Interim Results

14 September 2022

BAY CAPITAL PLC

("Bay" or the "Company")

Interim Results for the six months ended 30 June 2022

Bay Capital (LSE: BAY) announces its unaudited condensed interim results for the six months to 30 June 2022 (the "Interim Report").

Peter Tom CBE, Chairman, said:

"Since listing, we have evaluated a number of opportunities that fit with our strategy, and we continue to assess several potential transactions in our sectors of focus - industrials, construction, business services, and the software and technology companies which service those industry verticals.

Throughout the first half of the year we have sought to conserve capital with strong cost control and a careful approach to managing operating expenses.

The current macroeconomic and geopolitical environment is creating interesting opportunities for the business, and we look forward to updating shareholders with further progress in due course."

Strategy

The Company was established in 2021 to pursue opportunities in the industrial, construction and business services sectors, including the software and technology companies which service those industries.

The Company has a flexible approach, enabling it to deploy capital in minority, majority or outright ownership investments across the UK and internationally. The Directors aim to identify fundamentally sound assets, where tangible opportunities exist to drive strategic, operational and performance improvements.

Results and developments in the six month period to 30 June 2022

The Company's loss after taxation was £108,394 (6 month period to 30 June 2021: £89,500) principally reflecting operating expenses incurred as a listed business of £103,938. The Company generated a loss per share of 0.2 pence (6 month period to 30 June 2021: £44,750 loss per share).

As a result of tight cost control and moderate operating expenses, as at 30 June 2022, the Company's cash balance was £6,572,054 (31 December 2021: £6,720,238).

On 28 June 2022, the Company held its inaugural Annual General Meeting at which all resolutions were unanimously passed.

Risks

As the Company has yet to complete an investment or acquisition, it has limited financial statements, historical financial data and trading history. As such, during the period the Company was subject to the risks and uncertainties associated with those of an early-stage acquisition company.

The Directors are of the opinion that these risks, which were detailed in Bay's published final results for the financial year ended 31 December 2021, remain applicable to the Company.

Dividend

At this point in the Company's development, it does not anticipate declaring any dividends in the foreseeable future. The Directors will determine an appropriate dividend policy for the Company following its inaugural investment or acquisition.

Outlook

During the period and post period end, Bay has continued to pursue its investment and acquisition strategy and is currently assessing opportunities across the industrial and construction sectors.  The Directors have identified a number of successful companies with the potential for growth and value creation that have considered a listing and are seeking to partner with, and leverage the benefits of, the Board's experience and that of the wider Bay team.   The Directors look forward to updating shareholders on progress in due course.

Peter Tom CBE

Chairman

13 September 2022

Enquiries:

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period 1 January 2022 to 30 June 2022

The Company has no items of other comprehensive income.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2022

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period from incorporation on 31 March 2021 to 30 June 2021

For the period 1 January 2022 to 30 June 2022

CONSOLIDATED STATEMENT OF CASH FLOWS

For the period 1 January 2022 to 30 June 2022

NOTES TO THE GROUP FINANCIAL INFORMATION

1.     General information

The Company was incorporated on 31 March 2021 as Bay Capital Limited, a private limited company under the laws of Jersey with registered number 134743. On 8 September 2021, the Company was re-registered as an unlisted public limited company and its name was changed to Bay Capital Plc. On 30 September 2021 the Company shares were admitted to trading onto the Main Market of the London Stock Exchange. The Company is the parent company of Bay Capital Subco Limited (a private limited company under the laws of Jersey with registered number 134744). The Company and its subsidiary together form the Group.

The address of its registered office is 28 Esplanade, St. Helier, Channel Islands, JE2 3QA, Jersey.

The Company has been incorporated for the purpose of identifying suitable acquisition opportunities in accordance with the Group's investment and acquisition strategy with a view to creating shareholder value. The Group will retain a flexible investment and acquisition strategy which will, subject to appropriate levels of due diligence, enable it to deploy capital in target companies by way of minority or majority investments, or full acquisitions where it is in the interests of shareholders to do so. This will include transactions with target companies located in the UK and internationally.

2.     Basis of preparation

These interim condensed consolidated financial statements and accompanying notes have neither been audited nor reviewed by the Company's auditor.

The principal accounting policies applied in the preparation of the Interim Report are set out below. These policies have been consistently applied to the period presented, unless otherwise stated.

The Interim Report has been prepared in accordance with IFRS using the measurement bases specified by IFRS for each type of asset, liability, income and expense.

The Interim Report is presented in £ unless otherwise stated.

The Interim Report was approved by the Board of Directors on 13 September 2022.

Comparative figures

Comparative figures which have been presented cover the period from incorporation on 31 March 2021 to 30 June 2021. The statement of financial position comparative figures are shown as at 31 December 2021.

Going concern

The interim condensed consolidated financial statements have been prepared on a going concern basis.

The basis for this conclusion is as a result of the projected monthly financial forecasts prepared and reviewed by the Directors contained in the working capital board memorandum approved by the Board of the Company as part of its approval of these interim condensed consolidated financial statements. The Directors have a reasonable expectation that the Group 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 interim condensed consolidated financial statements.

3.     Significant accounting policies

The interim condensed consolidated financial statements is based on the following policies which have been consistently applied:

Basis of consolidation

The interim condensed consolidated financial statements incorporate the results of Bay Capital Plc and its subsidiary.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

·      Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

·      Exposure, or rights, to variable returns from its involvement with the investee

·      The ability to use its power over the investee to affect its returns

Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

·      The contractual arrangement(s) with the other vote holders of the investee

·      Rights arising from other contractual arrangements

·      The Group's voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the interim condensed consolidated financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Functional and presentational currency

The Group's functional and presentational currency for these financial statements is the pound sterling.

Employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.  A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Debtors

Short term debtors are measured at transaction price, less any impairment.

Creditors

Short term trade creditors are measured at the transaction price.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and on demand deposits due within three months with banks and other financial institutions, that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

Equity

Equity comprises of share capital, share premium, capital redemption reserve, shared based payment reserve, and retained earnings.

Share capital is measured at the par value.

Share premium and retained earnings represent balances conventionally attributed to those descriptions. The transaction costs relating to the issue of shares was deducted from share premium.

Capital redemption reserve includes amounts in relation to deferred shared capital.

Taxation

Income tax for the period is based on the taxable income for the year. Taxable income differs from profit as reported in the statement of comprehensive income for the period as there are some items which may never be taxable or deductible for tax and other items which may be deductible or taxable in other periods. Income tax for the period is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the interim condensed consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted, or substantially enacted, by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Financial assets and liabilities

The Group's financial assets and liabilities comprise cash and trade and other payables. Trade and other payables are not interest bearing and are stated at their amortised cost. 

Share-based payments

The Group operates an equity-settled share-based payment plan. The fair value of the employee services received in exchange for the grant of options is recognised as an expense over the vesting period, based on the Group's estimate of awards that will eventually vest, with a corresponding increase in equity as a share-based payment reserve.

This plan includes market-based vesting conditions for which the fair value at grant date reflects and are therefore not subsequently revisited. The fair value is determined using a binomial model.

Warrants

Warrants issued as part of share issues have been determined as equity instruments under IAS 32. Since the fair value of the shares issued at the same time as the warrants is equal to the price paid, these warrants, by deduction, are considered to have been issued at fair value.

Related party transactions

The Company discloses transactions with related parties which are not wholly owned with the same group. It does not disclose transactions with members of the same group that are wholly owned.

4.     Critical accounting estimates and judgments

In preparing the interim condensed consolidated financial statements, the Directors have to make judgments on how to apply the Group's accounting policies and make estimates about the future. The Directors do not consider there to be any critical judgments that have been made in arriving at the amounts recognised in the interim condensed consolidated financial statements.

5.     Net finance income

6.     Investments

Principal subsidiary undertakings of the Group

The Company directly owns the ordinary share capital of its subsidiary undertakings as set out below:

The address of the registered office of Bay Capital Subco Limited (the "Subco") is 28 Esplanade, St. Helier, Channel Islands, JE2 3QA, Jersey. The Subco was incorporated on 31 March 2021 and prepares its own financial statements for the period ended 31 December each year.

The A ordinary shares have full voting rights, full rights to participate in a dividend and full rights to participate in a distribution of capital. The B ordinary shares have been issued pursuant to the Company's Subco Incentive Scheme.

7.     Trade and other receivables

8.     Cash and cash equivalents

9.     Trade and other payables

10.   Earnings per share

11.   Financial instruments

Financial risk management objectives and policies

The Group's financial assets and liabilities mainly comprise cash, and trade and other payables. The carrying value of all financial assets and liabilities equals fair value given their short term in nature.

Credit risk

The Group's credit risk is wholly attributable to its cash balance. The credit risk from its cash and cash equivalents is deemed to be low due to the nature and size of the balances held as of 30 June 2022.

Interest rate risk

As of 30 June 2022, the Group had no exposure to interest rate risk.

Currency risk

All monetary assets and liabilities and all transactions of the Group are denominated in its functional currency. As such, the Group is exposed to no foreign currency risk.

Fair value of financial assets and liabilities

There is no material difference between the fair value of the Group's financial asset and its carrying value in the interim condensed consolidated financial statements.

12.   Share capital

13.   Reserves

Share premium and retained earnings represent balances conventionally attributed to those descriptions. The transaction costs relating to the issue of shares were deducted from share premium.

Capital redemption reserve includes amounts in relation to deferred shared capital.

The Group having no regulatory capital or similar requirements, its primary capital management focus is on maximising earnings per share and therefore shareholder return.

14.   Share incentive Plan

On 14 September 2021, the Group created a Subco Incentive Scheme within its wholly owned subsidiary Bay Capital Subco Limited ("Subco"). Under the terms of the Subco Incentive Scheme, scheme participants are only rewarded if a predetermined level of shareholder value is created over a three to five year period or upon a change of control of the Company or Subco (whichever occurs first), calculated on a formula basis by reference to the growth in market capitalisation of the Company, following adjustments for the issue of any new Ordinary shares and taking into account dividends and capital returns ("Shareholder Value"), realised by the exercise by the beneficiaries of a put option in respect of their shares in Subco and satisfied either in cash or by the issue of new ordinary shares at the election of the Company.

Under these arrangements in place, participants are entitled to up to a share of 15 percent of the Shareholder Value created, subject to such Shareholder Value having increased by at least 10 percent. per annum compounded over a period of between three and five years from admission or following a change of control of the Company or Subco.

15.   Share based payments

The Subco Incentive Scheme detailed in Note 14 is an equity-settled share option plan which allows employees and advisors of the Group to sell their B shares to the Company in exchange for a cash payment or for shares in the Company (at the Company's election) if certain conditions are met.

These conditions include good and bad leaver provisions and that growth in Shareholder Value of 10 percent compounded per annum is delivered over a three to five year period for the scheme to vest. This second condition is therefore a market condition which has been taken into account in the measurement at grant date of the fair value of the options.

The weighted average exercise price of the outstanding B share options is £0.10 which have a weighted average contractual life of 4 years 9 months. 110,000 B share options were issued in the period, all of which were outstanding at the period end. No B share options were exercised in the period. No B share options have expired during the period.

The Group recognised £5,489 of expenditure statement of total comprehensive income in relation to equity-settled share-based payments in the period.

The fair value of options granted during the period was determined by applying a binominal model. The expense is apportioned over the vesting period of the option and is based on the number which are expected to vest and the fair value of these options at the date of grant.

The inputs into the binomial model in respect of options granted in the period are as follows:

Expected volatility was estimated by reference to the average 5-year volatility of the FTSE SmallCap Index.

The target increase in Shareholder Value is laid out in the Articles of Association of the Subco and represents the compounded target annual increase in market capitalisation (adjusted for capital raises and dividends) that needs to be met between the third and fifth anniversary of the Group's admission onto the London Stock Exchange in order for the scheme to vest.

The Group did not enter into any share-based payment transactions with parties other than employees and advisors during the current period.

16.   Related party transactions

The Chairman and Non-Executive Director are entitled to fees of £30,000 and £20,000 per annum for their respective roles with the Company, as per their service agreements entered into on 14 September 2021.  There are no other benefits paid to Directors outside of their service fees, save for ordinary course reimbursable expenses properly incurred in performing their duties as Directors.  The Company does not operate a pension scheme. 

17.   Ultimate controlling party

In the opinion of the Directors, there is no single ultimate controlling party.

18.   Post balance sheet events

There are no events subsequent to the reporting date which would have a material impact on the financial statements.