- Title:
Interim Review and Unaudited Financial Statements - Time:
07:16:07 - Date:
8 Sept 2020 - Category:
Results - ID:
3252Y
Interim Review and Unaudited Financial Statements for the six months ended 31 July 2020
The Board of EPE Special Opportunities are pleased to announce the Company's Interim Review and Unaudited Financial Statements for the six months ended 31 July 2020.
· The performance of the Company for the six months ended 31 July 2020 was encouraging in the context of the generalised disruption caused by COVID-19, with the Company's portfolio demonstrating resilience to acute economic headwinds. The Board and the Investment Advisor (the "IA") continue to carefully monitor the outlook for the UK economy as the threat of a second wave of COVID-19 infections remains high.
· The Board, IA and the management of the portfolio companies took early and prudent steps to safeguard the financial position of the Company and its investments, and to protect the wellbeing of colleagues across the portfolio.
· The Company maintains strong liquidity of £23.3 million which is available to support the existing portfolio, meet the Company's committed obligations and to deploy capital into sufficiently attractive investment opportunities as they arise.
· The Net Asset Value ("NAV") of the Company as at 31 July 2020 was 303.04 pence per share, a decrease of 4.5 per cent on the NAV per share of 317.18 pence as at 31 January 2020. The small reduction in the Company's NAV per share has been driven primarily by the decline in value of the Company's unquoted assets, reflecting the impact of the COVID-19 pandemic.
· The share price as at 31 July 2020 was 175.00 pence, representing a decrease of 12.1 per cent on the share price of 199.00 pence as at 31 January 2020.
· Luceco plc's share price remained flat over the period. Luceco plc's share price subsequently increased by c.30 per cent. in August following the release of a trading update announcing performance ahead of market expectations. The business delivered operating profit for the interim period to 30 June 2020 ahead of the prior year despite reduced sales. Positive cash generation during the period led to a further reduction in the business's net debt to 0.8x last 12 month EBITDA and allowed for the reinstatement of the interim dividend.
· Whittard of Chelsea experienced challenging trading conditions, with UK retail stores closed in the interests of employee safety and in line with government advice. Whittard initiated a phased reopening of its stores starting from 19 June 2020. The disruption in the retail channel was partially mitigated by a significant increase in the business's ecommerce platform.
· David Phillips' performance was encouraging in the period, with the business benefitting from a well-developed sales pipeline at the start of the disruption. In response to the spread of COVID-19 and reduced activity in the UK property sector, the business initially suspended parts of its trading operations. As restrictions eased, these divisions resumed trading and are expected to make up some of their lost sales in the balance of the year.
· Pharmacy2U performed well over the period as consumers sought online alternatives to physical pharmacies. This shift in consumer behaviour delivered a significant increase in both patient numbers and sales over the period.
· As at 31 July 2020, the Company's portfolio was valued at a weighted average EBITDA to enterprise value multiple of 8.9x (excluding Pharmacy2U, which is valued on a sales multiple) and had a low level of third-party leverage with net debt at 0.6x EBITDA in aggregate.
· Subsequent to the review period, on 1 September 2020, the Company completed a £1.9 million investment into Atlantic Credit Opportunities Fund ("ACOF"), a commingled distressed credit fund which, subject to regulatory approval, will be managed by a subsidiary of the Investment Advisor, EPIC Private Equity LLP. The Company's investment in ACOF will provide ESO with the opportunity to generate uncorrelated returns through exposure to the significant dislocations in credit markets caused by the COVID-19 pandemic.
· The Company has £3.9 million of outstanding unsecured loan notes repayable in July 2022. The Company has no other third party debt outstanding.
· The Board continues to review new investment opportunities identified by the IA. The Company's strong cash position and the financial stability of the portfolio means that it is well positioned to take advantage of attractive opportunities, such as the Company's £1.9 million investment in Atlantic Credit Opportunities Fund, completed on 1 September 2020.
Mr Clive Spears, Chairman, commented: "The performance of EPE Special Opportunities in the six months ending 31 July 2020 was encouraging, supported by early measures taken to protect the Company, the portfolio and our colleagues in the face of unprecedented circumstances. The Board maintains a cautious outlook for the balance of the year, given the ongoing uncertainty surrounding the COVID-19 pandemic. I would like to take the opportunity to thank the Investment Advisor, EPIC Private Equity, for their hard work and dedication in guiding the Company through the disruption caused by the COVID-19 pandemic which leaves it well positioned for the future. I would also like to wish all shareholders and stakeholders across the portfolio the best of health."
The person responsible for releasing this information on behalf of the Company is Amanda Robinson of Langham Hall Fund Management (Jersey) Limited.
| EPIC Private Equity LLP |
+44 (0) 207 269 8865 Alex Leslie |
| Langham Hall Fund Management (Jersey) Limited |
+44 (0) 15 3488 5200) Amanda Robinson |
| Cardew Group Limited |
+44 (0) 207 930 0777 Richard Spiegelberg |
| Numis Securities Limited |
+44 (0) 207 260 1000 |
| Nominated Advisor: |
Stuart Skinner / Huw Jeremy |
| Corporate Broker: |
Charles Farquhar |
The performance of the Company for the six months ended 31 July 2020 was encouraging in the context of the generalised disruption caused by COVID-19, with the Company's portfolio demonstrating resilience to acute economic headwinds. The Board, Investment Advisor (the "IA") and the management of the portfolio companies took early and prudent steps to safeguard the financial position of the Company and its investments, and to protect the wellbeing of colleagues across the portfolio. The Board and IA continue to carefully monitor the outlook for the UK economy as the threat of a second wave of COVID-19 infection remains high.
Measures adopted to delay the spread of COVID-19 depressed economic activity in the second quarter of 2020 and, although western European economies are slowly reopening, the outlook remains uncertain in the medium term. The Company maintains strong liquidity of £23.3 million and operates with modest committed outgoings. The Company has £3.9 million of outstanding unsecured loan notes ("ULNs") repayable on 25 July 2022. The Company has no other third party debt outstanding. The Board has reviewed the business continuity plans of the Company's key operational service providers and is satisfied of their resilience, which has been demonstrated by all service providers through the lockdown period.
The IA worked closely with the management of portfolio companies to respond to the lockdown quickly and effectively, taking early and prudent steps to manage their liquidity and financial position. The portfolio has a low level of third party leverage (with net debt at 0.6x last 12 month EBITDA in aggregate) and has strong relationships with all external lenders.
The Net Asset Value ("NAV") per share of the Company as at 31 July 2020 was 303.04 pence per share, representing a decrease of 4.5 per cent. on the NAV per share of 317.18 pence as at 31 January 2020. The share price of the Company as at 31 January 2020 was 175.00 pence, representing a decrease of 12.1 per cent. on the share price of 199.00 pence as at 31 January 2020.
Luceco plc's share price was flat in the period, as the business delivered a steady performance despite adverse circumstances. Luceco plc's share price subsequently increased by c.30 per cent. in August following the release of a trading update announcing performance ahead of market expectations. Luceco plc reported operating profit for the interim period to 30 June 2020 ahead of the same period in 2019 despite reduced sales. Positive cash generation during the period led to a further reduction in the business's net debt to 0.8x last 12 month EBITDA. Luceco plc announced the reinstatement of dividends at the interim stage.
Whittard of Chelsea ("Whittard") faced significant challenges during the period, temporarily closing its retail stores on 21 March 2020 in the interests of employee safety and in line with government advice. The business's ecommerce channel traded ahead of prior years and budget, partially mitigating the impact of the disruption. Whittard initiated a phased reopening of its stores starting from 19 June 2020. The business continues to review its fixed and variable costs and has benefitted from the government schemes regarding furloughing, business rates and other taxation. The business has no third party debt.
David Phillips' performance was encouraging in the period, with the business benefitting from a well-developed sales pipeline at the start of the disruption. In response to the spread of COVID-19 and reduced activity in the UK property sector, the business initially suspended parts of its trading operations. As restrictions eased, these divisions resumed trading and are expected to make up some of their lost sales in the balance of the year. The business continues to review its fixed and variable costs and has benefitted from the government schemes regarding furloughing, business rates and other taxation.
Pharmacy2U performed well over the period as consumers sought online alternatives to physical pharmacies. This shift in consumer behaviour delivered a significant increase in both patient numbers and sales over the period.
The Board continues to review new investment opportunities identified by the IA. The Company's strong cash position and the financial stability of the portfolio means that it is well positioned to take advantage of any such opportunities.
Subsequent to the review period, on 1 September 2020, the Company completed a £1.9 million investment into Atlantic Credit Opportunities Fund ("ACOF"), a commingled distressed credit fund which, subject to regulatory approval, will be managed by a subsidiary of the Investment Advisor, EPIC Private Equity LLP. The Company's investment in ACOF will provide ESO with the opportunity to generate uncorrelated returns through exposure to the significant dislocations in credit markets caused by the COVID-19 pandemic.
I would like to take the opportunity to thank the Investment Advisor, EPIC Private Equity, for their hard work and dedication in guiding the Company through the disruption caused by the COVID-19 pandemic which leaves it well positioned for the future. I would also like to wish all shareholders and stakeholders across the portfolio the best of health.
Clive Spears
Chairman
8 September 2020
In the six months ended 31 July 2020 the Investment Advisor's efforts have been focused on mitigating the impact of the economic disruption caused by the COVID-19 pandemic on the Company and its portfolio. Social distancing measures and the resultant recession in the UK and globally continue to depress sales demand across the portfolio. Despite this, the portfolio as a whole has shown pleasing resilience. The IA and the Board are closely monitoring the dynamic situation and are mindful of the risks to the safety of our colleagues and the financial position of the Company and its investments presented by a potential second wave of infections.
The Company was well positioned at the start of the period with strong liquidity and prudent levels of third party leverage. That position has been maintained through the period with net debt in the underlying portfolio at 0.6x last 12 month EBITDA in aggregate. The Company has current cash balances of £23.3 million (as at 31 July 2020) which is available to support the existing portfolio, meet the Company's committed obligations and deploy into sufficiently attractive investment opportunities as they arise.
The Company
The Net Asset Value ("NAV") per share of the Company as at 31 July 2020 was 303.04 pence per share, representing a decrease of 4.5 per cent. on the NAV per share of 317.18 pence as at 31 January 2020. The share price of the Company as at 31 July 2020 was 175.00 pence, representing a decrease of 12.1 per cent. on the share price of 199.00 pence as at 31 January 2020.
The Portfolio
The Company's portfolio is valued at a weighted average enterprise value to EBITDA multiple of 8.9x for mature assets (excluding assets investing for growth). The valuation has been derived by reference to relevant quoted comparables, after the application of an appropriate discount to adjust for the portfolio's scale and unquoted nature (i.e. an illiquidity discount). Given the use of quoted comparables, the valuation reflects the fair value of assets as at the balance sheet date. The IA notes that the fair market value of the portfolio remains exposed to the volatile macro environment.
The share price of Luceco plc as at 31 July 2020 was 140.80 pence, in line with the beginning of period. Luceco plc's share price subsequently increased by c.30 per cent. in August following the release of a trading update announcing performance ahead of market expectations. On 8 September 2020, Luceco released its interim results for the six months ended 30 June 2020. The business delivered an adjusted operating profit of £9.0 million, £1.8 million ahead of the prior year despite a 13.4 per cent year-on-year reduction in sales due to reduced consumer demand. Notably, Luceco plc generated adjusted free cash flow of £10.2 million in the period (£5.1 million ahead of the prior year), which facilitated a further reduction in net debt to 0.8x last 12 month EBITDA. In addition, dividends were reinstated at the interim stage, including payment of dividends prudently suspended earlier in the year.
Whittard of Chelsea ("Whittard") has experienced unprecedented challenges since the start of the COVID-19 pandemic, with the closure of its UK retail estate resulting in sales for the period below budget and the prior year. The retail closure was partially mitigated by significant outperformance in Whittard's ecommerce platform against budget and the prior year, in line with the accelerated shift of consumer spending to online observed in the wider UK retail sector since the beginning of the pandemic. The business initiated a phased re-opening of its store estate from 19 June 2020. Despite this, sales performance is expected to be impacted throughout the remainder of the year as a result of reduced consumer and tourist footfall. The IA is particularly mindful of the impact any second wave of the virus could have on the seasonal peak, consumer sentiment and government restrictions on physical trading.
David Phillips' performance was encouraging in the period, with the business benefitting from a well-developed sales pipeline at the start of the disruption. The historic focus of management and the IA on improving the financial resilience and operational flexibility of the business during the turnaround phase meant that David Phillips was well positioned for the macro disruption caused by COVID-19. In response to the resultant reduction in activity in the UK property sector, the business initially suspended parts of its trading operations and benefitted from available government support (including the Coronavirus Job Retention Scheme). As restrictions eased, these divisions resumed trading and are expected to make up some of their lost sales in the balance of the year. The IA and the management team are closely monitoring the property market to be able to respond to systemic market changes brought about by the COVID-19 crisis. The IA believes the business is well placed to take advantage of these trends given its diversified customer base which encompasses both private landlords and the institutional residential property market.
Pharmacy2U performed well over the period. As the UK's leading online pharmacy, the business has benefitted from the need for online alternatives to physical pharmacies, which has delivered a significant increase in both patient numbers and sales since social distancing measures were implemented. Development of a new distribution facility in Leicestershire is expected to underpin the next stage of growth.
The IA continues to monitor the Company's investment in European Capital Private Debt Fund, which has completed the deployment of the Company's committed capital in the fund and has begun to distribute capital to the Company.
The IA continues to review opportunities to deploy capital into new investments, with the challenging macro environment generating an increase in the number of well-priced opportunities. This trend is expected to continue in the coming months as government support is unwound, precipitating requirements for external funding.
Subsequent to the review period, on 1 September 2020, the Company completed a £1.9 million investment into Atlantic Credit Opportunities Fund ("ACOF"), a commingled distressed credit fund which, subject to regulatory approval, will be managed by a subsidiary of the Investment Advisor, EPIC Private Equity LLP. The Company's investment in ACOF will provide ESO with the opportunity to generate uncorrelated returns through exposure to the significant dislocations in credit markets caused by the COVID-19 pandemic.
The IA would like to express gratitude to the management and employees of the portfolio companies for their hard work, dedication and responsiveness during this unprecedented period. The IA is also grateful for the continued support and counsel of the Board and the Company's shareholders.
EPIC Private Equity LLP
Investment Advisor to the Company
8 September 2020
Biographies of the Directors
| Clive Spears |
David Pirouet |
| Clive Spears retired from the Royal Bank of Scotland International Limited in December 2003 as Deputy Director of Jersey after 32 years of service. His main activities prior to retirement included Product Development, Corporate Finance, Trust and Offshore Company Services and he was Head of Joint Venture Fund Administration with Rawlinson & Hunter. Mr Spears is an Associate of the Chartered Institute of Bankers and a Member of the Chartered Institute for Securities & Investment. He has accumulated a well spread portfolio of directorships centring on private equity, infrastructure and corporate debt. His current appointments include Chairman of Nordic Capital Limited and director of Invesco Enhanced Income Limited.
|
David Pirouet joined PricewaterhouseCoopers Channel Islands LLP in 1980, retiring in 2009 after being an Audit and Assurance Partner for over 20 years. During his 29 years at the firm Mr Pirouet specialised in the financial services sector, in particular in the alternative investment management area and also led the business's Hedge Fund and business recovery practices for over four years. Mr Pirouet currently holds a number of non-executive positions across private equity, infrastructure and corporate debt. Mr Pirouet's appointments currently include non-executive Director and Chair of the Audit and Risk committee for GCP Infrastructure Investments (FTSE 250 listed company).
|
| Heather Bestwick |
Robert Quayle |
| Heather Bestwick has been a financial services professional for over 25 years, onshore in the City of London and offshore in the Cayman Islands and Jersey. She qualified as an English solicitor, specialising in ship finance, with City firm Norton Rose, and worked in their London and Greek offices for 8 years. Ms Bestwick subsequently practised and became a partner with global offshore law firm Walkers in the Cayman Islands, and Managing Partner of the Jersey office. Ms Bestwick sits on the boards of the manager of the Deutsche Bank dbX hedge fund platform and Rathbone Investment Management International Limited.
|
Robert Quayle qualified as an English solicitor at Linklaters & Paines in 1974 after reading law at Selwyn College, Cambridge. He subsequently practiced in London and the Isle of Man as a partner in Travers Smith Braithwaite. He served as Clerk of Tynwald (the Isle of Man's parliament) for periods totalling 12 years and holds a number of public and private appointments, and is active in the voluntary sector. Mr. Quayle is a director of a number of companies in the financial services and distribution sectors. |
| Nicholas Wilson |
|
| Nicholas Wilson has over 40 years of experience in hedge funds, derivatives and global asset management. He has run offshore branch operations for Mees Pierson Derivatives Limited, ADM Investor Services International Limited and several other London based financial services companies. He is Chairman of Gulf Investment Fund plc, a premium listed company, and, until recently, was chairman of Alternative Investment Strategies Limited. He is a resident of the Isle of Man.
|
|
Biographies of the Investment Advisor
| Giles Brand |
Hiren Patel |
|
| Giles Brand is a Partner and the founder of EPE. He is currently the Non-executive Chairman of Whittard of Chelsea and Luceco plc, and Non-executive Director of the Reader Organisation, a not-for-profit educational charity. Before joining EPE, Giles was a founding Director of EPIC Investment Partners, a fund management business which at sale had US$5 billion under management. Prior to this, Giles worked in Mergers and Acquisitions at Baring Brothers in Paris and London. Giles read History at Bristol University.
|
Hiren Patel is the Managing Director of EPE Administration and is a Partner and the Finance Director and Compliance Officer of EPE. He has worked in the investment management industry for the past twenty years. Before joining EPE Administration, Hiren was Finance Director of EPIC Investment Partners. Prior to this, Hiren was employed at Groupama Asset Management where he was the Group Financial Controller. |
|
| Robert Fulford |
James Henderson |
|
| Robert Fulford is an Investment Director of EPE. He previously worked at Barclaycard Consumer Europe before joining EPE. Whilst at Barclaycard, Robert was the Senior Manager for Strategic Insight and was responsible for identifying, analysing and responding to competitive forces. Prior to Barclaycard, Robert spent four years as a strategy consultant at Oliver Wyman Financial Services, where he worked with a range of major retail banking and institutional clients in the UK, mainland Europe, Middle East and Africa. At EPE Robert manages the investments in Whittard of Chelsea and David Philips. Robert read Engineering at Cambridge University.
|
James Henderson is an Investment Director at EPE. He previously worked in the Investment Banking division of Deutsche Bank before joining EPE. Whilst at Deutsche Bank he worked on a number of M&A transactions and IPOs in the energy, property, retail and gaming sectors, as well as providing corporate broking advice to mandated clients. At EPE, James manages the investment in Pharmacy2U. James read Modern History at Oxford University and Medicine at Nottingham University.
|
|
| Alex Leslie |
Ian Williams |
|
| Alex Leslie is an Investment Director at EPE. He previously worked in Healthcare Investment Banking at Piper Jaffray before joining EPE. Whilst at Piper Jaffray he worked on a number of M&A transactions and equity fundraisings within the Biotechnology, Specialty Pharmaceutical and Medical Technology sectors. At EPE, Alex manages the investment in Luceco plc. Alex read Human Biological and Social Sciences at Oxford University and obtained an MPhil in Management from the Judge Business School at the Cambridge University. |
Ian Williams is an Investment Director at EPE. He was previously a Partner at Lyceum Capital Partner LLP responsible for deal origination and engagement, with a primary focus on the business services and software sectors, as well as financial services, education and health sectors. Prior to Lyceum, Ian was a Director at Arbuthnot Securities, involved in transactions including IPOs, secondary fund raisings and M&A, focusing on the support services, healthcare, transport & IT sectors. Ian read Politics and Economics at the University of Bristol.
|
|
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 31 July 2020 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the AIM Rules.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The Directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.
The purpose of our review work and to whom we owe our responsibilities
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man IM1 1LA
8 September 2020
| |
|
|
1 Feb 2020 to 31 Jul 2020 |
|
1 Feb 2019 to 31 Jul 2019 (unaudited) |
|
1 Feb 2019 to 31 Jan 2020 (audited) |
||
| |
|
|
Revenue (unaudited) |
Capital (unaudited) |
Total (unaudited) |
|
Total |
|
Total |
| Note |
|
|
£ |
£ |
£ |
|
£ |
|
£ |
| |
Income |
|
|
|
|
|
|
|
|
| |
Interest income |
|
1,398 |
- |
1,398 |
|
94,630 |
|
101,566 |
| |
(Losses)/gains on investments |
|
- |
(2,439,705) |
(2,439,705) |
|
14,453,782 |
|
39,568,491 |
| |
Total income/(loss) |
|
1,398 |
(2,439,705) |
(2,438,307) |
|
14,548,412 |
|
39,670,057 |
| |
Expenses |
|
|
|
|
|
|
|
|
| 5 |
Investment advisor's fees |
|
(937,976) |
- |
(937,976) |
|
(747,247) |
|
(1,642,504) |
| 14 |
Directors' fees |
|
(77,000) |
- |
(77,000) |
|
(77,000) |
|
(154,264) |
| 6 |
Share based payment expense |
|
(217,715) |
- |
(217,715) |
|
(42,695) |
|
(71,158) |
| 7 |
Other expenses |
|
(342,047) |
- |
(342,047) |
|
(905,733) |
|
(1,257,703) |
| |
Total expense |
|
(1,574,738) |
- |
(1,574,738) |
|
(1,772,675) |
|
(3,125,629) |
| |
(Loss)/profit before finance costs and tax |
|
(1,573,340) |
(2,439,705) |
(4,013,045) |
|
(12,775,737) |
|
36,544,428 |
| |
|
|
|
|
|
|
|
|
|
| |
Finance charges |
|
|
|
|
|
|
|
|
| 13 |
Interest on unsecured loan note instruments |
|
(159,842) |
- |
(159,842) |
|
(159,842) |
|
(319,685) |
| |
(Loss)/profit for the year before taxation |
|
(1,733,182) |
(2,439,705) |
(4,172,887) |
|
12,615,895 |
|
36,224,743 |
| |
Taxation |
|
- |
- |
- |
|
- |
|
- |
| |
(Loss)/profit for the year |
|
(1,733,182) |
(2,439,705) |
(4,172,887) |
|
12,615,895 |
|
36,224,743 |
| |
Other comprehensive income |
|
- |
- |
- |
|
- |
|
- |
| |
Total comprehensive (loss)/income |
|
(1,733,182) |
(2,439,705) |
(4,172,887) |
|
12,615,895 |
|
36,224,743 |
| |
Basic (loss)/earnings per ordinary share (pence) |
|
(5.27) |
(7.42) |
(12.69) |
|
40.50 |
|
112.86 |
| |
Diluted (loss)/earnings per ordinary share (pence) |
|
(5.27) |
(7.42) |
(12.69) |
|
40.50 |
|
112.86 |
The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the EU. The supplementary revenue return and capital return columns are prepared in accordance with the Board of Directors' agreed principles. All items derive from continuing activities.
As at 31 July 2020
| |
|
|
31 July 2020 (unaudited) |
|
31 January 2020 (audited) |
|
31 July 2019 (unaudited) |
| Note |
|
|
£ |
|
£ |
|
£ |
| |
Non-current assets |
|
|
|
|
|
|
| 8 |
Investments at fair value through profit or loss |
|
82,107,768 |
|
83,382,923 |
|
59,965,060 |
| |
|
|
82,107,768 |
|
83,382,923 |
|
59,965,060 |
| |
Current assets |
|
|
|
|
|
|
| |
Cash and cash equivalents |
|
22,150,379 |
|
25,604,783 |
|
26,177,016 |
| |
Trade and other receivables |
|
175,798 |
|
235,211 |
|
214,434 |
| |
|
|
22,326,177 |
|
25,839,994 |
|
26,391,450 |
| |
Current liabilities |
|
|
|
|
|
|
| |
Trade and other payables |
|
(641,238) |
|
(1,028,704) |
|
(823,939) |
| |
Net current assets |
|
21,684,939 |
|
24,811,290 |
|
25,567,511 |
| |
|
|
|
|
|
|
|
| |
Non-current liabilities |
|
|
|
|
|
|
| 13 |
Unsecured loan note instruments |
|
(3,946,520) |
|
(3,936,217) |
|
(3,925,914) |
| |
|
|
(3,946,520) |
|
(3,936,217) |
|
(3,925,914) |
| |
Net assets |
|
99,846,187 |
|
104,257,996 |
|
81,606,657 |
| |
Equity |
|
|
|
|
|
|
| 10 |
Share capital |
|
1,730,828 |
|
1,726,953 |
|
1,707,589 |
| |
Share premium |
|
13,619,627 |
|
13,489,826 |
|
13,489,826 |
| |
Capital reserve |
|
81,845,729 |
|
84,285,434 |
|
59,170,725 |
| |
Revenue reserve |
|
2,650,003 |
|
4,755,783 |
|
7,238,517 |
| |
Total equity |
|
99,846,187 |
|
104,257,996 |
|
81,606,657 |
| |
Net asset value per share (pence) |
|
303.04 |
|
317.18 |
|
245.54 |
For the six months ended 31 July 2020
| |
|
|
Six months ended 31 July 2020 (unaudited) |
||||
| |
|
|
Share capital |
Share premium |
Capital reserve |
Revenue reserve |
Total |
| Note |
|
|
£ |
£ |
£ |
£ |
£ |
| |
Balance at 1 February 2020 |
|
1,726,953 |
13,489,826 |
84,285,434 |
4,755,783 |
104,257,996 |
| |
Total comprehensive loss for the period |
|
- |
- |
(2,439,705) |
(1,733,182) |
(4,172,887) |
| |
Contributions by and distributions to owners |
|
|
|
|
|
|
| 6 |
Share based payment charge |
|
- |
- |
- |
217,715 |
217,715 |
| |
Share ownership scheme participation |
|
- |
- |
- |
(20,497) |
(20,497) |
| |
Provision for future settlement |
|
- |
- |
- |
216,324 |
216,324 |
| 6 |
Share acquisition for JSOP scheme |
|
- |
- |
- |
(786,140) |
(786,140) |
| |
Issue of new shares |
|
3,875 |
129,801 |
- |
- |
133,676 |
| |
Total transactions with owners |
|
3,875 |
129,801 |
- |
(372,598) |
(238,922) |
| |
Balance at 31 July 2020 |
|
1,730,828 |
13,619,627 |
81,845,729 |
2,650,003 |
99,846,187 |
| |
|
|
Year ended 31 January 2020 (audited) |
||||
| |
|
|
Share capital |
Share premium |
Capital reserve |
Revenue reserve |
Total |
| |
|
|
£ |
£ |
£ |
£ |
£ |
| |
Balance at 1 February 2019 |
|
1,503,286 |
3,867,209 |
44,716,943 |
9,725,035 |
59,812,473 |
| |
Total comprehensive income/(loss) for the year |
|
- |
- |
39,568,491 |
(3,343,748) |
36,224,743 |
| |
Contributions by and distributions to owners |
|
|
|
|
|
|
| 6 |
Share based payment charge |
|
- |
- |
- |
71,158 |
71,158 |
| |
Share ownership scheme participation |
|
- |
- |
- |
64,980 |
64,980 |
| |
Provision for future settlement |
|
- |
- |
- |
(350,000) |
(350,000) |
| |
Purchase of shares |
|
- |
- |
- |
(1,411,642) |
(1,411,642) |
| |
Issue of new shares |
|
223,667 |
9,622,617 |
- |
- |
9,846,284 |
| |
Total transactions with owners |
|
223,667 |
9,622,617 |
- |
(1,625,504) |
8,220,780 |
| |
Balance at 31 January 2020 |
|
1,726,953 |
13,489,826 |
84,285,434 |
4,755,783 |
104,257,996 |
| |
|
|
Six months ended 31 July 2019 (unaudited) |
||||
| |
|
|
Share capital |
Share premium |
Capital reserve |
Revenue reserve |
Total |
| |
|
|
£ |
£ |
£ |
£ |
£ |
| |
Balance at 1 February 2019 |
|
1,503,286 |
3,867,209 |
44,716,943 |
9,725,035 |
59,812,473 |
| |
Total comprehensive income/(loss) for the period |
|
- |
- |
14,453,782 |
(1,837,887) |
12,615,895 |
| |
Contributions by and distributions to owners |
|
|
|
|
|
|
| 6 |
Share based payment charge |
|
- |
- |
- |
42,695 |
42,695 |
| |
Cash received from JSOP participants |
|
- |
- |
- |
77,866 |
77,866 |
| |
Purchase of treasury shares |
|
(19,364) |
- |
- |
(769,192) |
(788,556) |
| |
Issue of new shares |
|
223,667 |
9,622,617 |
- |
- |
9,846,284 |
| |
Total transactions with owners |
|
204,303 |
9,622,617 |
- |
(648,631) |
9,178,289 |
| |
Balance at 31 July 2019 |
|
1,707,589 |
13,489,826 |
59,170,725 |
7,238,517 |
81,606,657 |
For the six months ended 31 July 2020
| |
|
1 Feb 2020 to 31 Jul 2020 (unaudited) |
|
1 Feb 2019 to 31 Jan 2020 (audited) |
|
1 Feb 2019 to 31 Jul 2019 (unaudited) |
| |
|
£ |
|
£ |
|
£ |
| Operating activities |
|
|
|
|
|
|
| Interest income received |
|
1,398 |
|
17,574 |
|
10,639 |
| Expenses paid |
|
(1,335,075) |
|
(2,718,136) |
|
(1,227,634) |
| Net cash used in operating activities |
|
(1,333,677) |
|
(2,700,562) |
|
(1,216,995) |
| |
|
|
|
|
|
|
| Investing activities |
|
|
|
|
|
|
| Purchase of investments |
|
(1,000,000) |
|
(700,000) |
|
(700,000) |
| Sales of investments |
|
- |
|
942,505 |
|
- |
| Capital distribution from associates |
|
- |
|
768,650 |
|
- |
| Loan to associates |
|
(164,550) |
|
(185,683) |
|
(171,374) |
| Net cash (used in)/generated from investing activities |
|
(1,164,550) |
|
825,472 |
|
(871,374) |
| Financing activities |
|
|
|
|
|
|
| Unsecured loan note interest paid |
|
(149,540) |
|
(299,080) |
|
(149,540) |
| Purchase of shares |
|
- |
|
(1,411,642) |
|
(788,556) |
| Share acquisition for JSOP scheme |
|
(786,140) |
|
- |
|
- |
| Share ownership scheme participation |
|
(20,497) |
|
64,980 |
|
77,866 |
| Net cash used in financing activities |
|
(956,177) |
|
(1,645,742) |
|
(860,230) |
| Decrease in cash and cash equivalents |
|
(3,454,404) |
|
(3,520,832) |
|
(2,948,599) |
| Cash and cash equivalents at start of period/year |
|
25,604,783 |
|
29,125,615 |
|
29,125,615 |
| Cash and cash equivalents at end of period/year |
|
22,150,379 |
|
25,604,783 |
|
26,177,016 |
For the six months ended 31 July 2020
1 The Company
The Company was incorporated with limited liability in the Isle of Man on 25 July 2003. The Company then re-registered under the Isle of Man Companies Act 2006, with registration number 008597V. On 11 September 2018, the Company re-registered under the Bermuda Companies Act 1981, with registration number 53954. The Company moved its operations to Jersey with immediate effect on 17 May 2017 and has subsequently operated from Jersey only.
The Company's ordinary shares are quoted on AIM, a market operated by the London Stock Exchange, and the Growth Market of the Aquis Stock Exchange (formerly the NEX Exchange).
The interim financial statements are as at and for the six months ended 31 July 2020 comprise the Company and its associates. The interim financial statements are unaudited.
The financial statements of the Company as at and for the year ended 31 January 2020 are available upon request from the Company's business office at Liberation House, Castle Street, St Helier, Jersey, JE1 2LH and the registered office at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda, or at www.epespecialopportunities.com.
At 31 July 2020, the Company has two wholly owned subsidiary companies. EPIC Reconstruction Property Company (IOM) Limited, a company incorporated on 29 October 2005 in the Isle of Man and Corvina Limited, a company incorporated on 16 November 2012 in the Isle of Man.
At 31 July 2020, the Company also had interests in five partnerships and three limited companies that are treated as associates. The partnerships comprise one limited liability partnership and four limited partnerships.
The principal activity of the Company and its associates is to arrange income yielding financing for growth, buyout and special situations and holding the investments and its associates with a view to exiting in due course at a profit.
The Company has no employees.
2 Statement of compliance
These interim financial statements for the six months ended 31 July 2020 have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with Company's last annual financial statements as at and for the year ended 31 January 2020. They do not include all of the information required for a complete set of financial statements prepared in accordance with IFRS Standards. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's financial position and performance since the last annual financial statements.
In the Statement of Cash Flows, loans to associates have been presented in investing activities. In the prior period/year financial statements they were presented in operating activities. The comparatives have been revised to correspond with the presentation adopted in the current period. This change in presentation for the comparatives has had no effect on net profit/loss or net assets.
These interim financial statements were authorised for issue by the Company's Board of Directors on 8 September 2020.
3 Significant accounting policies
COVID 19 Impact:
The COVID-19 pandemic has had a significant impact on the valuation multiples, derived from quoted comparables, used in the preparation of the fair market valuation of the Company's unquoted investments. These quoted comparables are subject to both market volatility and uncertainty due to the impact of the pandemic and their trading outlook. The performance and financial position forecasted for the Company's portfolio is subject to the wider market uncertainty caused by the COVID-19 pandemic. These inputs have been used in the preparation of the fair market valuation of the Company's unquoted investments.
4 Financial risk management
The financial risk management objectives and policies are consistent with those disclosed in the financial statements as at and for the year ended 31 January 2020.
5 Investment advisory, administration fees and profit share
Investment advisory fees
Company
The investment advisory fee payable to EPIC Private Equity LLP ("EPE") is assessed and payable at the end of each fiscal quarter and is calculated as 2 per cent. of the Company's NAV where the Company's NAV is less than £100 million; otherwise the investment advisory fee shall be calculated as the greater of £2.0 million or the sum of 2 per cent. of the Company's NAV comprising Level 3 portfolio assets (i.e. unquoted assets), 1 per cent. of the Company's NAV comprising Level 1 assets (i.e. quoted assets), no fees on assets which are managed or advised by a third party manager, 0.5 per cent. of the Company's net cash (if greater than nil), and 2 per cent. of the Company's net cash (if less than nil) (i.e. reducing fees for net debt positions).
The charge for the current period was £937,976 (for the period ended 31 July 2019: £747,247; year ended 31 January 2020: £1,642,504). The amount outstanding as at 31 July 2020 was £500,000 (for the period ended 31 July 2019: £417,863; year ended 31 January 2020: £500,000).
Administration fees
EPE Administration Limited provides accounting and financial administration services to the company. The fee payable to EPE Administration Limited is assessed and payable at the end of each fiscal quarter and is calculated as 0.15 per cent. of the Company's NAV where the Company's NAV is less than £100 million (subject to a minimum fee of £35,000); otherwise the advisory fee shall be calculated as 0.15 per cent. of £100 million plus a fee of 0.1 per cent. of the excess of the Company's NAV above £100 million.
The charge for the current period was £70,242 (for the period ended 31 July 2019: £57,012; for the year ended 31 January 2020: £125,732).
Other administration fees during the period were £27,441 (for the period ended 31 July 2019: £28,416; for the year ended 31 January 2020: £72,499).
Profit share in ESO Investments 1 Limited
The distribution policy of ESO Investments 1 Limited includes an allocation of profits to the Investment Advisor such that, for each investment where a returns hurdle of 8 per cent. per annum has been achieved, the Investment Advisor is entitled to receive 20 per cent. of the increase in the base value of investment. For the period ended 31 July 2020, £1,633,929 has been credited to the profit share account of the Investment Advisor in the records of ESO Investments 1 Limited.
Profit share in ESO Investments 2 Limited
The distribution policy of ESO Investments 2 Limited includes an allocation of profit to the Investment Advisor such that, for each investment where a returns hurdle of 8 per cent. per annum has been achieved, the Investment Advisor is entitled to receive 20 per cent. of the increase in the base value of investment. For the period ended 31 July 2020, £4,736,542 has been credited to the profit share account of the Investment Advisor in the records of ESO Investments 2 Limited.
6 Share-based payment expense
Certain employees (including Directors) of the Company and the Investment Advisors receive remuneration in the form of equity settled share-based payment transactions, through a Joint Share Ownership Plan ("JSOP").
The cost of equity settled transactions with certain Directors of the Company and other participants (including employees, members and consultants of the Investment Advisor) ("Participants") is measured by reference to the fair value at the date on which they are granted. The fair value is determined based on the share price of the equity instrument at the grant date.
The Trust was created to award shares to Participants as part of the JSOP. Participants are awarded a certain number of shares ("Matching Shares") which are subject to a three-year service vesting condition from the grant date. In order to receive their Matching Share allocation Participants are required to purchase shares in the Company on the open market ("Bought Shares").The Participant will then be entitled to acquire a joint ownership interest in the Matching Shares for the payment of a nominal amount, on the basis of one joint ownership interest in one Matching Share for every Bought Share they acquire in the relevant award period.
The Trust holds the Matching Shares jointly with the Participant until the award vests. These shares carry the same rights as rest of the ordinary shares.
The Trust held 1,419,004 (for the period ended 31 July 2019: 1,035,624; for the year ended 31 Jan 2020: 956,569) matching shares at the period end which have traditionally not voted.
During the period, 462,435 shares were acquired by the Trust for the JSOP scheme (2020: nil). No shares were vested during the period to the JSOP participants (2020: 79,055). No shares were awarded to the JSOP participants in the period (2020: 856,058).
The amount expensed in the income statement has been calculated by reference to the grant date at a fair value of the equity instrument and the estimated number of equity instruments to be issued after the vesting period, less the amount paid for the joint ownership interest in the Matching Shares. The total expense recognised on the share-based payments during the period amounts to £217,715 (for the period ended 31 July 2019: £42,695; for the year ended 31 Jan 2020: £71,158).
7 Other expenses
The breakdown of other expenses presented in the statement of comprehensive income is as follows:
| |
|
1 Feb 2020 to 31 Jul 2020 (unaudited) |
1 Feb 2019 to 31 Jul 2019 (unaudited) |
1 Feb 2019 to 31 Jan 2020 (audited) |
| |
|
Total |
Total |
Total |
| |
|
£ |
£ |
£ |
| Administration fees |
|
(97,683) |
(85,428) |
(198,231) |
| Directors' and officers' insurance |
|
(11,103) |
(11,496) |
(22,665) |
| Professional fees |
|
(136,941) |
(675,530) |
(780,440) |
| Board meeting and travel expenses |
|
(1,981) |
(3,102) |
(16,425) |
| Auditors' remuneration |
|
(36,535) |
(33,376) |
(50,000) |
| Bank charges |
|
(303) |
(566) |
(1,095) |
| Irrecoverable VAT |
|
(450) |
(450) |
(600) |
| Sundry expenses |
|
(6,209) |
(6,402) |
(48,556) |
| Nominated advisor and broker fees |
|
(29,072) |
(26,994) |
(55,740) |
| Listing fees |
|
(21,755) |
(60,636) |
(81,591) |
| Net foreign exchange loss |
|
(15) |
(1,753) |
(2,360) |
| Other expenses |
|
(342,047) |
(905,733) |
(1,257,703) |
8 Investments at fair value through profit or loss
| |
|
31 July 2020 |
31 January 2020 |
31 July 2019 |
| |
|
£ |
£ |
£ |
| Investments at fair value through profit and loss |
|
82,107,768 |
83,382,923 |
59,965,060 |
| |
|
82,107,768 |
83,382,923 |
59,965,060 |
| Investment roll forward schedule |
|
|
|
| |
31 July 2020 (unaudited) |
31 January 2020 (audited) |
31 July 2019 |
| |
|
|
|
| Investments at fair value as at 1 February |
83,382,923 |
34,793,620 |
34,793,620 |
| Purchase of investments |
1,000,000 |
700,000 |
700,000 |
| Sale of investments |
- |
(942,505) |
- |
| Distributions |
- |
(768,650) |
- |
| Buyout of accrued carried interest |
- |
9,846,284 |
9,846,284 |
| Fair value movements |
(2,439,705) |
39,568,491 |
14,453,782 |
| Loan to associates |
164,550 |
185,683 |
171,374 |
| Investments at fair value as at 31 July/January |
82,107,768 |
83,382,923 |
59,965,060 |
Investment in associates
Investments in associates comprise equity and debt investments in ESO Investments 1 LP, ESO Alternative Investments LP, ESO Investments 1 Limited, ESO Investments 2 Limited, ESO Investments (DP) Limited and ESO Investments (PC) LLP which are stated at fair value through profit and loss. The associates have also accounted for their equity and debt investments at fair value.
9 Fair value of financial instruments
The Company determines the fair value of financial instruments with reference to IPEV guidelines and the valuation principles of IFRS 13 (Fair Value Measurement). The Company measures fair value using the IFRS 13 fair value hierarchy, which reflects the significance and certainty of the inputs used in deriving the fair value of an asset:
· Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments;
· Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using quoted market prices in active markets for similar instruments, quoted prices for identical or similar instruments in markets that are considered less than active or other valuation techniques in which all significant inputs are directly or indirectly observable from market data;
· Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments but for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
Valuation framework
The Company employs the valuation framework detailed below with respect to the measurement of fair values. A valuation of the Company's investments is prepared by the Investment Advisor with reference to IPEV guidelines and the valuation principles of IFRS 13 (Fair Value Measurement). The Investment Advisor recommends these valuations to the Board of Directors. The Board of Directors considers the valuations recommended by the Investment Advisor, determines any amendments required and thereafter adopts the fair values presented in the Company's financial statements.
Quoted equity investments
Quoted investments traded in an active market are classified as Level 1 in the IFRS 13 fair value hierarchy. The Company's investment in Luceco is a Level 1 asset. For Level 1 assets, the Company calculates the holding value from the latest market price (without adjustment).
Unquoted private equity investments and third party fund investments
Private equity investments and third party fund investments are classified as Level 3 in the IFRS 13 fair value hierarchy. The Company's investments in Whittard, David Phillips, Pharmacy2U and European Capital Private Debt Fund are considered to be Level 3 assets. Various valuation techniques may be applied in determining the fair value of investments held as Level 3 in the fair value hierarchy;
· For recently acquired assets, the Company considers the investment cost an applicable fair value for the asset;
· For underperforming assets, the Company considers the net asset or recovery valuation more applicable, in particular where the business' performance be contingent on shareholder financial support;
· For performing assets, the Company considers the market approach to be the most appropriate with a specific focus on trading comparables, applied on a forward basis. The Company will also consider transaction comparables, applied on a historic basis;
· For assets managed and valued by third party managers, the Company reviews the valuation methodology of the third party manager. If deemed appropriate and consistent with the Company's reporting standards, the Company will use the valuation prepared by the third party manager.
The Investment Advisor believe that it is appropriate to apply an illiquidity discount to the multiples of comparable companies when using them to calculate valuations for small, private companies. This discount adjusts for the difference in size between generally larger comparable companies and the smaller assets being valued. The illiquidity discount also incorporates the premium the market gives to comparable companies for being freely traded or listed securities. The Investment Advisor has determined between 15 per cent. and 25 per cent. to be an appropriate illiquidity discount with reference to market data and transaction multiples seen in the market in which the Investment Advisor operates.
Where portfolio investments are held through subsidiary/associate holding companies, the net assets of the holding company are added to the value of the portfolio investment being assessed to derive the fair value of the holding company held by the Company.
Fair value hierarchy - Financial instruments measured at fair value
The table below analyses the underlying investments held by the associates measured at fair value at the reporting date by the level in the fair value hierarchy into which the fair value measurement is categorised. Debt securities are also included, as these are also stated at fair value with the Board assessing the fair value of the total investment, which includes debt and equity. The amounts are based on the values recognised in the statement of financial position of the associates. All fair value measurements below are recurring.
| |
|
Level 1 |
Level 3 |
Total |
| 31 July 2020 |
|
£ |
£ |
£ |
| Financial assets at fair value through profit or loss |
|
|
|
|
| Unquoted private equity investments (including debt) |
|
- |
22,179,014 |
22,179,014 |
| Third party private debt fund investment |
|
- |
1,393,452 |
1,393,452 |
| Quoted private equity investments |
|
57,306,094 |
- |
57,306,094 |
| Investments at fair value through profit or loss |
|
57,306,094 |
23,572,466 |
80,878,560 |
| |
|
|
|
|
| Other asset and liabilities |
|
- |
1,229,208 |
1,229,208 |
| Total investments at fair value through profit or loss |
|
57,306,094 |
24,801,674 |
82,107,768 |
| |
|
|
|
|
| |
|
Level 1 |
Level 3 |
Total |
| 31 January 2020 |
|
£ |
£ |
£ |
| Financial assets at fair value through profit or loss |
|
|
|
|
| Unquoted private equity investments (including debt) |
|
- |
23,892,971 |
23,892,971 |
| Third party private debt fund investment |
|
- |
1,512,259 |
1,512,259 |
| Quoted private equity investments |
|
57,227,830 |
- |
57,227,830 |
| Investments at fair value through profit or loss |
|
57,227,830 |
25,405,230 |
82,633,060 |
| |
|
|
|
|
| Other asset and liabilities |
|
- |
749,863 |
749,863 |
| Total investments at fair value through profit or loss |
|
57,227,830 |
26,155,093 |
83,382,923 |
The following table, detailing the value of portfolio investments only, shows a reconciliation of the opening balances to the closing balances for fair value measurements in level 3 of the fair value hierarchy for the underlying investments held by the associates.
| |
|
31 July 2020 (unaudited) |
31 January 2020 |
| Unlisted private equity investments (including debt) |
|
£ |
£ |
| Balance as at 1 February |
|
25,405,230 |
14,209,340 |
| Additions to investments |
|
1,000,000 |
700,000 |
| Capital distributions from investments |
|
(207,348) |
(247,693) |
| Change in fair value through profit and loss |
|
(2,625,416) |
10,743,583 |
| Balance as at 31 July / 31 January |
|
23,572,466 |
25,405,230 |
Significant unobservable inputs used in measuring fair value
The table below sets out information about significant unobservable inputs used at 31 July 2020 in measuring financial instruments categorised as Level 3 in the fair value hierarchy.
| Description |
Fair value at 31 July 2020 |
Valuation technique |
| £ |
||
| Unquoted private equity investments (including debt) |
22,179,014 |
Sales/EBITDA multiple |
| Third party private debt fund investment |
1,393,452 |
Reported net asset value |
Significant unobservable inputs are developed as follows:
· Trading comparable multiple: valuation multiples used by other market participants when pricing comparable assets. Relevant comparable assets are selected from public companies determined to be proximate to the Company's investment based on similarity of sector, size, geography or other relevant factors. The valuation multiple for a comparable company is determined by calculating the enterprise value of the company implied by its market price as at the reporting date and dividing by the relevant financial metric (sales or EBITDA).
· Recovery valuation: the value estimated to able to be recovered by stakeholders in the event of the trade out of the business. The total amount available to be distributed is determined by calculating the value able to be realised from the liquidation of the business' assets and the sale of any ring fenced divisions.
· Reported net asset value: for assets managed and valued by a third party, the manager provides the Company with periodic valuations of the Company's investment. The Company reviews the valuation methodology of the third party manager. If deemed appropriate and consistent with the Company's reporting standards, the Board will adopt the valuation prepared by the third party manger.
Although management believes that its estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value. For fair value measurements of Level 3 assets, changing one or more of the assumptions used to reasonably possible alternative assumptions would have the following effects on the Level 3 investment valuations:
· For the Company's investment in mature Level 3 assets, the valuations used in the preparation of the financial statements imply an average EV to EBITDA multiple of 7.8x (weighted by each asset's total valuation) (2020: 5.6x). The key unobservable inputs into the preparation of the valuation of mature Level 3 assets was the EV to EBITDA multiple applied to the asset's financial forecasts. If these inputs had been taken to be 25 per cent. higher, the value of the Level 3 assets and profit for the period would have been £4,374,948 higher. If these inputs had been taken to be 25 per cent. lower, the value of the Level 3 assets and profit for the period would have been £4,374,948 lower. A corresponding increase or decrease in the asset's financial forecasts would have a similar impact on the Company's assets and profit.
· For the Company's investment in growth Level 3 assets, the valuations used in the preparation of the financial statements imply an average EV to sales multiple of 0.5x (weighted by each asset's total valuation) (2020: 0.5x). The key unobservable inputs into the preparation of the valuation of growth Level 3 assets were the EV to sales multiple applied to the asset's financial forecasts. If these inputs had been taken to be 25 per cent. higher, the value of the Level 3 assets and profit for the period would have been £218,529 higher. If these inputs had been taken to be 25 per cent. lower, the value of the Level 3 assets and profit for the period would have been £218,529 lower. A corresponding increase or decrease in the asset's financial forecasts would have a similar impact on the Company's assets and profit.
Financial instruments not measured at fair value
The carrying value of short-term financial assets and financial liabilities (cash, debtors and creditors) approximate their fair value. The carrying value of the convertible and the new loan note instruments are also considered to approximate fair value.
10 Share capital
| |
|
31 July 2020 |
31 January 2020 |
31 July 2019 |
|||
| |
|
(unaudited) |
(audited) |
(unaudited) |
|||
| |
|
Number |
£ |
Number |
£ |
Number |
£ |
| Authorised share capital |
|
|
|
|
|
|
|
| Ordinary shares of 5p each |
|
45,000,000 |
2,250,000 |
45,000,000 |
2,250,000 |
45,000,000 |
2,250,000 |
| Called up, allotted and fully paid |
|
|
|
|
|
|
|
| Ordinary shares of 5p each |
|
34,616,554 |
1,730,828 |
34,539,061 |
1,726,953 |
34,539,061 |
1,726,953 |
| Ordinary shares of 5p each held in treasury |
|
(1,668,251) |
- |
(1,668,251) |
- |
(1,303,528) |
(19,364) |
| |
|
32,948,303 |
1,730,828 |
32,870,810 |
1,726,953 |
33,235,533 |
1,707,589 |
11 Basic and diluted loss per share (pence)
Basic loss per share is calculated by dividing the loss of the Company for the period attributable to the ordinary shareholders of (£4,172,887) (for the period ended 31 July 2019: profit of £12,615,895; for the year ended 31 January 2020: profit of £36,224,743) divided by the weighted average number of shares outstanding during the period of 32,885,795 after excluding treasury shares (for the period ended 31 July 2019: 31,149,678; for the year ended 31 January 2020: 32,095,510).
Diluted loss per share is calculated by dividing the loss of the Company for the period attributable to ordinary shareholders of (£4,172,887) (for the period ended 31 July 2019: profit of £12,615,895; for the year ended 31 January 2020: profit of £36,224,743) divided by the weighted average number of ordinary shares outstanding during the period, as adjusted for the effects of all dilutive potential ordinary shares, of 32,885,795 after excluding treasury shares (for the period ended 31 July 2019: 31,149,678; for the year ended 31 January 2020: 32,095,510).
12 NAV per share (pence)
The Company's NAV per share of 303.04 pence (for the period ended 31 July 2019: 245.54 pence; for the year ended 31 January 2020: 317.18 pence) is based on the net assets of the Company at the period end of £99,846,187 (for the period ended 31 July 2019: £81,606,657; for the year ended 31 January 2020: £104,257,996) divided by the shares in issue at the end of the period of 32,948,303 after excluding treasury shares (for the period ended 31 July 2019: 33,235,533; for the year ended 31 January 2020: 32,870,810).
The Company's diluted NAV per share of 303.04 pence (for the period ended 31 July 2019: 245.54 pence; for the year ended 31 January 2020: 317.18 pence) is based on the net assets of the Company at the period end of £99,846,187 (for the period ended 31 July 2019: £81,606,657; for the year ended 31 January 2020: £104,257,996) divided by the shares in issue at the end of the period, as adjusted for the effects of dilutive potential ordinary shares of 32,948,303 after excluding treasury shares (for the period ended 31 July 2019: 33,235,533; for the year ended 31 January 2020: 32,870,810).
13 Non-current liabilities
The Company has issued Unsecured Loan Notes ("ULN") which pay interest at 7.5 per cent. per annum and are redeemable on July 23 July 2022 (subject to voluntary early redemption by the Company). At 31 July 2020, £3,987,729 of ULNs in principal amount were outstanding. Issue costs totalling £144,236 have been offset against the value of the loan note instrument and are being amortised over the life of the instrument. The total issue costs expensed in the period ended 31 July 2020 was £10,303 (for the period ended 31 July 2019: £10,303; for the year ended 31 Jan 2020: £20,605). The carrying value of the ULNs in issue at the period end was £3,946,520 (for the period ended 31 July 2019: £3,925,914; for the year ended 31 Jan 2020: £3,936,217). The total interest expense on the ULNs for the period is £159,842 (for the period ended 31 July 2019: £159,842; for the year ended 31 Jan 2020: £319,685). This includes the amortisation of the issue costs.
14 Related parties
Directors' fees expense during the period amounted to £77,000 (for the period ended 31 July 2019: £77,000; for the year ended 31 January 2020: £154,264) of which £12,833 is accrued as at 31 July 2020 (for the period ended 31 July 2019: £12,834; for the year ended 31 January 2020: £12,833).
Certain Directors of the Company and other participants are incentivised in the form of equity settled share-based payment transactions, through a Joint Share Ownership Plan (see note 6).
Five of the Directors have interests in the shares of the Company as at 31 July 2020 (31 July 2019: four). Nicholas Wilson holds 131,265 ordinary shares (31 July 2019: 125,987), Robert Quayle holds 112,577 ordinary shares (31 July 2019: 107,201), Clive Spears holds 133,270 ordinary shares (31 July 2019: 126,493), Heather Bestwick holds 19,263 ordinary shares (31 July 2019: 13,888) and David Pirouet holds 11,162 shares (31 July 2019: nil).
15 Subsequent events
On 19 August 2020, Luceco, the Company's largest asset, updated the market on its financial position and outlook in a RNS announcement. Luceco announced performance ahead of market expectations, with guidance for full year 2020 Adjusted Operating Profit increased from at least £18 million to at least £23 million.
On 1 September 2020, the Company completed a £1.9 million investment in Atlantic Credit Opportunities Fund ("ACOF"), a commingled distressed credit fund which, subject to regulatory approval will be managed by a subsidiary of the Investment Advisor. The Company will hold its investment in ACOF through ESO Alternative Investments LP ("ESO AI LP"). ESO AI LP's acquisition will diversify the Company's asset class exposure, in line with the Company's stated investment strategy.
| Directors |
Administrator and Company Address |
| C.L. Spears (Chairman) |
Langham Hall Fund Management (Jersey) Limited |
| H. Bestwick |
Liberation House |
| D.R. Pirouet |
Castle Street, St Helier |
| R.B.M. Quayle |
Jersey JE1 2LH |
| N.V. Wilson |
|
| |
|
| |
|
| Investment Advisor |
Nominated Advisor and Broker |
| EPIC Private Equity LLP |
Numis Securities Limited |
| Audrey House |
10 Paternoster Square |
| 16-20 Ely Place |
London EC4M 7LT |
| London EC1N 6SN |
|
| |
|
| |
|
| Auditors and Reporting Accountants |
Registered Agent (Bermuda) |
| KPMG Audit LLC |
Conyers Dill & Pearman |
| Heritage Court |
Clarendon House, 2 Church Street |
| 41 Athol Street |
Hamilton HM 11 |
| Douglas |
Bermuda |
| Isle of Man IM1 1LA |
|
| |
|
| |
|
| Bankers |
Registrar and CREST Providers |
| Barclays Bank plc |
Computershare Investor Services (Jersey) Limited |
| 1 Churchill Place |
Queensway House |
| Canary Wharf |
Hilgrove Street |
| London E14 5HP |
St. Helier JE1 1ES |
| |
|
| HSBC Bank plc |
Investor Relations |
| 1st Floor |
Richard Spiegelberg |
| 60 Queen Victoria Street |
Cardew Company |
| London EC4N 4TR |
5 Chancery Lane |
| |
London EC4A 1BL |
| |
|
| Santander International |
|
| PO Box 545 |
|
| 19-21 Commercial Street |
|
| St Helier, Jersey, JE4 8XG |
|
Interim Review and Unaudited Financial Statements07:16:078 Sept 2020Results3252Y