Chairman's Statement

For the period ended 31 December 2022

I am delighted to be writing this inaugural Chairman's statement for Macaulay Capital Plc ("Macaulay") and to welcome all Shareholders to the Group following the flotation of the Company on 29 July 2022.

These accounts are for the period from Macaulay's incorporation on 13 May 2022 to our year end of 31 December 2022.

Background

When we embarked on the fundraise and admission to trading on the Aquis Stock Exchange Growth Market we had hoped for admission to have been achieved by the end of April 2022.  In the event, whilst the fundraising was complete, for reasons wholly unrelated to the Group, a whole host of clearing banks turned down the opportunity to provide the simple banking services we required.  Fortunately, the historical, enlightened, and pragmatic Hoare and Co stepped forward and we were able to complete the IPO.

Our share capital comprises 10,000,000 shares which were issued at 20p per share, raising a gross total of £2 million, made up of £100,000 raised prior to admission and an additional £1.9 million raised on flotation.

The Horner Family is collectively the largest shareholder block with a total of 2.1 million shares (21.0%) today, which we expect to increase by a further 6 million shares over the next 15 months to 8.1 million shares (50.3%), through the exercise of warrants priced at 25p per share.  

Much work has been done to position the Group well for the future, including establishing the compliance and regulatory framework, building the website, setting up the processes for onboarding potential investors in the Macaulay transactions and building our pipeline of potential opportunities, which is of course changing the whole time.

In early 2022 we considered embarking on the process of FCA authorisation as an independent company but felt that this might lead to further delays in establishing Macaulay.  We therefore opted to be an Appointed Representative of The Fund Incubator Limited.  Whilst this is a satisfactory solution for the time being, we wish to be completely independent in the future and will, when time permits, commence the lengthy and expensive process of seeking FCA authorisation.

Trading Activities

In May 2022 we completed the first Macaulay transaction, assisting Devonvale Limited's ("Devonvale") management team to buy out the company's founders.  Devonvale was established in Honiton in 2002 and is a manufacturer of flapjacks, cakes and cereal bars.   We established Vale Foods (Holdings) Limited to effect the buyout in conjunction with Martin Loader (Managing Director) and an incoming Executive Chairman, Tony Revill-Johnson, and invested £1 million, subscribing for 40% of the equity for £86,000 and for £914,000 of loan stock with a coupon of 8%.    

As this transaction was ready to complete prior to the Company's fundraise and admission to AQSE and we did not want to delay or fail to achieve its completion, the Horner Family provided the interim funding required for the investment. Accordingly, Macaulay invested £200,000 and £800,000 was invested by the Horner Family.  By the end of 2022, the Horner Family had successfully sold down all of the £800,000 portion at cost to third party investors introduced by Macaulay.

We are pleased to say that some six months from the purchase, Devonvale is performing in line with expectations.

On 23 March 2023 we announced the completion of another transaction, being the secondary management buy-out of Camloc Motion Control Limited, an established Midlands based precision engineering business which manufactures compression struts and dampers.  This was bought from a private equity fund managed by Foresight plc and again we partnered with the incumbent management team.  In this case Macaulay has taken on some £700,000 of the total fundraise of approximately £1.55 million and intends to sell down £500,000 of its investment in due course.  Given the total funding was made up of £52,666 for approximately 52.7% of the equity and £1,498,359 in 8% loan stock, Macaulay will be earning a significantly enhanced coupon on its investment over the "usual" £200,000.

We have found that as we meet and explain Macaulay's operations to potential future investors, they ask what we have available for them to invest in.  So, going forward we might well have a "stock" of investments which are earning a good running yield for Macaulay, thus enabling us to present potential investors with an immediate range of opportunities.

The Legacy Portfolio

In addition to Devonvale, Macaulay manages the investment portfolio transferred from Chelverton Asset Management Limited, (the "Legacy Portfolio" and "CAM" respectively). The Legacy Portfolio consists of five investments previously carried out by the "Macaulay Team" as part of CAM and financed by the group of investors coming under the Chelverton Investor Club banner. All of the agreements between CAM and the Legacy Portfolio companies have been novated to Macaulay giving it direct responsibility for on-going monitoring activities and entitling it to management fees, together with the potential for additional performance fees on exit.   

Investors  

Having a pool of potential investors for the underlying opportunities that Macaulay creates is a business imperative.  However, there is a "Catch 22" - which is that when we have investment opportunities for people we attract their interest - but unless we have a critical mass of investors to fund any given transaction it can be difficult to attract investment opportunities.

Our marketing efforts are aimed at trying to find people like us, who consider the area of the market in which we operate to be underserved. We aim to create shareholder value through the identification of opportunities to invest in established companies which, if they were ten times larger, would attract much greater interest and would therefore command a much higher rating. 

We have also been trying to impress on potential investors the importance of investing across a range of our opportunities and building a portfolio by investing in transactions created by Macaulay over several years and thus reducing their investment risk.

Outlook

As we expected we are finding no shortage of investment opportunities to consider. As we are highly selective, we reject the majority of these, taking on only a handful to offer stage and then finally presenting an even smaller number, say 3 - 5 a year, to potential investors.

The process is time-consuming and often unrewarding but necessary to achieve good outcomes for us and our fellow investors.  We will continue marketing and introducing "the Macaulay Approach" to

High-Net-Worth individuals and Family Offices for whom what we do, particularly in a time of rising Inheritance Tax Assessments, should be of great interest.      

We are pleased with the progress that has been made to date and fully expect to make greater steps forward in the current year.

Finally, and on behalf of the Board, I would like to thank our Shareholders, employees and advisers for their support.

Lindsay Mair

Chairman

  12 May 2023