TIDMESO TIDMEC.P TIDMEO.P
RNS Number : 0013O
EPE Special Opportunities PLC
16 September 2013
16 September 2013
EPE Special Opportunities plc
Interim Results for the six months ended 31 July 2013
The Board of EPE Special Opportunities plc are pleased to
announce the Company's Interim Results for the six months ended 31
July 2013.
Highlights:
-- The NAV of the Company at 31 July 2013 was 109.15 pence per
share, an increase of 6.1 % since 31 January 2013.
-- Nexus delivered strong export and retail sales in the first
half year, despite a challenging retail and wholesale
environment.
-- Whittard has achieved an increase in like-for-like sales
compared to 2012 and a significant gain in gross margins as a
result of the continued success of its pricing strategy focused on
premium positioning and the cessation of discounting.
-- The rest of the underlying portfolio has also performed well,
with a number of portfolio companies ahead of budget at the half
year point.
-- The Company's residual investment in Palatinate was sold,
equating to 2.4 x Money Multiple and 43.3 % IRR. The sale was
completed at a 31.4 % premium to Palatinate's prevailing holding
value, generating an uplift in the Company's NAV of 3.79 pence per
share.
-- The overwhelming shareholder support at the AGM in favour of
extending the life of the Company to December 2020 creates a
framework for longevity and the opportunity to maximise value
within the current portfolio and in new transactions.
Geoffrey Vero, Chairman, commented: "In spite of uncertain
economic conditions, we are pleased with the performance of the
portfolio and the progress of the Company over the last six months.
We are optimistic that the Company's portfolio will continue to
perform and that there exist opportunities to acquire high quality
assets at attractive prices ."
Enquiries:
Numis Securities Ltd
+44 (0) 20 7260 1000 Nominated Advisor Stuart Skinner / Hugh Jonathan
Corporate Broker Charles Farquhar
EPIC Private Equity LLP
+44 (0) 20 7269 8865 Alex Leslie
IOMA
+44 (0) 16 2468 1250 Philip Scales
Cardew Group
+44 (0) 20 7930 0777 Richard Spiegelberg / Georgina Hall
Chairman's Statement
The six months to July 2013 showed a slightly improving economic
outlook, with a GDP increase in Q2 2013 and strong employment
figures, seemingly marking the beginning of the recovery for the UK
economy. However, a number of indicators remain weak, which could
continue to negatively impact the Company's economic environment.
Whilst domestic demand increased moderately during 2013, this was
largely offset by a pronounced fall in exports, and the weakness of
productivity suggests that the financial crisis may still be
weighing on the current effective supply capacity of the economy as
well as on demand. Given the UK's international exposure,
particularly through its financial and services sectors, its near
and medium term growth will also depend on the outlook of those
international markets. The Eurozone is in the process of recovering
and has recently shown more stability than over the last few years.
However, it is not expected to fully recover from recession until
2014 at the earliest.
The Company has not pursued any new transactions so far in 2013
as a result of these uncertain economic conditions. However, these
conditions may yet yield investment opportunities during the
remainder of the year, particularly with regards to special and
distressed situations, two areas of the Company's investment
strategy. The Company continues to actively source deals and deal
flows remain strong.
This year has so far proven encouraging for the portfolio, most
notably the Company's two largest investments, Nexus Industries and
Whittard of Chelsea. As of July 2013, Nexus is trading ahead of
budget and is continuing to expand and increase margins, supported
by its wholly-owned manufacturing facility based in China. For the
remainder of 2013, Nexus is budgeting significant double-digit
organic sales and EBITDA growth. Whittard of Chelsea continued to
perform strongly in the six months to 31 July 2013 and is expecting
to support the delivery of significantly improved margins by the
end of 2013 via its premium positioning strategy, international and
wholesale. Your Board are optimistic that economic indicators
appear to be improving and that the Company's portfolio will
continue to perform well.
On 11 June 2013, the Company exited its investment in Palatinate
Schools Holdings Limited ("Palatinate") to Minerva Education
Finance Limited, generating a total return to ESO Investments 1 LP
("ESO 1 LP") since September 2010 of 2.4x Money Multiple and a
43.3% IRR.
Your Board was pleased with the overwhelming shareholder support
at the AGM to extend the life of the Company to December 2020, with
5 year extensions thereafter. The revised structure of the Company
creates a framework for longevity, providing the opportunity to
maximise value within the current portfolio and in new
transactions. The Board believes that the increased duration of the
Company is a significant step in maximising capital gain in the
medium and long term for the benefit of shareholders.
The Board and the Investment Advisor are investigating the
possibility of raising additional funds for the Company using
senior debt, mezzanine or bond. Should the Company decide to raise
funds by way of debt or debt-like instruments it would anticipate
that those instruments and any existing Convertible Loan Notes in
aggregate would be more than 3.0x covered by the Gross Assets of
the Company. Any new funds raised would be used, inter alia, to
retire existing Convertible Loan Notes in light of the December
2015 end date, buy-in minorities in the existing investments and
support new investments.
The 31 July 2013 Net Asset Valuation of 109.15 pence per share
represents an increase of 6.1 per cent on the Net Asset Value of
per share of 102.92 pence as at 31 January 2013.
I would like to extend my thanks to the Investment Advisor, EPIC
Private Equity LLP ("EPE"), as well as my fellow Directors and
professional advisors, for their concerted efforts over the last
six months. I look forward to once again updating you on continued
success over the remainder of the year.
Geoffrey Vero
Chairman
13 September 2013
Investment Advisor's Report
In the six month period since 31 January 2013, the Investment
Advisor has focused on maintaining and creating value from within
the existing portfolios held by the Company and the Fund. The
Investment Advisor continues to undertake cost saving and revenue
improvement measures in investee companies to increase the value of
the current portfolio. These initiatives remain important given the
challenging current economic climate. At the same time, the
Investment Advisor has endeavoured to find new opportunities by way
of platform or bolt-on investment opportunities. All new
investments will be made via ESO Investments 2 LP, in which the
Company is the sole investor.
The underlying portfolio has performed well since January 2013,
with a number of companies finishing their half years to 31 July
2013 ahead of budget. Nexus finished the half year ahead of budget,
despite a challenging retail environment, thanks in part to strong
export and retail sales, as well as strong supply chain margins
delivered by its 250,000 square foot factory in China. Whittard of
Chelsea delivered a strong first half in 2013, with an increase in
retail like-for-like sales compared to 2012 and strong gross
margins showing a significant gain from last year. This reflects
the continued success of the pricing strategy initiated in 2012 to
cease discounting and drive the premium position of the brand. The
business continues to show solid growth in web and UK wholesale
activities, both at the sales and gross margin level compared to
the previous year. Key performance drivers include channel growth
in online and wholesale, gross margin improvements and continued
investment in the product offering. Indicia performed below budget
in the first six months of 2013, and its management has engaged a
recovery plan focussing on delivering additional sales by fully
converting its strong sales pipeline, as well as increasing
profitability on existing customers. Indicia has recently had some
transformational client wins including ITV, who have appointed
Indicia as its lead agency on a three year contract. Bighead
performed above budget both at sales and EBITDA level, underscored
by a strong new business pipeline for the second half of 2013.
Process Components, however, underperformed in the first half of
2013, offering lower than expected sales and EBITDA, predominantly
driven by poor trading performance in the US. However the sales
infrastructure has been restructured and there has already been an
improvement in prospect levels and quotation conversion, setting an
optimistic trend for this coming year.
On 11 June 2013, the Company disposed of its residual investment
in Palatinate to Minerva Education Finance Limited. The disposal
returned GBP6.9 million in total to ESO 1 LP at the exit date,
GBP6.8 million as cash and GBP0.1 million as warranty retention,
and a total of GBP11.4 million since the acquisition in September
2010 via income, repayment of loans in October 2012 and the
disposal proceeds. The total return to ESO 1 LP since September
2010 equates to a 2.4x Money Multiple and 43.3% IRR. The disposal
has a positive impact on the Fund and was completed at a 31.4%
premium to Palatinate's prevailing holding value of GBP5.2 million,
resulting in a NAV uplift of 3.79 pence per share between May and
June 2013.
The Net Asset Value per share as at 31 July 2013 for the Company
was 109.15 pence, calculated on the basis of 27.8 million ordinary
shares. On the basis of this Net Asset Value, the outstanding
GBP6.0m of Convertible Loan Notes ("CLNs") and GBP3.8m of Net Cash,
Gross Asset Cover of the CLNs has moved to 6.1x and Cash Interest
Cover to 19.6x. Liquidity in cash and facilities at ESO plc and ESO
Investments 1 LP remains high at GBP10.6m. The Company continues to
allocate capital prudently having returned to stakeholders a
combined c.GBP7.0m of par value of CLNs and ordinary shares at a
cost of GBP4.7m since September 2010.
The Company maintains a low third party debt position of 1.7x
EBITDA across its portfolio, whilst arithmetic average Net Debt to
EBITDA across the portfolio is 2.3x. The portfolio remains
conservatively valued with a weighted average Enterprise Value to
EBITDA multiple of 5.4x.
Investment highlights from the inception of the Company (16
September 2003) to date include: deployed GBP65 million of capital
and returned over GBP53 million to the Company in capital and
income; generated gross income of GBP16 million; paid dividends of
GBP5 million; the underlying portfolio, as at 31 July 2013, is
valued at a gross 2.7x money multiple and 27% internal rate of
return.
The UK's economic outlook is improving slowly. Consumer spending
figures are showing some upward momentum, mainly due to a rise in
real income, reflecting stronger employment growth and an easing in
inflation expected later in the year. However, despite the
improving economic environment, the recovery of the UK economy
remains timid. UK exports and imports remain weak, and trading
conditions in the retail sector, which concerns several portfolio
investments of the Company, remain poor. Lending growth,
particularly to businesses, has shown little upward momentum.
Furthermore, any real boost in growth is tied to the full recovery
of international markets including the Eurozone, which is not
expected until the end of 2014. The Company therefore continues to
focus on consolidation with a view to preserving value in its core
investments.
Whilst current economic conditions remain challenging for the
Company's underlying portfolio, they may provide opportunities to
acquire high quality assets at relatively low price points and
opportunities continue to be assessed.
Investment Strategy
The Investment Advisor believes that the current economic
environment continues to create a wide range of investment
opportunities. As a result, the Investment Advisor continues to use
proprietary deal sourcing approaches to source these opportunities,
as well as engaging actively with the wider restructuring and
advisory community to communicate the Company's investment
strategy. The Company seeks to target growth and buyout
opportunities, as well as special situations and distressed
transactions, making investments where it believes pricing to be
attractive and the potential for value creation strong. The Company
will continue to target the following types of investments:
-- Growth, Buyout and Pre-IPO opportunities: leveraging the
Investment Advisor's investment experience, contacts and ability.
The Company is particularly focussed on making investments in
sectors where the opportunity exists to create a unique asset via
the consolidation of a number of smaller companies, taking
advantage of the lack of liquidity in the SME market and the
attraction to secondary buyers of larger operations.
-- Special Situations: investment opportunities where the
Investment Advisor believes that assets are undervalued due to
specific, event-driven circumstances and where asset-backing may be
available and the opportunity exists for recovery and significant
upside. Target companies may or may not be distressed as a result
of the situation. The Investment Advisor will aim to use its
restructuring and refinancing expertise to resolve the situation
and achieve a controlling position in the target company. The
Company seeks to acquire distressed debt, undervalued equity or the
assets of target businesses in solvent or insolvent situations.
-- Private Investment in Public Equities (PIPEs): the Company
may consider making investments in a number of smaller quoted
companies, primarily ones whose shares are admitted to AIM. The
Company will either seek to acquire and de-list the target company
or make an investment in the ordinary equity of a quoted target
company. The Company may offer ordinary shares in the Company as
all or part of the consideration for such investments.
-- Secondary portfolios / LP positions (Secondary or Primary) /
EPE Funds: the Company is able, through EPE's Placement business,
to invest as a limited partner in various Private Equity funds on
substantially improved terms. On occasion, the Company will seek to
take advantage of these commitments. The EPE skill-set and
experience is well suited to the requirements of co-investing in
funds.
The Company will consider most industry sectors, including
consumer, retail, manufacturing, financial services, healthcare,
support services and media industries. The Company partners with
management and entrepreneurs to maximise value by combining
financial and operational expertise in each investment.
The Company will seek to invest between GBP2 million and GBP10
million in a range of debt and equity instruments with a view to
generating returns through both yield and capital gain. Whilst in
general the Company aims to take controlling equity positions, it
may seek to develop companies as a minority investor. Occasionally
the Board may authorise investments of less than GBP2 million. For
investments larger than GBP5 million, the Company may seek
co-investment from third parties.
Portfolio Diversification
The Company's current portfolio, as at 31 July 2013, is
diversified by sector and instrument as follows:
SECTOR DIVERSIFICATION
Sector %
---------------------------- -----
Retail / FMCG 30%
Engineering, Manufacturing
and Distribution 51%
Business Services 16%
Healthcare 3%
---------------------------- -----
Total 100%
---------------------------- -----
INSTRUMENT DIVERSIFICATION
Instrument %
------------------- -----
Mezzanine Loans 20%
Shareholder Loans 37%
Equity 43%
------------------- -----
Total 100%
------------------- -----
Current Portfolio: ESO Investments (PC) LLP
Process Components
Process Components is an engineering parts and equipment
supplier to the powder processing industries, primarily food,
agriculture and pharmaceuticals. The business was formed in June
2009 and since then has demonstrated substantial year-on-year
growth, doubling EBITDA in that time. However, trading to the year
ending June 2013 has been challenging, driven by poor trading in
the US with new product lines taking longer to achieve recognition.
Nevertheless, a programme of investment in new product development,
sales and marketing is already driving growth over the short to
medium term. Customers are blue chip global manufacturers, and the
business has been growing its international supply operations,
seeking to expand its infrastructure from the US and Europe into
Asia with the opening of a new office in the region. The business
is also seeking to grow via acquisition and targeting suppliers of
adjacent products.
Current Portfolio: ESO Investments 1 LP
Nexus Industries
Nexus Industries ("Nexus") is a manufacturer and distributor of
electrical accessories in the UK, operating under the brand names
Masterplug and British General, supplying both the retail and
wholesale markets. The business had a strong first half of 2013,
despite the current market conditions, with substantial
year-on-year growth driven by the retail and international
divisions. Organic sales growth and margin improvements are
expected to be driven by the wholly-owned production facility
located in mainland China. International expansion is a major focus
for the business, with penetration growing in the US, China and
Australasia. Nexus is also working on acquiring complementary
businesses in both adjacent product categories and new
strategically suitable locations. The Investment Advisor is of the
view that maximum value will be achieved from Nexus by holding for
the medium to long term, giving the management team the opportunity
to implement the organic and acquisition-led growth strategies.
Indicia
Indicia is a direct marketing business focussed on database and
multi-channel analytics. Indicia was formed through the acquisition
and consolidation of three separate businesses and is currently
initiating a partnership with a larger US agency. The business has
underperformed against budget in the first half of 2013, leading
Indicia's senior management to implement a plan focussed on driving
additional sales out of existing clients and accelerating the
conversion of pipeline clients. This plan is expected to underpin
the full year forecast and support future growth. Despite this
weaker performance, Indicia's strategy of investing in its
commercial team continues to generate a strong pipeline of
potential new clients.
Whittard of Chelsea
Whittard of Chelsea is a specialist retailer of tea and coffee.
The Investment Advisor has focussed on developing the Whittard of
Chelsea brand by growing the online, wholesale and franchise
channels. The strategy has driven a very strong turnaround in
profitability since the date of investment. The cessation of
discounting and focus on the premium positioning of the brand this
year has achieved a significant improvement in gross margins. The
Investment Advisor is of the view that maximum value will be
achieved from Whittard of Chelsea by holding for the medium to long
term, giving the management team the opportunity to build on the
platform created by the successful turnaround and achieve
significant growth in both turnover and profitability.
Bighead Bonding Fasteners
Bighead Bonding Fasteners ("Bighead") is a specialist
engineering business manufacturing specialist load-spreading
fasteners and fixings for composites, plastics and traditional
materials. 2013 so far has seen strong trading at sales and EBITDA
level. The new business pipeline is very strong, with significant
new business potential in the automotive sector. The Company
continues to invest in sales and process engineering to secure and
support future growth, particularly focussed on the Automotive
sector. The Investment Advisor, over the long-term, aims to
replicate Bighead's local success in high-end niche applications by
establishing an international network of distributors for the
Company's products and to focus resources on the growth in
lightweight technologies. The Company continues to seek new
distribution and technology partners to facilitate growth.
Pharmacy2U
Pharmacy2U is an online pharmacy business, delivering National
Health Service and private prescriptions direct to the home using
an innovative, in-house developed technology, Electronic
Prescription Service ("EPSr2").
Valuation Methodology
The Company values its investments with reference to the BVCA
guidelines which state that portfolio companies should be valued on
an EBITDA multiple basis using publicly quoted comparables and/or
transaction comparables, then discounting the equity value by an
appropriate percentage to account for marketability considerations.
Cost may be considered as fair value in some cases but assets will
always be held at fair value, whether this is at, above or below
cost, and the value of such assets is reviewed periodically to
ensure that such is the case.
The Company intends to announce an estimated net asset value per
ordinary share on a monthly basis following a review of the
valuation of the Company's investments. The Company continues to
endeavour to comply with industry standards and the Fund applies
the International Private Equity and Venture Capital Valuation
Guidelines. The Company believes that there is unlikely to be any
material effect on the valuation process as a result of this
process. The Investment Advisor adopts a conservative approach to
valuation with reference to the aforementioned methodology having
regard for on-going volatile market conditions, particularly in the
UK retail sector, and credit restraints.
Review report by KPMG Audit LLC to EPE Special Opportunities
plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly report for the six
months ended 31 July 2013, which comprises the consolidated
statement of comprehensive income, the consolidated statement of
assets and liabilities, the consolidated statement of changes in
equity, the consolidated statement of cash flows and the related
explanatory notes. We have read the other information contained in
the half-yearly report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the
terms of our engagement. Our review has been undertaken so that we
might state to the Company those matters we are required to state
to it in this 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 reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the half-yearly report in accordance with the AIM
Rules.
The annual financial statements of the Group are prepared in
accordance with IFRSs, as adopted by the EU. The condensed set of
financial statements included in this half-yearly report has been
prepared in accordance with IAS 34 Interim Financial Reporting.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of consolidated financial statements in the
half-yearly 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 Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) 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 consolidated
financial statements in the half-yearly report for the six months
ended 31 July 2013 is not prepared, in all material respects, in
accordance with IAS 34 and the AIM Rules.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man IM99 1HN
13 September 2013
Consolidated Statement of Comprehensive Income
For the six months ended 31 July 2013
1 Feb
1 Feb 2012
2012 to to 31
1 Feb 2013 to 31 Jul 31 Jul Jan
2013 2012 2013
Revenue Capital Total Total Total
(unaudited) (unaudited) (unaudited) (unaudited) (audited)
------------- ------------- ------------- ------------- -----------
Note GBP GBP GBP GBP GBP
----------------------------------- ------------- ------------- ------------- ------------- -----------
Income
Rental income - - - 11,979 (12,243)
Interest income 1,680 - 1,680 681 3,157
----------------------------------- ------------- ------------- ------------- ------------- -----------
Total income 1,680 - 1,680 12,660 (9,086)
----------------------------------- ------------- ------------- ------------- ------------- -----------
Expenses
5 Investment advisor's fees (266,165) - (266,165) - (216,667)
Administration fees (34,150) - (34,150) (21,596) (54,133)
Directors' fees (62,000) - (62,000) (53,918) (126,500)
Directors' and Officers' insurance (2,062) - (2,062) (2,000) (7,412)
Professional fees (17,388) - (17,388) (50,104) (32,811)
Board meeting and travel expenses (6,207) - (6,207) (3,976) (6,490)
Auditors' remuneration (19,766) - (19,766) (18,002) (32,952)
Bank charges (349) - (349) (252) (960)
Irrecoverable VAT (97,382) - (97,382) (39,639) (100,863)
Share based payment expense (72,453) - (72,453) - (14,092)
Sundry expenses (14,817) - (14,817) (11,171) (11,256)
Listing fees (9,589) - (9,589) (8,689) (19,632)
Nominated advisor and broker
fees (32,147) - (32,147) (15,000) (40,357)
Total expenses (634,475) - (634,475) (224,347) (664,125)
----------------------------------- ------------- ------------- ------------- ------------- -----------
Net income/(expense) (632,795) - (632,795) (211,687) (673,211)
----------------------------------- ------------- ------------- ------------- ------------- -----------
Gains on investments
Share of profit of equity
6 accounted investees - 2,375,921 2,375,921 201,558 4,013,103
Deconsolidation of subsidiary - (9,003) (9,003) - -
Amounts due from equity accounted
investees written off - - - (167,750) (167,750)
Revaluation of investment
property - - - (7,840) (27,840)
Gain on buy-back of convertible
loan notes - - - - 303,629
Gain for the period/year on
investments - 2,366,918 2,366,918 25,968 4,121,142
----------------------------------- ------------- ------------- ------------- ------------- -----------
Finance charges
11 Interest on mortgage loan - - - (13,395) (16,869)
Interest on convertible loan
11 note instruments (241,222) - (241,222) (265,294) (504,819)
Profit/(loss) for the period/year
before taxation (874,017) 2,366,918 1,492,901 (464,408) 2,926,243
Taxation - - - - -
------------- -------------
Profit/(loss) for the period/year (874,017) 2,366,918 1,492,901 (464,408) 2,926,243
----------------------------------- ------------- ------------- ------------- ------------- -----------
Other comprehensive income - - - - -
----------------------------------- ------------- ------------- ------------- ------------- -----------
Total comprehensive income/(loss)
for the period/year (874,017) 2,366,918 1,492,901 (464,408) 2,926,243
----------------------------------- ------------- ------------- ------------- ------------- -----------
Basic earnings/(loss) per
9 ordinary share (pence) (3.11) 8.42 5.31 (1.57) 9.95
----------------------------------- ------------- ------------- ------------- ------------- -----------
Diluted earnings/(loss) per
9 ordinary share (pence) (3.11) 8.22 5.19 (1.57) 9.85
----------------------------------- ------------- ------------- ------------- ------------- -----------
The total column of this statement represents the Group's
Consolidated Statement of Comprehensive Income, prepared in
accordance with IFRS. The supplementary revenue return and capital
return columns are both prepared under Board approved guidelines in
relation to the allocation between revenue and capital. All items
in the above statement derive from continuing activities.
The notes section forms an integral part of these financial
statements
Consolidated Statement of Assets and Liabilities
As at 31 July 2013
31 July 31 July 31 January
2013 2012 2013
(unaudited) (unaudited) (audited)
Note GBP GBP GBP
---------------------------------- --------------- --------------- ------------
Non-current assets
6 Investment property - 447,575 -
Investment in equity accounted
6 investees 25,972,474 27,209,829 28,736,582
Loans to equity accounted investees
6,7 and related companies 1,495,027 1,834,406 1,854,227
27,467,501 29,491,810 30,590,809
---------------------------------- --------------- --------------- ------------
Current assets
Cash and cash equivalents 8,824,502 4,275,247 4,417,775
Trade and other receivables 98,696 212,046 66,486
8,923,198 4,487,293 4,484,261
---------------------------------- --------------- --------------- ------------
Current liabilities
Trade and other payables (44,985) (22,485) (53,074)
---------------------------------- --------------- --------------- ------------
(44,985) (22,485) (53,074)
----------------------------------
Net current assets 8,878,213 4,464,808 4,431,187
---------------------------------- --------------- --------------- ------------
Non-current liabilities
11 Convertible loan note instruments (5,991,256) (7,322,889) (5,977,377)
11 Bank loan - (447,575) -
---------------------------------- --------------- --------------- ------------
(5,991,256) (7,770,464) (5,977,377)
---------------------------------- --------------- --------------- ------------
Net assets 30,354,458 26,186,154 29,044,619
---------------------------------- --------------- --------------- ------------
Equity
8 Share capital 1,540,146 1,540,146 1,540,146
Share premium 1,815,385 1,815,385 1,815,385
Capital reserve (1,898,974) (8,361,066) (4,265,892)
Revenue reserve 28,897,901 31,187,252 29,950,543
Capital redemption reserve - 4,437 4,437
Total equity 30,354,458 26,186,154 29,044,619
---------------------------------- --------------- --------------- ------------
10 Net asset value per share (pence) 109.15 89.20 102.92
---------------------------------- --------------- --------------- ------------
Consolidated Statement of Changes in Equity
For the six months ended 31 July 2013
Six months ended 31 July 2013
(Unaudited)
Share Share Capital Capital Revenue Total
capital premium redemption reserve reserve
reserve
GBP GBP GBP GBP GBP GBP
------------------------ ---------- ---------- ------------ ------------ ----------- -----------
Balance at 1 February
2013 1,540,146 1,815,385 4,437 (4,265,892) 29,950,543 29,044,619
Total comprehensive
income for the period - - - 2,366,918 (874,017) 1,492,901
------------------------ ---------- ---------- ------------ ------------ ----------- -----------
Contributions by
and distributions
to owners
Share based payment
charge - - - - 47,453 47,453
Cash received from
JSOP participants - - - - 17,599 17,599
Purchase of treasury
shares - - - - (248,114) (248,114)
Removal of capital
redemption reserve - - (4,437) - 4,437 -
Total transactions
with owners - - (4,437) - (178,625) (183,062)
------------------------ ---------- ---------- ------------ ------------ ----------- -----------
Balance at 31 July
2013 1,540,146 1,815,385 - (1,898,974) 28,897,901 30,354,458
------------------------ ---------- ---------- ------------ ------------ ----------- -----------
Six months ended 31 July 2012
(Unaudited)
Share Share Capital Capital Revenue Total
capital premium redemption reserve reserve
reserve
GBP GBP GBP GBP GBP GBP
------------------------ ---------- ---------- ------------ ------------ ----------- -----------
Balance at 1 February
2012 1,540,146 1,815,385 4,437 (8,387,034) 32,187,320 27,160,254
Total comprehensive
income for the period - - - 25,968 (490,376) (464,408)
------------------------ ---------- ---------- ------------ ------------ ----------- -----------
Contributions by
and distributions
to owners
Purchase of treasury
shares - - - - (509,692) (509,692)
Total transactions
with owners - - - - (509,692) (509,692)
------------------------ ---------- ---------- ------------ ------------ ----------- -----------
Balance at 31 July
2012 1,540,146 1,815,385 4,437 (8,361,066) 31,187,252 26,186,154
------------------------ ---------- ---------- ------------ ------------ ----------- -----------
Year ended 31 January
2013 (Audited)
Share Share Capital Capital Revenue Total
capital premium redemption reserve reserve
reserve
GBP GBP GBP GBP GBP GBP
----------------------- ---------- ---------- ------------ ------------ ------------ ------------
Balance at 1 February
2012 1,540,146 1,815,385 4,437 (8,387,034) 32,187,320 27,160,254
Total comprehensive
income for the year - - - 4,121,142 (1,194,899) 2,926,243
Contributions by
and distributions
to owners
Share based payment
charge - - - - 14,092 14,092
Cash received from
JSOP participants - - - - 17,671 17,671
Purchase of treasury
shares - - - - (1,073,641) (1,073,641)
Total transactions
with owners - - - - (1,041,878) (1,041,878)
----------------------- ---------- ---------- ------------ ------------ ------------ ------------
Balance at 31 January
2013 1,540,146 1,815,385 4,437 (4,265,892) 29,950,543 29,044,619
----------------------- ---------- ---------- ------------ ------------ ------------ ------------
Consolidated Statement of Cash Flows
For the six months ended 31 July 2013
1 Feb 2013 1 Feb 2012 1 Feb 2012
to 31 Jul to 31 Jul to 31 Jan
2013 2012 2013
(unaudited) (unaudited) (audited)
GBP GBP GBP
--------------------------------------- -------------- -------------- ------------
Operating activities
Rental income received - - 33,750
Interest income received 1,680 681 3,157
Expenses paid (643,389) (271,712) (732,225)
Net cash used in operating activities (641,709) (271,031) (695,318)
-------------------------------------------- -------------- -------------- ------------
Investing activities
Loan repayments from investee
companies 80,000 - 117,273
Net receipts from associate and
related companies 5,433,000 1,512,904 3,681,921
Deconsolidation of ERPC II Limited (6,706) - -
Net cash generated from investing
activities 5,506,294 1,512,904 3,799,194
-------------------------------------------- -------------- -------------- ------------
Financing activities
Mortgage loan interest paid - (13,395) (24,709)
Part payment of mortgage loan - (7,840) -
Convertible loan note interest
paid (227,343) (375,000) (505,067)
Convertible loan note repurchases - (1,955,246) (2,994,902)
Purchase of treasury shares (248,114) (509,692) (1,073,641)
Share ownership scheme participation 17,599 - 17,671
Net cash used in financing activities (457,858) (2,861,173) (4,580,648)
-------------------------------------------- -------------- -------------- ------------
Increase/(decrease) in cash and
cash equivalents 4,406,727 (1,619,300) (1,476,772)
Cash and cash equivalents at
start of period/year 4,417,775 5,894,547 5,894,547
-------------------------------------------- -------------- -------------- ------------
Cash and cash equivalents at
end of period/year 8,824,502 4,275,247 4,417,775
-------------------------------------------- -------------- -------------- ------------
Notes to the Unaudited Interim Financial Statements
For the six months ended 31 July 2013
1 The Company
The Company was incorporated with limited liability in the Isle
of Man on 25 July 2003. The Company then re-registered under the
Isle of Man Companies Act 2006, with registration number 008597V.
The Company's ordinary shares are listed on the Alternative
Investment Market ("AIM") and the ICAP Securities and Derivatives
Exchange ("ICAP").
The interim consolidated financial statements as at and for the
six months ended 31 July 2013 comprise the Company and its
subsidiaries (together "the Group"). The interim consolidated
financial statements are unaudited.
The consolidated financial statements of the Group as at and for
the year ended 31 January 2013 are available upon request from the
Company's registered office at IOMA House, Hope Street, Douglas,
Isle of Man, IM1 1AP, or at www.epicpe.com.
The Company has two wholly owned subsidiary companies. EPIC
Reconstruction Property Company (IOM) Limited, a company
incorporated on 29 October 2005 in the Isle of Man and Corvina
Limited, a company incorporated on 16 November 2012 in the Isle of
Man. The Group lost control of EPIC Reconstruction Property Company
II Limited and as from 1 February 2013 was deconsolidated from the
Group accounts.
The Company also has interests in two partnerships that are
accounted for as associates. The partnerships comprise one limited
liability partnership, ESO Investments (PC) LLP, and one limited
partnership, ESO Investments 1 LP. The Company also has an interest
in a third partnership, ESO Investments 2 LP, through which new
investments will be made. As at 31 July 2013, ESO Investments 2 LP
had made no investments.
Following the approval of the Share Matching Plan at the Annual
General Meeting on 20 July 2012, the Company has established an
employee benefit trust located in the Isle of Man to administer the
scheme.
2 Statement of compliance
These interim consolidated and company financial statements have
been prepared in accordance with IAS 34 Interim Financial
Reporting.
The interim consolidated financial statements do not include all
of the information required for full annual financial statements,
and should be read in conjunction with the consolidated financial
statements of the Group as at and for the year ended 31 January
2013.
The interim consolidated financial statements were approved by
the Board of Directors on 16 September 2013.
3 Significant accounting policies
The accounting policies applied by the Group in these interim
consolidated financial statements are the same as those applied by
the Group as at and for the year ended 31 January 2013, except as
described below.
The following changes are also expected to be reflected in the
Group's consolidated financial statements as at and for the year
ended 31 January 2014.
The Group has adopted the following new standard with a date of
initial application of 1 February 2013.
-- IFRS 13: Fair Value Measurement
IFRS 13 establishes a single framework for measuring fair value
and making disclosures about fair value measurements, when such
measurements are required or permitted by IFRSs. In particular, it
unifies the definition of fair value as the price at which an
orderly transaction to sell an asset or transfer a liability would
take place between market participants at the measurement date. In
accordance with the transitional provisions of IFRS 13, the Group
has applied the new fair value measurement guidance prospectively
in valuation of unquoted investments held by the partnerships. The
change has no significant impact on the measurements of the Group's
assets and liabilities.
The Company holds interests in ESO Investments 1 LP, ESO
Investments 2 LP and ESO Investments (PC) LLP, which are managed
and controlled by EPIC Private Equity LLP for the benefit of the
Company and the other members. The Company has the power to appoint
members to the investment committee of ESO Investments 1 LP, ESO
Investments 2 LP and ESO Investments (PC) LLP but does not have the
ability to direct the activities of ESO Investments 1 LP, ESO
Investments 2 LP and ESO Investments (PC) LLP. The Directors
consider that ESO Investments 1 LP, ESO Investments 2 LP and ESO
Investments (PC) LLP do not meet the definition of subsidiaries.
These entities are instead treated as associates.
4 Financial risk management
The Group financial risk management objectives and policies are
consistent with those disclosed in the consolidated financial
statements as at and for the year ended 31 January 2013.
5 Investment advisory fees
The investment advisory fee payable to EPIC Private Equity LLP
was, until 31 August 2010, calculated at 2% of the Group's Net
Asset Value ("NAV"), with a minimum of GBP325,000 payable per
annum. On 31 August 2010, the Investment Advisor agreed to waive
the fee from the Company for a period of two years in return for a
priority profit share paid from ESO Investments 1 LP. Consequently
the payment of fees has resumed at a rate of 2% per annum of the
Company's NAV (including its share of the Fund) plus VAT. The
charge for the current period was GBP266,165 (period ended 31 July
2012: GBPnil, year ended 31 January 2013: GBP216,667).
6 Non-current assets
31 July 31 July 31 January
2013 2012 2013
------------------------------------- ----------- ----------- -----------
Group Group Group
GBP GBP GBP
------------------------------------- ----------- ----------- -----------
Investment property - 447,575 -
Financial assets
Investments in equity accounted
investee/associate 25,972,474 27,209,829 28,736,582
Loans to equity accounted investees
and related companies 1,495,027 1,834,406 1,854,227
27,467,501 29,491,810 30,590,809
------------------------------------- ----------- ----------- -----------
The Investment Advisor has applied appropriate valuation methods
with reference to BVCA guidelines and the valuation principles of
IAS 39 Financial Instruments: Recognition and Measurement.
Underlying investments in the equity accounted investees are valued
using these principles.
Investment in equity accounted associates
Investments in equity accounted associates comprise the
investment in ESO Investments 1 LP and ESO Investments (PC) LLP
(formerly ESO Investments 2 LLP) which are stated at cost plus the
share of profit and loss to date. The equity accounted associates
have accounted for their equity investments at fair value.
During the period, the Company received GBP5,140,000 (year ended
31 January 2013: GBP3,681,921) from ESO Investments 1 LP.
Summary of financial information of equity accounted investees
as at 31 July 2013 is as follows:
31 July
2013 31 January 2013
------------------ ---------------- ---------------- ------------ ---------------- ------------------------------
ESO Investments ESO Investments ESO Investments ESO Investments
(PC) LLP 1 LP Total (PC) LLP 1 LP Total
------------------ ---------------- ---------------- ------------ ---------------- ---------------- ------------
GBP GBP GBP GBP GBP GBP
Non-current
assets 4,500,000 37,203,734 41,703,734 4,500,000 38,058,325 42,558,325
Current assets 100 2,676,905 2,677,005 100 5,053,476 5,053,576
Total assets 4,500,100 39,880,639 44,380,739 4,500,100 43,111,801 47,611,901
------------------ ---------------- ---------------- ------------ ---------------- ---------------- ------------
Current
liabilities (482,972) (2,381,432) (2,864,404) (550,972) (1,313,485) (1,864,457)
Total liabilities (482,972) (2,381,432) (2,864,404) (550,972) (1,313,485) (1,864,457)
------------------ ---------------- ---------------- ------------ ---------------- ---------------- ------------
Group's share
of net assets 3,257,320 22,715,154 25,972,474 3,197,202 25,539,380 28,736,582
------------------ ---------------- ---------------- ------------ ---------------- ---------------- ------------
Income 80,000 1,151,963 1,231,963 26,149 2,330,911 2,357,060
Gains on
investments - 3,065,211 3,065,211 55,144 5,160,596 5,215,740
Expenses (12,000) (107,554) (119,554) (11,258) (240,238) (251,496)
Profit 68,000 4,109,620 4,177,620 70,035 7,251,269 7,321,304
------------------ ---------------- ---------------- ------------ ---------------- ---------------- ------------
Group's share
of profit 60,118 2,315,803 2,375,921 67,312 3,945,791 4,013,103
------------------ ---------------- ---------------- ------------ ---------------- ---------------- ------------
Key terms of the ESO Investments 1 LP Partnership Agreement
Profits or losses are credited or debited to each Member's
account to reflect the distributions payable to each Member were
the LP to be liquidated at its statement of financial position
value.
Prior to the First Hurdle Point (being the point at which each
member has received repayment of the loans advanced and a Hurdle
amount being 8% per annum on the loan balances) distributions shall
be made as:
-- 37% to DES Holdings IV(A) LLC
-- 63% to EPE Special Opportunities plc.
At the First Hurdle Point for an investor an amount equal to 25%
of the Hurdle shall be credited from that investor to EPE Carry LP.
After the First Hurdle Point distributions shall be as stated above
less 20% which shall be credited to EPE Carry LP until the Second
Hurdle Point.
At the Second Hurdle Point, (being the point at which DES
Holdings IV(A) LLC has received 1.5 times its loans advanced)
distributions shall be made as:
-- 25% to DES Holdings IV(A) LLC
-- 75% to EPE Special Opportunities plc.
Subject to a 20% allocation to EPE Carry LP in the event that
the First Hurdle Point has been reached.
At the Third Hurdle Point, (being the point at which DES
Holdings IV(A) LLC has received 2 times its loans advanced)
distributions shall be made as:
-- 18% to DES Holdings IV(A) LLC
-- 82% to EPE Special Opportunities plc.
Subject to a 20% allocation to EPE Carry LP in the event that
the Second Hurdle Point has been reached.
7 Loans to equity accounted investees and related companies
31 July 2013 31 July 2012 31 January
2013
Group Group Group
GBP GBP GBP
-------------------------- ------------- ------------- -----------
ESO Investments 1 LP 512,055 793,192 549,172
EPIC Structured Finance
Limited 500,000 500,000 805,055
ESO Investments (PC) LLP 482,972 541,214 500,000
1,495,027 1,834,406 1,854,227
-------------------------- ------------- ------------- -----------
The loans to equity accounted investees and related companies
are unsecured, interest free and not subject to any fixed repayment
terms.
8 Share capital
31 July 2013 31 July 2012 31 January 2013
------------------------ ------------------------ ------------------------
Number GBP Number GBP Number GBP
--------------------- ------------ ---------- ------------ ---------- ------------ ----------
Authorised share
capital
Ordinary shares
of 5p each 33,000,000 1,650,000 33,000,000 1,650,000 33,000,000 1,650,000
--------------------- ------------ ---------- ------------ ---------- ------------ ----------
Called up, allotted
and fully paid
Ordinary shares
of 5p each 30,802,911 1,540,146 30,802,911 1,540,146 30,802,911 1,540,146
Ordinary shares
of 5p each held
in treasury (2,992,719) - (1,446,142) - (2,583,551) -
27,810,192 1,540,146 29,356,769 1,540,146 28,219,360 1,540,146
--------------------- ------------ ---------- ------------ ---------- ------------ ----------
9 Basic and diluted earnings per ordinary share
The basic earnings per share is calculated by dividing the
profit for the period attributable to ordinary shareholders by the
weighted average number of shares outstanding during the period of
28,119,630 (six month period ended 31 July 2012: 29,581,304 after
share consolidation, year ended 31 January 2013: 29,403,897).
The diluted earnings per share is calculated by dividing the
profit for the period attributable to ordinary shareholders by the
weighted average number of shares outstanding during the period, as
adjusted for the effects of all dilutive potential ordinary shares
of 28,778,809 (six month period ended 31 July 2012: 29,581,304
after share consolidation, year ended 31 January 2013:
29,704,938).
10 Net asset value per share (pence)
The net asset value per share is based on the net assets at the
period end of GBP30,354,458 divided by 27,810,192 ordinary shares
in issue at the end of the period (31 July 2012: GBP26,186,154 and
29,356,769 ordinary shares, 31 January 2013: GBP29,044,619 and
28,219,360 ordinary shares).
The diluted net asset value per share of 106.62 pence, is based
on the net assets of the Group and the Company at the year-end of
GBP30,354,458 divided by the shares in issue at the end of the
year, as adjusted for the effects of dilutive potential ordinary
shares, of 28,469,371, after excluding treasury shares (31 July
2012: GBP26,186,154 and 29,356,769 ordinary shares, 31 January
2013: GBP29,044,619 and 28,520,401 ordinary shares).
11 Non-current liabilities
31 July 2013 31 July 2012 31 January
2013
Group Group Group
GBP GBP GBP
----------------------------------- ------------- ------------- -----------
Convertible loan note instruments 5,991,256 7,322,889 5,977,377
Mortgage loan - 447,575 -
----------------------------------- ------------- ------------- -----------
5,991,256 7,770,464 5,977,377
----------------------------------- ------------- ------------- -----------
Convertible loan note instruments were issued on 31 August 2010
to The Equity Partnership Investment Company plc. The notes carry
interest at 7.5% per annum and are convertible at the option of the
holder at a price of 170 pence per ordinary share. The convertible
shares fall under the definition of compound financial instruments
within IAS 32 Financial Instruments: Presentation. The Directors
are required to assess the element
of liability contained with the compound instrument. The
Directors consider that the instrument has no equity element.
Issue costs of GBP129,696 have been offset against the value of
the convertible loan note instruments and are being amortised over
the life of the instrument at an effective interest rate of 0.24%
per annum.
The convertible loan notes are repayable on 31 December 2015
unless the shareholders of the Company pass a resolution on or
before 30 September 2015 for the continuation of the Company beyond
31 December 2016, in which case the final repayment date shall be
31 December 2016, but each noteholder has the right to require the
redemption of some or all of their notes on 31 December 2015 by
providing the Company with written notice up to the close of
business on 30 November 2015.
12 Financial commitments and guarantees
Under the terms of the limited partnership agreement the Company
is committed to provide a maximum of GBP2.0 million additional
investment to ESO Investments 1 LP. To date no draw downs have been
made.
The Company historically provided certain guarantees to Lloyds
TSB Bank plc ("Lloyds") on the facilities that Lloyds provided to
Past Times Trading Limited. In July of this year the administrators
received the final balance of funds retained by Lloyds together
with a confirmation that all such guarantees provided by the
Company to Lloyds had been released. The administration is in its
final stages and surplus funds received by the administrators from
the administration process to date have been paid across to the
Company.
13 Subsequent events
There were no significant subsequent events.
Company Information
Directors Bankers
GO Vero (Chairman) Barclays Bank plc
RBM Quayle 1 Churchill Place
CL Spears Canary Wharf
NV Wilson London E14 5HP
Secretary Investment Advisor
P.P. Scales EPIC Private Equity
LLP
Audrey House
Registrar and Registered Office 16-20 Ely Place
IOMA Fund and Investment Management London EC1N 6SN
Limited
IOMA House
Hope Street Auditors and Reporting
Accountants
Douglas KPMG Audit LLC
Isle of Man IM1 1AP Heritage Court
41 Athol Street
Nominated Advisor and Broker Douglas
Numis Securities Limited Isle of Man IM99 1HN
10 Paternoster Square
London EC4M 7LT
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGUBUBUPWGAW
Epe Special Opportunities (LSE:ESO)
Historical Stock Chart
From Jun 2024 to Jul 2024
Epe Special Opportunities (LSE:ESO)
Historical Stock Chart
From Jul 2023 to Jul 2024
