Good morning, everyone, and thank you for joining us today for Foresight Group Half-year Results to the 30th of September, 2025. The presentation will commence shortly. After the presentation, we will conduct a Q&A session. If you wish to ask a question, you'll be able to ask a question either through the Zoom webinar link provided separately or by submitting written questions using the Ask a Question button on the Spark Live webcast page. If you've joined us via Zoom webinar, please note this call is being livestreamed to a webcast for a wider audience and will be recorded. I would now like to hand over to Bernard Fairman, Co-founder of Foresight Group, to open the presentation. Please go ahead.
Good morning. I'm Bernard Fairman, Co-founder and Executive Chairman of Foresight Group. I'm delighted to welcome you to Foresight's half-year results for the period ending September 2025, which I'm presenting today with our CEO, Gary Fraser. We offer institutional and retail investors a diverse range of private and listed investment solutions in real assets located in the U.K., Europe, and Australia, and growth capital for SME businesses across the U.K. and Ireland. Before addressing the Group's performance over the last six months, I want to provide you with a reminder of our core strengths. The Group delivers high-quality earnings with 85%-90% recurring revenue and over 90% of long-duration capital within our LP and Evergreen vehicles. This provides considerable revenue visibility each year and results in compounding growth that underwrites the Group's performance.
We take a boots-on-the-ground approach in the U.K. and internationally, enabling us to build deep local relationships that support a strong investment and investor pipeline across all of our strategies. These seek to address the significant investment opportunities within rapidly growing markets driven by structural shifts in the global energy mix, increasing electricity consumption, national initiatives to increase energy security, and also by the SME funding gap in the U.K. and Ireland. Reinforced by our leadership in tax-efficient investing, this diversified investment platform of strategies and funds across three business divisions of real assets, private equity, and Foresight Capital Management provides us with resilience through economic cycles and positions us uniquely within the sector. It is these key strengths of the Group that have combined to build our significant track record of profitable growth, nearly tripling our profits since IPO in 2021.
Performance that has been driven by both organic and inorganic growth and the average management fee rates benefiting from a mix shift following successful fundraising across our highly profitable U.K. tax-efficient and regional private equity products. This shift bucks the trend of reducing fee margins across the broader asset management industry and is a key benefit of our specialized skill set. I'll now pass to Gary to take you through the financials and our operational updates.
Thanks, Bernard. In H1, our key financial metrics were in line with expectations. AUM over the last six months was up 4%, with retail and institutional fundraising alongside strategic activity over the last 12 months delivering an 11% H1 on H1 revenue increase to GBP 81.5 million. Recurring revenue remained within our 85%-90% target range, and the core EBITDA pre-SBP growth of 6% has supported a 9% increase in our interim dividend to GBP 0.081 per share. Firstly, turning to the key movements in AUM during the period, which increased by 4% from GBP 13.2 billion to GBP 13.7 billion. Demand for our higher-margin retail products remained strong, with our retail sales team successfully raising GBP 223 million via a wide range of IFA relationships, whilst the second vintage of Foresight's flagship energy transition strategy, FEAP2, also concluded its first phase of fundraising with EUR 505 million of commitment secured to date.
These retail and institutional inflows were partially offset by net outflows within our public markets division, despite recording positive performance of GBP 56 million. Moving on to the Group's profitability, we have delivered an 11% increase in revenue driven by our fundraising achievements over the last 12 months, with the continued success of our U.K. tax-efficient products also leading to a higher average management fee rate. Cost of sales increased due to the inclusion of GBP 900,000 of DIT-related performance fees payable to the investment team following strong exits, with a balance of this increase due to additional fund costs principally from AUM acquired through the Web acquisition. Whilst core EBITDA pre-SBP grew by a healthy 6%, margin compression to 38% was driven by the negative contribution of our Foresight Capital Management division.
We expect to remain stable at this level for the remainder of the year, with institutional real asset fundraising being the key catalyst to future margin expansion. Turning now to slide nine, our consistent performance is driven by a high-quality revenue model. We remain focused on generating high-quality earnings, with the recurring revenue staying within our guided 85%-90% range and long-duration capital within closed-ended vehicles representing over 90% of AUM, providing us with excellent awareness of future revenues. In the full four years post-IPO, the compounding effect of this focus on locked-in revenue has resulted in an additional GBP 50 million of recurring annual management fees from funds raised, providing a strong base upon which to deliver further growth. Turning now to costs, core staff costs increased by 10% compared to the prior period.
4% of this increase related to the FY 2025 acquisition of the trade and assets of Web Asset Management and the Liontrust Diversified Real Assets Fund. A 3% increase related to wage inflation that included U.K. employer NI requirements. The remaining 3% primarily related to the retail sales and IR headcount growth to support our strong recent and future retail fundraising achievements, as well as continued investment in our tech capabilities. Turning to slide 11, the resulting core EBITDA pre-SBP of GBP 30.6 million is in line with expectations and builds upon the strong growth track record delivered post-IPO, with profitability typically H2-weighted when we usually see increased fundraising before the U.K. tax year end. Continuing profitable growth enables strong and growing dividends to be delivered in line with the Group's policy, which targets a dividend pay ratio of 60% of adjusted profit.
Post-IPO, the growth in total dividends has delivered a 21% three-year CAGR and returned a total of over GBP 90 million to shareholders. Given our performance in the period, the Board is pleased to declare an increased interim dividend of 8.1 pence per share, which is calculated as 33% of the prior year total dividend. Alongside our 60% dividend pay ratio, we seek to be efficient stewards of capital. Free cash flow not utilized for earnings accretive M&A will be substantially returned to shareholders. During the half, we bought back GBP 8.2 million of our shares as we commenced an up to GBP 50 million share buyback program to be carried out over the three years to FY28. The shares purchased by the program and subsequently held in Treasury have been utilized to satisfy demand for the company shares from both institutional investors and our performance share plan awards.
Shares sold from Treasury returned GBP 9.1 million of cash in the period. Now moving on to key operational updates from across the business in the half. Within institutional real assets, it is our specialist investment origination combined with our asset management capabilities that provide us with confidence in our ability to successfully launch multi-vintages of our FEAP, natural capital, and RF strategies. This multi-vintage approach should drive scale for the Group over time. It has been a good half for the FEAP strategy, completing the first phase of fundraising for its second vintage with a total of EUR 505 million secured to date. We remain confident this second vintage will achieve its target fund size of EUR 1.25 billion by mid-2027. The extended fundraising period should have little P&L impact over the fund's life as a result of equalization fees payable for later entry into the fund.
FEAP2 also made its first investment through the GBP 210 million acquisition of Harmony Energy Income Trust Plc alongside one of Foresight's retail funds. This provides a platform to deliver future fundraising and deployment in the coming years. In Australia, we expect our growth prospects to benefit from the strong track record of our investment team, which was further enhanced by the exit of leading independent power producer Zenith Energy, an evaluation materially above the fund's prior holding value, which generated performance fees for the Group. Now taking a closer look at a key deployment example from the half, namely FEIP II's acquisition of HEIT. This was the fund's first step in developing a pan-European battery storage platform by investing in one of the most mature storage markets with a high-quality portfolio.
The eight battery storage assets across both England and Scotland are fully operational and grid-connected and represent 30% of U.K. operational two-hour battery energy storage system capacity. This portfolio has performed strongly since acquisition, generating stable inflation-linked revenues, and the team are actively exploring further optimization opportunities. Following that acquisition of HEIT, the FEIP II team are also pursuing additional deployment opportunities across energy generation, storage, and grid flexibility. Turning now to slide 17, we continue to offer a number of retail products that preserve wealth and drive investment into U.K. SMEs across infrastructure such as student housing, fiber broadband, and natural capital, as well as private credit. Demand for these products has continued to increase after we became the number one investment manager in annual fundraising for the unquoted business relief products in 2025.
This followed the certainty provided at the 2024 U.K. budget with regards to business relief rules and allowances, with the unquoted markets retaining full 100% relief. With no material changes announced at the 2025 U.K. autumn budget last week, pensions are also due to fall into chargeable estates from April 2027, with fiscal drag continuing. As a result, we expect the business relief fundraising market to remain buoyant. We are confident in being able to remain number one in annual fundraising due to the strength of our excellent investment performance and the quality of our distribution capabilities, expecting to raise over GBP 600 million gross per annum over the remainder of our guidance period to FY 2029. Finally, turning to private equity, we continue to expand our regional strategy with the launch of a third vintage focused on the Northwest.
This fund delivered a first close of GBP 90 million, a 35% increase on the second vintage, and clearly evidencing investor confidence in the strategy. Whilst we already have a significant presence in the Northwest, we were particularly delighted to open two offices in the Southwest, being Bristol and Exeter, which has long been a target for the private equity team. We anticipate launching further follow-on vintages of our regional funds in the coming years, underpinned by our performance track record and strong regional LP relationships. I will now pass you back to Bernard to take you through the current trading and outlook. Bernard.
Thanks, Gary. Post-period end, we have achieved further exit success within our real assets division. Our diversified infrastructure trust agreed the sale of Kinetic at a premium to holding value, further building on the track record of our Australia team.
As part of the transaction, Foresight will retain a 30% stake through an SMA or continuation fund structure, continuing our support for Kinetic's long-term growth. Foresight Natural Capital also successfully made its first forestation exit, Bank Woodland, at a 1.8 multiple on invested capital. This validates our natural capital development model, demonstrating strong returns even in a high interest rate environment. Turning to the outlook, the recent U.K. budget reinforces the strong tailwinds supporting our business relief products as we continue to lead the market in fundraising, channeling further investments into U.K. SMEs. Against the backdrop of rising personal tax burdens in the U.K., demand for tax-efficient products is significant.
As one of the key strategies within our diversified business model, this increasing demand, alongside the expansion of our multi-vintage institutional products, keeps us on track to deliver on our target to double core EBITDA pre-SBP in the five years to FY 2029. Thank you for listening, and we'll now take your questions.
If you wish to ask a question, please use the raise hand function at the bottom of your Zoom screen. If you are dialing in via phone, you can raise your hand using star nine and star six to unmute. We will pause for a moment to assemble the queue. The first question is from Jonas Døhlen at Deutsche Bank. Please unmute yourself and begin with your question.
Yes, good morning. Thank you. Jonas Dolan from Deutsche Bank here. Two questions for me, please. First of all, FCM came in, of course, or as you reported, with higher costs and a negative EBITDA contribution, which seems to have been driven by the Web Asset Management acquisition. At what point should we expect this to get back to positive? Could you provide any more color around this? On current trading, if you could provide any color on the recent VCT change, how you expect that to impact your fundraising dynamic and similar in your unquoted business relief products? I saw several articles on VCT demand spiking after budget, so just wondering if this is something you've seen as well. Thank you.
Okay, so it's Gary here. I'll take the first question and pass over to Bernard for the second question. In terms of the FCM division, we've already made a number of cost savings within that division since the end of the first half. We'd expect those to flow through during the second half of the year. I think we'll be very close to break even by the year-end in terms of on a run rate basis. Therefore, we'd like to think that we'd be break even, if not EBITDA positive for FY 2027, but certainly during the second half of this current year, so H2 2026. That's where we are with FCM. We've made some positive strides in terms of the cost cutting in the business.
Clearly, I can't predict where we'll be in terms of redemptions during the second half, albeit I think the web side of the business has started to see really positive performance that's offsetting to a certain extent some of the outflows that we've seen. Certainly EBITDA positive towards H2 2026 and for the entirety of FY 2027. Bernard, passing over to you.
Yeah. Thank you. Looking at VCTs and also our IHT product, the key point about the changes to VCTs in the budget was the doubling in the sizes of the businesses you could invest in and the generally helpful changes that have been lobbied for by the VCT Industry Association, which has opened up a much bigger market than was currently available. Now, you'll have seen in the past that we've raised GBP 25 million-GBP 30 million for each of our two main VCTs.
That's not because we could only raise GBP 25 million-GBP 30 million. We think we could raise two to three times as much, as evidenced by the fact they both closed within about 10 days. We did not raise so much because we could not invest it during a sensible period because it was so restrictive. It is a lot less restrictive now. I think you will see us raising more money, probably 40-50 per VCT, but we will have to see what the boards say. We will raise more money. We will be able to invest it because the rules are easier. There will be a flood of applicants this year because of the reduction in tax relief. I suspect that next year it will make very little difference to us for two reasons. Firstly, we are the market leader. We are the best-performing VCTs in the market.
The market leader nearly always fills up quite quickly. Secondly, because the number of areas where you can get tax relief has got smaller and smaller. Zero tax relief or 20% tax relief, I mean, will be the calculation people will make. On IHT, I think this is for us a much bigger market. Again, a market where we're market leader. Being market leader gets you into virtually all opportunities in terms of where estates are looking to place large sums of money automatically. I think after the last budget, where rules were made more restrictive, as you recall, I expected the market to shrink. In fact, our market went up by about 30% as I guess people became more aware of the rules and restrictions and the tax due and all the rest of it. People started focusing on it.
There have effectively been no changes in the budget this time, and I expect there to be a significant increase in the amount of money we take. I would be quite surprised if we did not blow away all our expectations on IHT fundraising. As I say, being market leader is very helpful in that respect and having the super performance. All of those things help. I think good news in both areas post the budget.
Great. Thank you very much.
The next question is from Jens Ehrenberg at Cavendish. Please unmute yourself and begin with your question.
You can hear me all right. Just a couple of questions from my side, if that's fine. Partly adding on to what Jonas has touched on before. I suppose firstly, looking at the operating margin overall, can you give us a bit more color as to how we should think about this going into the second half at a group level? I appreciate we tend to have a more second half weighting with you guys, but just, yeah, how to think about that in context of work and censuses at the moment. I suppose more broadly speaking, bigger picture, it's great to see the continuously strong demand for sort of the VCTs and IHT products. If we put that into context with still a relatively challenging backdrop for FCM, how should we think about the medium-term targets?
We appreciate you still seem very much on track, but if we assume there is less better demand for your higher margin product, are you sort of tracking a little bit ahead of where you would expect to be? Part also relating to the comments on, yeah, the strong fundraising expectations. Thank you.
In terms of the margin, I think for the H1, we were 37.6%. I think we'll see the margin increase in the second half, but I still think it will be below 40%. I think we'll see margin improvement, but maybe not up to 40% in the second half. That necessarily means we see an improvement in terms of revenues generated and overall profitability in the second half. I still like to think, as we sit here today, my confidence levels are high and it's achieving somewhere in the range, but probably at the lower end of the range of consensus. If I look at consensus at the minute, I think it's 68 plus, up to 72. That's where I would see it based on the margin improvement in the second half. In terms of the second part of the question.
I just wanted to throw something in here. I mean, the one message that I think everybody should take away is the fact that this is a very broad, diversified business. It's rare that all of the parts of the business are firing together. It has happened, but it's quite rare. We have got multiple bits of the business. As one grows at a slower rate, others perform much better than perhaps even we expected. For example, the Australian business generated quite a large performance fee, which we were not necessarily expecting because you cannot dictate when big deals get done, the timing of them. That is indicative. The fact the retail business is basically performing better than it ever has in the history of the business, of our business, and that is 41 years.
Again, it's indicative of the fact that when one thing is not going so well, which is FCM, another one is going better than we thought. We are the exact opposite of a monoline business where we stand or fall on one area. We have so many different parts of the business that a great opportunity to make up shortfalls and to continue with our growth. You have seen that in these results.
In terms of just coming back to one of the other questions about medium-term targets and how should we think about that? I mean, in terms of margin by the end of the outturn period to FY 2029, we are still targeting margin improvement between mid-40s at that point in time. It is not necessarily going to be linear from where we are now, but from FY 2027 onwards, I see us pushing back into the 40s and beyond as we start to see not only increases in retail fundraising that Bernard alluded to coming through, but also as we start to see higher amounts coming through in our institutional real asset strategy as well. That is where I would like to see us and believe we will be in terms of medium-term targets.
Finally, on FCM, FCM, I think it's a question of scale. As you all know, as well as or better than me, there have been continuous outflows from the U.K. market generally. This kind of product that we're selling in particular, because it's very interest rate sensitive, it would be reasonable to expect as interest rates come down, when they come down, that the sector will improve. It is deeply out of fashion at the minute, and it's a scale business. What are we going to do about that? Obviously, we're trying to increase our inflows. We're also looking quite closely at costs, and we'll likely take some costs out over the next period.
Super. Thank you. That makes a lot of sense. Can I just have one brief follow-up? I appreciate you might not be able to give too much comment. Just curious on coming back to the retail product. Just in terms of in the run-up to the budget and the couple of days we've had since, have you seen any change in dynamic just because perhaps there's a bit of the uncertainty that's gone now? I appreciate it was probably reasonably strong going into the budget as well, but just curious if you've seen anything and appreciate it's very, very early doors.
Good point. What happens is that the budget happens, and then the advisors go and see their clients. There's usually a delay of about two to three weeks before you see the main impact. I mean, a straw in the wind. Yesterday, inflows were GBP 5 million on the day. Watch this space, but in a couple of weeks, we should be in a better position to know.
Super. Thank you. Appreciate it.
Just a reminder, if you would like to ask a question, you can submit questions in written format by the webcast page by clicking the Ask a Question button. If you have dialed into the call and wish to ask a question, please use the raise hand function at the bottom of your Zoom screen. If you are dialing in via phone, you can raise your hand using star nine and star six to unmute. There are no further questions. I will now hand back to Bernard Fairman for closing remarks.
Thank you very much, everybody, for participating and for listening. The point I'd like to leave you with is the points I just made. This is a diversified business with profit centers that we've developed over many years. New products coming down the road for the next year or so. In the meanwhile, the retail business is doing exceptionally well and likely to continue to perform and, in fact, do better. As I just mentioned, in the next few weeks, we expect a, I expect a significant upturn in flows. I just told you what yesterday's flow was, which is not, it's fairly typical of the last few weeks. Thank you very much, everybody, for attending and for listening. We look forward to a rather more healthy share price over the next few months. Thank you very much.