TIDMCRV
RNS Number : 4849H
Craven House Capital PLC
03 December 2020
Craven House Capital plc
("Craven House" or the "Company")
Annual Results for year ended 31 May 2020
CRAVEN HOUSE CAPITAL PLC
CHAIRMAN'S STATEMENT
FOR THE YEARED 31 MAY 2020
Dear Shareholder
I am pleased to provide an introduction to the annual report and
financial statements for Craven House Capital Plc for the year
ending 31 May 2020. During the period the Company completed a
fundamental restructuring of its holdings involving distribution of
a dividend in specie to our shareholders, comprising the bulk of
Craven's historic investment portfolio, and transfer of
intercompany loan accounts and creditors to Craven Industrial
Holdings Plc.
As had been communicated repeatedly to shareholders in recent
years, the Company's Investment Manager and the Board had, for some
time, been evaluating the suitability of the Company's AIM
quotation compared with alternative trading venues and other
options available. During the period, the Board determined that the
AIM market was no longer suitable for its portfolio at the time and
presented the restructuring proposal to shareholders at a General
Meeting of Craven House on the 22 May 2020. The proposal secured
the approval of the overwhelming majority of the Company's
shareholders and the restructuring process was completed prior to
the year end. The investment portfolio retained by the Company and
resulting balance sheet are significantly simplified, focused, more
suitable to AIM and, we believe in time, will be better understood
by the market.
Mark Pajak
Acting Chairman
CRAVEN HOUSE CAPITAL PLC
INVESTMENT MANAGER'S REPORT
FOR THE YEARED 31 MAY 2020
Statement by the Investment Manager
Following the restructuring approved by shareholders on the 22
May 2020, the Company's investment portfolio is significantly
simplified and comprises minority shareholdings in five
Swedish-managed eCommerce businesses.
The Company's investments are held at fair value in accordance
with the IPEVC guidelines. Given the proximity of the acquisition
date of the shareholdings in the businesses listed below (March
2020) to the year-end of Craven (May 2020), the original
acquisition price of "Price of Recent Investment" has been applied
as the valuation methodology. A summary of the Company's
investments is as follows with further information provided in
notes 8 and 14 below;
Investment Value at 31 May Value at 31 May
2020 2019
Shares in Craven Industrial Holdings
Plc - $27,368,571
Comprising:
Shares in Garimon Ltd $1,600,000 -
Shares in Rosedog Ltd $1,600,000 -
Shares in OneBas.com Ltd $1,600,000 -
Shares in IZYRadio Ltd $1,600,000 -
Shares in YRRO Ltd $1,600,000 -
We are confident that the impact of the COVID-19 pandemic has
not impaired the prospects or therefore the valuation of these
businesses since the time of acquisition. Their respective
strategies, which include the online marketing and distribution of
magazines, music and dietary supplements are, in fact, likely to
benefit from the shift in consumer behaviour resulting from the
pandemic. The development of each business remains at an early
stage and we look forward to reporting on material developments
within the portfolio as appropriate.
Desmond Holdings Ltd
Investment Manager to Craven House Capital Plc
CRAVEN HOUSE CAPITAL PLC
STRATEGIC REPORT
FOR THE YEARED 31 MAY 2020
The directors present the Strategic Report of Craven House
Capital plc for the year ended 31 May 2020.
Principal activity
Shareholders approved the adoption of a revised Investing Policy
during the year. The Investing Policy is primarily to invest in or
acquire a portfolio of companies, partnerships, joint ventures,
businesses or other assets participating in the e-Commerce sector.
The investments or acquisitions may be funded wholly by cash, the
issue of new shares or debt, or a mix thereof, as the Board deems
appropriate. The Company's equity interest in a proposed investment
may range from a minority position to 100% ownership; the proposed
investments may be either quoted or unquoted, although will likely
be unquoted in the majority of cases. The Company will specifically
target investments which the Board believes offer high growth
opportunities or steady cash flows and where the exit will be a
liquidity event, such as a trade sale or IPO.
Review of the Business in the year
A comprehensive review of the Company's performance and business
activities is included in the Investment Manager's Report above. At
a General Meeting of the Company on 22 May 2020, shareholders
approved a fundamental restructuring of the Company which was
completed prior to the year end. The historic investment portfolio
of the Company was distributed to shareholders via a dividend in
specie; the majority of the Company's current assets and
liabilities were transferred to Craven Industrial Holdings Plc,
whose shares were issued to Ordinary Shareholders. Following the
distribution of the dividend in specie, the Company's portfolio
comprised minority stakes in five e-commerce businesses which were
acquired in March 2020. The status of the underlying investments is
disclosed in further detail in note 8 and note 14 below.
Position of the Company's business at the end of the year
As a result of the restructuring outlined above, the Company's
balance sheet as of May 2020 shows significant movement vs. the
prior year. The investment portfolio retained as of year-end, which
did not form part of the dividend in specie, was valued at $8m,
unchanged from the price of acquisition of these assets in March
2020. Receivables and cash reserves totaled $52,000. Sufficient
cash is available to the Company from its subsidiaries and via
external loan facilities to ensure it is able to meet its
liabilities as they fall due. The majority of the $254,000 in
liabilities payable by the Company as of May 2020 were paid post
year end. Outside of the board of directors, the Company has no
employees and the majority of overhead expenditure continues to
comprise regulatory, accounting and audit costs.
Principal risks and uncertainties facing the business
The principal risks to the business include the ability of the
Company to successfully execute its Investing Policy and the early
/ pre-revenue stage of the development of the current portfolio of
investments. Description of these risks are further detailed in
note 14 below.
Corporate governance
The directors place a high degree of importance on ensuring that
high standards of Corporate Governance are maintained and have
therefore chosen to apply the framework as provided by the Quoted
Companies Alliance Corporate Governance Code for small and medium
size companies (2018) (the 'QCA Code'). Further details are
available on the Company's website.
Mr M J Pajak - Director of behalf of the Board
Date
CRAVEN HOUSE CAPITAL PLC
REPORT OF THE DIRECTORS
FOR THE YEARED 31 MAY 2020
The directors present their annual report with the audited
financial statements of the Company for the year ended 31 May
2020.
DIVIDS
On 22 May 2020 at a General Meeting of the Company, shareholders
approved the payment of a special dividend in specie to Ordinary
Shareholders comprising shares in the Company's subsidiary and
principal holding company, Craven Industrial Holdings Plc. Payment
of this dividend was completed on 29 May 2020. A fair review of the
business and disclosure of the Company's activities and principal
risks and uncertainties are included in the Investment Manager's
Report and the Strategic Report.
EVENTS SINCE THE OF THE YEAR
Information relating to events since the end of the year is
given in the note 17 to the financial statements.
DIRECTORS
The directors who held office during the year were:
Mr M J Pajak;
Mr B S Bindra; and
Mr C P Morrison.
Directors' remuneration and details of service contracts are
given in note 3 to the financial statements.
POLITICAL AND CHARITABLE CONTRIBUTIONS
No charitable or political donations were made during the
year.
FINANCIAL RISK MANAGEMENT POLICIES
Information on the use of financial instruments by the Company
and its management of financial risk is disclosed in note 14 to the
financial statements.
FUTURE DEVELOPMENTS
In the coming year the Company will continue to execute its
investment strategy. Details of post year end transactions are
disclosed in note 17.
SIGNIFICANT SHAREHOLDERS
Shareholders with holdings of more than 3% of the Company as of
the date of this report are as follows;
Jim Nominees Ltd - 19.0%
Vidacos Nominees Ltd - 12.4%
Interactive Brokers LLC - 10.8%
Lynchwood Nominees Ltd - 10.2%
WB Nominees Ltd - 6.5%
PWB Enterprises Inc - 4.7%
DIRECTOR SHAREHOLDINGS
Shareholdings in the Company by directors as of the date of this
report are as follows;
Mr M J Pajak indirect holdings (via Desmond Holdings Ltd) -
272,705 ordinary shares of $1.00
Mr B S Bindra - 14,440 ordinary shares of $1.00
Mr C P Morrison - 7,356 ordinary shares of $1.00
CRAVEN HOUSE CAPITAL PLC
REPORT OF THE DIRECTORS - continued
FOR THE YEARED 31 MAY 2020
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union and applicable law. Under company law the
directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company, and of the profit or loss for that period.
In preparing these financial statements, the directors are required
to:
- select suitable accounting policies and then apply them consistently;
- make judgements and accounting estimates that are reasonable
and prudent;
- state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in
the financial statements;
- prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Company will continue
in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of the accounts and the other
information included in annual reports may differ from legislation
in other jurisdictions.
The Company is compliant with AIM Rule 26 regarding the
Company's website.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
So far as the directors are aware, there is no relevant audit
information (as defined by Section 418 of the Companies Act 2006)
of which the Company's auditors are unaware, and each director has
taken all the steps that he or she ought to have taken as a
director in order to make himself or herself aware of any relevant
audit information and to establish that the Company's auditors are
aware of that information.
AUDITOR
RBK Business Advisers, Chartered Accountants & Statutory
Audit Firm resigned as auditors during the year and Edwards Veeder
(UK) Limited, Chartered Accountants & Business Advisors were
appointed. A resolution for the re-appointment of Edwards Veeder
(UK) Limited, Chartered Accountants & Business Advisors will be
proposed in accordance with Section 489 of the Companies Act 2006
at the forthcoming Annual General Meeting.
Mr M J Pajak - Director of behalf of the Board
Date
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF
CRAVEN HOUSE CAPITAL PLC
Opinion
We have audited the financial statements of Craven House Capital
Plc (the 'company') for the year ended 31 May 2020 which comprise
the statement of comprehensive income, the statement of financial
position, the statement of changes in equity, the statement of cash
flows and the related notes to the financial statements, including
a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
-- give a true and fair view of the state of the company's
affairs as at 31 May 2020 and of its loss for the
year then ended;
-- have been properly prepared in accordance with IFRSs as
adopted by the European Union; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the directors' use of the going concern basis of accounting
in the preparation of the financial statements
is not appropriate; or
-- the directors have not disclosed in the financial statements
any identified material uncertainties that
may cast significant doubt about the company's ability to
continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial
statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit matters Description of How the scope of our audit
risk addressed the risk
Investment valuation
For the financial year The company's Our audit work included but
ended 31 May 2020, assessment of was not restricted to:
investments the valuation
measured at fair value of investments * We reviewed the high level controls in operation in
amounted to $8,000,000 measured at fair relation to investment valuations;
which represents 99% of value requires
total assets. significant judgement.
------------------------- -----------------------------------------------------------
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF
CRAVEN HOUSE CAPITAL PLC - continued
Key audit Description How the scope of our
matters of risk audit addressed the
risk
Investment
valuation
(continued) * We considered if the company's valuation policy is in
There is a line with The International Private Equity and
The risk that Venture Capital Valuation (IPEV) guidelines and IFRS;
valuation the
of application
investments of an
is inappropriate * We reviewed and assessed the reasonableness of the
considered valuation assumptions applied in the investment managers'
a key methodology valuation memo for the financial year ended 31 May
audit and/or the 2020;
matter as use of
investments inappropriate
represent assumptions
significant could result
balances on in the
the valuation of
statement investments
of being
financial materially
position. misstated as
at 31 May
2020.
-------------- ----------------------------------------------------------------
Investment Our audit work included
ownership but was not restricted
and to:
existence There is a
risk that * Shareholder registers were reviewed to confirm the
The the company shares were held by the company;
ownership does not
and own the
existence rights to the
of investments * Shareholder and purchase agreements were reviewed to
investments or that establish ownership;
are the
considered investments
a key audit do not
matter as exist at the * Certificates of incorporation were reviewed for
investments year ended investments acquired during the financial year; and
represent 31 May 2020.
99% of
total
assets
on the
statement
of
financial
position.
-------------- ----------------------------------------------------------------
Management Our audit work included
override but was not restricted
of controls to
There is a
We are risk that * We have considered the controls in place, remained
required to management alert for material and unusual items and tested a
consider may override sample of journals to assess the risk.
how the controls
management to suit
biases their
could objectives.
affect the
results
of the
company.
-------------- ----------------------------------------------------------------
This is not a complete list of all risks identified by our audit.
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF
CRAVEN HOUSE CAPITAL PLC - continued
Our application of materiality
We apply the concept of materiality both in planning and performing
our audit and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including
omissions could influence the economic decisions of reasonable users
that are taken on the basis of the financial statements. Importantly,
misstatements below these levels will not necessarily be evaluated
as material, as we also take into account the nature of identified
misstatements, and the particular circumstances of their occurrence,
when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined the materiality
for the financial statements as a whole to be $121,000 which is based
on 1.5% of total assets. We considered this as an appropriate benchmark.
We set performance materiality as 80% of the overall Financial Statement
materiality.
We report to the Audit Committee all identified unadjusted errors
in excess of $6,050 which is set at 5% of planning materiality. Errors
below that threshold would also be reported if, in our opinion as
auditor, disclosure was required on qualitative grounds.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the company
and its environment, including controls and assessing the risks of
material misstatements.
We carried out a full scope audit of the company's financial statements.
This included specific audit procedures where the extent of our audit
work was based on our assessment of the risks of material misstatement.
All audit work to respond to the risks of material misstatement were
performed directly by the audit engagement team. We set out the key
audit matters that had the greatest impact on our audit strategy and
scope within the key audit matters section.
Other information
The other information comprises the information included in the Chairman's
Statement, the Investment Manager's Report, the Strategic Report and
the Report of the Directors. The directors are responsible for the
other information. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion
thereon. In connection with our audit of the financial statements,
our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in
the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the
audit:
* the information given in the Strategic Report and the
Report of the Directors for the financial year for
which the financial statements are prepared is
consistent with the financial statements; and
* the Strategic Report and the Report of the Directors
have been prepared in accordance with applicable
legal requirements.
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF
CRAVEN HOUSE CAPITAL PLC - continued
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and
its environment obtained in the course of the audit, we have not identified
material misstatements in the Strategic Report or the Report of the
Directors.
We have nothing to report in respect of the following matters in relation
to which the Companies Act 2006 requires us to report to you if, in
our opinion:
* adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
* the financial statements are not in agreement with
the accounting records and returns; or
* certain disclosures of directors' remuneration
specified by law are not made; or
* we have not received all the information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Statement of Directors' Responsibilities
set out on page 7 the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either
intend to liquidate the company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council's
website at: https://www.frc.org.uk/auditorsresponsibilities . This
description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company's
members those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
Lee Lederberg
Senior Statutory Auditor
for and on behalf of Edwards Veeder (UK) Limited
Chartered Accountants & Statutory Audit Firm
Ground Floor, 4 Broadgate,
Broadway Business Park,
Chadderton,
Greater Manchester,
United Kiingdom,
OL9 9XA
Date:
CRAVEN HOUSE CAPITAL PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MAY 2020
2020 2019
$'000 $'000
CONTINUING OPERATIONS
Changes in fair value (6,892) 376
Other income
144 99
Intercompany loans written
off (7,158) -
Management fee accrual waived 4 1,446 -
Administrative expenses (727) (2,284)
OPERATING LOSS AND LOSS BEFORE
INCOME TAX (13,187) (1,809)
Income tax 6 - -
--------------- ----------
LOSS FOR THE YEAR AND TOTAL
COMPREHENSIVE INCOME (13,187) (1,809)
=============== ==========
Loss per share expressed
in cents per share:
Basic and diluted 7 (456.52) (72.39)
The notes on pages 15 to 33 form part of the financial
statements.
CRAVEN HOUSE CAPITAL PLC Company Number 05123368
STATEMENT OF FINANCIAL POSITION
AS AT 31 MAY 2020
2020 2019
Notes $'000 $'000
ASSETS
NON-CURRENT ASSETS
Investments at fair
value through
profit or loss 8 8,000 27,369
-------- ---------
8,000 27,369
-------- ---------
CURRENT ASSETS
Trade and other receivables 9 46 933
Cash and cash equivalents 10 6 46
-------- ---------
52 979
-------- ---------
TOTAL ASSETS 8,052 28,348
======== =========
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 11 3,802 12,594
Share premium 11,153 25,128
Accumulated deficit (7,157) (14,666)
-------- ---------
TOTAL EQUITY 7,798 23,056
-------- ---------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 12 254 4,492
NON-CURRENT LIABILITIES
Loans and borrowings 13 - 800
TOTAL LIABILITIES 254 5,292
-------- ---------
TOTAL EQUITY AND LIABILITIES 8,052 28,348
======== =========
Approved and authorised for issue by the Board on
......................2020 and signed on its behalf by:
.................................................................
Mr M J Pajak - Director
The notes on pages 15 to 33 form part of the financial
statements.
CRAVEN HOUSE CAPITAL PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MAY 2020
Called
up share Share Accumulated
capital premium deficit Total
$'000 $'000 $'000 $'000
Balance at 1 June 2018 12,594 25,128 (12,857) 24,865
Changes in equity
Issue of share capital - - - -
---------- ---------- -------------- ----------
Transactions with owners 12,594 25,128 (12,857) 24,865
---------- ---------- -------------- ----------
Loss for the year - - (1,809) (1,809)
Balance at 31 May 2019 12,594 25,128 (14,666) 23,056
Changes in equity
Issue of share capital 1,365 11,025 - 12,390
Cancellation of deferred
shares (10,157) - 10,157 -
Reduction in share
premium - (25,000) 25,000 -
Dividend in specie - - (14,461) (14,461)
---------- ---------- -------------- ----------
Transactions with owners 3,802 11,153 6,030 20,985
---------- ---------- -------------- ----------
Loss for the year - - (13,187) (13,187)
Balance at 31 May 2020 3,802 11,153 (7,157) 7,798
---------- ---------- -------------- ----------
CRAVEN HOUSE CAPITAL PLC
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 MAY 2020
Amended
2020 2019
Notes $'000 $'000
Cash flows from operating activities
Loss before income tax (13,187) (1,809)
Adjustments for non-cash items
Fair value movement arising on investments 6,892 (376)
Intercompany loans written off 7,158 -
Management fee accrual waived (1,657) -
Costs paid by shares 190 -
Repairs 5 -
Dividend income (144) (98)
Increase in trade and other receivables (3,394) (9)
Increase in trade and other payables 103 1,977
Net cash outflow from operating
activities (4,034) (315)
Cash flows from investing activities
Dividends received from joint ventures 144 98
--------- --------
Net cash inflow from investing activities 144 98
--------- --------
Cash flows from financing activities
Proceeds from issue of shares 3,900 -
Proceeds from borrowings - 75
Repayment of loan (50) (25)
Net cash inflow from financing activities
3,850 50
--------- --------
Net decrease in cash and cash equivalents (40) (167)
Cash and cash equivalents at the
beginning
of the year 10 46 213
Cash and cash equivalents at the
end of the year 10 6 46
========= ========
The notes on pages 15 to 33 form part of the financial statements.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 MAY 2020
1. ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared in accordance with International
Financial Reporting Standards and IFRIC interpretations and with those
parts of the Companies Act 2006 applicable to companies reporting under
IFRS as adopted by the EU.
Craven House Capital plc is a public company incorporated in the United
Kingdom under the Companies Act 2006. The address of the registered office
is given on the company information page. The Company is listed on the
AIM Market of the London Stock Exchange (ticker: CRV).
The directors have considered the definition of an investment entity in
IFRS 10 as well as the associated application guidance. The directors
consider that the Company has met the definition of an investment entity.
The significant judgments and assumptions made by the directors in determining
that the Company is an investment entity are that; it has obtained funds
from investors (its shareholders) and is providing those investors with
investment management services; it commits to its investors that its business
purpose is to invest funds solely for returns from capital appreciation,
investment income, or both; and it measures and evaluates the performance
of substantially all of its investments on a fair value basis.
The main accounting implications for the preparation of the accounts as
an investment entity are that the accounts are not prepared on a consolidated
basis. Instead the Company's investments in its subsidiaries are accounted
for at fair value through its profit and loss account.
The financial statements have been prepared under the historical cost
convention, except to the extent varied below for fair value adjustments
required by accounting standards, and in accordance with applicable International
Financial Reporting Standards (IFRS) as adopted for use by the European
Union. The principal accounting policies are set out below.
The financial statements are presented in US dollars which is the Company's
functional currency. Amounts are rounded to the nearest thousand, unless
otherwise stated.
Going concern
The Company's business activities, together with the factors likely to
affect its future development, performance and position are set out in
the Investment Manager's Report. The financial statements include the
Company's objectives, policies and processes for managing its capital;
its financial risk management objectives; details of its financial instruments;
and its exposures to credit risk and liquidity risk. The directors believe
that the Company is well placed to manage its business risks successfully.
The directors have a reasonable expectation that the Company 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 annual financial statements.
The Company maintains minimal cash reserves, however in addition to the
cash on the Company's statement of financial position, sufficient cash
is available to the Company via credit facilities to ensure it is able
to meet its liabilities as they fall due and there is therefore no risk
to the going concern status of the Company.
There are currently no commitments to provide support to any subsidiary,
however the Company may elect to provide capital to its subsidiaries at
any time to further its stated Investing Policy.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
1. ACCOUNTING POLICIES - continued
The Company has applied for the first time certain amendments to
the standards
Amendments to IAS 28: Long Term Interests in Associates and
Joint Ventures (effective for annual periods beginning on or after
1 January 2019, endorsed by the European Union on 8 February
2019).
Amendments to IFRS 9: Prepayment Features with Negative
Compensation (effective for annual periods beginning on or after 1
January 2019, endorsed by the European Union 22 March 2018).
IFRIC 23 Uncertainty Over Income Tax Treatments (effective for
annual periods beginning on or after 1 January 2019, endorsed by
the European Union on 23 October 2018).
Annual improvements to IFRS Standards 2015-2017 Cycle (effective
for annual periods beginning on or after 1 January 2019, endorsed
by the European Union on 14 March 2019).
None of these amendments have had an effect on the Company's
financial position and performance.
The following new and revised standards and interpretations have
not been adopted by the Company, whether endorsed by the European
Union or not
Amendments to References to the Conceptual Framework in IFRS
Standards (effective for annual periods beginning on or after 1
January 2020, endorsed by the European Union on 29 November
2019).
Amendments to IAS 1 and IAS 8: Definition of Material (effective
for annual periods beginning on or after 1 January 2020, endorsed
by the European Union 29 November 2019).
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark
Reform (effective for annual periods beginning on or after 1
January 2020, endorsed by the European Union on 15 January
2020).
Amendments to IFRS 3: Business Combinations (effective for
annual periods beginning on or after 1 January 2020, endorsed by
the European Union on 21 April 2020).
The Company has assessed the impact of the adoption of these
standards and interpretations on its financial statements on
initial adoption and do not expect these standards to have a
material impact.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
1. ACCOUNTING POLICIES - continued
Financial assets
Purchases or sales of financial assets are recognised at the
date of the transaction. Where appropriate criteria are met, the
Company makes use of the option of measuring non current
investments upon initial recognition as financial assets at fair
value through profit or loss. These criteria include that the fixed
asset investment should meet the Company's published Investing
Policy and form part of the Company's managed portfolio or similar
investments. Such financial assets are carried at fair value and
movements in fair value are recognised through profit and loss. For
quoted securities, fair value is either the bid price or the last
traded price, depending on the convention of the exchange on which
the investment is quoted.
Impairment of financial assets
A financial asset not classified at fair value through profit or
loss is assessed at each reporting date to determine whether there
is objective evidence that it is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has
occurred after the initial recognition of the asset, and that the
loss event had a negative effect on the estimated future cash flows
of that asset that can be estimated reliably.
The new impairment model requires forward looking information,
which is based on assumptions for the future movement of different
economic drivers and how these drivers will affect each other. It
also requires management to assign probability to various
categories of receivables. Probability of default constitutes a key
input in measuring an ECL and entails considerable judgment; it is
an estimate of the likelihood of default over a given time horizon,
the calculation of which includes historical data, assumptions and
expectation of future conditions.
The directors have determined that the application of IFRS 9's
impairment requirements does not have a material impact on the
financial statements.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
1. ACCOUNTING POLICIES - continued
Measurement
Financial assets at fair value through profit or loss are
initially recognised at fair value. Transaction costs are expensed
through profit and loss. Subsequent to initial recognition, all
financial assets at fair value through profit or loss are measured
at fair value in accordance with International Private Equity and
Venture Capital Valuation ("IPEVCV") guidelines, as the Company's
business is to invest in financial assets with a view to profiting
from their total return in the form of capital growth and income.
Gains and losses arising from changes in the fair value of the
financial assets at fair value through profit or loss are presented
in the year in which they arise.
Valuation of investments
A number of the Company's assets are measured at fair value for
financial reporting purposes. The Investment Manager determines the
appropriate valuation techniques and inputs for fair value
measurements.
In estimating the fair value of an asset, the Investment Manager
uses market-observable data to the extent it is available. The
Investment Manager reports its findings to the Board of Directors
of the Company every quarter to explain the cause of fluctuations
in the fair value of the assets.
Information about the valuation techniques and inputs used in
determining the fair value of various assets and liabilities are
disclosed in notes 8 and 14.
Financial instruments that are measured subsequent to initial
recognition at fair value are grouped into Levels 1 to 3 based on
the degree to which the fair value is observable:
Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 fair value measurements for those derived from inputs
other than quoted prices included within Level 1 that are
observable for the assets or liability, either directly or
indirectly; and Level 3 fair value measurements are those derived
from inputs that are not based on observable market data.
a) Quoted investments
Where investments are quoted on recognised stock markets and an
active market in the shares exists, the company values those
investments at closing mid-market price on the reporting date.
Where an active market does not exist those quoted investments are
valued by the application of an appropriate valuation methodology
as if the relevant investment was unquoted.
b) Unquoted investments
In estimating the fair value for an unquoted investment, the
Company applies a methodology that is appropriate in light of the
nature, facts and circumstances of the investment and its
materiality in the context of the total investment portfolio using
reasonable data, market inputs, assumptions and estimates. Any
changes in the above data, market inputs, assumptions and estimates
will affect the fair value of an investment.
Financial liabilities and equity
Financial liabilities are recognised when the Company becomes
party to the contractual provisions of the financial instrument and
are measured initially at fair value adjusted for transaction
costs. Financial liabilities are measured subsequently at amortised
cost using the effective interest method.
An equity instrument is any contract that evidences a residual
interest in the assets of the Company after deducting all its
liabilities.
In accordance with IFRIC 19, when a financial liability is
extinguished by the issue of equity, the equity instrument issued
is measured at fair value and any difference between the financial
liability extinguished and the measurement of the equity instrument
is recognised in profit and loss.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
1. ACCOUNTING POLICIES - continued
Current and deferred tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Company's
liability for current tax is calculated using tax rates that have
enacted by the statement of financial position date.
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the statement of financial
position date where transactions or events that result in an
obligation to pay more tax in the future or a right to pay less tax
in the future have occurred at the statement of financial position
date. Timing differences between the Company's taxable profits and
its results as stated in the financial information that arises from
the inclusion of gains and losses in tax assessments in periods
different from those in which they are recognised in the financial
information.
A deferred tax asset is only recognised for an unused tax loss
carried forward if it is considered probable that there will be
sufficient future taxable profits against which the loss can be
utilised.
Foreign currencies
In preparing the financial statements of the Company,
transactions in currencies other than the entity's functional
currency are recorded at the rates of exchange prevailing at the
dates of the transactions. At each statement of financial position
date, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at the date when the fair
value was determined. Non-monetary items that are measured in terms
of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the
period in which they arise except for exchange differences on
monetary items receivable from or payable to a foreign operation
for which settlement is neither planned nor likely to occur; which
form part of the net investment in a foreign operation and which
are recognised in the foreign currency translation reserve.
For the purposes of presenting US dollar financial statements,
the assets and liabilities of the Company's foreign operations are
expressed using exchange rates prevailing at the statement of
financial position date. Income and expense items are translated at
the average exchange rate for the period, unless exchange rates
fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used. Exchange
differences arising, if any, are classified as equity and
recognised in a foreign currency translation reserve.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the directors. The directors, who
are responsible for allocating resources and assessing performance
of the operating segments, have been identified as the senior
management that make strategic decisions.
Critical accounting estimates and judgements
Preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Further information
regarding the assumptions relied upon and sensitivity analysis
around these assumptions is provided in note 14 below.
In particular, significant areas of estimation, uncertainty and
critical judgements in applying accounting policies that have the
most significant effect on the amount recognised in the financial
statements relate to the valuation of investments.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
1. ACCOUNTING POLICIES - continued
Critical accounting estimates and judgements - continued
The Company has made a number of investments in the form of
equity instruments in private companies operating in emerging
markets. The investee companies are generally at a key stage in
their development and operating in an environment of uncertainty in
capital markets. Should planned development prove successful, the
value of the Company's investment is likely to increase, although
there can be no guarantee that this will be the case. Should
planned development prove unsuccessful, there is a material risk
that the Company's investments may be impaired. The carrying
amounts of investments are therefore highly sensitive to the
assumption that the strategies of these investee companies will be
successfully executed.
The directors have also determined that the Company meets IFRS
10's definition of an investment company and that the functional
currency is appropriate given that underlying transactions, events
and conditions that are most likely to impact on the Company's
performance are more closely linked to the US dollar than GB
sterling.
Share capital and share premium
Share capital represents the nominal (par) value of shares that
have been issued.
Share premium includes any premium received on issue of share
capital. Any transaction costs associated with the issuing of
shares are deducted from share premium.
2. SEGMENTAL REPORTING
The operating segment has been determined and reviewed by the
directors to be used to make strategic decisions. The directors
consider there to be a single business segment being that of
investing activities, therefore there is only one reportable
segment.
3. EMPLOYEES AND DIRECTORS
2020 2019
$'000 $'000
Wages and salaries - directors' remuneration 66 83
====== ======
The average monthly number of employees (including directors)
during the year was as follows:
2020 2019
Directors 3 3
===== =====
The Company has no employees other than the directors.
Directors' remuneration is analysed as follows;
2020 2019
$'000 $'000
Fees:
Mr R Burrows (resigned 17 October
2018) - 17
Mr M J Pajak 56 56
------ ------
56 73
------ ------
Share based payments:
Mr B S Bindra 5 5
Mr C P Morrison 5 5
10 10
------ ------
Total 66 83
====== ======
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
3. EMPLOYEES AND DIRECTORS - continued
The service contracts of the directors who served during the
year are as follows:
Basic annual fee
Mr M J Pajak GBP45,000
Mr B S Bindra $5,000**
Mr C P Morrison $5,000**
** Payable in new ordinary shares of the company at $1.00 per
share
Desmond Holdings Ltd is the Company's Investment Manager. The
directors are the key management of the Company. There were no
directors (2019: none) to whom retirement benefits were accruing
under money purchase schemes.
4. OTHER INCOME
Other income includes dividends received from joint venture,
Qeton Ltd, of $143,214 (2019: $97,514).
5. LOSS BEFORE INCOME TAX
The loss before income tax is stated after charging:
2020 2019
$'000 $'000
Rental charges 17 35
Fees payable to the Company's auditor
for the audit of the Company's annual
accounts 17 29
Foreign exchange losses - 2
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
6. INCOME TAX
Analysis of charge in the year
2020 2019
$'000 $'000
Current tax: - -
Deferred tax - -
Tax on loss on ordinary activities - -
====== ======
2020 2019
$'000 $'000
Loss on ordinary activities before
tax (13,187) (1,809)
========= ========
Analysis of charge in the year
2020 2019
$'000 $'000
Loss on ordinary activities multiplied
by the Company's rate of corporation
tax in the UK of 19% (2019: 19%) (2,505) (344)
Effects of:
Intercompany balances written off 1,360 -
Dividends (27) (18)
Disallowed legal and professional
costs 12 -
Investment valuation 1,309 (71)
Losses (utilised)/carried forward (149) 433
---------- --------
Current tax charge for the year - -
as above
========== ========
At 31 May 2020, the Company had UK tax losses of $4,472,598
(2019: $5,378,098) available to be carried forward and utilised
against future taxable profits. A deferred tax asset of $849,794
(2019: $1,021,839) has not been recognised due to uncertainties
over the timing of when taxable profits will arise.
7. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Diluted earnings per share has not been disclosed as the
inclusion of the unexercised warrants described in note 11 would be
non-dilutive.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
7. EARNINGS PER SHARE - continued
Reconciliations are set out below.
2020
Earnings Weighted average Per-share amount
$'000 number of shares cents
Basic EPS
Earning attributable
to ordinary shareholders (13,187) 2,888,529 (456.52)
2019
Earnings Weighted average Per-share amount
$'000 number of shares cents
Basic EPS
Earning attributable
to ordinary shareholders (1,809) 2,499,039 (72.39)
8. INVESTMENTS
Investments at fair value through profit or loss
The Company adopted the valuation methodology prescribed in the
IPEVCV guidelines to value its investments at fair value through
profit and loss.
The Company had the following holdings at 31 May 2020:
Principal Place Ownership
Name Holding of Business Interest
Garimon Ltd Direct UK / Sweden 29.9%
Onebas.com Ltd Direct UK / Sweden 29.9%
IZYRadio Ltd Direct UK / Sweden 29.9%
Rosedog Ltd Direct UK / Sweden 29.9%
YRRO Ltd Direct UK / Sweden 29.9%
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
8. INVESTMENTS -continued
Investments at fair value through profit or loss
Quoted equity Unquoted
investments equity investments
$'000 $'000 Total
$'000
At 1 June 2018 11,083 15,910 26,993
Fair value movement (2,326) 2,702 376
-------------- -------------------- ----------
At 31 May 2019 8,757 18,612 27,369
-------------- -------------------- ----------
Additions - 8,000 8,000
Fair value movement (4,800) (2,092) (6,892)
Transfer to Craven
House Industrial
Holdings Plc
(3,957) (16,520) (20,477)
-------------- -------------------- ----------
At 31 May 2020 - 8,000 8,000
-------------- -------------------- ----------
As part of a group reconstruction undertaken during the year,
the Company's beneficial ownership of its historic portfolio was
transferred to Ordinary Shareholders via a dividend in specie of
shares in its wholly owned subsidiary, Craven Industrial Holdings
Plc.
The value of Investments at 31 May 2020 therefore represents the
Company's acquisitions on 13 March 2020 of a 29.9% interest, at
consideration of $1.6m each, in the above-named five UK entities.
These are all unquoted investments and have therefore been measured
on a Level 3 basis as no observable market data is available.
Further information on each investment holding is as follows;
Shares in Garimon Ltd are valued at $1,600,000 representing a
29.9% holding. This shareholding has been valued on a Price of
Recent Investment basis which the directors consider represents the
best indication of the fair value at the year end. Garimon is the
owner of "Magazinos.com", the world's largest-by-content on-line
media magazine and periodical content provision service. The
management of Magazinos are currently evaluating options available
to broaden Magazinos' shareholder base by means of IPO and/or
partnering with a major industry investor.
Shares in Onebas.com Ltd are valued at $1,600,000 representing a
29.9% holding. This shareholding has been valued on a Price of
Recent Investment basis which the directors consider represents the
best indication of the fair value at the year end. On ebas.com Ltd
is the owner of "ONEBas.com Music", an optimised search engine
providing a portal to music content freely circulating online.
Shares in IZYRadio Ltd are valued at $1,600,000 representing a
29.9% holding. This shareholding has been valued on a Price of
Recent Investment basis which the directors consider represents the
best indication of the fair value at the year end. IZYRadio Ltd is
a UK/Swedish-based B2B and B2C venture which aims to offer superior
music quality and music videos to radio stations via software
applications.
Shares in Rosedog Ltd are valued at $1,600,000 representing a
29.9% holding. This shareholding has been valued on a Price of
Recent Investment basis which the directors consider represents the
best indication of the fair value at the year end. Rosedog Ltd is
the owner of Pro Vitos(TM), an online marketer of vitamins and diet
supplements and Omega 3 North Norway(TM), a distributor of branded
diet supplements
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
8. INVESTMENTS - continued
Shares in YRRO Ltd are valued at $1,600,000 representing a 29.9%
holding. This shareholding has been valued on a Price of Recent
Investment basis which the directors consider represents the best
indication of the fair value at the year end. YRRO is the owner
of Ocean Skin Labs(TM), a distributor of branded collagen supplements
and Norwegian Fish Oil(TM), a distributor of branded diet supplements.
The businesses of all of the above portfolio investments are presently
loss-making although their cost bases are low and there is minimal
committed future expenditure, meaning that the extent and timing
of the Company's further investment in the businesses are highly
controllable. The Company and the incumbent management teams of
the investee companies will continue to work together with the aim
that these businesses become financially self-sustaining and generating
surpluses within the short- to medium-term and to crystallise additional
capital value for shareholders through strategic, third-party partnerships.
9. TRADE AND OTHER RECEIVABLES
2020 2019
$'000 $'000
Current:
Amounts owed by connected parties - 890
Prepayments and accrued income 46 43
------ ------
46 933
====== ======
10. CASH AND CASH EQUIVALENTS 2020 2019
$'000 $'000
Cash at bank 6 46
====== ======
The amounts disclosed in the statement of cash flows in respect
of cash and cash equivalents are in respect of the following statement
of financial position amounts:
Year ended 31 May 2020
31.5.20 1.6.19
$'000 $'000
Cash and cash equivalents 6 46
Year ended 31 May 2019
31.5.19 1.6.18
$'000 $'000
Cash and cash equivalents 46 213
======== =======
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
11. CALLED UP SHARE CAPITAL
Allotted, called up and
fully paid
Equity shares Nominal 2020 2019
Number: Class: Value: $'000 $'000
3,863,590 (2019:
2,499,039) Ordinary $1.00 3,802 2,437
Nil (2019: 77,979,412) Deferred GBP0.09 - 9,234
Nil (2019: 77,979,412) Deferred GBP0.009 - 923
--------- -----------
3,802 12,594
========= ===========
During the year the Company cancelled all of its deferred shares
for no consideration.
The aggregate nominal values of shares include exchange
differences arising from the translation of shares at historic
rates and the translation at the rate prevailing at the date of the
change in functional currency.
During the year ended 31 May 2018, the Company extended the time
scale of 78,632 fully transferable exercisable warrants which were
originally issued in the year ended 31 May 2012. At the date of
issue, the warrants could be exercised on or before 30 June 2014,
this period has now been extended to 30 June 2020. The warrants are
exercisable at a price of $15.00 per share.
12. TRADE AND OTHER PAYABLES
2020 2019
$'000 $'000
Current:
Trade payables 226 698
Amounts owed to connected parties - 2,039
Accruals and deferred income 28 1,755
254 4,492
====== ======
13. LOANS AND BORROWINGS
2020 2019
$'000 $'000
Non-current:
Other loans - 800
============ ==========
During the year, $300,000 of the convertible loan note was
satisfied by way of share issue. As part of the group
reconstruction, the outstanding balance of $500,000 was assigned to
the Company's wholly owned subsidiary, Craven Industrial Holdings
Plc.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
14. FINANCIAL INSTRUMENTS
Financial risk management objectives and policies
Management has adopted certain policies on financial risk management
with the objective of:
i. ensuring that appropriate funding strategies are adopted to meet
the Company's short-term and long-term funding requirements taking
into consideration the cost of funding, gearing levels and cash
flow projections;
ii. ensuring that appropriate strategies are also adopted to manage
related interest and currency risk funding; and
iii. ensuring that credit risks on receivables are properly managed.
Financial instrument by category
The accounting policies for financial instruments have been applied
to the line items below:
Financial assets at fair value through profit or loss
Financial instruments that are measured subsequent to initial recognition
at fair value are grouped into Levels 1 to 3 based on the degree
to which the fair value is observable:
Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities;
Level 2 fair value measurements for those derived from inputs other
than quoted prices included within Level 1 that are observable for
the assets or liability, either directly or indirectly; and
Level 3 fair value measurements are those derived from inputs that
are not based on observable market data.
Unquoted equity investments held at fair value through profit or
loss are valued in accordance with the IPEVCV guidelines as follows;
2020 2019
Investment valuation methodology $'000 $'000
Quoted prices (unadjusted)
(level 1) - 8,757
Earnings multiple basis
(level 3) - 414
Net Assets (level 3) - 18,198
Price of Recent Investment 8,000 -
(level 3)
8,000 27,369
======= =======
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
14. FINANCIAL INSTRUMENTS - continued
IFRS 13 and IFRS 7 requires the directors to consider the impact
of changing one or more of the inputs used as part of the valuation
process to reasonable possible alternative assumptions.
The Level 3 valuations listed above include inputs based on non-observable
market data as outlined in note 8 above. The Investment Manager
has derived a fair value for these investments based on the value
of the underlying net assets of the respective investments and
/ or has considered prospective enterprise values for these investments
from the perspective of a market participant.
The directors have considered a number of reasonable possible alternative
assumptions regarding the value of the Level 3 investments. IFRS
13 requires an entity to disclose quantitative information about
the significant unobservable inputs used.
A summary of the unobservable inputs, judgements and estimates
made in relation to the Level 3 investments is as follows:
As of the year end, the valuation the Company's minority shareholdings
in each its investee companies has been valued on a Price of Recent
Investment basis which the directors consider represents the best
indication of the fair value at the year end. All five of these
businesses are presently loss-making although their cost bases
are low and there is minimal committed future expenditure, meaning
that the extent and timing of the Company's further investment
in the businesses are highly controllable.
However, each business operates in a competitive market place and
there can be no guarantee that any of the investee companies will
ultimately be successful and that the future carrying value of
these companies will not need to be impaired. In the worst-case
scenario of any one investment having to be fully impaired, this
would result in a decrease of valuation of the investment of $1,600,000.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
14 . FINANCIAL INSTRUMENTS - continued
The valuation method applied to each equity investment is that which
is considered most appropriate with regard to the stage of development
of the investee business and the IPEVCV guidelines.
All other financial instruments, including cash and cash equivalents,
trade and other receivables, trade and other payables and loans
and borrowings, are measured at amortised cost.
Due to their short-term nature, the carrying values of cash and
cash equivalents, trade and other receivables, trade and other payables
and loans and borrowings approximates their fair value.
Credit risk
The Company's credit risk is primarily attributable to other receivables.
Management has a credit policy in place and the exposure to credit
risks is monitored on an ongoing basis. In respect of other receivables,
individual credit evaluations are performed whenever necessary.
The Company's maximum exposure to credit risk is represented by
loans, both those held as unquoted investments and included in other
receivables, and cash balances. The Company monitors the financial
position of borrowing entities on an ongoing basis and is satisfied
with the quality of the debt. Investment of surplus cash balances
are reviewed on an annual basis by the Company and it is satisfied
with the choice of institution. The directors have assessed the
amounts owed to connected parties for impairment in accordance with
IFRS 9 and concluded that there is no material impact.
Interest rate risk
The Company currently operates with positive cash and cash equivalents
as a result of issuing share capital in anticipation of future funding
requirements. As the Company has no borrowings from the bank and
the amount of deposits in the bank are not significant, the exposure
to interest rate risk is not significant to the Company.
Liquidity risk
The Company manages its liquidity requirements by the use of both
short-term and long-term cash flow forecasts. The Company's policy
to ensure facilities are available as required is to issue equity
share capital in accordance with agreed settlement terms with vendors
or professional firms, and are typically due within one year unless
otherwise stated.
The Company maintains minimal cash reserves, however in addition
to the cash on the Company's statement of financial position, sufficient
cash is available to the Company via credit facilities to ensure
it is able to meet its liabilities as they fall due.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
14 . FINANCIAL INSTRUMENTS - continued
The table below summarises the maturity profile of the Company's
financial liabilities based on contractual discounted payments.
3 to
On Less than 12 More than
demand 3 months months 12 Months Total
Year ended 31 May
2020 $'000 $'000 $'000 $'000 $'000
Trade payables 226 - - - 226
Other payables
Accruals and deferred
income 28 - - - 28
Loans and borrowings - - - - -
----------
254 - - - 254
------- ---------- ------- ---------- ------
Year ended 31 May
2019
Trade payables 698 - - - 698
Other payables 2,039 - - - 2,039
Accruals and deferred
income 1,755 - - - 1,755
Loans and borrowings - 800 800
4,492 - - 800 5,292
------- ---------- ------- ---------- ------
Price risks
The Company's securities are susceptible to price risk arising
from uncertainties about future value of its investments. This
price risk is the risk that the fair value of future cash flows
will fluctuate because of changes in market prices, whether those
changes are caused by factors specific to the individual investment
or financial instrument or its holder or factors affecting all
similar financial instruments or investments traded in the
market.
During the year under review, the Company did not hedge against
movements in the value of its investments. A 10% increase/decrease
in the fair value of investments would result in a $800,000 (2019:
$2,736,857 increase/decrease in the net asset value).
While investments in companies whose business operations are
based in emerging markets may offer the opportunity for significant
capital gains, such investments also involve a degree of business
and financial risk, in particular for unquoted investments.
Generally, the Company is prepared to hold unquoted investments
for a medium to long time frame, in particular if an admission to
trading on a stock exchange has not yet been planned. Sale of
securities in unquoted investments may result in a discount to the
book value.
Currency risks
The Company is exposed to foreign currency risk on its
investments held at fair value and adverse movements in foreign
exchange rates will reduce the values of these investments. There
is no systematic hedging in foreign currencies against such
possible losses on translation/realisation.
Foreign exchange volatility is significantly reduced following
the transition to US Dollar as the Company's currency exposures are
now more closely matched to its functional and reporting currency.
The Company's exposure to other foreign currency changes is not
deemed to be material as the Company's investments are US Dollar
based.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
14. FINANCIAL INSTRUMENTS - continued
Capital management
The Company's financial strategy is to utilise its resources to
further grow its portfolio. The Company keeps investors and the
market informed of its progress with its portfolio through periodic
announcements and raises additional equity finance at appropriate
times. The Company regularly reviews and manages its capital
structure for the portfolio companies to maintain a balance between
the higher shareholder returns that might be possible with certain
levels of borrowing for the portfolio and the advantages and
security afforded by a sound capital position, and makes
adjustments to the capital structure of the portfolio in the light
of changes in economic conditions. Although the Company has
utilised loans from shareholders to acquire investments, it is the
Company's policy as far as possible to finance its investing
activities with equity and not to have gearing in its
portfolio.
At the statement of financial position date the capital
structure of the Company consisted of borrowings disclosed in note
13, cash and cash equivalents and equity comprising issued capital
and reserves.
The table below sets out the Company's classification of each
class of financial assets/liabilities, their fair values (where
appropriate) and under which valuation method they are valued:
Total carrying
amount and
Level Level Level Fair
1 2 3
Note $'000 $'000 $'000 Value
$'000
31 May 2020
Loans and receivables
Trade and other receivables 9 - - 46 46
Cash and cash equivalents 10 6 - - 6
-------- -------- --------- ---------------
6 - 46 52
Liabilities at amortised
cost
-------- -------- --------- ---------------
Trade and other payables 12 - - (254) (254)
Loans and borrowings 13 - - - -
-------- -------- --------- ---------------
- - (254) (254)
-------- -------- --------- ---------------
Fair value through
profit and loss
Investments 8 - - 8,000 8,000
6 - 7,792 7,798
-------- -------- --------- ---------------
31 May 2019
Loans and receivables
Trade and other receivables 9 - - 933 933
Cash and cash equivalents 10 46 - - 46
-------- -------- --------- ---------------
46 - 933 979
Liabilities at amortised
cost
-------- ------------- --------- ---------------
Trade and other payables 12 - - (4,492) (4,492)
Loans and borrowings 13 - - (800) (800)
-------- ------------- --------- ---------------
- - (5,292) (5,292)
-------- ------------- --------- ---------------
Fair value through
profit and loss
Investments 8 8,757 - 18,612 27,369
8,803 - 14,253 23,056
-------- ------------- --------- ---------------
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 MAY 2020
15. RELATED PARTY DISCLOSURES
Transactions with subsidiaries
During the year, the Company made a number of payments on behalf
of, advanced and received loans to/from its subsidiary
undertakings, Craven Industrial Holdings Plc., DLC Holdings Corp.,
Craven House Capital North America LLC, Craven House Angola LDA and
Kwikbuild Corporation Ltd.
To facilitate the group reconstruction, all amounts due to/from
DLC Holdings Corp., Craven House Capital North America LLC, Craven
House Angola LDA and Kwikbuild Corporation Ltd were assigned to
their immediate parent Craven Industrial Holdings Plc. At the year
end, the resultant balance of $7,158,248 due from Craven Industrial
Holdings Plc. to the Company was written off in full.
Loan to Craven Industrial Holdings Plc
During the year, the Company made a number of payments on behalf
of, and received a loan repayment from its subsidiary Craven
Industrial Holdings Plc. At the year end the outstanding balance
was $nil (2019: $38,969). During the year, a balance of
GBP7,158,248 was written off in full as part of the group
reconstruction.
Loan to Craven House Capital North America LLC
During the year, the Company made a number of payments on behalf
of, advanced and received loans to/from its subsidiary Craven House
Capital North America LLC. At the year end the outstanding balance
was $nil (2019: $777,645). During the year, a balance of
GBP4,437,192 was transferred to Craven Industrial Holdings Plc as
part of the group restructuring mentioned above.
Loan from Craven House Angola LDA
During the year, the Company received a number of loans from its
subsidiary Craven House Angola LDA. At the year end the outstanding
balance was $nil (2019: $1,175,664). During the year, a balance of
GBP1,208,187 was transferred to Craven Industrial Holdings Plc as
part of the group restructuring mentioned above.
Loan from Kwikbuild Corporation Ltd
During the year, the Company paid a number of costs on behalf
of, advanced and received loans to/from its subsidiary Kwikbuild
Corporation Ltd. At the year end the outstanding balance was $nil
(2019: $813,443). During the year, a balance of GBP795,443 was
transferred to Craven Industrial Holdings Plc as part of the group
restructuring mentioned above.
Loan from Desmond Holdings Limited
During the year, the Company received a loan of $nil (2019:
$75,000) from Desmond Holdings Limited. At the year end the
outstanding balance was $nil (2019: $50,000). In May 2020 a balance
of GBP3,529 was transferred to Craven Industrial Holdings Plc as
part of the group restructuring mentioned above.
All loans accrue interest at a rate of 5% as of 1 June 2019
(prior to this date no interest was charged) and are repayable on
demand.
Sales to 7Mobile LDA
During the year, the Company's joint venture, Qeton Ltd, made
sales totalling EUR99,950 (2019: EUR934,832) to 7Mobile LDA. Craven
House Angola Lda., a subsidiary of the Company, has directors in
common with 7Mobile Lda. As of 31 May 2020, Qeton Ltd and Craven
House Angola Lda are no longer owned by the Company.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
15. RELATED PARTY DISCLOSURES -continued
Desmond Holdings Limited
Desmond Holdings Limited is the Investment Manager of the
Company. Mr M J Pajak is the sole shareholder and director of
Desmond Holdings Limited. During the year, the Company incurred
management fees of $211,614 (2019: $219,860) from Desmond Holdings
Limited. At the year end, the balance payable of $629,529 was
assigned to Craven Industrial Holdings Plc.
Also during the year, an accrual for prior year management fees
in the sum $1,657,438 was waived in full. At the year end, $Nil
(2019: $424,426) was due to Desmond Holdings Limited in relation to
management fees.
A further $50,000 owed to Desmond Holdings Limited as at 31 May
2019 in relation to a working capital loan was repaid in full
during the year.
All loans accrue interest at a rate of 5% as of 1 June 2019
(prior to this date no interest was charged) and are repayable on
demand.
Directors and key management
All key management personnel are directors and appropriate
disclosure with respect to them is made in note 3 of the financial
statements. There are no other contracts of significance in which
any director has or had during the year a material interest.
16. ULTIMATE CONTROLLING PARTY
The directors consider that there is no ultimate controlling
party.
17. EVENTS AFTER THE REPORTING PERIOD
None.
The Annual Results for year ended 31 May 2020 will be available
to download from the Company's website at:
http://www.cravenhousecapital.com
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Ends
For further information please contact:
Craven House Capital Tel: 0203 286 8130
Plc
Mark Pajak
www.Cravenhousecapital.com
SI Capital Tel: 01483 413500
Broker
Nick Emerson
www.sicapital.co.uk
SPARK Advisory Partners Tel: 0203 368 3550
Limited
Nominated Adviser
Matt Davis/James Keeshan
www.Sparkadvisorypartners.com
About Craven House Capital:
The Company's Investing Policy is primarily to invest in or
acquire a portfolio of companies, partnerships, joint ventures,
businesses or other assets participating in the e-Commerce
sector.
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END
FR UOOURRKUURAA
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December 03, 2020 07:43 ET (12:43 GMT)
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