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Foresight VCT AGM (2017)

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timbo003
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Foresight VCT AGM (2017)

#55880

Postby timbo003 » May 25th, 2017, 3:08 am

This year’s Foresight VCT AGM was held on Tuesday 23rd May starting at 10:00, at the Foresight Offices, 23rd floor, The Shard, SE1 9SG.

There were around 25 attendees, which included about 10 ordinary shareholders, the BOD and representatives from the manager and two investee companies.

The Annual report for year ending Dec 2016 can be found here:
http://www.foresightgroup.eu/media/1309 ... ts-vct.pdf

The Chairman (John Gregory) kicked of the meeting by announcing that he had received feedback from a number of shareholders who had complained that a 10:00 am start was too early for an AGM. Therefore all future meetings would be held at a later time. We then had presentations from two investee companies followed by the manager and then finished off with the formal business which included Q&As and voting on the resolutions:


Ollie Quinn (Designer and retailer of Ollie Quinn branded prescription glasses)

Web site: https://www.olliequinn.co.uk/
Facebook: https://www.facebook.com/OQstories/
Foresight press release: https://tinyurl.com/k4pdz2d

David Garrett (CEO) gave the presentation

Ollie Quinn were previously trading under the name Baily Nelson, apparently the name Ollie Quin is derived from the intials OQ (although we were not told anything about the origin or significance of OQ). The company is a vertically integrated supplier of prescription glasses and sunglasses, producing their own designs and selling through their own bespoke retail outlets, the manufacturing is outsourced to a third party laboratory located in Gloucester for the UK and another somewhere in Canada. The company refer to the outlets as boutiques, rather than shops and following a quick perusal of the stores on their Facebook page, I suspect they would have most appeal for Hipster type customers. Unlike other opticians, they sell all their glasses at one price, with mono focal at £98 and varifocal at £195. Foresight invested a total of £3m in April to provide development capital for brand roll out. Ollie Quinn currently have 9 stores in Canada and 9 in the UK and the Directors believe that the concept could be suitable for roll out into most Western markets. Most of the UK stores are located in London, the remainder in big provincial cities. Gross margins on sales are around 80% and the average payback time after opening a new store is about 6 months. Current revenue is £9.3m with EBITDA running at £0.1m. Historical growth has been 20% per month across 3 years. The main competition (threat) comes from Luxottica who manufacture and market numerous well known brands which are sold through their own retail outlets (including the David Clulow chain in the UK) and independent retailers.
http://www.luxottica.com/en/eyewear-brands

Luxottica are currently in merger talks with Essilor, the world's largest manufacturer of ophthalmic lenses. We learned during Q&As that Ollie Quinn’s UK manufacturing facility is owned by Luxottica and they do not currently have a second supply source, although we were all relieved to hear that they are currently seeking alternative/additional suppliers.



Poundshop.com (on line store with all items priced at £1)

Web site: https://www.poundshop.com/
Facebook: https://www.facebook.com/onlinepoundshop
Foresight press release: https://tinyurl.com/lk3yckz

Donna Baker (CEO) gave the presentation

Poundshop.com, as the name suggests is an online £ shop which sells a variety of different products all for £1 (there is no multi-pricing), for example, branded food, pet food, cosmetics and toiletries etc. The web site not only functions as a means of taking simple orders from customers, but it also collects data on customer’s habits and preferences and then tailors mail shots and web offers to each individual customer (at this point we were reminded that data is supposed to be the new oil). The Chairman of the company is Steve Smith, who founded Poundland starting with one shop and then ten years later he sold the business for £50m.
http://stevensmith.com/

A typical Poundshop customer is female, over 35, budget conscious with low to average income. Average spend per visit is £23 plus VAT, plus shipping. Foresight VCT invested £1.7m (total for all Foresight funds was £2m) in development capital which is being used to open a new 20k square foot warehouse in the West Midlands with a new improved stock management system. They are also using the funds to design and launch a new web site (due to go live end of June) which should drive repeat orders and increase customer retention. Since Foresight’s investment, revenues have been growing at 10% per month.

Sales are mainly in the UK (81%) with most of the remaining sales to ex-pats in Spain and France. There are 3,000 SKUs which include 245 top household names. Margins are currently around 33% but should increase, the company is currently loss making, but breakeven is forecast for March 2018.

In response to a question on the competition, we were told that Amazon provided some online competition, but Poundland have now gone offline. Furthermore, Poundland have now gone multi-price and have experienced additional problems since delisting, for example integration of the 99p shops.


Foresight presentation

Russel Healy gave the presentation on the Ordinary share and Planned exit portfolios, the main points covered were as follows:

Since introduction of the new rules, most of Foresight's new investments have been in profitable companies (4 out of 5 of the 2017 investments are profitable). Typically with each new investment, Foresight will appoint one Foresight member to the Board and also identify a suitable chairman.

Foresight invest nationwide. London based investments tend to be more richly priced than regional investments.

Foresight look at around 1000 business plans per year and they are proactive in looking for opportunities through their networks of regional lawyers, accountants and former chairmen of investee companies, they also run regional marketing events.

For every 5 investments they may sift through 500 qualifying and 1,000 non-qualifying business plans.

The VCTs currently have an advanced pipeline of 4 opportunities where Foresight expect to invest a total of £10.3m in the near future. These comprise of one Retail/leisure opportunity (Indian Restaurants) and three in the media / software area.

In the last year Foresight have had to make one major provision, that was for £3.3m in Autologic, where the business is currently being morphed from a one off sales revenue model to a recurring revenue model. Once complete, the business will be on a more sound footing. Autologic has been a very successful investment for the VCT so far, returning 4X cost to date.

There is just one investment left in the planned exit portfolio and that is Industrial Engineering Plastics. Foresight are now extremely focused on achieving a successful exit.



Dan Wells gave the presentation on the Infrastructure shares portfolio

The 5th anniversary of the infra structure share class comes up on July 18th 2017. The shares are on target for a total return of between 104p and 109p, which Foresight acknowledged is below the expectations when the fund was launched. The underperformance is attributed in part to the high valuations of infrastructure assets when the fund made their first investments. The fund will be wound up shortly with the default option for investors to be paid cash. There will also be an alternative option to rollover into the Foresight VCT ordinary shares. [Note: I suggested to Gary after the meeting that if they could arrange for the alternative option to be a roll over into Foresight 4 VCT under the new open offer, this would enable investors to benefit from 30% up front income tax relief. I think Gary will now look into that]

The fund has now made one full disposal and three partial disposals, the partial disposals were necessary after the merger of the Foresight VCT 1 and 2 infrastructure share pools, in order to comply with the 50% maximum equity per VCT rule.

Foresight’s view is that the solar assets have a 30 – 40 year working life, so they are currently in the process of extending planning permission and leases up to 2049 (from their original 20 – 25 year duration). This will increase the NAV for these assets by around 10%.

The PFI assets will probably all go to one acquirer and likewise the solar assets are likely to be sold as one lot to just one buyer. The anticipated closure date for these deals is sometime in August.



Formal Business and Q&As

The Chairman opted for a Q&A session before tackling the resolutions, please note that the Q&A summary that follows is not a verbatim account:



Q: You have a number of new hires in the private equity team, how many do you now have working on VCT private equity?

A: There are 18 people working on private equity and they are spending around 60% of their time on the VCTs.



Q: You sold out of AIM quoted Zoo Digital recently and your final disposal in April this year coincided with the acquisitive French media group Ymagis acquiring a strategic stake. With the benefit of hindsight, do you think you might have sold out too quickly?

A: We had been in Zoo a long time, we knew there was a fund raising coming up and a further investment in Zoo would no longer fit our investment criteria.

Note: I spoke to Gary after the meeting and he conceded that Ymagis may end up acquiring Zoo. Apparently Foresight sold Zoo shares directly into the market, rather than placing shares with other fund managers, the price obtained for their final trache was around 10.5p/share. A placing was announced at the end of April at 9p/share, the shares now trade at around 10.5p/share and Ymagis have increased their stake.



Q: Your total return for last year was a disappointing 3.5p/share, how do you account for this?

A: The performance wasn’t stella, although the portfolio underwent restructuring as a result of the merger and there was a lot of cash raised which did not yield a good return. However, we are now in good shape.

Note: there was an RNS released later in the day (after the market closed) which showed a significant (6.1p/share) increase in NAV between December 31st and March 31st after accounting for the shares going ex-dividend (5p/share).

http://www.londonstockexchange.com/exch ... 35971.html



Q: Over the last 15 years, this VCT has been my worst performing VCT and as a result I am likely to sell out. What are you going to change in order to improve performance?

A: Shareholders were overwhelmingly supportive of the merger between F1 and F2 which was accompanied by a package of measures, Foresight have an increasingly exciting portfolio and we are in a good position to re-establish ourselves as one of the foremost VCT performers.



Q: How long have Peter Dicks and John Gregory been on the BOD?

A: John Gregory has been a BOD member for the last 6 years and intends to remain a BOD member until the new crop of investments are realized. Peter Dicks has been a BOD member since inception. We recognize that PD is not an entirely independent director, as he is also on the BOD for F3 and F4, however, he will step down from F3 and F4 following completion of the merger of those two VCTs.



Q: According to various corporate governance guidelines, the recommended maximum tenure for a director is 9 years. In future, will you disclose the length of service for directors in the annual reports?

A: Noted, but we need to ensure continuity.



Q: How many directorships does Peter Dicks currently hold?

A: 8 or 9 (PD didn’t know exactly)



Q: The directors do not hold many shares. Are there any intentions to increase your holdings, why not consider taking all of your remuneration as shares?

A: We have bought shares from time to time in the past and will probably do so again in the future.



When it came to voting, all resolutions were carried on the proxy votes (see RNS below for further details). The number of votes cast represented just over 10% of the total shares in issue. The resolutions that received most opposing votes were resolutions 2 and 3 which concerned the remuneration report (7% against) and remuneration policy (6.4% against). All four Directors were up for re-election and not surprisingly, Peter Dicks received the most votes opposing his re-election (3.7% against).
http://www.investegate.co.uk/foresight- ... 5358H7619/

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Re: Foresight VCT AGM (2017)

#56218

Postby oxmatt » May 26th, 2017, 5:48 pm

Note: there was an RNS released later in the day (after the market closed) which showed a significant (6.1p/share) increase in NAV between December 31st and March 31st after accounting for the shares going ex-dividend (5p/share).


Are you sure? My understanding would be that the NAV would still be before the dividend as it was paid on 3 April even though it went ex-div earlier in the month. Wouldn't that only change the share price not the underlying NAV? So only a 1.1p increase. It would have been better for the RNS to be clear whether this was before/after the dividend like most others do.

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Re: Foresight VCT AGM (2017)

#64595

Postby timbo003 » July 4th, 2017, 6:49 am

Simulity Labs hasn't received much of a mention at the recent Foresight Investor seminars or the AGM, but it looks like they have managed to get in and out at a very respectable multiple after less than a year invested (see yesterday's RNS released after the market close)

More of the same please!


http://www.investegate.co.uk/foresight- ... 4052H7616/


London: 3 July 2017 - Foresight Group ("Foresight") announces, on behalf of the Board of Foresight VCT plc ("F1"), that it has completed the successful sale of Simulity Labs Limited ("Simulity" or "the Company") to ARM, the world's leading semiconductor IP company.

F1 received c.£11.4m at completion and will receive up to £0.3m of deferred consideration after 12 months subject to certain conditions, implying a cash on cash return of c.3x on the £4m invested in October 2016, or an IRR of c.400%. NAV per ordinary share for F1 has consequentially increased 3.2p from March 2017, all other things being equal.

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Re: Foresight VCT AGM (2017)

#93151

Postby UncleEbenezer » November 4th, 2017, 8:36 pm

timbo003 wrote:Dan Wells gave the presentation on the Infrastructure shares portfolio

[...]

The PFI assets will probably all go to one acquirer and likewise the solar assets are likely to be sold as one lot to just one buyer. The anticipated closure date for these deals is sometime in August.

Hmmm ...

It's now November, and no relevant announcements. No exit, and it's my only VCT share class not to have paid nor declared a divi in 2017.

Meanwhile, we have politicians casting clouds over PFI assets.

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Re: Foresight VCT AGM (2017)

#104417

Postby 127tolmers » December 15th, 2017, 4:59 pm

https://www.investegate.co.uk/foresight-vct-plc/gnw/foresight-vct-plc---dividend-declaration/20171215152543H6579/


Wind up of Planned Exit at total return of 82.71p vs target 110p. Final divi of 7.71p on 29 Dec.

Also Infrastructure wind up at total return of 115.05p triggering a £863k performance fee! Final div of 93.05p on 29 Dec.

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Re: Foresight VCT AGM (2017)

#104456

Postby UncleEbenezer » December 15th, 2017, 10:39 pm

127tolmers wrote:Wind up of Planned Exit at total return of 82.71p vs target 110p. Final divi of 7.71p on 29 Dec.

Also Infrastructure wind up at total return of 115.05p triggering a £863k performance fee! Final div of 93.05p on 29 Dec.

A final divi rather than a tender. Hmmm.

Another dilemma for the spreadsheet: should I cheat and call this a return of capital? Seems to make more sense than calling it a huge divi. This is different from a special divi - even those that very explicitly return capital like Octopus Apollo - in that we come out the other side with no shares. Or with shares in nothing, if you prefer.

(I hold Infra shares, and find this a decent outcome from where we were, though of course a pale shadow of Foresight Solar).

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Re: Foresight VCT AGM (2017)

#105717

Postby hiriskpaul » December 22nd, 2017, 12:08 pm

127tolmers wrote:
https://www.investegate.co.uk/foresight-vct-plc/gnw/foresight-vct-plc---dividend-declaration/20171215152543H6579/


Wind up of Planned Exit at total return of 82.71p vs target 110p. Final divi of 7.71p on 29 Dec.

Also Infrastructure wind up at total return of 115.05p triggering a £863k performance fee! Final div of 93.05p on 29 Dec.

I think that makes the Planned Exit VCT my worst performing limited life VCT at just 18% return after tax. Could be worse, at least they did not lose me any money. Foresight not all bad though as Solar VCT I think was my best performing limited life VCT.

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Re: Foresight VCT AGM (2017)

#108411

Postby 127tolmers » January 6th, 2018, 8:28 pm

New requirement for all VCTs (& ITs) under MIFID to have a KID.

Here is the Foresight VCT one on their website. Performance scenarios make interesting reading.
http://www.foresightgroup.eu/media/5735 ... -final.pdf

Not one there yet for Foresight 4!

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Re: Foresight VCT AGM (2017)

#108457

Postby oxmatt » January 7th, 2018, 10:05 am

1.3% annualised as well

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Re: Foresight VCT AGM (2017)

#108553

Postby BusyBumbleBee » January 7th, 2018, 4:07 pm

I see they have rated the VCT as medium risk : interesting to see how other manager's rate theirs.

After five years they give these returns under various conditions

What you might get back after costs
Stress £3,723
Unfavourable £6,312
Moderate £9,344
Favourable £13,671

Odds stacked against you here. Hate to think what a high risk investment returns

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Re: Foresight VCT AGM (2017)

#108568

Postby Blagdon » January 7th, 2018, 4:57 pm

Hi Tolmers

Performance scenarios make interesting reading.

Do the numbers actually mean anything? or they like the similar pension forecast numbers done using standard prescribed %s?

Regards
Blagdon

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Re: Foresight VCT AGM (2017)

#131467

Postby 127tolmers » April 11th, 2018, 2:52 pm

https://www.investegate.co.uk/foresight ... 3821H3207/

New long term strategy

The Directors, together with the Manager, have an agreed long term strategy for the Fund which includes the following four key objectives:
· Increasing and then maintaining the net assets significantly above £150 million
· Paying an annual dividend to shareholders of at least 5.0p per Ordinary Share and endeavouring to maintain, or increase, NAV per Ordinary Share year on year
· Completing a significant number of new and follow on qualifying investments every year
· Offering a programme of regular share buy backs at a discount in the region of 10% to the prevailing NAV

Other snippets

The annual management fee on the Ordinary Shares Fund 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 produced an ongoing charges ratio for the year ended 31 December 2017 of 2.2% of net assets, which is among the lower when compared to competitor VCTs.

The Board regularly reviews its own performance and undertakes succession planning to maintain an appropriate level of independence, experience and skills in order for it to be in a position to discharge its responsibilities. Peter Dicks, a founder member of the Board and a past Chairman, has served the Company with great commitment and distinction throughout this period. He has, however, decided to retire at this year's Annual General Meeting.

After commissioning an independent professional search, the Board was delighted to secure the services of Margaret Littlejohns as a Director of the Company. Margaret, who was appointed a Non-Executive Director of the Company in October last year, is an experienced fund director. She currently sits on the Boards of the Henderson High Income Trust, JPMorgan Mid Cap Investment Trust and UK Commercial Property Trust. Her earlier career was largely with Citigroup followed by a period from 2004 during which, with her husband, she set up and ran a self storage business which she successfully sold in 2016.

Ixaris appears to have doubled in the last year.


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