TIDMELTA
RNS Number : 3621Z
Electra Private Equity PLC
21 May 2021
Electra Private Equity PLC
Unaudited Results Announcement for the Half Year Ended 31 March
2021
Decision to list Electra's Two Largest Remaining Portfolio
Assets, TGI Fridays ("Fridays") and Hotter Shoes ("Hotter"), on the
FTSE Main Market and AIM, Respectively
Commenting, Neil Johnson, Chairman of Electra Private Equity
PLC, said:
"With the recent sale of Sentinel, we enter the final stage of
our strategy with confidence, having returned over GBP2 billion to
shareholders since October 2016. The new management teams at our
two remaining larger portfolio assets, Fridays and Hotter, have
performed admirably through the pandemic, not just sustaining their
businesses in the most difficult circumstances, but also
transforming them. In light of this, and their potential for
further significant longer term value creation, the Board has
decided that the optimal outcome for shareholders is likely to lie
in a capital market solution for both businesses. It is our
intention to demerge Fridays onto the FTSE Main Market late in the
third quarter of this year and, subsequently, in the fourth
quarter, to bring Hotter on to AIM through reclassification of the
Electra entity. Plans are well advanced for both listings."
Group Highlights
-- Net asset value ("NAV") as at 31 March 2021 of GBP196.9
million or 514.3p per share (September 2020: GBP135.3 million or
353.4p per share);
-- Valuation of the three largest investments together now above pre Covid-19 levels;
-- Confidence in the strategies of both Fridays and Hotter to
achieve accelerated and sustainable growth;
-- Intention to demerge Fridays onto the FTSE Main Market late
in Q3 2021 and subsequently to bring Hotter onto AIM through
reclassification of the Electra entity in Q4 2021; and
-- Successful exit from Sentinel Performance Solutions Ltd
("Sentinel") in April 2021, realising GBP22.2 million (September
2020 valuation: GBP10.9 million).
Portfolio Highlights*
-- Fridays
o All 87 stores including new Fridays in Lincoln and the first
"63(rd) +1(st) " in Cobham opened within relevant Covid-19
constraints;
o In the three weeks since re-opening for restricted "dine in"
(no alcohol and 8pm closure) on 26 April, Fridays' eight Scottish
stores have recorded sales up 14% on unrestricted trading in the
same period in 2019;
o Pro forma EBITDA on recovery to 2019 demand and market share
levels of GBP32.7 million** (2019: GBP25.6 million):
o Net debt of GBP62 million as at 31 March 2021, after
adjustment for Covid-19 related accruals; and
o Strong pipeline of new openings in 2021 and beyond, for
Fridays and its new complimentary brand, "63(rd) +1(st) ".
-- Hotter
o Following the implementation of its "direct to consumer"
operating model in October 2020, Hotter continues to perform
strongly with focus on its "freesole", "cushion +" and "stability
+" product ranges which incorporate differentiating technology to
meet customers' needs beyond the core brand promise of
uncompromising comfort and fit;
o UK online like for like ("LFL") sales growth of 30% in the
seven months to end April 2021;
o EBITDA in the seven months to end April 2021 is 8% ahead of
proforma EBITDA for the continuing business in the year to January
2020 which indicated pro-forma full year EBITDA of GBP5.4 million;
and
o Net debt of GBP12 million as at 31 March 2021.
-- Sentinel
o Strong trading continued over winter period giving EBITDA of
GBP4.2 million in year to March 2021; and
o Successful sale of the business in April 2021 resulted in net
proceeds to Electra of GBP22.2 million (September 2020 valuation:
GBP10.9 million).
-- Other Assets
o Adjustoform Products Limited sold in May 2021 for net proceeds
of GBP1.6 million (September 2020 valuation: GBP1.3 million).
* Portfolio company data throughout this announcement other than
at period ends is unaudited and based on management information
subjected to internal verification
** Table 2 on the next page indicates actual performance of
Fridays in 2019 and, on a pro forma basis, the performance we would
expect on recovery to 2019 demand and market share levels,
reflecting the structural changes made to Fridays' cost base and
portfolio (0% LFL growth). The table also indicates the impact of a
range of growth / market share gains reflecting the opportunity
from competitor contraction, product improvement and the strategic
developments outlined above. This pro-forma table has been updated
from that published in December to reflect the impact of the Brexit
deal and other updated data.
1
Table 1: Composition of NAV:
As at 31 March 2021 30 September
2020
GBPm p/share GBPm p/share
--------------------------- ------ -------- ------ --------
Fridays 146.2 381.9 106.6 278.5
Sentinel 22.2 58.0 10.9 28.5
Hotter 19.2 50.2 5.8 15.2
SPC 1.1 2.9 1.0 2.6
Other 4.0 10.5 4.3 11.2
Cash and cash equivalents 4.5 11.9 6.9 18.0
Other net liabilities (0.4) (0.1) (0.2) (0.5)
--------------------------- ------ -------- ------ --------
Total NAV 196.9 514.3 135.3 353.4
--------------------------- ------ -------- ------ --------
Table 2: Fridays Proforma Performance
2 019 Proforma
A ctual Market demand at 2019 level
-------------------- -----------------------------------
Fridays LFL growth 0.0% 5.0% 7.5% 10.0%
Sales (GBPm) 214.8 226 .6 237 .9 245.6 249 .3
EBITDA (GBPm) 25.6 32 .7 36.5 38 .9 4 1 .3
EBITA (GBPm) 15.0 2 1.9 2 5.7 2 8.1 3 0.5
-------------------- --------- -------- -------- ------ -------
For Further Information:
Gavin Manson, Chief Financial and Operating Officer, Electra
Private Equity PLC
020 3874 8300
The financial information set out below does not constitute the
Company's statutory accounts for the half year ended 31 March 2021
or the year ended 30 September 2020 but is derived from those
accounts. Statutory accounts for the year to 30 September 2020 were
approved by the Board of Directors on 8 December 2020, published on
26 January 2021 and delivered to the Registrar of Companies.
References in this announcement to Electra Private Equity PLC and
its subsidiaries have been abbreviated to "Electra" or the
"Company" or the "Group".
The information contained in this announcement is restricted and
is not for release, publication or distribution, directly or
indirectly, nor does it constitute an offer of securities for sale,
in the United States, Canada, Japan, Australia, New Zealand or
South Africa.
2
Chairman's Statement
"With the recent sale of Sentinel, we enter the final stage of
our strategy with confidence, having returned over GBP2 billion to
shareholders since October 2016. The new management teams at our
two remaining larger portfolio assets, Fridays and Hotter, have
performed admirably through the pandemic, not just sustaining their
businesses in the most difficult circumstances, but also
transforming them. In light of this, and their potential for
further significant longer term value creation, the Board has
decided that the optimal outcome for shareholders is likely to lie
in a capital market solution for both businesses. It is our
intention to demerge Fridays onto the FTSE Main Market late in the
third quarter of this year and, subsequently, in the fourth
quarter, to bring Hotter on to AIM through reclassification of the
Electra entity. Plans are well advanced for both listings."
Throughout the 14 months since the emergence of the Covid-19
pandemic we have remained focused on ensuring that each of our
portfolio businesses emerges stronger from the pandemic, with a
strategy and implementation plan in place for sustainable growth
and the creation of shareholder value. Through the focus and
agility of our management teams the March valuation of our three
core investments together has returned to pre Covid-19 levels.
Following the successful exit from Sentinel in April at a multiple
of seven times the carrying value in September 2019, immediately
after we gained control in July 2019, we are confident that both
TGI Fridays ("Fridays") and Hotter Shoes ("Hotter") will
demonstrate incremental value as we emerge from Covid-19.
Both these businesses have plans in place that will deliver
long-term value creation. Fridays is a rejuvenated business with a
strategy for sustainable growth and the opportunity for
acceleration in the opportunity-rich casual dining market, whilst
Hotter has delivered the early stages of its plan following the
accelerated delivery of its targeted operating model last year.
A key consideration of the Board in managing the delivery of our
realisation strategy has been to seek the optimal outcome in the
balance between timing of returning cash to shareholders and
maximisation of value. The public markets are currently reflecting
post Covid-19 value for well positioned consumer businesses, and as
such, it is our intention to demerge Fridays onto the FTSE Main
Market late in the third quarter of this year and subsequently to
bring Hotter onto AIM through reclassification of the Electra
entity in the fourth quarter.
We believe that through this strategy we can deliver further
growth for our shareholders, bringing the implementation of our
strategy to a successful conclusion whilst leaving two strong and
well managed businesses to drive further value creation.
The strategy to optimise value through capital market solutions
for Fridays and Hotter leaves our existing executive incentive
Share of Value Plan ("SoVP"), which would be settled in cash,
potentially out of alignment with corporate strategy. Following
consideration by the Board's Remuneration Committee and in light of
recent strength in the Electra share price subsequent to the period
end, agreement has been reached to ensure continued alignment of
shareholders' and executives' interests through the vesting of SoVP
awards in May, with the full net proceeds of GBP3.7 million being
reinvested through subscription by the executives for new shares in
Electra. The executives have undertaken to retain their shares for
not less than six months following each relevant transaction. It is
anticipated that the subscription for new shares will take place as
soon as practically possible following release of these Interim
Results at the higher of NAV and market price.
As we continue our preparation for the transactions planned for
the second half of the year, we recognise that as a result of
market disruption since March 2020 our valuations as at March 2021
reflect a higher than normal degree of judgement. The disruption to
the historical earnings of the comparator companies used in our
valuation process has resulted in us having to utilise published
forward earnings multiples for our comparator companies and
estimated but conservative forecast earnings for our portfolio
companies in establishing enterprise value. Having considered the
resultant valuations carefully and after discussion with our
auditor and with input from other advisers, the Board is
comfortable that the published valuations are a reasonable
reflection of Fridays as it prepares to emerge from Covid-19
lockdown, and of Hotter as it demonstrates early delivery of its
new business model.
Further information in relation to our larger remaining assets
is given below:
Larger Controlled Assets: Fridays
As reported at March September September
2021 2020 2019
GBPm GBPm GBPm
Valuations 146.2 106.6 141.4
---------------- ------ ---------- ----------
Fridays is emerging from lockdown a much stronger and more
rounded business. Its market has been equally transformed as a
result of the reduction in competitor supply - through the closure
of an estimated 21%* of direct competitor restaurants. These
factors combined give us confidence in Fridays' ability to
demonstrate further material value creation.
*Source: Jefferies note on UK Leisure: 11 April 2021
3
Following the initial imposition of lockdown on 23 March 2020,
Fridays has traded continually from the launch of its "click &
collect" and delivery services on 7 May 2020. Its restaurants have
traded whenever local restrictions have allowed, with new,
permanent outside space, with capacity equivalent to approximately
four additional restaurants, opened on 12 April 2021. This focused
and agile approach has allowed Fridays not only to demonstrate its
improved customer offering to many new customers but to also
optimise cash generation and maintain its supply chain throughout
the disruption to date.
Through the impact of the material disruption to trade
throughout most of the six-month period since September 2020,
Fridays' net debt position after reflecting all pandemic related
accruals has increased from GBP39 million in September 2020 to
GBP62 million in March 2021, with cash holdings at the period end
of GBP21.5 million. With partial reopening in April, Fridays became
immediately cash generative.
Whilst sustained consumer confidence and any future Covid-19
restrictions are outside our control, Fridays' restaurants and team
members are ready to serve their customers and rapidly build on the
success of recent months.
Early indications of post reopening trading are very positive
with Fridays' Scottish stores recording sales of 14% like for like
("LFL") growth vs 2019 levels in the three weeks following
reopening on 26 April 2021, despite being unable to serve alcohol
and closing at 8pm. The first three days of business following
reopening across England and Wales on 17 May has shown LFL growth
of 76% vs 2019, reflecting release of pent-up demand following the
national lockdown, as well as highlighting the opportunity from
spreading demand throughout the week.
With this positive start Fridays will continue its strategic
growth through delivery of its "4D" Strategy, all underpinned by
its 5(th) D of Development through the addition of brands or
markets utilising the Fridays platform to drive profitable
growth:
1. Dine-in: the core offering of quality food and drinks in an
American-themed environment within its developing Fridays and
"63(rd) + 1(st) " estate;
2. Delivery: prepared food and drinks delivered to your home at the time of consumption;
3. Digital: expanding the reach of Fridays through the delivery
of prepared but uncooked Fridays meals with accompanying drinks
nationwide for at home dining and summer barbeques; and
4. Drive-in: opportunity for future growth in drive-through
locations aligned to sustainable travel.
The sustainable development of the Dine-in offering continues
with the opening of Fridays in Lincoln and the first "63(rd) +
1(st) " in Cobham immediately on reopening, resulting in a trading
estate of 87 restaurants. A further three Fridays and four "63(rd)
+ 1(st) " are in the pipeline for opening over the coming
months.
The development of Fridays' Delivery and Digital channels was
accelerated during Covid-19 disruption and will continue to form
part of Fridays' development strategy going forward. "Jailbreak
Chicken", a new delivery-only brand, was launched on a trial basis
during lockdown and is now available in 19 towns and cities across
the country. This builds on the growth of Fridays' range of drinks
and "cook at home" meals launched over the last year.
Fridays is also in early exploration of opportunities for future
strategic expansion through:
-- the development of quick service restaurants through a
capital-light approach aligned to Drive-in sustainable transport
infrastructure; and
-- opportunities to Develop its existing brands in new markets or additional brands in the UK.
Each of the core activities and future opportunities mentioned
will be built around the efficient and highly digitised Fridays'
infrastructure platform which has been implemented over the last
year, and which allows the Fridays customer facing team to focus on
providing great customer service and experiences.
Given the uncertainty of the post Covid-19 trading environment,
this efficient platform will be a key factor in helping to drive
future value creation. The table below indicates actual performance
in 2019 and, on a pro forma basis, the performance we would expect
on recovery to 2019 levels of demand and market share, reflecting
the structural changes made to Fridays' cost base and portfolio (0%
LFL growth). The table also indicates the estimated pro forma
impact of a range of growth / market share gains reflecting the
opportunity from competitor contraction, product improvement and
the strategic developments outlined above. This pro forma table has
been updated from that published in December 2020 to reflect the
impact of the Brexit deal and other updated data.
2 019 Pro-forma
A ctual Market demand at 2019 level
--------------------- -----------------------------------
Fridays L FL growth 0.0% 5.0% 7.5% 10.0%
Sales (GBPm) 214.8 226 .6 237 .9 245.6 249 .3
EBITDA (GBPm) 25.6 32 .7 36.5 38 .9 4 1 .3
EBITA (GBPm) 15.0 2 1.9 2 5.7 2 8.1 3 0.5
--------------------- --------- -------- -------- ------ -------
With these developments and Fridays' continued focus on the
delivery of quality food, drinks and service we are excited by the
opportunity for growth and value creation.
4
Larger Controlled Assets: Hotter
As reported at March September September
2021 2020 2019
GBPm GBPm GBPm
Valuations 19.2 5.8 33.0
---------------- ------ ---------- ----------
Coinciding with the implementation of its new operating model,
in October 2020 Hotter launched its "freesole", "cushion +" and
"stability +" product ranges which incorporate differentiating
technology to meet customers' needs beyond the core brand promise
of uncompromising comfort and fit. Hotter's product has continued
to develop in 2021 with further focus on differentiating technology
in the spring/summer range launched in late February.
The optimisation of its operating model improves Hotter's
situation and gives it the opportunity for growth as a digital
direct to consumer business serving its existing UK and US markets,
supported by a small, strategic UK retail estate. This leaves it
free of the significant constraints imposed previously by its large
retail network and the consequential impact on product range,
margin erosion across channels and working capital
inefficiency.
Performance since the October operating model and product
strategy launch has been highly encouraging despite the impact of
Covid-19 on Hotter's remaining retail estate. In the seven months
from October UK online sales have grown 30% on the prior period
whilst sales from digital partnerships have grown 44%. Online sales
in the UK and US contributed 68% of total sales over this period,
up from 54% in the prior year on an LFL basis. The growth in online
sales reflects a shift from retail sales (retained stores only)
with the offline direct to consumer business unchanged at 22% of
total sales.
Over the same seven-month period the impact and resilience of
Hotter's new operating model is demonstrated by EBITDA being 8%
ahead of the proforma for continuing operations for the year to
January 2020, which (as illustrated in the table below) indicated
full year proforma EBITDA of GBP5.4 million. This growth is despite
the retained retail estate and retail wholesale partners being
closed for 21 out of the 30 weeks in the seven-month period. Over
this period the retained retail estate had negative EBITDA of
GBP0.3 million.
Whilst Hotter is relatively early in the demonstration of
sustained growth and profitability in its new model, the resilience
and performance to date give us grounds for confidence in its
development as an increasingly profitable digital business serving
its target demographic of over-55-year-olds in the UK, the US and
beyond. The increase in its valuation as at March 2021 reflects
early demonstration of the EBITDA improvement under Hotter's new
operating model.
The table below, replicated and updated from our September 2020
annual results, shows EBITDA for the year ended January 2020 as
reported, and also on a pro forma basis under the new operating
model on an LFL sales basis. It also shows the pro forma impact of
a range of sales growth rates through its direct channels - now
contributing over 85% of sales in a "normal" period, with early
growth in the seven months to April of 10%.
Pro forma
-------------
Y ear to Y ear to Direct Channel Growth
January 20 January 20
as reported continuing
--------------------------
1 0 .0% 15.0% 2 0 .0%
---------------
Sales (GBPm) 85.5 60.5 64.6 66.7 68.8
EBITDA (GBPm) 4.3 5.4 7.3 8.3 9.2
--------------- ------------- ------------ -------- ------ --------
There remains uncertainty over the degree to which Covid-19
disruption will have an ongoing impact on Hotter's remaining retail
operations. We now estimate that a 10% reduction in retail demand
from 2019 levels across a full year would reduce EBITDA
contribution by approximately GBP0.2 million. This estimation of
the impact of retail trade at reduced levels during market recovery
from Covid-19 has reduced since our December full year report as a
result of the demonstration of rigorous cost management within the
Company.
With the significant improvements made to Hotter's customer
offering, we have confidence in the management team's ability to
drive future sales and profit growth, as a direct to consumer
business.
Larger Controlled Assets: Sentinel
As reported at March September September
2021 2020 2019
GBPm GBPm GBPm
Valuations 22.2 10.9 3.2
---------------- ------ ---------- ----------
Electra acquired control of Sentinel in July 2019 and
immediately appointed experienced industry professional David
Barrett as CEO. The Sentinel management team was simplified and
refreshed, and significant non-productive cost was taken out of the
business. With focus on profitable organic and new product growth
combined with continued cost efficiency, EBITDA in the year to
March 2020 improved by 150% to GBP3.0 million. Despite material
disruption in each of its core UK, French and Italian markets,
EBITDA in the year to March 2021 was increased further to GBP4.2
million.
5
In April 2021, Electra led the sale of the Sentinel business to
the Utrecht based global industrial products group Aalberts N.V.
The net proceeds received by Electra of GBP22.2 million represented
a return of over 13 times the GBP1.7 million invested in taking
control for a nominal sum in 2019 and subsequently supporting the
business turnaround.
Other Assets - Combined Valuation GBP5.1 million
In early May, we concluded the sale of Adjustoform Products
Limited for net cash proceeds of GBP1.6 million. This reflects the
March 2021 valuation and an increase from its pre-pandemic
valuation of GBP0.5 million.
Other remaining assets comprise an escrow interest following the
SPC disposal in December 2019, a small corporate investment and a
property interest. We continue to work towards planned realisation
of these investments.
Dividends
Following today's announcement of our intention to demerge
Fridays onto the FTSE Main Market and subsequently to bring Hotter
onto AIM through reclassification of the Electra entity in the
second half of 2021, the Board intends to ensure that both
companies are adequately capitalised to face the future with
confidence and to optimise shareholder value. The possibility of
further cash distributions will be assessed in conjunction with the
implementation of these transactions.
As indicated above, whilst market uncertainty remains
heightened, we currently expect a successful conclusion to our
strategy in 2021. Being in a position to target this outcome is
thanks to the efforts of our portfolio company management and wider
teams, and the focus and resilience they have shown in recent
months. Whilst there is much to be done over the coming months, I
again thank each of them and their wider teams for their highly
professional and effective efforts to optimise the resilience of
our businesses and to ensure that each of them emerges
strongly.
Neil Johnson
Chairman
20 May 2021
6
Portfolio Review
Portfolio Movement
Electra's investment portfolio increased from GBP128.6 million
to GBP192.7 million during the six months to 31 March 2021. The
increase resulted from a recovery in portfolio valuation of GBP64.3
million.
2021 2020 2019 2018
For the six months ended 31 March GBPm GBPm GBPm GBPm
----------------------------------- ------ ------- -------- -------
Opening investment portfolio 128.6 193.0 267.0 358.0
Investments - 2.8 8.0 11.0
Realisations (0.2) (12.0) (118.0) (36.0)
Investment return 64.3 (51.4) 18.0 (2.0)
----------------------------------- ------ ------- -------- -------
Closing investment portfolio 192.7 132.4 175.0 331.0
----------------------------------- ------ ------- -------- -------
Investment Realisations Investment Investment
fair value as at return fair value as at
30 September 2020 31 March 2021
GBPm GBPm GBPm GBPm
-------------------------------- ------------------- ------------- ----------- ------------------
TGI Fridays 106.6 - 39.6 146.2
Sentinel Performance Solutions 10.9 - 11.3 22.2
Hotter Shoes 5.8 - 13.4 19.2
Other 3.9 (0.2) 0.3 4.0
-------------------------------- ------------------- ------------- ----------- ------------------
Total core investments 127.2 (0.2) 64.6 191.6
-------------------------------- ------------------- ------------- ----------- ------------------
Special Product Company 1.0 - 0.1 1.1
Secondaries 0.4 - (0.4) -
Total non-core investments 1.4 - (0.3) 1.1
-------------------------------- ------------------- ------------- ----------- ------------------
Total investment portfolio 128.6 (0.2) 64.3 192.7
-------------------------------- ------------------- ------------- ----------- ------------------
Realisations
Total realisations for the six months amounted to GBP0.2 million
compared with GBP12 million in the corresponding period of the
previous year.
Realisations 2021 2020
During the six months ended 31 March GBPm GBPm
-------------------------------------- ------ -----
Special Product Company - 8.7
Other (0.2) 1.7
-------------------------------------- ------ -----
Total core investments (0.2) 10.4
-------------------------------------- ------ -----
Debt - 1.6
Total realisations (0.2) 12.0
-------------------------------------- ------ -----
7
Key Investments
Fridays
The UK franchise of an American-themed restaurant chain
providing a high energy and fun environment, with a wide
demographic appeal.
Investment Valuations
2021 2020 2019 2018
As at 31 March GBPm GBPm GBPm GBPm
----------------------- ------ ------ ------- -------
Investment valuations 146.2 118.8 132.8* 150.0*
------------------------ ------ ------ ------- -------
* Adjusted for additional investments made after the previous
period end.
The challenges facing the casual dining sector over the last
year have been on a scale never before contemplated. Many good
businesses will not reopen after lockdown and a significant number
of skilled workers have left the industry due to lack of job
security. Whilst estimates vary over the percentage of Fridays'
competitors that will not re-open, we consider the initial number
is likely to be in the scale of 21%**. The utilisation of empty
space over time remains to be seen, however the expectation is that
other restaurants will fill some of it. Fridays is well positioned
to capitalise on this opportunity, having built a pipeline of new
store opportunities from those sites that best match our business,
both for Fridays and for "63(rd) + 1(st) ". These new sites come
with fit-out and occupation costs significantly below pre-pandemic
levels.
Over the last year Robert Cook and his newly assembled
management team have worked tirelessly to operate economically at
every opportunity, generating cash and serving new and existing
customers. They have significantly improved the quality and
consistency of delivery of Fridays' core dine-in product whilst
developing new channels, new products and new development plans -
including for the new brands "63(rd) +1(st) " and "Jailbreak
Chicken". With skills brought in from outside the industry, the
team has also transformed the Fridays infrastructure including the
utilisation of technology and data to support both customer
experience and the optimisation of performance through yield
management.
These activities have enabled Fridays to come through the last
year without any additional external funding, and it can now face
the future with confidence and a strong balance sheet. With the new
platform now implemented and the enhanced skills brought in Fridays
is well positioned for future growth and development, and is able
to offer its team members exciting and rewarding careers.
Whilst consumer demand and necessary restrictions on trading
over the coming months remain to be seen, the performance of
Fridays on restricted opening in Scotland from 26 April 2021 has
been extremely encouraging. Over the three weeks from reopening the
eight Scottish stores have shown growth of 14% on total sales over
the same period in 2019, despite not serving alcohol inside and
closing at 8pm. This performance gives confidence over how the
remaining stores will trade on wider dine-in reopening on 17 May
2021.
With the new stores in Lincoln and Cobham opening and a strong
pipeline of new stores and new opportunities, we are confident that
Fridays has the opportunity to grow significant shareholder value
in both the short term and in the longer term as a public
company.
**Source: Jefferies note on UK Leisure: 11 April 2021
8
Hotter Shoes
The UK's largest shoe manufacturer with a strong focus on
comfort and service.
Investment Valuations
2021 2020 2019 2018
As at 31 March GBPm GBPm GBPm GBPm
----------------------- ----- ----- ----- ------
Investment valuations 19.2 3.0 27.9 48.0*
------------------------ ----- ----- ----- ------
* Adjusted for additional investments made after the previous
period end.
With the delivery of its targeted operating model completed in
2020 Hotter faces the future as a technology-enabled direct to
consumer business with confidence.
Coinciding with the implementation of its new operating model,
in October 2020 Hotter launched its "freesole", "cushion +" and
"stability +" product ranges which incorporate differentiating
technology to meet customers' needs beyond the core brand promise
of uncompromising comfort and fit. Hotter's product has continued
to develop in 2021 with further focus on differentiating technology
in the spring/summer range launched in late February and with
further enhancements coming in autumn/winter and beyond.
The optimisation of its operating model improves Hotter's
situation and gives it the opportunity for growth as a digital
direct to consumer business serving its existing UK and US markets,
supported by a small, strategic UK retail estate of technology
centres focused on ensuring optimal customer experience through
retail sales and online. This leaves it free of the significant
constraints imposed previously by its large retail network and the
consequential impact on product range, margin erosion across
channels and working capital inefficiency.
Performance since the October operating model and product
strategy launch has been highly encouraging despite the impact of
Covid-19 on Hotter's remaining retail estate. In the seven months
from October, UK online sales have grown 30% on the prior period
whilst sales from digital partnerships have grown 44%. Online sales
in the UK and US contributed 68% of total sales over this period,
up from 54% in the prior year on an LFL basis. The growth in online
sales reflects a shift from retail sales (retained stores only)
with the off-line direct to consumer business unchanged at 22% of
total sales.
Over the same seven-month period the impact and resilience of
Hotter's new operating model is demonstrated by EBITDA being 8%
ahead of the proforma for continuing operations for the year to
January 2020, which indicated full year pro-forma EBITDA of GBP5.4
million. This growth is despite the retained retail estate and
retail wholesale partners being closed for 21 out of the 30 weeks
in the seven-month period. Over this period the retained retail
estate had negative EBITDA of GBP0.3 million.
Whilst Hotter is relatively early in the demonstration of
sustained growth and profitability in its new model, the resilience
and performance to date give us grounds for confidence in its
development as an increasingly profitable digital business serving
its target demographic of over-55-year-olds in the UK, the US and
beyond. The increase in its valuation as at March 2021 reflects
early demonstration of the EBITDA improvement under Hotter's new
operating model. This platform and the growth opportunity it
provides give us confidence that as a public company Hotter can
develop beyond its core products to serve its targeted demographic
directly and through digital partnerships.
9
CFOO's Review
"Last year we worked with our management teams to seek to ensure
that despite the disruption of Covid-19 we remained on track for
the successful delivery of our strategy in 2021. Whilst our plans
at portfolio company level and at Electra level had to evolve in
light of the impact of the pandemic, we believe that we are well
placed to complete the successful delivery of our strategy over the
coming months. The sale of Sentinel in April was a positive first
step and with plans for both Fridays and Hotter in place we are
focused on delivery of the planned transactions and in ensuring
that each business is left in a position to continue to grow
shareholder value."
Operating Activities
Our focus in the first six months of the financial year has been
on ensuring that each of our businesses comes through the pandemic
strongly, and in preparation for the implementation of the final
stages of our strategy. With Fridays well positioned for nationwide
re-opening and Hotter demonstrating delivery of its plan, we
believe that we are well prepared but remain focused. The
successful sale of Sentinel in April was an important first step
with the GBP22.2 million cash proceeds being a positive return on
the GBP1.7 million invested since we assumed control in 2019 for a
nominal sum. Although a much smaller business, the GBP1.6 million
proceeds from the sale of Adjustoform in May also provided a
positive outcome for a business that had until 2020 been valued on
a break-up basis.
We are focused on ensuring that both Fridays and Hotter have the
appropriate balance sheets to maximise their future potential and
value as standalone public listed companies. We therefore intend to
retain the cash currently held and obtained from the sale of other
smaller assets, until we can be confident that its use is optimal
in delivering overall shareholder value. An appropriate
distribution will be considered later in the year.
Operating Costs and Share of Value Plan ("SoVP")
Operating costs continue to be closely managed consistent with
the implementation of our realisation strategy.
Fair value of the SoVP was recalculated as at 31 March 2021. The
revaluation resulted in a GBP0.4 million accounting charge to the
Income Statement in accordance with guidance under IFRS 2, and
reflected in these Interim Results. In May 2021 following an
increase in the share price after 31 March 2021, the SoVP vested.
This vesting reflects the performance of the Company over the
period from 1 January 2018 when the SoVP came into effect. In light
of the intended public market solutions for Fridays and Hotter, the
cash vesting of the plan created a potential misalignment between
executive and shareholder interests. In light of this and
reflecting their belief in the longer term value creation
opportunity from Fridays and Hotter, the executives have undertaken
to invest the full GBP3.7 million net proceeds of the SoVP vesting
in a subscription for new Electra shares. The subscription will
take place as soon as practically possible following the release of
these Interim Results. The executives have undertaken to retain
these new shares for a period of at least six months following the
capital market transaction for each company. The gross cost of
vesting, including employer's National Insurance contributions, is
GBP7.9 million. This cost is partially economically hedged by the
690,481 Electra shares held in the Electra Employee Benefit Trust
(the "Trust"). The new shares will be issued at the higher of
reported NAV and market price at the time of issue. The shares
currently held in the Trust are being retained and will act as a
partial economic hedge against portfolio company management
incentives linked to value creation.
Going Concern
Following the adoption of our wind down strategy in 2018 it
became appropriate, in light of the likely ultimate wind-up of the
Company, for the Company to report on a basis other than that of a
going concern. Given our intent now to reclassify the Company as a
trading holding company for Hotter, listed on AIM, this basis of
preparation is no longer appropriate. The Directors have assessed
the Company's net cash position against forecast cash outflows,
including known cash expenses, estimated transaction costs and
portfolio management incentives for the listing of Fridays and
Hotter, and formed a reasonable expectation, based on current
forecasts, that the Company has adequate resources to continue in
operational existence for at least twelve months following the
approval of the condensed interim financial statements. As such
these accounts are prepared on the basis of a going concern. Given
the situation of the Company, the change of basis of preparation
has no numerical impact on the financial performance or position of
the Company as reported.
Analysis of Movement in Net Asset Value ("NAV") per Share
NAV per share increased by 160.9p driven by a significant
recovery in investment valuations of 166.3p, offset slightly by
expenses of 5.4p.
NAV per share p
--------------------------- ------
As at 1 October 2020 353.4
Capital losses and income 166.3
Expenses, FX and tax (5.4)
As at 31 March 2021 514.3
--------------------------- ------
10
Net Liquid Resources
As at 31 March 2021, the Company held GBP0.4 million (2020:
GBP1.2 million) of cash and GBP4.1 million (2020: GBP9.1 million)
of money market fund investments.
Gearing (including Leverage under AIFMD)
At 31 March 2021, Electra was ungeared at the Group level.
Gavin Manson
Chief Financial and Operating Officer
20 May 2021
11
Consolidated Income Statement (Unaudited)
2021 2020
Revenue Capital Total Revenue Capital Total
Note For the six months ended 31 March GBPm GBPm GBPm GBPm GBPm GBPm
----- ---------------------------------------------- -------- -------- ------ -------- -------- --------
2 Investment income 5.7 - 5.7 0.3 - 0.3
7 Investment gains/(losses) - 57.9 57.9 - (51.4) (51.4)
3 Other expenses (2.0) - (2.0) (1.0) - (1.0)
Net return/(loss) before tax 3.7 57.9 61.6 (0.7) (51.4) (52.1)
Tax - - - - - -
----- ---------------------------------------------- -------- -------- ------ -------- -------- --------
Return/(loss) after tax 3.7 57.9 61.6 (0.7) (51.4) (52.1)
6 Basic and diluted return/(loss) per share (p) 9.7 151.2 160.9 (1.8) (134.2) (136.0)
----- ---------------------------------------------- -------- -------- ------ -------- -------- --------
The "Total" columns of this statement represent the Group's
Consolidated Income Statement prepared in accordance with
International Financial Reporting Standards ("IFRS") adopted by the
EU. The supplementary "Revenue" and "Capital" columns are prepared
under guidance published by the Association of Investment Companies
(the "AIC").
All activities represent continuing operations. The Company has
no recognised gains and losses other than those shown above and
therefore no separate Statement of Total Comprehensive Income has
been presented.
The accompanying notes are an integral part of the Half Year
Report.
12
Consolidated Statement of Changes in Equity (Unaudited)
Called Own shares Capital Revenue Total
up share held reserve reserve equity
capital
------ ------------------------------
For the six months ended GBPm GBPm GBPm GBPm GBPm
Note 31 March 2021
------ ------------------------------ ---------- ----------- --------- --------- --------
As at 1 October 2020 9.6 (2.4) 76.9 51.2 135.3
Net return during the period - - 57.9 3.7 61.6
As at 31 March 2021 9.6 (2.4) 134.8 54.9 196.9
------------------------------------- ---------- ----------- --------- --------- --------
Called Capital Own Capital Revenue Total
up share Share redemption shares reserve reserve equity
capital premium reserve held
----- ----------------------
For the six months GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Note ended 31 March 2020
----- ---------------------- ---------- ---------- ------------ -------- --------- --------- --------
As at 1 October 2019 9.6 122.9 34.9 - (11.7) 54.8 210.5
Net loss during the
period - - - - (51.4) (0.7) (52.1)
8 Share-based payments - - - - - (1.3) (1.3)
Ordinary shares held
under employee share
11 option plan - - - (2.4) - - (2.4)
9 Dividends - - - - (11.8) - (11.8)
----- ---------------------- ---------- ---------- ------------ -------- --------- --------- --------
As at 31 March 2020 9.6 122.9 34.9 (2.4) (74.9) 52.8 142.9
----- ---------------------- ---------- ---------- ------------ -------- --------- --------- --------
The accompanying notes are an integral part of the Half Year
Report.
13
Consolidated Balance Sheet (Unaudited)
31 March 30 September 31 March
2021 2020 2020
Note GBPm GBPm GBPm
----- ------------------------------------------------ ----------- ------------- -----------
Non-current assets
7 Investments held at fair value 192.7 128.6 132.4
----- ------------------------------------------------ ----------- ------------- -----------
192.7 128.6 132.4
----- ------------------------------------------------ ----------- ------------- -----------
Current assets
7 Investments held at fair value 4.1 5.6 9.1
Trade and other receivables 1.0 0.6 1.0
Current tax asset 0.1 0.3 0.1
Cash and cash equivalents 0.4 1.3 1.2
----- ------------------------------------------------ ----------- ------------- -----------
5.6 7.8 11.4
----- ------------------------------------------------ ----------- ------------- -----------
Current liabilities
10 Trade and other payables (1.5) (0.9) (0.7)
----- ------------------------------------------------ ----------- ------------- -----------
(1.5) (0.9) (0.7)
----- ------------------------------------------------ ----------- ------------- -----------
Total assets less current liabilities 196.9 135.5 143.1
----- ------------------------------------------------ ----------- ------------- -----------
Non-current liabilities
Provisions for liabilities and charges - (0.2) (0.2)
- (0.2) (0.2)
----- ------------------------------------------------ ----------- ------------- -----------
Net assets 196.9 135.3 142.9
----- ------------------------------------------------ ----------- ------------- -----------
Capital and reserves
11 Called up share capital 9.6 9.6 9.6
11 Share premium - - 122.9
11 Capital redemption reserve - - 34.9
11 Own shares held (2.4) (2.4) (2.4)
11 Capital reserve 134.8 76.9 (74.9)
11 Revenue reserve 54.9 51.2 52.8
----- ------------------------------------------------ ----------- ------------- -----------
Total equity 196.9 135.3 142.9
----- ------------------------------------------------ ----------- ------------- -----------
12 Basic and diluted net asset value per share (p) 514.3 353.4 372.5
----- ------------------------------------------------ ----------- ------------- -----------
11 Number of ordinary shares in issue 38,282,763 38,282,763 38,282,763
----- ------------------------------------------------ ----------- ------------- -----------
The accompanying notes are an integral part of the Half Year
Report.
Approved by the Board of Directors and signed on its behalf
by:
Neil Johnson Gavin Manson
Chairman Chief Financial and Operating
Officer
20 May 2021 20 May 2021
Electra Private Equity PLC
Company Number: 00303062
14
Consolidated Cash Flow Statement (Unaudited)
For the six months ended 31 March 2021 2020
--------------------------------------------------------
GBPm GBPm
-------------------------------------------------------- ------ -------
Operating activities
Purchase of trading investments - (11.8)
Sales of trading investments 1.5 27.2
Dividends and distributions received - 1.5
Interest income received 0.2 0.3
Expenses paid (2.7) (2.5)
-------------------------------------------------------- ------ -------
Cash generated from operations (1.0) 14.7
Tax repaid 0.2 0.9
-------------------------------------------------------- ------ -------
Net cash (used in)/generated from operating activities (0.8) 15.6
-------------------------------------------------------- ------ -------
Financing activities
Dividends paid - (11.8)
Purchase of shares held under incentive schemes - (2.4)
Repayment of lease liabilities (0.1) (1.0)
-------------------------------------------------------- ------ -------
Net cash used in financing activities (0.1) (15.2)
-------------------------------------------------------- ------ -------
Net (decrease)/increase in cash and cash equivalents (0.9) 0.4
Cash and cash equivalents at 1 October 1.3 0.8
Cash and cash equivalents at 31 March 0.4 1.2
-------------------------------------------------------- ------ -------
The accompanying notes are an integral part of the Half Year
Report.
15
Notes to the Accounts
1. Segmental Analysis
The Group operates a single business segment for reporting
purposes and is managed as a single investment company, with
multiple investment categories including buyouts and secondaries.
Reporting is provided to the Board of Directors on an aggregated
basis. The Company's portfolio of investments is predominantly
based in the United Kingdom.
2. Revenue Income
2021 2020
For the year ended 31 March GBPm GBPm
----------------------------- ----- -----
Interest income 5.3 0.2
Other income 0.4 0.1
Total revenue income 5.7 0.3
----------------------------- ----- -----
3. Other Expenses
For the six months ended 31 March 2021 2020
GBPm GBPm
----------------------------------- ------ ------
Administrative expenses 2.0 1.0
Total other expenses 2.0 1.0
----------------------------------- ------ ------
Administrative expenses for the six-month ended 31 March 2020
are shown net of a GBP1.0 million reversal of cumulative expenses
previously charged on the Executive Share of Value Plan ("SoVP"),
as a result of the revaluation of the scheme. Refer to Note 8 for
further details.
4. Right-of-Use Assets
Office building
2021 2020
GBPm GBPm
------------------------------------- --------------- --------------
Opening balance 0.3 -
Adjustment on transition to IFRS 16 - 1.0
Additions - 0.4
Disposals - (1.0)
Depreciation (0.1) (0.1)
Balance as at 31 March 0.2 0.3
------------------------------------- --------------- --------------
The Company adopted IFRS 16 Leases on 1 October 2019, in respect
of the head office which the Company rents, using the "modified
retrospective" approach on transition. Prior to adoption of IFRS
16, the lease was recognised as an operating lease and the related
rental expenses were recognised in other expenses in the Income
Statement.
The head office property is the only right-of-use asset in the
Company. As part of its downsizing plan, the Company relocated to a
smaller office in December 2019. Disposals in the above table
relate to the exit of the old lease. The new office lease was
entered into in December 2019 with a three-year lease term and is
measured as a right-of-use asset with an initial value of GBP0.4
million, which is depreciated over its lease term, in accordance
with the Company's accounting policy. The carrying value of
right-of-use assets as at 31 March 2021 is GBP0.2 million.
5. Lease Liabilities
In accordance with IFRS 16 Leases, a corresponding liability of
GBP0.4 million was recognised when the office lease was entered
into. The cash commitment amounts to GBP80,000 in the first year
and GBP160,000 for each of the remaining two years. Interest charge
is calculated at an incremental borrowing rate of 3.5%, totalling
GBP20,000 over the three-year lease term and charged in the Income
Statement. The carrying value of lease liabilities as at 31 March
2021 is GBP0.3 million. The Company also has a cash commitment of
circa. GBP10,000 p.a. over a three-year period on the lease of one
printer for its office.
6. Return/(Loss) per Share
The capital, revenue and total return per ordinary share are
based on the net return/(loss) shown in the Consolidated Income
Statement and the weighted average number of ordinary shares during
the period of 38,282,763 (2020: 38,282,763). There are no dilutive
instruments issued by the Company.
16
7. Financial Instruments
The Group's activities expose it to a variety of financial
risks: market risk (including interest risk and price risk), credit
risk and liquidity risk.
The condensed consolidated half year accounts do not include all
financial risk management information and disclosures required in
the annual financial statements; they should be read in conjunction
with the Group's annual financial statements as at 30 September
2020. There have not been any changes in the risk management
policies and procedures since the year end.
The unlisted financial assets held at fair value are valued in
accordance with the principles of valuation of unlisted equity
investments as detailed in basis of accounting and significant
accounting policies.
Fair Value Hierarchy
Fair value is the amount for which an asset could be exchanged
between knowledgeable willing parties in an arm's length
transaction. The Group complies with IFRS 13 in respect of
disclosures about the degree of reliability of fair value
measurements. This requires the Group to classify, for disclosure
purposes, fair value measurements using a fair value hierarchy that
reflects the significance of the inputs used in making the
measurements. The levels of fair value measurement bases are
defined as follows:
Level 1: fair values measured using quoted prices (unadjusted)
in active markets for identical assets or liabilities.
Level 2: fair values measured using valuation techniques for all
inputs significant to the measurement other than quoted prices
included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
Level 3: fair values measured using valuation techniques for
which any significant input to the valuation is not based on
observable market data (unobservable inputs).
The Group considers observable data to be market data that is
readily available, regularly distributed or updated, reliable and
verifiable, not proprietary and provided by independent sources
that are actively involved in the relevant market.
The following tables represent the Group's assets by hierarchy
levels, and all fair value measurements disclosed are recurring
fair value measurements. There has been no transfer between levels
during the six months ended 31 March 2021 or 31 March 2020.
Financial Assets at Fair Value through Profit or Loss
Level 1 Level 2 Level 3 Total
As at 31 March 2021 GBPm GBPm GBPm GBPm
--------------------------------- -------- -------- -------- ------
Listed and unlisted investments 4.1 - 192.7 196.8
--------------------------------- -------- -------- -------- ------
Level 1 Level 2 Level 3 Total
As at 31 March 2020 GBPm GBPm GBPm GBPm
--------------------------------- -------- -------- -------- ------
Listed and unlisted investments 9.1 - 132.4 141.5
--------------------------------- -------- -------- -------- ------
Investments classified within Level 1 consist only of money
market funds, whose values are based on quoted market prices in
active markets. The Group does not adjust the quoted price for
these instruments.
No financial instruments held by the Group or Company are
classified within Level 2.
Investments classified within Level 3 consist of private equity
direct investments, and secondary investments, on which observable
prices are not available and the Group uses valuation techniques to
derive the fair value.
The main inputs into the Group's valuation models for private
equity investments are EBITDA multiples (based on the deemed
maintainable EBITDA and EBITDA multiples of comparable listed
companies), quality of earnings assessments, assessments of
third-party external debt, comparability difference adjustments,
cost of capital adjustments and probabilities of default.
In accordance with the Group's policy, appropriate comparable
public companies based on industry, size, developmental stage,
revenue generation and strategy are determined and a trading
multiple for each comparable company identified is then calculated.
The multiple is calculated by dividing the enterprise value of the
comparable group by its EBITDA. The trading multiple is then
adjusted for considerations such as illiquidity, other differences,
advantages and disadvantages between the Group's portfolio company
and the comparable public companies based on company-specific facts
and circumstances.
17
7. Financial Instruments (continued)
The value of private equity funds is primarily based on the
latest available financial/capital account statement of the private
equity fund. As at 31 March 2021, the Company held no investments
in private equity funds (2020: 0.3%). These investments are not
publicly traded and prior to maturity an exit can only be made by
the Company through a sale of its investment and commitment through
a secondary market. The carrying values of the private equity funds
may be significantly different from the values ultimately realised
on an exit via a secondary market sale.
The following tables present the movement of assets measured at
fair value, based on fair value measurement levels.
Level 1 Level 3
2021 2020 2021 2020
----------------------------------
GBPm GBPm GBPm GBPm
---------------------------------- ------ ------- ------ --------
Opening balance 5.6 17.0 128.6 193.0
Purchases - 9.0 - 2.8
Realisations (1.5) (17.0) (0.2) (12.0)
Increase/(decrease) in valuation - - 64.3 (51.4)
---------------------------------- ------ ------- ------ --------
As at 31 March 4.1 9.0 192.8 132.4
---------------------------------- ------ ------- ------ --------
Realisations in the tables above include interest and
distributions received from investments. During the year, the
Company invested GBP1.0 million (2020: GBP0.4 million) in
supporting portfolio companies to improve performance. Total gains
and losses on assets measured at Level 3 are recognised as part of
the investment gains and losses balance in the Consolidated Income
Statement and no other comprehensive income has been recognised on
these assets. Total unrealised gains for the six months ended 31
March 2021 were GBP64.1 million (2019: loss of GBP51.4
million).
The tables below present those investments in portfolio
companies whose fair values are recognised in whole or in part
using valuation techniques based on assumptions that are not
supported by prices or other inputs from observable current market
transactions in the same instrument and the effect of changing one
or more of those assumptions behind the valuation techniques
adopted based on reasonably possible alternative assumptions. The
sensitivity thresholds have been determined based on the average of
historical changes in each type of unobservable input.
Description Fair value as Valuation Unobservable Weighted Reasonable Change in
at technique inputs average input possible shift valuation +/-
March 2021 +/- GBPm
GBPm
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Consumer goods, Comparable
leisure and trading EBITDA
hospitality 190.3 multiples multiple 12.4x 2.0x 36.7/(36.7)
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Comparability
difference
adjustment 40.0% 5.0% (17.9)/17.9
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Property 2.4 Yield Yield % 8.0% 1.0% -
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total 192.7
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Description Fair value as Valuation Unobservable Weighted Reasonable Change in
at technique inputs average input possible shift valuation +/-
March 2020 +/- GBPm
GBPm
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Consumer goods, Comparable
leisure and trading EBITDA
hospitality 122.8 multiples multiple 7.9x 2.0x 34.0/(34.0)
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Comparability
difference
adjustment 33.0% 5.0% (5.8)/5.8
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Property 2.7 Yield Yield % 8.0% 1.0% -
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Comparable
Business trading EBITDA
services 6.5 multiples multiple 10.7x 1.0x 1.0/(1.0)
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Comparability
difference
adjustment 50.0% 5.0% (1.1)/1.1
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Private equity
funds 0.4 NAV valuation NAV n/a 5.0% -
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total 132.4
---------------- --------------- --------------- --------------- --------------- --------------- ---------------
8. Share-Based Payment
The Group operates an Executive Share of Value Plan ("SoVP"),
which is designed to provide long-term incentives for senior
management and Executive Directors of the Group to deliver
long-term shareholder returns. The SoVP is recognised as a cash
settled share-based payment in accordance with IFRS 2.
Following consideration at the Board's Remuneration Committee
and in light of recent strength in the Electra share price
subsequent to the period end, agreement has been reached to ensure
continued alignment of shareholders' and executives' interests
through the vesting of SoVP awards in May 2021 with the full net
proceeds of GBP3.7 million being reinvested through the
subscription for new shares in Electra. The executives have
undertaken to retain their shares for not less than six months
following the capital market transaction for each of Fridays and
Hotter. It is anticipated that the subscription for new shares will
take place as soon as practically possible following release of
these Interim Results at the higher of NAV and market price.
18
8. Share-Based Payment (continued)
Details of key terms under the original SoVP are as follows:
Grant date 12 April 2018
------------------------------------------------------------
Number of unit awards granted 100,000
-------------------------------------------------------- ------------------------------------------------------------
Fair value on grant date GBP1,999,000
-------------------------------------------------------- ------------------------------------------------------------
Performance period 3 years
-------------------------------------------------------- ------------------------------------------------------------
1. Continued services over the vesting period.
2. NAV growth in excess of NAV threshold plus cumulative
distributions over a normal measurement
Vesting conditions period of 1 January 2018 to 31 December 2020.
-------------------------------------------------------- ------------------------------------------------------------
All unvested awards shall vest on date of such event, at
the discretion of the Remuneration
Change in corporate control and other corporate events Committee.
-------------------------------------------------------- ------------------------------------------------------------
Equity settled, with option of cash alternative determined
Settlement method by the Remuneration Committee.
-------------------------------------------------------- ------------------------------------------------------------
Details of key terms under the modified SoVP are as follows:
Performance period Extended to 31 December 2021
---------------------------------------------------------
Continued services over the vesting period remain
mandatory. However, in order to provide an incentive
not only to optimise NAV but also to realise value
for shareholders, the NAV-based threshold and
target have now been replaced with threshold and
targets based on shareholder values over the measurement
Vesting conditions period.
------------------ ---------------------------------------------------------
Settlement method Cash
------------------ ---------------------------------------------------------
Following the changes above, the SoVP is now recognised as a
cash settled share-based payment scheme. The cost of the SoVP is
recognised as an expense and instead of a corresponding increase in
the share-based payment reserve, the Company now accrues a
liability until the end of the vesting period. The fair value of
the SoVP as at 31 March 2021 was GBP0.7 million (2020: GBP0.2
million). In determining the fair value of the SoVP, the Group
employed the stochastic model with the following key variable
inputs:
-- Risk-free rate: 0.02%
-- Discount rate: 8.00%
-- Expected future dividends: assumed nil
-- Expected volatility: 40.59%
The probability of achieving the performance condition is
calculated based on the average of 100,000 simulations produced by
the model as a percentage of the maximum value that can be
delivered under the SoVP.
Expenses on share-based payments are recognised over the period
in which vesting conditions are fulfilled. No expense is recognised
for awards that do not ultimately vest. During the six months to 31
March 2021, GBP0.4 million of share-based payment expenses (2020:
credit of GBP1.0 million due to significant downward revaluation)
have been charged to the Income Statement in accordance with
guidance under IFRS 2.
9. Dividends
2021 2020
For the six months ended 31 March GBPm GBPm
------------------------------------------ ------ -----
Special dividend of FY20 (31p per share) - 11.8
- 11.8
------------------------------------------------- -----
10. Trade and Other Payables
Trade and other payables consist of accrued expenses, including
liabilities under the SoVP (refer to Note 8 above), and supplier
invoices received but not settled.
11. Called up Share Capital and Reserves
The Company has 38,282,763 (2020: 38,282,763) of allotted,
called up and fully paid ordinary shares of 25p each, totalling
GBP9.6 million as at 31 March 2021 (2020: GBP9.6 million). There
have been no movements on the Company's share capital during the
six months ended 31 March 2021 and 31 March 2020.
19
11. Called up Share Capital and Reserves (continued)
Own Shares Held
Own shares held are shares purchased by the Company's Employee
Benefit Trust (the "Trust") in relation to the SoVP operated by the
Company. The number of shares held by the Trust was 690,481 as at
31 March 2021 (2020: 690,481); these are held at a cost of GBP2.4
million (2020: GBP2.4 million) in the Consolidated Balance
Sheet.
Share Premium and Capital Redemption Reserve
At a General Meeting on 19 June 2020, shareholders voted to
approve the cancellation of both the share premium account and the
capital redemption reserve. The cancellations became effective on
21 July 2020 following the approval by the High Court of Justice,
and with immediate effect the distributable reserves of the Company
were increased by GBP157.8 million. These reserves combined with
existing distributable reserves and the impact of future value
creation will facilitate the distribution of our targeted returns
to shareholders.
Capital Reserve
Capital reserve includes both realised capital reserve, which is
the accumulated gains and losses on the realisation of investments,
and unrealised capital reserve, which is the accumulated changes in
the value of financial instruments measured at fair value which
have been charged through profit and loss.
Revenue Reserve
The revenue reserve is the accumulated net revenue profits and
losses of the Group.
12. Net Asset Value ("NAV") per Share
The basic NAV per share is calculated by dividing the NAV of
GBP196.9 million (2020: GBP142.9 million) by the number of ordinary
shares in issue, amounting to 38,282,763 (2020: 38,282,763). There
were no dilutive shares during the six months ended 31 March 2021
and 31 March 2020.
13. Related Party Transactions
Balances and transactions between the Company and its
subsidiaries are eliminated on consolidation. Details of
transactions between the Company and other related parties are
disclosed below.
Sherborne Investors Management LP ("Sherborne")
Sherborne serves as an adviser to the Group on research and
formulation as well as making proposals to the Board of Directors.
Stephen Welker, who is also a Partner in Sherborne, serves as a
Non-Executive Director in the Company. Under the terms of its
contract with the Company, Directors appointed by Sherborne have
waived their fees but are entitled to be reimbursed for all
reasonable expenses. In the six months ended 31 March 2021,
Sherborne charged no expenses to the Group (2020: GBP22,516 as
reimbursement for Mr Welker's travel and subsistence costs). The
outstanding amount payable by the Group to Sherborne as at 31 March
2021 was GBPnil (2020: GBPnil).
14. Capital Commitments and Contingencies
There were no outstanding capital commitments or contingent
liabilities as at 31 March 2021.
15. Post Balance Sheet Events
As disclosed in the Chairman's Statement and the CFOO's Review,
the Company successfully completed the sale of Sentinel for net
proceeds of GBP22.2 million in mid-April 20201.
Also following consideration at the Board's Remuneration
Committee and in light of recent strength in the Electra share
price subsequent to the period end, agreement has been reached to
ensure continued alignment of shareholders' and executives'
interests through the vesting of SoVP awards in May 2021 with the
full net proceeds of GBP3.7 million being reinvested through the
subscription for new shares in Electra. The executives have
undertaken to retain their shares for not less than six months
following the transactions in Fridays and Hotter referred to in the
Chairman's Statement. It is anticipated that the subscription for
new shares will take place as soon as practically possible
following release of these Interim Results at the higher of NAV and
market price. Full terms, including the maximum vesting
opportunity, of the SoVP can be found in the Remuneration Policy
section of the Company's Annual Report and Financial Statements for
the year ended 30 September 2020.
The gross cost of vesting to the Company is GBP7.9 million,
which includes GBP6.9 million on awards to the participants and a
further GBP1.0 million on employer National Insurance
contributions. The Company deems the vesting to be a non-adjusting
event. If the SoVP had vested on or before 31 March 2021, the
vesting would have had the impact of increasing other expenses by
GBP7.2 million ("Revenue" column of the Consolidated Income
Statement) and therefore decreasing the NAV by GBP7.2 million or
18.8p per share. The Company holds an economic hedge against the
cash impact of the SoVP vesting in the form of 690,481 shares held
in the Electra Employee Benefit Trust. Refer to Note 11 above for
further details.
20
16. Basis of Accounting and Significant Accounting Policies
The Half Year Report is unaudited and does not constitute
financial statements within the meaning of section 434 of the
Companies Act 2006. The statutory financial statements for the year
ended 30 September 2020, which were prepared in accordance with
International Financial Reporting Standards ("IFRS") as endorsed by
the European Union and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS, have been delivered
to the Registrar of Companies. The auditor's opinion on those
financial statements was unqualified and did not contain a
statement made under section 498(2) or section 498(3) of the
Companies Act 2006.
The condensed consolidated interim financial statements comprise
the Consolidated Balance Sheets as at 31 March 2021, 30 September
2020 and 31 March 2020, the Consolidated Income Statement,
Consolidated Statement of Changes in Equity and Consolidated Cash
Flow Statement for the six months ended 31 March 2021 and 31 March
2020, and the related notes hereinafter, collectively referred to
as "financial information".
The condensed consolidated interim financial statements have
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority, IAS 34 and the principal
accounting policies and key estimates set out in the Annual Report
for the year ended 30 September 2020 which is available on
Electra's website (www.electraequity.com).
Going Concern
Following the adoption of our wind down strategy in 2018 it
became appropriate, in light of the likely ultimate wind-up of the
Company, for the Company to report on a basis other than that of a
going concern. Given our intent now to reclassify the Company as a
trading holding company for Hotter, listed on AIM, this basis of
preparation is no longer appropriate. The Directors have assessed
the Company's net cash position against forecast cash outflows,
including known cash expenses, estimated transaction costs and
portfolio management incentives for the listing of Fridays and
Hotter, and formed a reasonable expectation, based on current
forecasts, that the Company has adequate resources to continue in
operational existence for at least twelve months following the
approval of the condensed interim financial statements. As such
these accounts are prepared on the basis of a going concern. Given
the situation of the Company, the change of basis of preparation
has no numerical impact on the financial performance or position of
the Company as reported.
Investments
Purchases and sales of listed investments are recognised on the
trade date where a contract exists whose terms require delivery
within a timeframe determined by the relevant market. Purchases and
sales of unlisted investments are recognised when the contract for
acquisition or sale becomes unconditional. Investments are
designated at fair value through profit or loss (as detailed in the
financial statements as investments held at fair value) and are
subsequently measured at reporting dates at fair value. The fair
value of direct unquoted investments is calculated in accordance
with the principles of valuation of investments below.
Principles of Valuation of Investments
(i) General
The Group estimates the fair value of each investment at the
reporting date in accordance with IFRS 13 and the International
Private Equity and Venture Capital Valuation ("IPEV")
Guidelines.
Fair value is the price for which an asset could be exchanged
between knowledgeable and willing parties in an arm's length
transaction. In estimating fair value, the Manager applies a
valuation technique which is appropriate in light of the nature,
facts and circumstances of the investment and uses reasonable
current market data and inputs combined with judgement and
assumptions. Valuation techniques are applied consistently from one
reporting date to another except where a change in technique
results in a better estimate of fair value.
The Group tests its valuation techniques using a tool known as
"calibration". This compares the inputs and assumptions used in
estimating fair value on the reporting date with those used on
previous reporting dates and those underlying the initial entry
price of an investment in order to ensure that the inputs and
assumptions used on the reporting date are consistent with those
used previously.
In general, the Group will determine the enterprise value of the
investee company in question using one of a range of valuation
techniques; adjust the enterprise value for factors that would
normally be taken into account such as surplus assets, excess
liabilities or other contingencies or relevant factors; and
apportion the resulting amount between the investee company's
relevant financial instruments according to their ranking and
taking into account the effect of any instrument that may dilute
the economic entitlement of a given instrument.
(ii) Unlisted Equity Investments
In respect of each unlisted investment the Group selects one or
more of the following valuation techniques:
-- a market approach, based on the price of the recent
investment, earnings multiples or industry valuation
benchmarks;
-- an income approach, employing a discounted cash flow technique; and
-- a replacement cost approach valuing the net assets of the portfolio company.
In assessing whether a methodology is appropriate the Group
maximises the use of techniques that draw heavily on observable
market-based measures of risk and return.
21
16. Basis of Accounting and Significant Accounting Policies
(continued)
Principles of Valuation of Investments (continued)
Multiple
Typically, the Group uses an earnings multiple technique. This
involves the application of an appropriate and reasonable multiple
to the maintainable earnings of an investee company.
The Group usually derives a multiple by reference to current or
forecast market-based multiples, reflected in the market valuations
of quoted comparable companies or the price at which comparable
companies have changed ownership. Differences between these
market-based multiples and the investee company being valued are
reflected by adjusting the multiple for points of difference which
might affect the risk and earnings growth prospects which underpin
the earnings multiple. Such points of difference might include the
relative size and diversity of the entities, rate of earnings
growth, reliance on a small number of key employees, diversity of
product ranges, diversity and quality of customer base, level of
borrowing and any other reason the quality of earnings may differ.
Refer to key sources of estimation uncertainty on pages 24 and 25
for further details.
In respect of maintainable earnings, the Group usually uses
earnings for the most recent 12-month period adjusted, if
necessary, to represent a reasonable estimate of maintainable
earnings. Such adjustments might include exceptional or
non-recurring items, the impact of discontinued activities and
acquisitions, or forecast material changes in earnings.
In some circumstances the Group may apply a multiple to the net
assets of a business, typically where the business' value derives
mainly from the underlying fair value of its assets rather than its
earnings, such as property holding companies.
Discounted Cash Flow
The discounted cash flow technique involves deriving the value
of a business or an investment by calculating the present value of
the estimated future cash flows from that business or investment
using reasonable assumptions and estimations of expected future
cash flows, the terminal value or maturity amount and date, and the
appropriate risk-adjusted rate that captures the risk inherent to
the business or investment. The Group usually uses the discounted
cash flow technique in respect of certain debt investments or where
the realisation of an investment is imminent with the pricing of
the relevant transaction being substantially agreed such that the
technique is likely to be the most appropriate one.
(iii) Fund Investments
In determining the fair value of investments in funds, the net
asset value of the fund as reported by the manager is used as the
starting point. The Group may make adjustments to the reported net
asset value to reflect, for example, purchases and sales occurring
between the fund's measurement date and the reporting date, or any
other facts or circumstances which might impact the fair value of
the fund.
(iv) Money Market Investments
Investments in money market funds are held at the current fair
value of the units invested.
(v) Accrued Income
Accrued income is included within investment valuations.
Cash and Cash Equivalents
Cash comprises cash at bank and is measured at amortised
cost.
Leased Assets - Group as a Lessee
For any new contracts entered into on or after 1 October 2019,
the Group considers whether a contract is or contains a lease.
A lease is defined as a contract, or part of a contract, that
conveys the right to use an asset (the underlying asset) for a
period of time in exchange for a consideration. The Group assesses
whether it has the right to direct how and for what purpose the
asset is used throughout the period of use.
For leases identified, the Group recognises a right-of-use asset
and a lease liability on the Balance Sheet at lease commencement
date. The right-of-use asset is measured at cost, which is made up
of the initial measurement of the lease liability, any initial
direct costs incurred by the Group, an estimate of any costs to
dismantle and remove the asset at the end of the lease, and any
lease payments made in advance of the lease commencement date (net
of any incentives received).
The Group depreciates the right-of-use assets on a straight-line
basis from the lease commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end of the lease
term. The Group also assesses the right-of-use asset for impairment
when such indicators exist.
22
16. Basis of Accounting and Significant Accounting Policies
(continued)
Leased Assets - Group as a Lessee (continued)
At the commencement date, the Group measures the lease liability
at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that
rate is readily available or the Group's incremental borrowing
rate. Lease payments included in the measurement of the lease
liability are made up of fixed payments (including in substance
fixed), variable payments based on an index or rate, amounts
expected to be payable under a residual value guarantee and
payments arising from options reasonably certain to be
exercised.
Subsequent to initial measurement, the liability will be reduced
for payments made and increased for interest. It is remeasured to
reflect any reassessment or modification, or if there are changes
in in-substance fixed payments. When the lease liability is
remeasured, the corresponding adjustment is reflected in the
right-of-use asset, or profit and loss if the right-of-use asset is
already reduced to zero. The Group has elected to account for
short-term leases and leases of low-value assets using the
practical expedients. Instead of recognising a right-of-use asset
and lease liability, the payments in relation to these are
recognised as an expense in profit or loss on a straight-line basis
over the lease term.
Foreign Currencies
The Group's and Company's presentational and functional currency
is Pounds Sterling ("Sterling"), since that is the currency of the
primary economic environment in which the Group operates.
Transactions in currencies other than Sterling are recorded at the
rates of exchange prevailing on the dates of the transactions.
Foreign currency assets and liabilities are translated into the
functional currencies of the Group's respective entities at rates
prevailing at the Balance Sheet date. Foreign currency revenue and
expenses are translated into the functional currencies of the
Group's respective entities at the month-end rate for the period
the transaction occurred. Exchange differences arising are
recognised through the Consolidated Income Statement.
At each Balance Sheet date, assets and liabilities of foreign
operations are translated into Sterling at the rates prevailing on
the Balance Sheet date. Foreign exchange differences arising on
retranslation of the equity and reserves of subsidiaries with
functional currencies other than Sterling are recognised directly
in the translation reserve in equity. Foreign exchange differences
arising on the retranslation of non-monetary items carried at fair
value are included in the Consolidated Income Statement for the
year.
Investment Income
Dividends receivable from equity shares are accounted for on the
ex-dividend date or, where no ex-dividend date is quoted, are
accounted for when the Group's right to receive payment is
established. Fixed returns on non-equity shares and debt securities
are recognised on a time apportionment basis so as to reflect the
effective yield when it is probable that economic benefit will flow
to the Group. Where income accruals previously recognised, but not
received, are no longer considered to be reasonably expected to be
received, either through investee company restructuring or doubt
over its receipt, then these amounts are reversed through expenses.
Income distributions from limited partnership funds are recognised
when the right to distribution is established.
Other Income
Interest income received from money market funds is accounted
for on an effective interest rate basis.
Expenses
Expenses are charged through the "Revenue" column of the
Consolidated Income Statement.
Defined Contribution Plan
The Group operates a defined contribution pension plan under
which the Group pays fixed contributions. Pension contributions are
recognised as expenses in the Consolidated Income Statement, as
incurred.
Tax
The tax effect of different items of income/gain and
expense/loss is allocated between capital and revenue on the same
basis as the particular item to which it relates, using the
Company's effective rate of tax for the accounting year.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit before tax as reported in
the Consolidated 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
Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the Balance
Sheet date.
Provisions
Provisions are recognised when the Group has a present
obligation of uncertain timing or amount as a result of past events
and it is probable that the Group will be required to settle that
obligation and a reliable estimate of that obligation can be made.
The provisions are measured at the Directors' best estimate of the
amount to settle the obligation at the Balance Sheet date. Changes
in provisions are recognised in the Consolidated Income
Statement.
23
16. Basis of Accounting and Significant Accounting Policies
(continued)
Revenue and Capital Reserves
Net capital return is added to the capital reserve in the
Consolidated Statement of Changes in Equity, while the net revenue
return is added to the revenue reserve.
Receivables and Payables
Receivables and payables are typically settled in a short
timeframe and are carried at the amount due to be settled. As a
result, the fair value of these balances is considered to be
materially equal to the carrying value, after taking into account
potential impairment losses.
Share Capital
Ordinary shares issued by the Group are recognised at the
proceeds or fair value received with the excess of the amount
received over nominal value being credited to the share premium
account. Direct issue costs, net of tax, are deducted from
equity.
Share-Based Payments
The Share of Value Plan ("SoVP) operated by the Company meets
the definition of share-based payments under IFRS 2. Where
appropriate, share-based payments are measured at fair value on
grant date, which is estimated using commonly used and accepted
models. The cost of share-based payments is spread over the period
until the awards vest and is recognised as an expense in the Income
Statement with a corresponding increase either in the equity
reserves for schemes recognised as equity settled or in liabilities
for schemes recognised as cash settled. Where share-based payments
have market vesting conditions, the full charge is recognised
irrespective of the conditions being met, provided all other
performance and/or service conditions are satisfied.
Critical Accounting Judgements and Key Sources of Estimation
Uncertainty
Critical accounting judgements and key sources of estimation
uncertainty used in preparing the financial information are
continually evaluated and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable. The resulting judgements and estimates
will, by definition, seldom equal the related actual results.
In the course of preparing the Half Year Report for the six
months ended 31 March 2021, the Directors concluded that the
Company continues to meet the definition of an investment entity
based on the reassessment of the conditions listed under the basis
of consolidation in the Annual Report and Financial Statements for
the year ended 30 September 2020.
Key Sources of Estimation Uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty in the reporting year that may have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are discussed below.
Unquoted assets are measured at fair value in accordance with
IFRS 13 and the IPEV Guidelines for financial reporting purposes.
Judgement is required in order to determine the appropriate
valuation methodology and subsequently in determining the inputs
into the valuation model used. The most significant judgements for
the inputs into the valuation models are: making assessments of the
future earnings potential of portfolio companies, the appropriate
earnings multiples to apply to these earnings, and adjustments that
are made to earnings multiples in view of comparable listed
companies.
As discussed in the Chairman's Statement and the CFOO's Review
of this report, the uncertainty and disruption generated by the
Covid-19 pandemic impacts all sectors particularly in the
hospitality (Fridays) and retail (Hotter) sectors. Fridays and
Hotter are categorised in the consumer goods, leisure and
hospitality sector in Note 7, with an aggregate value of GBP165.4
million. As explained in Note 7, the fair values for these
investments are recognised in whole or in part using valuation
techniques based on assumptions that are not supported by prices or
other inputs from observable current market transactions. The
effect of changing one or more of the assumptions behind the
valuation techniques adopted based on reasonably possible
alternative assumptions is also disclosed in Note 7.
There remain many unknown factors over the degree to which
businesses will be able to resume "normal" levels of trading during
phased recovery and the short, medium, and long-term impact of
Covid-19 on consumer confidence and behaviours. Also due to the
impact of Covid-19 on the pattern of earnings of the portfolio
companies, in some cases a higher degree of judgement, compared
with previous years, has been exercised in the valuations as at 31
March 2021; in particular:
-- through the use of forecast, instead of actual, maintainable
earnings and market multiples; and
-- in assessing the points of difference discounts to be applied
to comparable listed companies' multiples.
As such, the valuation of our investments as at 31 March 2021
carries significantly more estimation uncertainty than in previous
years.
24
16. Basis of Accounting and Significant Accounting Policies
(continued)
Key Sources of Estimation Uncertainty (continued)
The Group has also considered the potential impact of Brexit in
preparation of the financial statements, and based on the current
available information, no material impact is expected by the
Group.
The Board has set up a Valuations Committee, which is chaired by
a Non-Executive Director. The Valuations Committee works closely
with G10 Capital Limited ("G10"), the Company's Alternative
Investment Fund Manager ("AIFM"), to establish the appropriate
valuation techniques and inputs for fair value measurement and the
Chairman of the Valuations Committee reports its findings to the
Board every six months to explain the cause of fluctuations in the
fair value of the assets and liabilities.
Sensitivity analysis on key sources of estimation has been
disclosed in Note 7. Information about the valuation techniques and
inputs used in determining the fair value of various assets and
liabilities is disclosed above in this note.
25
Independent Review Report to Electra Private Equity PLC
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2021 which comprises the Consolidated
Income Statement, the Consolidated Statement of Comprehensive
Income, the Consolidated Statement of Changes in Equity, the
Consolidated Balance Sheet, the Consolidated Statement of Cash
Flows and the related Notes 1 to 16. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in Note 16, the annual financial statements of the
Company are prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 and International Financial Reporting Standards as adopted by
the European Union. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
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 Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. 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.
Conclusion
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 financial report for the six months ended 31
March 2021 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Use of Our Report
This report is made solely to the Company 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 Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review 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, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
20 May 2021
26
Half Year Report
Current and Future Development
A review of the main features of the six months to 31 March 2021
is contained in the Chairman's Statement and Portfolio Review.
Performance
A detailed review of performance during the six months to 31
March 2021 is contained in the Portfolio Review.
Risk Management
The Company has put in place an Investment Management Agreement
with G10 for the provision of risk management services as required
by the Alternative Investment Fund Managers Directive ("AIFMD")
rules. The AIFM has oversight of risk management and the ongoing
process of identifying, evaluating, monitoring and managing the
risks facing the Company in accordance with AIFMD.
The principal risks facing the Company are considered by the
Board to be portfolio diversification risk, strategy implementation
risk, investment risk, solvency and liquidity risk, macroeconomic
risk, valuation risk, operational risk, gearing risk, foreign
currency risk, and cash drag risk, as set out in the Company's
Annual Report and Financial Statements for the year ended 30
September 2020 along with the risks detailed in Note 15 of the
notes to the financial statements for the same year. The principal
risks have not changed significantly since the year end.
Going Concern
Following the adoption of our wind down strategy in 2018 it
became appropriate, in light of the likely ultimate wind-up of the
Company, for the Company to report on a basis other than that of a
going concern. Given our intent now to reclassify the Company as a
trading holding company for Hotter, listed on AIM, this basis of
preparation is no longer appropriate. The Directors have assessed
the Company's net cash position against forecast cash outflows,
including known cash expenses, estimated transaction costs and
portfolio management incentives for the listing of Fridays and
Hotter, and formed a reasonable expectation, based on current
forecasts, that the Company has adequate resources to continue in
operational existence for at least twelve months following the
approval of the condensed interim financial statements. As such
these accounts are prepared on the basis of a going concern. Given
the situation of the Company, the change of basis of preparation
has no numerical impact on the financial performance or position of
the Company as reported.
Related Party Transactions
Details of related party transactions for the six months ended
31 March 2021 are disclosed in Note 13.
Forward-Looking Statements
Certain statements in this Half Year Report are forward looking.
Although the Company believes that the expectations in these
forward-looking statements are reasonable, it can give no assurance
that these expectations will prove to have been correct. Because
these statements involve risks and uncertainties, actual results
may differ materially from those expressed or implied by these
forward-looking statements. The Company undertakes no obligation to
update any forward-looking statements whether as a result of new
information, future events or otherwise.
27
Responsibility Statement
The Directors confirm to the best of their knowledge that:
a) the condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 as adopted by the European
Union; and
b) the Half Year Report includes a fair review of the information required by:
(i) DTR 4.2.7 of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
(ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the Company
during that period; and any changes in the related party
transactions described in the last Annual Report that could do
so.
Approved by the Board of Directors and signed on its behalf
by:
Neil Johnson
Chairman
20 May 2021
28
Information for Shareholders
Financial Calendar for 2020/21
Half year results announced May 2021
Annual results announced December
2021
Annual General Meeting February
2022
Website and Electra News via Email
For further information on share prices, regulatory news and
other information, please visit www.electraequity.com.
If you would like to receive email notification of our
announcements, please visit the Electra website at
www.electraequity.com and click on the "Sign up to our email
alerts" logo on the website's home page. Registering for email
alerts will not stop you receiving Annual Reports or any other
shareholder documents you have selected to receive by post or
electronically.
Shareholder Enquiries
In the event of queries regarding your ordinary shareholding,
contact the Company's registrar, Equiniti Limited, which will be
able to assist you with:
-- registered holdings;
-- balance queries;
-- lost certificates; and
-- change of address notifications.
Equiniti Limited's full details are provided on page 33 or
please visit www.equiniti.com.
If You Are an Existing Shareholder and Wish to Buy More/Sell
your Shares in Electra:
An internet and telephone dealing service has been arranged
through Equiniti, which provides a simple way for UK shareholders
of Electra to buy or sell Electra's shares. For full details and
terms and conditions simply log onto www.shareview.co.uk/dealing or
call 0371 384 2351. Please note that lines are open 8.30am to
5.30pm (UK time) Monday to Friday (excluding public holidays in
England and Wales).
The service is only available to shareholders of Electra who
hold shares in their own name, have a UK registered address and are
aged 18 and over.
Shareview Dealing is provided by Equiniti Financial Services
Limited. Equiniti Financial Services Limited is authorised and
regulated by the Financial Conduct Authority of 25 The North
Colonnade, Canary Wharf, London E14 5HS (FCA reference 468631).
Equiniti Financial Services Limited is registered in England and
Wales with number 6208699.
If You Are Not an Existing Shareholder:
If you are not an existing shareholder, we recommend you seek
your own personal financial advice from an appropriately qualified
independent adviser or alternatively contact your own broker.
Electra Private Equity PLC's shares are listed on the London Stock
Exchange with the ticker "ELTA".
Please note: The above information is not a recommendation to
buy or sell shares. The value of shares and any income from them
can fluctuate and you may get back less than the amount invested.
If you have any doubt over what action you should take, please
contact an authorised financial adviser.
29
Trading Information - Ordinary Shares
Listing London Stock Exchange
ISIN GB0003085445
SEDOL 0308544
Ticker/EPIC code ELTA
Bloomberg ELTALN
Reuters ELTAL
Share Fraud Warning
We are aware that in the past a number of shareholders have
received unsolicited phone calls or correspondence concerning
investment matters. These are typically from overseas-based brokers
who target UK shareholders, offering to sell them what often turn
out to be worthless or high-risk shares. These operations are
commonly known as boiler room scams.
Please be very wary of any such calls or correspondence. Ask for
the name and organisation of the person calling you and check if
they can be found on the Financial Conduct Authority ("FCA")
Register. If they are not listed, please report it directly to the
FCA using its consumer helpline (0800 111 6768). You may also wish
to advise us by telephoning 020 3874 8300 or emailing
IR@electrapeplc.com.
It is very unlikely that either the Company or the Company's
registrar, Equiniti, would make unsolicited telephone calls to
shareholders. Such calls would only relate to official
documentation already circulated to shareholders and never be in
respect of investment advice.
Please remember that if you use an unauthorised firm to buy or
sell shares, you will not be eligible to receive payment under the
Financial Services Compensation Scheme if things go wrong.
Other Useful Websites
LPeC
LPeC is a group of private equity investment trusts and similar
vehicles listed on the London Stock Exchange and other major
European stock markets, formed to raise awareness and increase
understanding of listed private equity.
LPeC provides information on private equity in general, and the
listed sector in particular, undertaking and publishing research
and working to improve levels of knowledge about private equity
among investors and their advisers.
For further information visit www.listedprivatecapital.com.
Association of Investment Companies ("AIC")
The AIC is the trade organisation for closed-ended investment
companies. The AIC represents a broad range of closed-ended
investment companies, including investment trusts, offshore
investment companies and venture capital trusts which are traded on
the London Stock Exchange, the Alternative Investment Market, the
Special Financials Market, Euronext and the Channel Islands Stock
Exchange.
For further information visit www.theaic.co.uk.
British Private Equity & Venture Capital Association
("BVCA")
The BVCA is the industry body and public policy advocate for the
private equity and venture capital industry in the UK. The BVCA's
aim is to aid understanding around the activities of its members
and promote the private equity and venture capital industry to
entrepreneurs and investors as well as to the Government, the EU,
trade unions, international media and the general public. It
communicates the industry's impact and reinforces the crucial role
its members play in the global economy as a catalyst for change and
growth.
For further information visit www.bvca.co.uk.
30
Glossary
AIF
Alternative Investment Fund. Electra Private Equity PLC is an
AIF.
AIFM
The Alternative Investment Fund Manager ("AIFM") for Electra
Private Equity PLC is G10 Capital Limited ("G10").
AIFMD
Alternative Investment Fund Managers Directive 2011/61/EU of the
European Parliament.
Basic and Diluted NAV
The NAV per share is calculated by dividing the Company's NAV by
the number of ordinary shares in issue. There are no dilutive
shares in the Company.
Commitments
Legal obligation to provide capital for future investment in a
private equity fund or in relation to a single investment.
Earnings Multiple
This is normally referred to as a price earnings (P/E) ratio. It
is the ratio of a company's valuation compared to its earnings.
EBITDA
Earnings before interest, tax, depreciation and amortisation. It
is often used to compare the profitability of similar
companies.
Enterprise Value ("EV")
This is the aggregate value of a company's entire issued share
capital and net debt.
Gearing
This is the level of a company's debt related to its equity
capital and is usually expressed in percentage form. It shows the
extent to which a company is funded by lenders as opposed to
shareholders.
Investment Return
This is the aggregate of income and capital profits and losses
from the investment portfolio. This is sometimes disclosed as
portfolio return. This is a common measure used by investment
companies.
Listed Company
Any company where the shares are freely tradable and are listed
or traded on a recognised stock exchange.
Net Asset Value ("NAV")
This is the value of all the Company's assets minus current and
long-term liabilities. Can also be referred to as "shareholders'
funds".
NAV per Share
This is the value of the Company's assets attributable to one
ordinary share. It is calculated by dividing shareholders' funds by
the total number of ordinary shares in issue. This is a common
measure used by investment companies.
31
NAV Total Return
The total return to shareholders is the aggregate of income and
capital profits of the investment portfolio for the period less all
costs. It can be expressed as a percentage of the opening position.
This is a common measure used by investment companies.
Six months to 31 March Three years to 31 March
Reported under IFRS 2021 2020 2021 2020
------------------------------------------- ------ -------- ----------- -------------
Dividend per share (p) - 31.0 475.0 4,915.0
Increase/(decrease) in NAV per share (p) 160.9 (175.0) (594.7) (5,171.0)
------------------------------------------- ------ -------- ----------- -------------
Total return (p) 160.9 (144.0) (119.7) (256.0)
Opening NAV per share (p) 353.4 548.0 1,109.0 5,544.0
------------------------------------------- ------ -------- ----------- -------------
NAV total return 45.5% (26.3)% (10.8)% (4.6)%
------------------------------------------- ------ -------- ----------- -------------
Total Shareholder Return ("TSR")
This is the total returns delivered by the Company through a
combination of dividends distributed to shareholders and share
price performance. This is expressed as a percentage change in
movement between the dividend adjusted closing share price and the
opening share price.
Six months to 31 March Three years to 31 March
Reported under IFRS 2021 2020 2021 2020
-------------------------------------------- ------- -------- ----------- -------------
Closing share price (p) 375.0 187.0 375.0 187.0
Dividends paid (p) - 31.0 475.0 4,915.0
-------------------------------------------- ------- -------- ----------- -------------
Dividend adjusted closing share price (p) 375.0 218.0 850.0 5,102.0
Opening share price (p) 182.5 331.5 850.0 4,951.0
-------------------------------------------- ------- -------- ----------- -------------
Total shareholder return 105.5% (34.2)% 0.0% 3.0%
-------------------------------------------- ------- -------- ----------- -------------
Unlisted Company
Any company whose shares are not listed or traded on a
recognised stock exchange.
32
Contact Details
Electra Private Equity PLC
Board of Directors
Neil Johnson (Chairman)
Paul Goodson
David Lis
Gavin Manson (Chief Financial and Operating Officer)
Stephen Welker
Linda Wilding
Registered Office
Registered in England: Company No. 00303062
7(th) Floor, 17 Old Park Lane, London, England W1K 1QT
Telephone +44 (0)20 3874 8300
www.electraequity.com
Company Secretary and Administrator
Frostrow Capital LLP
25 Southampton Buildings, London, England WC2A 1AL
Telephone +44 (0)20 3008 4910
Registered Independent Auditor
Deloitte LLP
Hill House, 1 Little New Street, London, England EC4A 3TR
Alternative Investment Fund Manager
G10 Capital Limited
4th Floor, 3 More London Riverside, London, England SE1 2AQ
Joint Stockbrokers
HSBC
8 Canada Square, Canary Wharf, London, England E14 5HQ
Numis Securities Limited
The London Stock Exchange Building, 10 Paternoster Square,
London, England EC4M 7LT
Depositary
APEX Depositary (UK) Limited
9(th) Floor, No 1 Minster Court, Mincing Lane, London, England
EC3R 7AA
Registrar and Transfer Office
Equiniti Limited
Aspect House, Spencer Road, Lancing, West Sussex, England BN99
6DA
Telephone (UK) 0371 384 2351 *
Textel/hard of hearing line (UK) 0371 384 2255 *
Telephone (overseas) +44 121 415 7047
* Lines open 8.30am to 5.30pm (UK time), Monday to Friday
(excluding public holidays in England and Wales).
33
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END
IR BIGDURSDDGBG
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