced continued growth in both its gaming revenues and new customer registration as well as announcing several strategic relationships with groups such as The Sun, Rank and News International. Ixaris's sales progress has continued throughout the year as a result of improved worldwide distribution for its virtual

credit cards. Datapath continues to trade well and produced operating profits of £2.5 million in the year to 31 March 2008.

Disappointingly, ClockWorx (formerly Auctioning4U) was placed into Administration on 31 January 2008 following a failure to secure funding commitments for its specialist online auction platforms and its ClockWorx workflow software suite.

Investment activity

The level of new investment activity remained high during the year under review, with five new investments being made totalling £3,147,000: £500,000 in TFC Europe; £750,000 in Iskra Wind Turbines; £630,000 in O-Gen (UK); £267,000 in Global Immersion; and £1,000,000 in Datapath.

TFC Europe supplies and designs injection moulded technical fasteners and ring and spring products to customers across a wide range of industries, including aerospace, automotive, hydraulics and petrochemicals.

Iskra Wind Turbines is a Loughborough based manufacturer of tree-sized wind turbines, typically 5.4 m rotor diameter on a 12 m high tower. The company has developed a high efficiency turbine suitable for volume manufacture that has the best price/performance of any tree-sized turbine currently commercially available.

O-Gen's business is to develop, build, own and operate plants which convert organic matter into combined heat and power ('CHP'). The market is driven by government regulation and incentives, specifically landfill tax which is currently £24 per tonne increasing at £8 per tonne per annum and is driving waste operators towards cheaper and more efficient methods of waste disposal. The electricity generated from processing the organic matter will be sold to the National Grid. As a renewable energy source this attracts Renewable Obligation Certificates ('ROCs') which generate further revenue. According to UK legislation, by 2010, 10% of power generated in the UK must be from renewable sources compared to 4% generated currently.

Global Immersion, a management buyout completed in July, designs and installs sophisticated projection systems in planetariums and immersive theatres worldwide and provides related maintenance services.

Datapath supplies graphics cards and other products used mainly to control large screen displays, known as 'videowalls'. More than 50% of all videowalls installed worldwide use Datapath equipment. Revenues have grown to £8.5 million over the last 2 years and EBIT has risen to £2.6 million.

During the period, £1,717,000 was invested in follow-on funding rounds in ten portfolio companies, namely Trilogy Communications (£325,000), The Bunker Secure Hosting (£346,000), ClockWorx (£220,000), Closed Loop London (£250,000), Adeptra (£47,000), Advanced Visual Technology (£25,000), ZOO Digital Group plc (£300,000), SkillsMarket (£140,000), Oled-T (£54,000) and alwaysON (£10,000).

ZOO Digital (AIM listed) raised further capital to fund a significant acquisition, which should help the company achieve traction in its target markets, particularly the USA. More recent investments: Trilogy, The Bunker and SkillsMarket required follow-on funding rounds as they continued to develop their product offerings following Foresight 4's original investment. The Adeptra fundraising was required to support their transition to a direct sales model and support strong growth (sales increased from $8.8 million in 2005 to $12 million in 2006), including winning their first three mainland European customers.

The Bunker Secure Hosting is experiencing strong demand for its ultra secure IT hosting services and is currently planning for a substantial increase in its capacity.

Realisations

As previously mentioned, Nomad Payments was sold during January 2008 for gross proceeds of approximately £3,245,000 compared to an original cost of £1,769,968.

On 17 October 2007, the Company sold its entire holding in Covion to Balfour Beatty, which returned proceeds of £823,000 on an original investment of £200,000 made in May 2005.

In July 2007, the Company's entire holding in Oasis Healthcare was sold, realising proceeds of £539,000 or 94p per Oasis Share. The sale of Oasis to Duke Street Capital followed several bids and counter bids from parties interested in buying Oasis's expanding portfolio of dental practices and represents a significant premium to the share price of 28p per share just 12 months ago.

Net Asset Value

The net asset value per share as at 29 February 2008 increased to 110.2p compared to 101.5p as at 28 February 2007.

Dividend

The Company's dividend policy is to aim to distribute to shareholders a steady flow of dividends from income and realised capital gains. Reflecting recent realised gains, an interim dividend of 5.0p per share for the year ending 29 February 2008 was paid on 28 December 2007, making 12.5p per share of cumulative dividend payments in the last two years.

Valuation policy

Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital (IPEVC) guidelines developed by the British Venture Capital Association and other organisations under which investments are valued, as defined in the guidelines, at 'fair value'. Ordinarily, unquoted investments will be valued at cost for the 12 months following the date of acquisition as the most suitable approximation of fair value unless there is an impairment or accretion in value during the period. Quoted investments and investments traded on AIM and PLUS are valued at the bid price as at 29 February 2008. The portfolio valuations are prepared by Foresight Group and are subject to approval by the Board.

Share Issues and Share Buy-backs

During the year the Company issued 1,026,940 shares at prices ranging between 108.0p and 109.0p per Ordinary Share as part of the linked Offer with three other Foresight VCTs. Following the period end a further 787,662 Ordinary Shares were issued at prices ranging from 109.0p to 116.0p per share. These funds will enable your Company to remain an active investor in the current market and take advantage of new opportunities currently being reviewed by Foresight Group.

It continues to be the Company's policy to consider purchasing shares in the market when they become available in order to help provide liquidity for the Company's shareholders. During the period, the Company repurchased 628,342 shares at a cost of £560,000.

Annual General Meeting

The Company's Annual General Meeting will take place on 18 July 2008. I look forward to welcoming you to the meeting, which will be held in London.

Outlook

There has been no significant fallout from the current credit crunch on the levels of merger and acquisition activity at the smaller end of the market in which Foresight 4 VCT operates and of which the sale of Nomad Payments and Covion Holdings are examples. Your Manager will continue to pursue potential realisations from within the portfolio.

The market in which Foresight 4 VCT operates continues to be encouraging in terms of potential new investment opportunities, as evidenced by the current deal flow being reviewed by your manager. Foresight 4 VCT will have access to this deal flow of new opportunities as it invests new funds raised as well as reinvesting some of the proceeds from successful realisations.

Peter Dicks

Chairman

27 June 2008

For further information please contact:

Foresight Group, Tel: [phone]

Landsbanki, Tel: [phone]

  The Disclosure and Transparency Rules ('DTR') of the UK Listing Authority require certain disclosures in relation to the annual financial report, as follows: 

Principal risks, risk management and regulatory environment

The Board believes that the principal risks faced by the Company are:

• Economic risk - events such as an economic recession and movement in interest rates could affect smaller companies' valuations.

• Loss of approval as a Venture Capital Trust - the Company must comply with Section 274 of the Income Tax Act 2007 which allows it to be exempted from capital gains tax on investment gains. Any breach of these rules may lead to the Company losing its approval as a VCT; qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained; and future dividends paid by the Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains.

• Investment and strategic - inappropriate strategy, poor asset allocation or consistent weak stock selection might lead to under performance and poor returns to shareholders.

• Regulatory - the Company is required to comply with the Companies Acts, the rules of the UK Listing Authority and United Kingdom Accounting Standards. Breach of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report.

• Reputational - inadequate or failed controls might result in breaches of regulations or loss of shareholder trust.

• Operational - failure of the Adviser's accounting systems or disruption to its business might lead to an inability to provide accurate reporting and monitoring.

• Financial - inadequate controls might lead to misappropriation of assets. Inappropriate accounting policies might lead to misreporting or breaches of regulations.

• Market risk - investment in AIM traded, PLUS traded and unquoted companies by nature involve a higher degree of risk than investment in companies traded on the main market. In particular, smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. In addition, the market for stock in smaller companies is often less liquid than that for stock in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such stock.

• Liquidity risk - the Company's investments may be difficult to realise. The fact that a share is traded on AIM does not guarantee its liquidity. The spread between the buying and selling price of such shares may be wide and thus the price used for valuation may not be achievable.

The Board seeks to mitigate the internal risks by setting policy, regular review of performance, enforcement of contractual obligations and monitoring progress and compliance. In the mitigation and management of these risks, the Board applies rigorously the principles detailed in the 'Turnbull' guidance. 

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Directors' Report and the financial statements, in accordance with applicable United Kingdom law and United Kingdom Generally Accepted Accounting Practice. Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of its profit or loss for that period.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent; and

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Additionally, the Directors confirm to the best of their knowledge that the annual financial report includes a fair review of the development, performance and position of the Company as required by DTR 4.1.8 to 4.1.12.  Unaudited Profit and Loss Account

for the year ended 29 February 2008

	Year to 29 February 2008			Year to 28 February 2007
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income and deposit interest	559	-	559	541	-	541
Investment management fees	(169)	(506)	(675)	(147)	(441)	(588)
Other expenses	(258)	-	(258)	(249)	-	(249)
Unrealised gain/(loss) on revaluation of investments	-	1,387	1,387	-	3,081	3,081
Operating profit	132	881	1,013	145	2,640	2,785
Gain/(loss) on realisation of investments	-	2,017	2,017	-	(2,917)	(2,917)
Profit/(loss) on ordinary activities before taxation	132	2,898	3,030	145	(277)	(132)
Tax on ordinary activities	-	-	-	-	-	-
Profit/(loss) on ordinary activities after taxation	132	2,898	3,030	145	(277)	(132)
Balance transferred to/(from) reserves	132	2,898	3,030	145	(277)	(132)
Profit/(loss) on earnings per share	0.6p	13.1p	13.7p	0.7p	(1.3)p	(0.6)p

All items in the Profit and Loss Account derive from continuing operations. No operations were acquired or discontinued in the period.

The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits. Income from investments is recognised on an accruals basis.

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

Unaudited Reconciliation of Movement in Shareholders' Funds

for the year ended 29 February 2008

	2008	2007
	£'000	£'000
Opening shareholders' funds	22,681	16,566
Net proceeds from share issues	1,011	7,113
Shares repurchased in the year	(563)	(304)
Profit/(loss) for the year	3,030	(132)
Dividend	(1,098)	(562)

Closing shareholders' funds

25,061

22,681

  Unaudited Balance Sheet

at 29 February 2008

	2008	2007
	£'000	£'000
Non-current assets
Assets held at fair value through profit or loss - investments	18,836	15,110
Current assets
Debtors	1,835	289
Money market and other deposits	4,387	7,335
Cash	121	9
	6,343	7,633
Creditors: amounts falling due within one year	(118)	(62)
Net current assets	6,225	7,571
Net assets	25,061	22,681
Capital and reserves
Called-up share capital	228	224
Share premium account	10,177	9,176
Capital redemption reserve	1,826	1,820
Profit and loss account	12,830	11,461
Equity shareholders' funds	25,061	22,681
Net asset value per ordinary share	110.2p	101.5p

  Unaudited Cash Flow Statement

for the year ended 29 February 2008

	2008	2007
	£'000	£'000
Cash flow from operating activities
Investment income received	176	89
Deposit and similar interest received	212	412
Investment management fees paid	(639)	(652)
Secretarial fees paid	(37)	(68)
Other cash payments	(166)	(239)
Net cash outflow from
operating activities and returns on investment	(454)	(458)
Taxation	-	-
Financial investment
Purchase of unquoted investments and investments	(4,863)	(5,652)
quoted on AIM
Net proceeds on sale of unquoted investments	3,725	598
Net proceeds on deferred consideration	-	925
Net proceeds on sale of quoted investments	394	14
Loan guarantee called	-	(150)
Repurchase of own shares	(500)	(304)
Net capital outflow from financial investment	(1,244)	(4,569)
Equity dividends paid	(1,098)	(562)
Net cash outflow before financing and liquid resource management	(2,796)	(5,589)
Management of liquid resources
Movement in money market and other deposits	2,948	(3,126)
	2,948	(3,126)
Financing
Proceeds of fund-raisings	-	7,524
Expenses of fund-raisings	(40)	(411)
	(40)	7,113
Increase/(decrease) in cash	112	(1,602)
Reconciliation of net cashflow to movement
in net cash
Increase/(decrease) in cash for the year	112	(1,602)
Net cash at start of period	9	1,611
Net cash at end of period	121	9
Reconciliation of operating profit to net
cash flow from operating activities
Operating profit	1,013	2,785
Unrealised gain on investments	(1,387)	(3,081)
Decrease in creditors	(7)	(56)
Increase in debtors	(73)	(106)
Net cash outflow from operating activities	(454)	(458)

  Notes 

1. The unaudited preliminary results have been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the year ended 29 February 2008. All investments held by the Company are classified as 'fair value through profit and loss'. Unquoted investments have been valued in accordance with IPEVC guidelines. Quoted investments are stated at bid prices in accordance with the IPEVC guidelines and Generally Accepted Accounting Practice.

2. These are not statutory accounts in accordance with section 240 of the Companies Act 1985 and are neither audited nor reviewed. The full audited accounts for the year ended 28 February 2007, which were unqualified, have been lodged with the Registrar of Companies. No statutory accounts in respect of any period after 28 February 2007 have been reported on by the Company's auditors or delivered to the Registrar of Companies. 

3. Copies of the Annual Report will be mailed to shareholders and will be available for inspection at the Registered Office of the Company at ECA Court, South Park, Sevenoaks, Kent TN13 1DU. Alternatively, the Annual Report will be available at www.foresightgroup.eu

4. The number of shares in issue at 29 February 2008 was 22,755,104 ordinary shares (2007: 22,356,506 ordinary shares).

5.  Total earnings after taxation for the year were £3,030,000 (2007: £132,000). The basic earnings per share is based on 22,130,708 being the weighted number of shares in issue during the year (2007: 22,047,046 shares).

The revenue return per share is based on the net revenue after taxation of £132,000 (2007: £145,000) and on 22,130,708 being the weighted number of shares in issue during the year (2007: 22,047,046 shares).

The capital return per share is based on net realised capital gains of £2,898,000 (2007: loss of £277,000) and on 22,130,708 being the weighted number of shares in issue during the year (2007: 22,047,046 shares).

6. The Company paid an interim dividend of 5.0p per ordinary share on 28 December 2007 (15 December 2006: 2.5p per ordinary share). The Board is not recommending a final dividend for the year ended 29 February 2008. 

7. Related Party Transactions: Bernard Fairman is managing partner of Foresight Group, which acts as investment manager to the Company in respect of its venture capital investments and received fees of £574,533 including VAT during the period (2007: £531,951). VCF Fund Managers Limited, a subsidiary of Foresight Group, received £63,550 during the period in respect of company secretarial fees (2007: £62,239).

8.  The Annual General Meeting will be held at 10.00am on 18 July 2008 at 35 New Bridge Street, London EC4V 6BW

9. Income

	2008	2007
	£'000	£'000
Income from Investments:
Unfranked investment income	356	112
Other Income:
Deposit Interest	203	429
	559	541

10. Movement in reserves 

COMPANY

			Called-up share capital	Share premium account	Capital redemption reserve	Profit & loss account	Total
			£'000	£'000	£'000	£,000	£'000
As at 28 February 2007			224	9,176	1,820	11,461	22,681
Share issues in the period			10	1,100	-	-	1,110
Expenses in relation to share issues			-	(99)	-	-	(99)
Share buyback			(6)	-	6	(563)	(563)
Dividends			-	-	-	(1,098)	(1,098)
Retained profit for the year			-	-	-	3,030	3,030
As at 29 February 2008			228	10,177	1,826	12,830	25,061

 

END

 

 

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