TIDMESO TIDMEO.P TIDMEC.P TIDMEL.P
RNS Number : 3252Y
EPE Special Opportunities Limited
08 September 2020
EPE Special Opportunities Limited
("ESO" or the "Company")
Interim Review and Unaudited Financial Statements for the six
months ended 31 July 2020
The Board of EPE Special Opportunities are pleased to announce
the Company's Interim Review and Unaudited Financial Statements for
the six months ended 31 July 2020.
Summary
-- The performance of the Company for the six months ended 31
July 2020 was encouraging in the context of the generalised
disruption caused by COVID-19, with the Company's portfolio
demonstrating resilience to acute economic headwinds. The Board and
the Investment Advisor (the "IA") continue to carefully monitor the
outlook for the UK economy as the threat of a second wave of
COVID-19 infections remains high.
-- The Board, IA and the management of the portfolio companies
took early and prudent steps to safeguard the financial position of
the Company and its investments, and to protect the wellbeing of
colleagues across the portfolio.
-- The Company maintains strong liquidity of GBP23.3 million
which is available to support the existing portfolio, meet the
Company's committed obligations and to deploy capital into
sufficiently attractive investment opportunities as they arise.
-- The Net Asset Value ("NAV") of the Company as at 31 July 2020
was 303.04 pence per share, a decrease of 4.5 per cent on the NAV
per share of 317.18 pence as at 31 January 2020. The small
reduction in the Company's NAV per share has been driven primarily
by the decline in value of the Company's unquoted assets,
reflecting the impact of the COVID-19 pandemic.
-- The share price as at 31 July 2020 was 175.00 pence,
representing a decrease of 12.1 per cent on the share price of
199.00 pence as at 31 January 2020.
-- Luceco plc's share price remained flat over the period.
Luceco plc's share price subsequently increased by c.30 per cent.
in August following the release of a trading update announcing
performance ahead of market expectations. The business delivered
operating profit for the interim period to 30 June 2020 ahead of
the prior year despite reduced sales. Positive cash generation
during the period led to a further reduction in the business's net
debt to 0.8x last 12 month EBITDA and allowed for the reinstatement
of the interim dividend.
-- Whittard of Chelsea experienced challenging trading
conditions, with UK retail stores closed in the interests of
employee safety and in line with government advice. Whittard
initiated a phased reopening of its stores starting from 19 June
2020. The disruption in the retail channel was partially mitigated
by a significant increase in the business's ecommerce platform.
-- David Phillips' performance was encouraging in the period,
with the business benefitting from a well-developed sales pipeline
at the start of the disruption. In response to the spread of
COVID-19 and reduced activity in the UK property sector, the
business initially suspended parts of its trading operations. As
restrictions eased, these divisions resumed trading and are
expected to make up some of their lost sales in the balance of the
year.
-- Pharmacy2U performed well over the period as consumers sought
online alternatives to physical pharmacies. This shift in consumer
behaviour delivered a signi cant increase in both patient numbers
and sales over the period.
-- As at 31 July 2020, the Company's portfolio was valued at a
weighted average EBITDA to enterprise value multiple of 8.9x
(excluding Pharmacy2U, which is valued on a sales multiple) and had
a low level of third-party leverage with net debt at 0.6x EBITDA in
aggregate.
-- Subsequent to the review period, on 1 September 2020, the
Company completed a GBP1.9 million investment into Atlantic Credit
Opportunities Fund ("ACOF"), a commingled distressed credit fund
which, subject to regulatory approval, will be managed by a
subsidiary of the Investment Advisor, EPIC Private Equity LLP. The
Company's investment in ACOF will provide ESO with the opportunity
to generate uncorrelated returns through exposure to the
significant dislocations in credit markets caused by the COVID-19
pandemic.
-- The Company has GBP3.9 million of outstanding unsecured loan
notes repayable in July 2022. The Company has no other third party
debt outstanding.
-- The Board continues to review new investment opportunities
identified by the IA. The Company's strong cash position and the
financial stability of the portfolio means that it is well
positioned to take advantage of attractive opportunities, such as
the Company's GBP1.9 million investment in Atlantic Credit
Opportunities Fund , completed on 1 September 2020.
Mr Clive Spears, Chairman, commented: "The performance of EPE
Special Opportunities in the six months ending 31 July 2020 was
encouraging, supported by early measures taken to protect the
Company, the portfolio and our colleagues in the face of
unprecedented circumstances. The Board maintains a cautious outlook
for the balance of the year, given the ongoing uncertainty
surrounding the COVID-19 pandemic. I would like to take the
opportunity to thank the Investment Advisor, EPIC Private Equity,
for their hard work and dedication in guiding the Company through
the disruption caused by the COVID-19 pandemic which leaves it well
positioned for the future. I would also like to wish all
shareholders and stakeholders across the portfolio the best of
health."
The person responsible for releasing this information on behalf
of the Company is Amanda Robinson of Langham Hall Fund Management
(Jersey) Limited.
Enquiries:
EPIC Private Equity LLP +44 (0) 207 269 8865
Alex Leslie
Langham Hall Fund Management (Jersey) Limited +44 (0) 15 3488 5200)
Amanda Robinson
Cardew Group Limited +44 (0) 207 930 0777
Richard Spiegelberg
Numis Securities Limited +44 (0) 207 260 1000
Nominated Advisor: Stuart Skinner / Huw Jeremy
Corporate Broker: Charles Farquhar
Chairman's Statement
The performance of the Company for the six months ended 31 July
2020 was encouraging in the context of the generalised disruption
caused by COVID-19, with the Company's portfolio demonstrating
resilience to acute economic headwinds. The Board, Investment
Advisor (the "IA") and the management of the portfolio companies
took early and prudent steps to safeguard the financial position of
the Company and its investments, and to protect the wellbeing of
colleagues across the portfolio. The Board and IA continue to
carefully monitor the outlook for the UK economy as the threat of a
second wave of COVID-19 infection remains high.
Measures adopted to delay the spread of COVID-19 depressed
economic activity in the second quarter of 2020 and, although
western European economies are slowly reopening, the outlook
remains uncertain in the medium term. The Company maintains strong
liquidity of GBP23.3 million and operates with modest committed
outgoings. The Company has GBP3.9 million of outstanding unsecured
loan notes ("ULNs") repayable on 25 July 2022. The Company has no
other third party debt outstanding. The Board has reviewed the
business continuity plans of the Company's key operational service
providers and is satis ed of their resilience, which has been
demonstrated by all service providers through the lockdown
period.
The IA worked closely with the management of portfolio companies
to respond to the lockdown quickly and effectively, taking early
and prudent steps to manage their liquidity and nancial position.
The portfolio has a low level of third party leverage (with net
debt at 0.6x last 12 month EBITDA in aggregate) and has strong
relationships with all external lenders.
The Net Asset Value ("NAV") per share of the Company as at 31
July 2020 was 303.04 pence per share, representing a decrease of
4.5 per cent. on the NAV per share of 317.18 pence as at 31 January
2020. The share price of the Company as at 31 January 2020 was
175.00 pence, representing a decrease of 12.1 per cent. on the
share price of 199.00 pence as at 31 January 2020.
Luceco plc's share price was flat in the period, as the business
delivered a steady performance despite adverse circumstances.
Luceco plc's share price subsequently increased by c.30 per cent.
in August following the release of a trading update announcing
performance ahead of market expectations. Luceco plc reported
operating profit for the interim period to 30 June 2020 ahead of
the same period in 2019 despite reduced sales. Positive cash
generation during the period led to a further reduction in the
business's net debt to 0.8x last 12 month EBITDA. Luceco plc
announced the reinstatement of dividends at the interim stage.
Whittard of Chelsea ("Whittard") faced significant challenges
during the period, temporarily closing its retail stores on 21
March 2020 in the interests of employee safety and in line with
government advice. The business's ecommerce channel traded ahead of
prior years and budget, partially mitigating the impact of the
disruption. Whittard initiated a phased reopening of its stores
starting from 19 June 2020. The business continues to review its
xed and variable costs and has bene tted from the government
schemes regarding furloughing, business rates and other taxation.
The business has no third party debt.
David Phillips' performance was encouraging in the period, with
the business benefitting from a well-developed sales pipeline at
the start of the disruption. In response to the spread of COVID-19
and reduced activity in the UK property sector, the business
initially suspended parts of its trading operations. As
restrictions eased, these divisions resumed trading and are
expected to make up some of their lost sales in the balance of the
year. The business continues to review its xed and variable costs
and has bene tted from the government schemes regarding
furloughing, business rates and other taxation.
Pharmacy2U performed well over the period as consumers sought
online alternatives to physical pharmacies. This shift in consumer
behaviour delivered a signi cant increase in both patient numbers
and sales over the period.
The Board continues to review new investment opportunities
identi ed by the IA. The Company's strong cash position and the
financial stability of the portfolio means that it is well
positioned to take advantage of any such opportunities.
Sub sequent to the review per i od, on 1 Septem ber 2 0 20, the
C ompany co m pleted a GBP 1.9 million investment into Atlantic C
redit Oppor t unities Fund ( "ACOF"), a commin gled distressed
credit fund which, subject to regulatory approval, will be managed
by a subsidiary of the Investment Advisor, EPIC Private Equity LLP.
T h e C omp a n y's investment in ACOF will provide ESO with the
opp o rtunity to gen e rate un c o rrelated retu r ns thr o ugh e x
p o s ure to the sign i ficant dislocations in credit mar kets cau
sed by the C OVID-19 pan demic.
I would like to take the oppor t unity to thank the I n vestment
Advis or, EPIC Private Equity, for their hard wo rk and dedication
in g uiding the C o m pany th r ou gh the dis r u ption ca u sed by
the COVI D -19 pand e mic which leaves it well po sitioned for the
futur e. I wo uld also like to wish all s har e h olders and stakeh
olders ac r o ss the portf olio the best of health.
C live Spears
C h airman
8 September 20 20
Investment Advisor's Report
In the six months ended 31 July 2020 the Investment Advisor's
efforts have been focused on mitigating the impact of the economic
disruption caused by the COVID-19 pandemic on the Company and its
portfolio. Social distancing measures and the resultant recession
in the UK and globally continue to depress sales demand across the
portfolio. Despite this, the portfolio as a whole has shown
pleasing resilience. The IA and the Board are closely monitoring
the dynamic situation and are mindful of the risks to the safety of
our colleagues and the financial position of the Company and its
investments presented by a potential second wave of infections.
The Company was well positioned at the start of the period with
strong liquidity and prudent levels of third party leverage. That
position has been maintained through the period with net debt in
the underlying portfolio at 0.6x last 12 month EBITDA in aggregate.
The Company has current cash balances of GBP23.3 million (as at 31
July 2020) which is available to support the existing portfolio,
meet the Company's committed obligations and deploy into
sufficiently attractive investment opportunities as they arise.
The Company
The Net Asset Value ("NAV") per share of the Company as at 31
July 2020 was 303.04 pence per share, representing a decrease of
4.5 per cent. on the NAV per share of 317.18 pence as at 31 January
2020. The share price of the Company as at 31 July 2020 was 175.00
pence, representing a decrease of 12.1 per cent. on the share price
of 199.00 pence as at 31 January 2020.
The Portfolio
The Company's portfolio is valued at a weighted average
enterprise value to EBITDA multiple of 8.9x for mature assets
(excluding assets investing for growth). The valuation has been
derived by reference to relevant quoted comparables, after the
application of an appropriate discount to adjust for the
portfolio's scale and unquoted nature (i.e. an illiquidity
discount). Given the use of quoted comparables, the valuation
reflects the fair value of assets as at the balance sheet date. The
IA notes that the fair market value of the portfolio remains
exposed to the volatile macro environment.
The share price of Luceco plc as at 31 July 2020 was 140.80
pence, in line with the beginning of period. Luceco plc's share
price subsequently increased by c.30 per cent. in August following
the release of a trading update announcing performance ahead of
market expectations. On 8 September 2020, Luceco released its
interim results for the six months ended 30 June 2020. The business
delivered an adjusted operating profit of GBP9.0 million, GBP1.8
million ahead of the prior year despite a 13.4 per cent
year-on-year reduction in sales due to reduced consumer demand.
Notably, Luceco plc generated adjusted free cash flow of GBP10.2
million in the period (GBP5.1 million ahead of the prior year),
which facilitated a further reduction in net debt to 0.8x last 12
month EBITDA. In addition, dividends were reinstated at the interim
stage, including payment of dividends prudently suspended earlier
in the year.
Whittard of Chelsea ("Whittard") has experienced unprecedented
challenges since the start of the COVID-19 pandemic, with the
closure of its UK retail estate resulting in sales for the period
below budget and the prior year. The retail closure was partially
mitigated by significant outperformance in Whittard's ecommerce
platform against budget and the prior year, in line with the
accelerated shift of consumer spending to online observed in the
wider UK retail sector since the beginning of the pandemic. The
business initiated a phased re-opening of its store estate from 19
June 2020. Despite this, sales performance is expected to be
impacted throughout the remainder of the year as a result of
reduced consumer and tourist footfall. The IA is particularly
mindful of the impact any second wave of the virus could have on
the seasonal peak, consumer sentiment and government restrictions
on physical trading.
David Phillips' performance was encouraging in the period, with
the business benefitting from a well-developed sales pipeline at
the start of the disruption. The historic focus of management and
the IA on improving the financial resilience and operational
flexibility of the business during the turnaround phase meant that
David Phillips was well positioned for the macro disruption caused
by COVID-19. In response to the resultant reduction in activity in
the UK property sector, the business initially suspended parts of
its trading operations and benefitted from available gov er nment s
up p ort (includ i ng the C oronavir us J ob Retention Scheme). As
restrictions ea sed, these divisions resumed tra ding and are ex p
ected to make up s ome of their lo st sales in the balance of t he
yea r. T he IA and t he management team are clo sely monitoring the
pr o perty m ar ket to be able to respo nd to s y stemic market
changes bro u ght about by the COVID-19 crisis. The IA believes the
bu siness is well placed to take advantage of these trends given
its div e r sified cu stomer base which en c ompasses both private
la ndlo r ds and the in stitutional residential prop e rty
market.
Pharmacy2U performed well over the period. As the UK's leading
online pharmacy, the business has benefitted from the need for
online alternatives to physical pharmacies, which has delivered a
signi cant increase in both patient numbers and sales since social
distancing measures were implemented. Development of a new
distribution facility in Leicestershire is expected to underpin the
next stage of growth.
The IA co ntinues to m onitor the C ompan y's investment in Eu r
opean Capital Private Debt Fund, w hich has completed the dep l
oyment of the C ompany's committed ca pital in the fund and has
begun to distribute capital to the C ompany.
The IA continues to review opp o rtunities to deploy capital
into new investments, with the challenging mac ro enviro n ment
generating an increa se in the n umber of well- priced op p
ortunities. T his trend is ex pected to c ontin ue in the coming
months as g overnment su p port is un w ou n d, precipitating r e
quirem e nts for external f u ndin g.
Sub sequent to t he review per i od, on 1 September 20 2 0, the
C ompany c ompleted a GBP 1.9 million investment into Atlantic C
redit Opportu nities Fund ( "ACOF"), a commingled distressed credit
fu n d which, subject to regulatory approval, will be managed by a
subsidiary of the Investment Advisor, EPIC Private Equity LLP. The
C ompan y's investment in ACOF will provide ESO with the o pp o
rtunity to g e nerate un c orrelated retu r ns thro u gh ex po s
ure to the significant dislocations in credit mar kets cau sed by
the COVI D -19 pan demic.
The IA would like to e xpress gratitude to the man a gement a nd
emp l oyees of the p ortfolio companies f or their hard work, d e
dication and resp o n siveness during t his unprec e d e nted perio
d. The IA is also g rateful f or the co ntinued s upport a nd co un
sel of the B oard and the C omp a ny's s hareh older s.
EPIC Private Equity LLP
Investment Advisor to the Company
8 September 2020
Biographies of the Directors
Clive Spears David Pirouet
Clive Spears retired from the Royal Bank David Pirouet joined PricewaterhouseCoopers
of Scotland International Limited in Channel Islands LLP in 1980, retiring
December 2003 as Deputy Director of Jersey in 2009 after being an Audit and Assurance
after 32 years of service. His main activities Partner for over 20 years. During his
prior to retirement included Product 29 years at the rm Mr Pirouet specialised
Development, Corporate Finance, Trust in the nancial services sector, in particular
and Offshore Company Services and he in the alternative investment management
was Head of Joint Venture Fund Administration area and also led the business's Hedge
with Rawlinson & Hunter. Mr Spears is Fund and business recovery practices
an Associate of the Chartered Institute for over four years. Mr Pirouet currently
of Bankers and a Member of the Chartered holds a number of non-executive positions
Institute for Securities & Investment. across private equity, infrastructure
He has accumulated a well spread portfolio and corporate debt. Mr Pirouet's appointments
of directorships centring on private currently include non-executive Director
equity, infrastructure and corporate and Chair of the Audit and Risk committee
debt. His current appointments include for GCP Infrastructure Investments (FTSE
Chairman of Nordic Capital Limited and 250 listed company).
director of Invesco Enhanced Income Limited.
-----------------------------------------------
Heather Bestwick Robert Quayle
-----------------------------------------------
Heather Bestwick has been a nancial services Robert Quayle qualified as an English
professional for over 25 years, onshore solicitor at Linklaters & Paines in 1974
in the City of London and offshore in after reading law at Selwyn College,
the Cayman Islands and Jersey. She quali Cambridge. He subsequently practiced
ed as an English solicitor, specialising in London and the Isle of Man as a partner
in ship nance, with City rm Norton Rose, in Travers Smith Braithwaite. He served
and worked in their London and Greek as Clerk of Tynwald (the Isle of Man's
of ces for 8 years. Ms Bestwick subsequently parliament) for periods totalling 12
practised and became a partner with global years and holds a number of public and
offshore law rm Walkers in the Cayman private appointments, and is active in
Islands, and Managing Partner of the the voluntary sector. Mr. Quayle is a
Jersey of ce. Ms Bestwick sits on the director of a number of companies in
boards of the manager of the Deutsche the financial services and distribution
Bank dbX hedge fund platform and Rathbone sectors.
Investment Management International Limited.
-----------------------------------------------
Nicholas Wilson
Nicholas Wilson has over 40 years of
experience in hedge funds, derivatives
and global asset management. He has run
offshore branch operations for Mees Pierson
Derivatives Limited, ADM Investor Services
International Limited and several other
London based financial services companies.
He is Chairman of Gulf Investment Fund
plc, a premium listed company, and, until
recently, was chairman of Alternative
Investment Strategies Limited. He is
a resident of the Isle of Man.
Biographies of the Investment Advisor
Giles Brand Hiren Patel
Giles Brand is a Partner and the founder Hiren Patel is the Managing Director
of EPE. He is currently the Non-executive of EPE Administration and is a
Chairman of Whittard of Chelsea and Luceco Partner and the Finance Director
plc, and Non-executive Director of the and Compliance Officer of EPE.
Reader Organisation, a not-for-profit He has worked in the investment
educational charity. Before joining EPE, management industry for the past
Giles was a founding Director of EPIC twenty years. Before joining EPE
Investment Partners, a fund management Administration, Hiren was Finance
business which at sale had US$5 billion Director of EPIC Investment Partners.
under management. Prior to this, Giles Prior to this, Hiren was employed
worked in Mergers and Acquisitions at at Groupama Asset Management where
Baring Brothers in Paris and London. Giles he was the Group Financial Controller.
read History at Bristol University.
--------------------------------------------------
Robert Fulford James Henderson
--------------------------------------------------
Robert Fulford is an Investment Director James Henderson is an Investment
of EPE. He previously worked at Barclaycard Director at EPE. He previously
Consumer Europe before joining EPE. Whilst worked in the Investment Banking
at Barclaycard, Robert was the Senior division of Deutsche Bank before
Manager for Strategic Insight and was joining EPE. Whilst at Deutsche
responsible for identifying, analysing Bank he worked on a number of M&A
and responding to competitive forces. transactions and IPOs in the energy,
Prior to Barclaycard, Robert spent four property, retail and gaming sectors,
years as a strategy consultant at Oliver as well as providing corporate
Wyman Financial Services, where he worked broking advice to mandated clients.
with a range of major retail banking and At EPE, James manages the investment
institutional clients in the UK, mainland in Pharmacy2U. James read Modern
Europe, Middle East and Africa. At EPE History at Oxford University and
Robert manages the investments in Whittard Medicine at Nottingham University.
of Chelsea and David Philips. Robert read
Engineering at Cambridge University.
--------------------------------------------------
Alex Leslie Ian Williams
------------------------------------------------
Alex Leslie is an Investment Director Ian Williams is an Investment Director
at EPE. He previously worked in Healthcare at EPE. He was previously a Partner at
Investment Banking at Piper Jaffray before Lyceum Capital Partner LLP responsible
joining EPE. Whilst at Piper Jaffray he for deal origination and engagement, with
worked on a number of M&A transactions a primary focus on the business services
and equity fundraisings within the Biotechnology, and software sectors, as well as nancial
Specialty Pharmaceutical and Medical Technology services, education and health sectors.
sectors. At EPE, Alex manages the investment Prior to Lyceum, Ian was a Director at
in Luceco plc. Alex read Human Biological Arbuthnot Securities, involved in transactions
and Social Sciences at Oxford University including IPOs, secondary fund raisings
and obtained an MPhil in Management from and M&A, focusing on the support services,
the Judge Business School at the Cambridge healthcare, transport & IT sectors. Ian
University. read Politics and Economics at the University
of Bristol.
------------------------------------------------
Independent Review Report to EPE Special Opportunities
Limited
Conclusion
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 2020 which comprises Statement of
Comprehensive Income, Statement of Financial Position, Statement of
Changes in Equity, Statement of Cash Flows and the related
explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly report for the six months ended 31 July 2020 is
not prepared, in all material respects, in accordance with IAS 34
Interim Financial Reporting as adopted by the EU and the AIM
Rules.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly report and consider whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
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.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The Directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly report
based on our review.
The purpose of our review work and to whom we owe our
responsibilities
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.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man IM1 1LA
8 September 2020
Statement of Comprehensive Income
For the six months ended 31 July 2020
1 Feb 1 Feb
2019 to 2019 to
31 Jul 31 Jan
1 Feb 2020 to 31 Jul 2020 2019 (unaudited) 2020 (audited)
Revenue Capital
(unaudited) (unaudited) Total (unaudited) Total Total
Note GBP GBP GBP GBP GBP
----------------- ------------- ------------- ------------------ ------------------ ----------------
Income
Interest income 1,398 - 1,398 94,630 101,566
(Losses)/gains
on investments - (2,439,705) (2,439,705) 14,453,782 39,568,491
----------------- ------------- ------------- ------------------ ----------------
Total
income/(loss) 1,398 (2,439,705) (2,438,307) 14,548,412 39,670,057
----------------- ------------- ------------- ------------------ ------------------ ----------------
Expenses
Investment
advisor's
5 fees (937,976) - (937,976) (747,247) (1,642,504)
14 Directors' fees (77,000) - (77,000) (77,000) (154,264)
Share based
payment
6 expense (217,715) - (217,715) (42,695) (71,158)
7 Other expenses (342,047) - (342,047) (905,733) (1,257,703)
Total expense (1,574,738) - (1,574,738) (1,772,675) (3,125,629)
----------------- ------------- ------------- ------------------ ------------------ ----------------
(Loss)/profit
before
finance costs
and tax (1,573,340) (2,439,705) (4,013,045) (12,775,737) 36,544,428
----------------- ------------- ------------- ------------------ ------------------ ----------------
Finance charges
Interest on
unsecured
loan note
13 instruments (159,842) - (159,842) (159,842) (319,685)
(Loss)/profit
for the
year before
taxation (1,733,182) (2,439,705) (4,172,887) 12,615,895 36,224,743
Taxation - - - - -
----------------- ------------- ------------- ------------------ ------------------ ----------------
(Loss)/profit
for the
year (1,733,182) (2,439,705) (4,172,887) 12,615,895 36,224,743
----------------- ------------- ------------- ------------------ ------------------ ----------------
Other
comprehensive
income - - - - -
----------------- ------------- ------------- ------------------ ------------------ ----------------
Total
comprehensive
(loss)/income (1,733,182) (2,439,705) (4,172,887) 12,615,895 36,224,743
----------------- ------------- ------------- ------------------ ------------------ ----------------
Basic
(loss)/earnings
per ordinary
share (pence) (5.27) (7.42) (12.69) 40.50 112.86
----------------- ------------- ------------- ------------------ ------------------ ----------------
Diluted
(loss)/earnings
per ordinary
share (pence) (5.27) (7.42) (12.69) 40.50 112.86
----------------- ------------- ------------- ------------------ ------------------ ----------------
The total column of this statement represents the Company's
Statement of Comprehensive Income, prepared in accordance with IFRS
as adopted by the EU. The supplementary revenue return and capital
return columns are prepared in accordance with the Board of
Directors' agreed principles. All items derive from continuing
activities.
Statement of Financial Position
As at 31 July 2020
31 July 2020 31 January 31 July 2019
(unaudited) 2020 (audited) (unaudited)
Note GBP GBP GBP
-------------------------------- ------------- ---------------- -------------
Non-current assets
Investments at fair value
8 through profit or loss 82,107,768 83,382,923 59,965,060
82,107,768 83,382,923 59,965,060
-------------------------------- ------------- ---------------- -------------
Current assets
Cash and cash equivalents 22,150,379 25,604,783 26,177,016
Trade and other receivables 175,798 235,211 214,434
-------------------------------- ------------- ---------------- -------------
22,326,177 25,839,994 26,391,450
-------------------------------- ------------- ---------------- -------------
Current liabilities
Trade and other payables (641,238) (1,028,704) (823,939)
--------------------------------
Net current assets 21,684,939 24,811,290 25,567,511
-------------------------------- ------------- ---------------- -------------
Non-current liabilities
13 Unsecured loan note instruments (3,946,520) (3,936,217) (3,925,914)
(3,946,520) (3,936,217) (3,925,914)
-------------------------------- ------------- ---------------- -------------
Net assets 99,846,187 104,257,996 81,606,657
-------------------------------- ------------- ---------------- -------------
Equity
10 Share capital 1,730,828 1,726,953 1,707,589
Share premium 13,619,627 13,489,826 13,489,826
Capital reserve 81,845,729 84,285,434 59,170,725
Revenue reserve 2,650,003 4,755,783 7,238,517
Total equity 99,846,187 104,257,996 81,606,657
Net asset value per share
(pence) 303.04 317.18 245.54
-------------------------------- ------------- ---------------- -------------
Statement of Changes in Equity
For the six months ended 31 July 2020
Six months ended 31 July 2020 (unaudited)
Share Share Capital Revenue Total
capital premium reserve reserve
Note GBP GBP GBP GBP GBP
----------------------------------- ---------- ------------ ------------ ------------ ------------
Balance at 1 February 2020 1,726,953 13,489,826 84,285,434 4,755,783 104,257,996
Total comprehensive loss
for the period - - (2,439,705) (1,733,182) (4,172,887)
----------------------------------- ---------- ------------ ------------ ------------ ------------
Contributions by and distributions
to owners
6 Share based payment charge - - - 217,715 217,715
Share ownership scheme
participation - - - (20,497) (20,497)
Provision for future settlement - - - 216,324 216,324
Share acquisition for JSOP
6 scheme - - - (786,140) (786,140)
Issue of new shares 3,875 129,801 - - 133,676
Total transactions with
owners 3,875 129,801 - (372,598) (238,922)
----------------------------------- ---------- ------------ ------------ ------------ ------------
Balance at 31 July 2020 1,730,828 13,619,627 81,845,729 2,650,003 99,846,187
----------------------------------- ---------- ------------ ------------ ------------ ------------
Year ended 31 January 2020 (audited)
Share Share Capital Revenue Total
capital premium reserve reserve
GBP GBP GBP GBP GBP
----------------------------------- ---------- ------------ ------------ ------------ ------------
Balance at 1 February 2019 1,503,286 3,867,209 44,716,943 9,725,035 59,812,473
Total comprehensive income/(loss)
for the year - - 39,568,491 (3,343,748) 36,224,743
----------------------------------- ---------- ------------ ------------ ------------ ------------
Contributions by and distributions
to owners
6 Share based payment charge - - - 71,158 71,158
Share ownership scheme
participation - - - 64,980 64,980
Provision for future settlement - - - (350,000) (350,000)
Purchase of shares - - - (1,411,642) (1,411,642)
Issue of new shares 223,667 9,622,617 - - 9,846,284
Total transactions with
owners 223,667 9,622,617 - (1,625,504) 8,220,780
----------------------------------- ---------- ------------ ------------ ------------ ------------
Balance at 31 January 2020 1,726,953 13,489,826 84,285,434 4,755,783 104,257,996
----------------------------------- ---------- ------------ ------------ ------------ ------------
Six months ended 31 July 2019 (unaudited)
Share Share Capital Revenue Total
capital premium reserve reserve
GBP GBP GBP GBP GBP
----------------------------------- ---------- ------------ ------------ ------------ ------------
Balance at 1 February 2019 1,503,286 3,867,209 44,716,943 9,725,035 59,812,473
Total comprehensive income/(loss)
for the period - - 14,453,782 (1,837,887) 12,615,895
----------------------------------- ---------- ------------ ------------ ------------ ------------
Contributions by and distributions
to owners
6 Share based payment charge - - - 42,695 42,695
Cash received from JSOP
participants - - - 77,866 77,866
Purchase of treasury shares (19,364) - - (769,192) (788,556)
Issue of new shares 223,667 9,622,617 - - 9,846,284
----------------------------------- ---------- ------------ ------------ ------------ ------------
Total transactions with
owners 204,303 9,622,617 - (648,631) 9,178,289
----------------------------------- ---------- ------------ ------------ ------------ ------------
Balance at 31 July 2019 1,707,589 13,489,826 59,170,725 7,238,517 81,606,657
----------------------------------- ---------- ------------ ------------ ------------ ------------
Statement of Cash Flows
For the six months ended 31 July 2020
1 Feb 2020 1 Feb 2019 1 Feb 2019
to 31 Jul to 31 Jan to 31 Jul
2020 (unaudited) 2020 (audited) 2019 (unaudited)
GBP GBP GBP
--------------------------------------- ------------------ ---------------- ------------------
Operating activities
Interest income received 1,398 17,574 10,639
Expenses paid (1,335,075) (2,718,136) (1,227,634)
Net cash used in operating activities (1,333,677) (2,700,562) (1,216,995)
---------------------------------------- ------------------ ---------------- ------------------
Investing activities
Purchase of investments (1,000,000) (700,000) (700,000)
Sales of investments - 942,505 -
Capital distribution from associates - 768,650 -
Loan to associates (164,550) (185,683) (171,374)
Net cash (used in)/generated from
investing activities (1,164,550) 825,472 (871,374)
---------------------------------------- ------------------ ---------------- ------------------
Financing activities
Unsecured loan note interest paid (149,540) (299,080) (149,540)
Purchase of shares - (1,411,642) (788,556)
Share acquisition for JSOP scheme (786,140) - -
Share ownership scheme participation (20,497) 64,980 77,866
Net cash used in financing activities (956,177) (1,645,742) (860,230)
---------------------------------------- ------------------ ---------------- ------------------
Decrease in cash and cash equivalents (3,454,404) (3,520,832) (2,948,599)
---------------------------------------- ------------------ ---------------- ------------------
Cash and cash equivalents at start
of period/year 25,604,783 29,125,615 29,125,615
---------------------------------------- ------------------ ---------------- ------------------
Cash and cash equivalents at end
of period/year 22,150,379 25,604,783 26,177,016
---------------------------------------- ------------------ ---------------- ------------------
Notes to the Condensed Interim Financial Statements
For the six months ended 31 July 2020
1 The Company
The Company was incorporated with limited liability in the Isle
of Man on 25 July 2003. The Company then re-registered under the
Isle of Man Companies Act 2006, with registration number 008597V.
On 11 September 2018, the Company re-registered under the Bermuda
Companies Act 1981, with registration number 53954. The Company
moved its operations to Jersey with immediate effect on 17 May 2017
and has subsequently operated from Jersey only.
The Company's ordinary shares are quoted on AIM, a market
operated by the London Stock Exchange, and the Growth Market of the
Aquis Stock Exchange (formerly the NEX Exchange).
The interim financial statements are as at and for the six
months ended 31 July 2020 comprise the Company and its associates.
The interim financial statements are unaudited.
The financial statements of the Company as at and for the year
ended 31 January 2020 are available upon request from the Company's
business office at Liberation House, Castle Street, St Helier,
Jersey, JE1 2LH and the registered office at Clarendon House, 2
Church Street, Hamilton HM11, Bermuda, or at
www.epespecialopportunities.com .
At 31 July 2020, the Company has two wholly owned subsidiary
companies. EPIC Reconstruction Property Company (IOM) Limited, a
company incorporated on 29 October 2005 in the Isle of Man and
Corvina Limited, a company incorporated on 16 November 2012 in the
Isle of Man.
At 31 July 2020, the Company also had interests in five
partnerships and three limited companies that are treated as
associates. The partnerships comprise one limited liability
partnership and four limited partnerships.
The principal activity of the Company and its associates is to
arrange income yielding financing for growth, buyout and special
situations and holding the investments and its associates with a
view to exiting in due course at a profit.
The Company has no employees.
2 Statement of compliance
These interim financial statements for the six months ended 31
July 2020 have been prepared in accordance with IAS 34 Interim
Financial Reporting and should be read in conjunction with
Company's last annual financial statements as at and for the year
ended 31 January 2020. They do not include all of the information
required for a complete set of financial statements prepared in
accordance with IFRS Standards. However, selected explanatory notes
are included to explain events and transactions that are
significant to an understanding of the changes in the Company's
financial position and performance since the last annual financial
statements.
In the Statement of Cash Flows, loans to associates have been
presented in investing activities. In the prior period/year
financial statements they were presented in operating activities.
The comparatives have been revised to correspond with the
presentation adopted in the current period. This change in
presentation for the comparatives has had no effect on net
profit/loss or net assets.
These interim financial statements were authorised for issue by
the Company's Board of Directors on 8 September 2020.
3 Significant accounting policies
COVID 19 Impact:
The COVID-19 pandemic has had a significant impact on the
valuation multiples, derived from quoted comparables, used in the
preparation of the fair market valuation of the Company's unquoted
investments. These quoted comparables are subject to both market
volatility and uncertainty due to the impact of the pandemic and
their trading outlook. The performance and financial position
forecasted for the Company's portfolio is subject to the wider
market uncertainty caused by the COVID-19 pandemic. These inputs
have been used in the preparation of the fair market valuation of
the Company's unquoted investments.
4 Financial risk management
The financial risk management objectives and policies are
consistent with those disclosed in the financial statements as at
and for the year ended 31 January 2020.
5 Investment advisory, administration fees and profit share
Investment advisory fees
Company
The investment advisory fee payable to EPIC Private Equity LLP
("EPE") is assessed and payable at the end of each fiscal quarter
and is calculated as 2 per cent. of the Company's NAV where the
Company's NAV is less than GBP100 million; otherwise the investment
advisory fee shall be calculated as the greater of GBP2.0 million
or the sum of 2 per cent. of the Company's NAV comprising Level 3
portfolio assets (i.e. unquoted assets), 1 per cent. of the
Company's NAV comprising Level 1 assets (i.e. quoted assets), no
fees on assets which are managed or advised by a third party
manager, 0.5 per cent. of the Company's net cash (if greater than
nil), and 2 per cent. of the Company's net cash (if less than nil)
(i.e. reducing fees for net debt positions).
The charge for the current period was GBP937,976 (for the period
ended 31 July 2019: GBP747,247; year ended 31 January 2020:
GBP1,642,504). The amount outstanding as at 31 July 2020 was
GBP500,000 (for the period ended 31 July 2019: GBP417,863; year
ended 31 January 2020: GBP500,000).
Administration fees
EPE Administration Limited provides accounting and financial
administration services to the company. The fee payable to EPE
Administration Limited is assessed and payable at the end of each
fiscal quarter and is calculated as 0.15 per cent. of the Company's
NAV where the Company's NAV is less than GBP100 million (subject to
a minimum fee of GBP35,000); otherwise the advisory fee shall be
calculated as 0.15 per cent. of GBP100 million plus a fee of 0.1
per cent. of the excess of the Company's NAV above GBP100
million.
The charge for the current period was GBP70,242 (for the period
ended 31 July 2019: GBP57,012; for the year ended 31 January 2020:
GBP125,732).
Other administration fees during the period were GBP27,441 (for
the period ended 31 July 2019: GBP28,416; for the year ended 31
January 2020: GBP72,499).
Profit share in ESO Investments 1 Limited
The distribution policy of ESO Investments 1 Limited includes an
allocation of profits to the Investment Advisor such that, for each
investment where a returns hurdle of 8 per cent. per annum has been
achieved, the Investment Advisor is entitled to receive 20 per
cent. of the increase in the base value of investment. For the
period ended 31 July 2020, GBP1,633,929 has been credited to the
profit share account of the Investment Advisor in the records of
ESO Investments 1 Limited.
Profit share in ESO Investments 2 Limited
The distribution policy of ESO Investments 2 Limited includes an
allocation of profit to the Investment Advisor such that, for each
investment where a returns hurdle of 8 per cent. per annum has been
achieved, the Investment Advisor is entitled to receive 20 per
cent. of the increase in the base value of investment. For the
period ended 31 July 2020, GBP4,736,542 has been credited to the
profit share account of the Investment Advisor in the records of
ESO Investments 2 Limited.
6 Share-based payment expense
Certain employees (including Directors) of the Company and the
Investment Advisors receive remuneration in the form of equity
settled share-based payment transactions, through a Joint Share
Ownership Plan ("JSOP").
The cost of equity settled transactions with certain Directors
of the Company and other participants (including employees, members
and consultants of the Investment Advisor) ("Participants") is
measured by reference to the fair value at the date on which they
are granted. The fair value is determined based on the share price
of the equity instrument at the grant date.
The Trust was created to award shares to Participants as part of
the JSOP. Participants are awarded a certain number of shares
("Matching Shares") which are subject to a three-year service
vesting condition from the grant date. In order to receive their
Matching Share allocation Participants are required to purchase
shares in the Company on the open market ("Bought Shares").The
Participant will then be entitled to acquire a joint ownership
interest in the Matching Shares for the payment of a nominal
amount, on the basis of one joint ownership interest in one
Matching Share for every Bought Share they acquire in the relevant
award period.
The Trust holds the Matching Shares jointly with the Participant
until the award vests. These shares carry the same rights as rest
of the ordinary shares.
The Trust held 1,419,004 (for the period ended 31 July 2019:
1,035,624; for the year ended 31 Jan 2020: 956,569) matching shares
at the period end which have traditionally not voted.
During the period, 462,435 shares were acquired by the Trust for
the JSOP scheme (2020: nil). No shares were vested during the
period to the JSOP participants (2020: 79,055). No shares were
awarded to the JSOP participants in the period (2020: 856,058).
The amount expensed in the income statement has been calculated
by reference to the grant date at a fair value of the equity
instrument and the estimated number of equity instruments to be
issued after the vesting period, less the amount paid for the joint
ownership interest in the Matching Shares. The total expense
recognised on the share-based payments during the period amounts to
GBP217,715 (for the period ended 31 July 2019: GBP42,695; for the
year ended 31 Jan 2020: GBP71,158).
7 Other expenses
The breakdown of other expenses presented in the statement of
comprehensive income is as follows:
1 Feb 2020 1 Feb 2019 1 Feb 2019
to 31 Jul to 31 Jul to 31 Jan
2020 (unaudited) 2019 (unaudited) 2020 (audited)
Total Total Total
GBP GBP GBP
------------------------------------ ------------------ ------------------ ----------------
Administration fees (97,683) (85,428) (198,231)
Directors' and officers' insurance (11,103) (11,496) (22,665)
Professional fees (136,941) (675,530) (780,440)
Board meeting and travel expenses (1,981) (3,102) (16,425)
Auditors' remuneration (36,535) (33,376) (50,000)
Bank charges (303) (566) (1,095)
Irrecoverable VAT (450) (450) (600)
Sundry expenses (6,209) (6,402) (48,556)
Nominated advisor and broker fees (29,072) (26,994) (55,740)
Listing fees (21,755) (60,636) (81,591)
Net foreign exchange loss (15) (1,753) (2,360)
------------------------------------- ------------------ ------------------ ----------------
Other expenses (342,047) (905,733) (1,257,703)
------------------------------------- ------------------ ------------------ ----------------
8 Investments at fair value through profit or loss
31 July 2020 31 January 31 July 2019
2020
(unaudited) (audited) (unaudited)
GBP GBP GBP
Investments at fair value through
profit and loss 82,107,768 83,382,923 59,965,060
82,107,768 83,382,923 59,965,060
--------------- ----------------- --------------
Investment roll forward schedule
31 July 2020 31 January 31 July 2019
(unaudited) 2020 (audited)
(unaudited)
Investments at fair value as at
1 February 83,382,923 34,793,620 34,793,620
------------------------------------ ------------- ---------------- --------------
Purchase of investments 1,000,000 700,000 700,000
Sale of investments - (942,505) -
Distributions - (768,650) -
Buyout of accrued carried interest - 9,846,284 9,846,284
Fair value movements (2,439,705) 39,568,491 14,453,782
Loan to associates 164,550 185,683 171,374
Investments at fair value as at
31 July/January 82,107,768 83,382,923 59,965,060
------------------------------------ ------------- ---------------- --------------
Investment in associates
Investments in associates comprise equity and debt investments
in ESO Investments 1 LP, ESO Alternative Investments LP, ESO
Investments 1 Limited, ESO Investments 2 Limited, ESO Investments
(DP) Limited and ESO Investments (PC) LLP which are stated at fair
value through profit and loss. The associates have also accounted
for their equity and debt investments at fair value.
9 Fair value of financial instruments
The Company determines the fair value of financial instruments
with reference to IPEV guidelines and the valuation principles of
IFRS 13 (Fair Value Measurement). The Company measures fair value
using the IFRS 13 fair value hierarchy, which reflects the
significance and certainty of the inputs used in deriving the fair
value of an asset:
-- Level 1: Inputs that are quoted market prices (unadjusted) in
active markets for identical instruments;
-- Level 2: Inputs other than quoted prices included within
Level 1 that are observable either directly (i.e. as prices) or
indirectly (i.e. derived from prices). This category includes
instruments valued using quoted market prices in active markets for
similar instruments, quoted prices for identical or similar
instruments in markets that are considered less than active or
other valuation techniques in which all significant inputs are
directly or indirectly observable from market data;
-- Level 3: Inputs that are unobservable. This category includes
all instruments for which the valuation technique includes inputs
not based on observable data and the unobservable inputs have a
significant effect on the instrument's valuation. This category
includes instruments that are valued based on quoted prices for
similar instruments but for which significant unobservable
adjustments or assumptions are required to reflect differences
between the instruments.
Valuation framework
The Company employs the valuation framework detailed below with
respect to the measurement of fair values. A valuation of the
Company's investments is prepared by the Investment Advisor with
reference to IPEV guidelines and the valuation principles of IFRS
13 (Fair Value Measurement). The Investment Advisor recommends
these valuations to the Board of Directors. The Board of Directors
considers the valuations recommended by the Investment Advisor,
determines any amendments required and thereafter adopts the fair
values presented in the Company's financial statements.
Quoted equity investments
Quoted investments traded in an active market are classified as
Level 1 in the IFRS 13 fair value hierarchy. The Company's
investment in Luceco is a Level 1 asset. For Level 1 assets, the
Company calculates the holding value from the latest market price
(without adjustment).
Unquoted private equity investments and third party fund
investments
Private equity investments and third party fund investments are
classified as Level 3 in the IFRS 13 fair value hierarchy. The
Company's investments in Whittard, David Phillips, Pharmacy2U and
European Capital Private Debt Fund are considered to be Level 3
assets. Various valuation techniques may be applied in determining
the fair value of investments held as Level 3 in the fair value
hierarchy;
-- For recently acquired assets, the Company considers the
investment cost an applicable fair value for the asset;
-- For underperforming assets, the Company considers the net
asset or recovery valuation more applicable, in particular where
the business' performance be contingent on shareholder financial
support;
-- For performing assets, the Company considers the market
approach to be the most appropriate with a specific focus on
trading comparables, applied on a forward basis. The Company will
also consider transaction comparables, applied on a historic
basis;
-- For assets managed and valued by third party managers, the
Company reviews the valuation methodology of the third party
manager. If deemed appropriate and consistent with the Company's
reporting standards, the Company will use the valuation prepared by
the third party manager.
The Investment Advisor believe that it is appropriate to apply
an illiquidity discount to the multiples of comparable companies
when using them to calculate valuations for small, private
companies. This discount adjusts for the difference in size between
generally larger comparable companies and the smaller assets being
valued. The illiquidity discount also incorporates the premium the
market gives to comparable companies for being freely traded or
listed securities. The Investment Advisor has determined between 15
per cent. and 25 per cent. to be an appropriate illiquidity
discount with reference to market data and transaction multiples
seen in the market in which the Investment Advisor operates.
Where portfolio investments are held through
subsidiary/associate holding companies, the net assets of the
holding company are added to the value of the portfolio investment
being assessed to derive the fair value of the holding company held
by the Company.
Fair value hierarchy - Financial instruments measured at fair
value
The table below analyses the underlying investments held by the
associates measured at fair value at the reporting date by the
level in the fair value hierarchy into which the fair value
measurement is categorised. Debt securities are also included, as
these are also stated at fair value with the Board assessing the
fair value of the total investment, which includes debt and equity.
The amounts are based on the values recognised in the statement of
financial position of the associates. All fair value measurements
below are recurring.
Level 1 Level 3 Total
31 July 2020 GBP GBP GBP
------------------------------------------------ ----------- ----------- -----------
Financial assets at fair value through
profit or loss
Unquoted private equity investments (including
debt) - 22,179,014 22,179,014
Third party private debt fund investment - 1,393,452 1,393,452
Quoted private equity investments 57,306,094 - 57,306,094
Investments at fair value through profit
or loss 57,306,094 23,572,466 80,878,560
------------------------------------------------- ----------- ----------- -----------
Other asset and liabilities - 1,229,208 1,229,208
Total investments at fair value through
profit or loss 57,306,094 24,801,674 82,107,768
------------------------------------------------- ----------- ----------- -----------
Level 1 Level 3 Total
31 January 2020 GBP GBP GBP
------------------------------------------------ ----------- ----------- -----------
Financial assets at fair value through
profit or loss
Unquoted private equity investments (including
debt) - 23,892,971 23,892,971
Third party private debt fund investment - 1,512,259 1,512,259
Quoted private equity investments 57,227,830 - 57,227,830
Investments at fair value through profit
or loss 57,227,830 25,405,230 82,633,060
------------------------------------------------- ----------- ----------- -----------
Other asset and liabilities - 749,863 749,863
Total investments at fair value through
profit or loss 57,227,830 26,155,093 83,382,923
------------------------------------------------- ----------- ----------- -----------
The following table, detailing the value of portfolio
investments only, shows a reconciliation of the opening balances to
the closing balances for fair value measurements in level 3 of the
fair value hierarchy for the underlying investments held by the
associates.
31 July 2020 31 January
(unaudited) 2020
(audited)
Unlisted private equity investments GBP GBP
(including debt)
---------------------------------------- --- ------------------ ------------------
Balance as at 1 February 25,405,230 14,209,340
Additions to investments 1,000,000 700,000
Capital distributions from investments (207,348) (247,693)
Change in fair value through profit
and loss (2,625,416) 10,743,583
Balance as at 31 July / 31 January 23,572,466 25,405,230
--------------------------------------------- ------------------ ------------------
Significant unobservable inputs used in measuring fair value
The table below sets out information about significant
unobservable inputs used at 31 July 2020 in measuring financial
instruments categorised as Level 3 in the fair value hierarchy.
Description Fair value at 31 Valuation technique
July 2020
------------------------------------ ----------------------
GBP
------------------------------------ ----------------- ----------------------
Unquoted private equity investments Sales/EBITDA multiple
(including debt) 22,179,014
Third party private debt fund Reported net asset
investment 1,393,452 value
------------------------------------ ----------------- ----------------------
Significant unobservable inputs are developed as follows:
-- Trading comparable multiple: valuation multiples used by
other market participants when pricing comparable assets. Relevant
comparable assets are selected from public companies determined to
be proximate to the Company's investment based on similarity of
sector, size, geography or other relevant factors. The valuation
multiple for a comparable company is determined by calculating the
enterprise value of the company implied by its market price as at
the reporting date and dividing by the relevant financial metric
(sales or EBITDA).
-- Recovery valuation: the value estimated to able to be
recovered by stakeholders in the event of the trade out of the
business. The total amount available to be distributed is
determined by calculating the value able to be realised from the
liquidation of the business' assets and the sale of any ring fenced
divisions.
-- Reported net asset value: for assets managed and valued by a
third party, the manager provides the Company with periodic
valuations of the Company's investment. The Company reviews the
valuation methodology of the third party manager. If deemed
appropriate and consistent with the Company's reporting standards,
the Board will adopt the valuation prepared by the third party
manger.
Although management believes that its estimates of fair value
are appropriate, the use of different methodologies or assumptions
could lead to different measurements of fair value. For fair value
measurements of Level 3 assets, changing one or more of the
assumptions used to reasonably possible alternative assumptions
would have the following effects on the Level 3 investment
valuations:
-- For the Company's investment in mature Level 3 assets, the
valuations used in the preparation of the financial statements
imply an average EV to EBITDA multiple of 7.8x (weighted by each
asset's total valuation) (2020: 5.6x). The key unobservable inputs
into the preparation of the valuation of mature Level 3 assets was
the EV to EBITDA multiple applied to the asset's financial
forecasts. If these inputs had been taken to be 25 per cent.
higher, the value of the Level 3 assets and profit for the period
would have been GBP4,374,948 higher. If these inputs had been taken
to be 25 per cent. lower, the value of the Level 3 assets and
profit for the period would have been GBP4,374,948 lower. A
corresponding increase or decrease in the asset's financial
forecasts would have a similar impact on the Company's assets and
profit.
-- For the Company's investment in growth Level 3 assets, the
valuations used in the preparation of the financial statements
imply an average EV to sales multiple of 0.5x (weighted by each
asset's total valuation) (2020: 0.5x). The key unobservable inputs
into the preparation of the valuation of growth Level 3 assets were
the EV to sales multiple applied to the asset's financial
forecasts. If these inputs had been taken to be 25 per cent.
higher, the value of the Level 3 assets and profit for the period
would have been GBP218,529 higher. If these inputs had been taken
to be 25 per cent. lower, the value of the Level 3 assets and
profit for the period would have been GBP218,529 lower. A
corresponding increase or decrease in the asset's financial
forecasts would have a similar impact on the Company's assets and
profit.
Financial instruments not measured at fair value
The carrying value of short-term financial assets and financial
liabilities (cash, debtors and creditors) approximate their fair
value. The carrying value of the convertible and the new loan note
instruments are also considered to approximate fair value.
10 Share capital
31 July 2020 31 January 2020 31 July 2019
(unaudited) (audited) (unaudited)
------------------------ ------------------------ ------------------------
Number GBP Number GBP Number GBP
--------------------- ------------ ---------- ------------ ---------- ------------ ----------
Authorised share
capital
Ordinary shares
of 5p each 45,000,000 2,250,000 45,000,000 2,250,000 45,000,000 2,250,000
---------------------- ------------ ---------- ------------ ---------- ------------ ----------
Called up, allotted
and fully paid
Ordinary shares
of 5p each 34,616,554 1,730,828 34,539,061 1,726,953 34,539,061 1,726,953
Ordinary shares
of 5p each held
in treasury (1,668,251) - (1,668,251) - (1,303,528) (19,364)
32,948,303 1,730,828 32,870,810 1,726,953 33,235,533 1,707,589
------------ ---------- ------------ ---------- ------------ ----------
11 Basic and diluted loss per share (pence)
Basic loss per share is calculated by dividing the loss of the
Company for the period attributable to the ordinary shareholders of
(GBP4,172,887) (for the period ended 31 July 2019: profit of
GBP12,615,895; for the year ended 31 January 2020: profit of
GBP36,224,743) divided by the weighted average number of shares
outstanding during the period of 32,885,795 after excluding
treasury shares (for the period ended 31 July 2019: 31,149,678; for
the year ended 31 January 2020: 32,095,510).
Diluted loss per share is calculated by dividing the loss of the
Company for the period attributable to ordinary shareholders of
(GBP4,172,887) (for the period ended 31 July 2019: profit of
GBP12,615,895; for the year ended 31 January 2020: profit of
GBP36,224,743) divided by the weighted average number of ordinary
shares outstanding during the period, as adjusted for the effects
of all dilutive potential ordinary shares, of 32,885,795 after
excluding treasury shares (for the period ended 31 July 2019:
31,149,678; for the year ended 31 January 2020: 32,095,510).
12 NAV per share (pence)
The Company's NAV per share of 303.04 pence (for the period
ended 31 July 2019: 245.54 pence; for the year ended 31 January
2020: 317.18 pence) is based on the net assets of the Company at
the period end of GBP99,846,187 (for the period ended 31 July 2019:
GBP81,606,657; for the year ended 31 January 2020: GBP104,257,996)
divided by the shares in issue at the end of the period of
32,948,303 after excluding treasury shares (for the period ended 31
July 2019: 33,235,533; for the year ended 31 January 2020:
32,870,810).
The Company's diluted NAV per share of 303.04 pence (for the
period ended 31 July 2019: 245.54 pence; for the year ended 31
January 2020: 317.18 pence) is based on the net assets of the
Company at the period end of GBP99,846,187 (for the period ended 31
July 2019: GBP81,606,657; for the year ended 31 January 2020:
GBP104,257,996) divided by the shares in issue at the end of the
period, as adjusted for the effects of dilutive potential ordinary
shares of 32,948,303 after excluding treasury shares (for the
period ended 31 July 2019: 33,235,533; for the year ended 31
January 2020: 32,870,810).
13 Non-current liabilities
The Company has issued Unsecured Loan Notes ("ULN") which pay
interest at 7.5 per cent. per annum and are redeemable on July 23
July 2022 (subject to voluntary early redemption by the Company).
At 31 July 2020, GBP3,987,729 of ULNs in principal amount were
outstanding. Issue costs totalling GBP144,236 have been offset
against the value of the loan note instrument and are being
amortised over the life of the instrument. The total issue costs
expensed in the period ended 31 July 2020 was GBP10,303 (for the
period ended 31 July 2019: GBP10,303; for the year ended 31 Jan
2020: GBP20,605). The carrying value of the ULNs in issue at the
period end was GBP3,946,520 (for the period ended 31 July 2019:
GBP3,925,914; for the year ended 31 Jan 2020: GBP3,936,217). The
total interest expense on the ULNs for the period is GBP159,842
(for the period ended 31 July 2019: GBP159,842; for the year ended
31 Jan 2020: GBP319,685). This includes the amortisation of the
issue costs.
14 Related parties
Directors' fees expense during the period amounted to GBP77,000
(for the period ended 31 July 2019: GBP77,000; for the year ended
31 January 2020: GBP154,264) of which GBP12,833 is accrued as at 31
July 2020 (for the period ended 31 July 2019: GBP12,834; for the
year ended 31 January 2020: GBP12,833).
Certain Directors of the Company and other participants are
incentivised in the form of equity settled share-based payment
transactions, through a Joint Share Ownership Plan (see note
6).
Five of the Directors have interests in the shares of the
Company as at 31 July 2020 (31 July 2019: four). Nicholas Wilson
holds 131,265 ordinary shares (31 July 2019: 125,987), Robert
Quayle holds 112,577 ordinary shares (31 July 2019: 107,201), Clive
Spears holds 133,270 ordinary shares (31 July 2019: 126,493),
Heather Bestwick holds 19,263 ordinary shares (31 July 2019:
13,888) and David Pirouet holds 11,162 shares (31 July 2019:
nil).
15 Subsequent events
On 19 August 2020, Luceco, the Company's largest asset, updated
the market on its nancial position and outlook in a RNS
announcement. Luceco announced performance ahead of market
expectations, with guidance for full year 2020 Adjusted Operating
Pro t increased from at least GBP18 million to at least GBP23
million.
On 1 September 2020, the Company completed a GBP1.9 million
investment in Atlantic Credit Opportunities Fund ("ACOF"), a
commingled distressed credit fund which, subject to regulatory
approval will be managed by a subsidiary of the Investment Advisor.
The Company will hold its investment in ACOF through ESO
Alternative Investments LP ("ESO AI LP"). ESO AI LP's acquisition
will diversify the Company's asset class exposure, in line with the
Company's stated investment strategy.
Company Information
Directors Administrator and Company Address
C.L. Spears (Chairman) Langham Hall Fund Management
(Jersey) Limited
H. Bestwick Liberation House
D.R. Pirouet Castle Street, St Helier
R.B.M. Quayle Jersey JE1 2LH
N.V. Wilson
Investment Advisor Nominated Advisor and Broker
EPIC Private Equity LLP Numis Securities Limited
Audrey House 10 Paternoster Square
16-20 Ely Place London EC4M 7LT
London EC1N 6SN
Auditors and Reporting Accountants Registered Agent (Bermuda)
KPMG Audit LLC Conyers Dill & Pearman
Heritage Court Clarendon House, 2 Church Street
41 Athol Street Hamilton HM 11
Douglas Bermuda
Isle of Man IM1 1LA
Bankers Registrar and CREST Providers
Barclays Bank plc Computershare Investor Services
(Jersey) Limited
1 Churchill Place Queensway House
Canary Wharf Hilgrove Street
London E14 5HP St. Helier JE1 1ES
HSBC Bank plc Investor Relations
1st Floor Richard Spiegelberg
60 Queen Victoria Street Cardew Company
London EC4N 4TR 5 Chancery Lane
London EC4A 1BL
Santander International
PO Box 545
19-21 Commercial Street
St Helier, Jersey, JE4 8XG
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END
IR EAKNPEEXEEEA
(END) Dow Jones Newswires
September 08, 2020 02:16 ET (06:16 GMT)
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