TIDMSIGB
RNS Number : 6367W
Sherborne Investors (Guernsey)B Ltd
20 August 2020
SHERBORNE INVESTORS (GUERNSEY) B LIMITED
Interim Report and Unaudited Condensed Consolidated Financial
Statements
For the period from 1 January 2020 to 30 June 2020
Company Summary
The Company Sherborne Investors (Guernsey) B Limited (the
"Company") is a Guernsey domiciled limited liability
company and its shares are admitted to trading
on the London Stock Exchange's Specialist Fund
Segment ("SFS"). The Company was incorporated
on 8 November 2012. The Company commenced dealings
on the SFS on 7 May 2013.
Investment Objective To realise capital growth from investment in
a target company identified by the Investment
Manager, with the aim of generating a significant
capital return for Shareholders.
Investment Policy
To invest through its investment in SIGB, LP
(the "Investment Partnership") in a company which
is publicly quoted, which it considers to be
undervalued as a result of operational deficiencies
and which it believes can be rectified by the
Investment Manager's active involvement, thereby
increasing the value of the investment. The Company
will only invest in one target company at a time.
Investment Manager Sherborne Investors (Guernsey) GP, LLC (the "General
Partner") and the Investment Partnership have
appointed Sherborne Investors Management (Guernsey)
LLC (the "Investment Manager") to provide investment
management services to the Investment Partnership.
Chairman's Statement
Dear Shareholder,
I am pleased to present the Interim Report of Sherborne
Investors (Guernsey) B Limited (the "Company") for the period 1
January 2020 to 30 June 2020.
During the period the Company continued to pursue its investment
strategy through its shareholding in Electra Private Equity PLC
("Electra").
As at 30 June 2020, the net asset value ("NAV") attributable to
shareholders of the Company was GBP17.5 million (30 June 2019:
GBP30.9 million and 31 December 2019: GBP34.3 million) or 5.56
pence per share (30 June 2019: 9.83 pence per share and 31 December
2019: 10.91 pence per share). The Company's NAV was based on the
closing price of 191.25 pence as at 30 June 2020 (351.00 pence as
at 30 June 2019 and 391.50 pence as at 31 December 2019) for the
shares of Electra. As at the period end SIGB, LP held approximately
29.90% of Electra through ordinary shares. The ownership level
remains the same at the date of this statement.
On 12 December 2019, Electra declared the first special dividend
of financial year 2020 of 31 pence per share, paid on 24 January
2020, representing GBP3.55 million of proceeds to the Company.
Following receipt of Electra's dividend, the Company paid a
dividend of 0.65 pence per share on 7 February 2020 to shareholders
of record at 17 January 2020.
On 21 May 2020 Electra announced that its NAV at 31 March 2020
was 372.5 pence per share, of which 26.9 pence represented cash and
liquidity funds, and that as at 30 April 2020 its NAV was 414.3
pence per share. Electra also reconfirmed its intention to complete
the realisation of its remaining investments by the end of
2021.
The principal risks and uncertainties of the Company are in
relation to performance risk, market risk, relationship risk and
operational risk. These are unchanged from 31 December 2019, and
further details may be found in the Directors' Strategic Report
within the Annual Report and Audited Consolidated Financial
Statements of the Company for the year ended 31 December 2019. The
Directors will continue to assess the principal risks and
uncertainties relating to the Company for the remaining six months
of the year but expect these to remain unchanged.
Details of related party transactions during the period are
included in Note 11 of the Condensed Consolidated Financial
Statements.
During the period, the coronavirus ("COVID-19") outbreak has
caused extensive disruptions to businesses and economic activities
globally. The uncertainties over the emergence and spread of
COVID-19 have caused market volatility on a global scale. In March
2020 Electra's largest investment, TGI Fridays, a restaurant chain
operating principally in the UK, temporarily closed all of its
restaurants in accordance with a government mandate and during this
period another investment of Electra, Hotter, the UK's largest shoe
manufacturer, paused its manufacturing and closed its retail
locations but continued operating its ecommerce platform.
Subsequently, on 29 July 2020 Electra announced that TGI Fridays
had opened substantially all of its restaurants and was
experiencing positive year over year gains in revenue. Electra also
announced that Hotter had undertaken a company voluntary
arrangement ("CVA") and had received approval from creditors to
close the majority of Hotter's retail locations, resulting in a pro
forma EBITDA margin increase of 30%. Electra also confirmed that,
despite the pandemic, it remained on track to complete the
liquidation of all of its investments by the end of 2021. While the
results of Electra are currently encouraging, the situation is
constantly evolving as governments and businesses continue to
combat the impact of the pandemic. As an investment company, for
day to day operations the Company is ultimately dependent on the
Investment Manager, Administrator and Company Secretary all of whom
have robust business continuity plans in place to ensure that they
can continue to service the Company. These business continuity
plans have been in place and have been proven effective over the
period.
We are grateful for your continued support and will keep you
informed of the status of our investment as it develops.
Statement of Directors' Responsibilities
Responsibility statement
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as adopted
by the European Union;
-- The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and their impact on the condensed
financial statements and description of principal risks and
uncertainties for the remaining six months of the year);
-- The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein); and
-- The condensed set of financial statements, which has been
prepared in accordance with the applicable set of accounting
standards, gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the issuer, or the
undertakings included in the consolidation as a whole as required
by DTR 4.2.10R.
Going Concern
During the period, the COVID-19 outbreak has caused extensive
disruptions to businesses and economic activities globally. The
uncertainties over the emergence and spread of COVID-19 have caused
market volatility on a global scale. For further details on the
COVID-19 related impact to the Company refer to the Chairman's
Statement.
In addition to making enquiries of the Investment Manager and
Administrator, the Directors have undertaken a rigorous review of
the Company's ability to continue as a going concern including
reviewing the on-going cash flows and the level of cash balances as
of the reporting date as well as taking forecasts of future cash
flows and Electra's position as a non-going concern into
consideration and are of the opinion that the Group has adequate
cash on hand at the reporting date to continue its operational
activities for at least the next twelve months. This is not
impacted by any potential future decline in the Electra share
price. Electra is undergoing a "managed wind-down" and has
determined that it's no longer a going concern. However, this has
not impacted Electra's reporting basis and the board of Electra
still believes that it will be viable for the foreseeable future.
Accordingly, the Company continues to adopt a going concern basis
in preparing these Condensed Consolidated Financial Statements.
Independent Auditor's Review Report to the Members of Sherborne
Investors (Guernsey) B Limited
We have been engaged by Sherborne Investors (Guernsey) B Limited
(the "Company") to review the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2020 which comprises the Condensed Consolidated Statement of
Comprehensive Income, the Condensed Consolidated Statement of
Financial Position, the Condensed Consolidated Statement of Changes
in Equity, the Condensed Consolidated Statement of Cash Flows and
related notes 1 to 13. We have read the other information contained
in the interim financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this interim financial report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial
Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2020 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
For the period from 1 January 2020 to 30 June 2020
1 January 2020 1 January 2019 1 January 2019
to to to
30 June 2020 30 June 2019 31 December
201 9
(audited)
Notes GBP GBP GBP GBP GBP GBP
----------------- --------- ------------ ----------------- ------------ ------------ ---- ------------
Income 1(e)
Unrealised loss
on financial
assets
at fair value
through 1(d),
profit or loss 5 (22,920,788) (5,837,504) (1,201,839)
Dividend income 6 - 6,180,886 9,729,173
Bank interest
income 281 1,186 1,543
----------------- --------- ------------ ----------------- ------------ ------------ ---- ------------
Total
income/(loss) (22,920,507) 344,568 8,528,877
----------------- --------- ------------ ----------------- ------------ ------------ ---- ------------
Expenses 1(f)
Management fees 11 157,544 213,285 406,209
Administrative
fees 73,038 74,224 147,443
Directors' fees 2,11 62,500 62,500 125,000
Other fees 66,223 61,010 124,026
Professional
fees 47,240 57,269 92,967
------------
Total operating
expenses 406,545 468,288 895,645
----------------- --------- ------------------------------- ------------ ------------ ------------------
Total comprehensive
income/(loss) (23,327,052) (123,720) 7,633,232
---------------------------- ------------------------------- ------------ ------------ ------------------
Total
comprehensive
income/(loss)
attributable
to:
Equity
Shareholders (16,829,218) (211,269) 5,239,781
Non-controlling
interest (NCI) 1(b) (6,497,834) 87,549 2,393,451
----------------- --------- ------------------------------- ------------ ------------ ------------------
Weighted average
number of
shares
outstanding 4 314,547,259 314,547,259 314,547,259
Basic and
diluted
earnings per
share
attributable to
shareholders
(excluding
NCI) 4 (5.35)p (0.07)p 1.67p
----------------- --------- ------------------------------- ------------ ------------ ------------------
All revenue and expenses are derived from continuing
operations.
Although not required by IAS 34 - 'Interim Financial Reporting',
the comparative figures for the preceding year and the related
notes have been included on a voluntary basis.
The accompanying notes form an integral part of these Condensed
Consolidated Financial Statements.
Condensed Consolidated Statement of Financial Position
(Unaudited)
As at 30 June 20 20
30 June 2020 30 June 201 9 31 December 2019
(audited)
Notes GBP GBP GBP GBP GBP GBP
----------------- ------ -------------- ----------- ---------- ----------- -------------- -----------
Non-Current
Assets
Financial assets
at fair value
through profit 1(d),
or loss 5 21,890,639 40,175,762 44,811,427
----------------- ------ -------------- ----------- ---------- ----------- -------------- -----------
21,890,639 40,175,762 44,811,427
----------------- ------ -------------- ----------- ---------- ----------- -------------- -----------
Current Assets
Prepaid expenses 16,931 21,540 22,800
Dividend
receivable 6 - - 3,548,287
Cash and cash
equivalents 1(h) 1,003,800 1,156,000 696,863
1,020,731 1,177,540 4,267,950
----------------- ------ -------------- ----------- ---------- ----------- -------------- -----------
Current
Liabilities
Trade and other
payables 7 93,981 116,293 85,416
Dividend payable 10 - - 2,044,557
93,981 116,293 2,129,973
Net Current
Assets 926,750 1,061,247 2,137,977
----------------- ------ ----------------------- ----------------------- --------------
Net Assets 22,817,389 41,237,009 46,949,404
----------------- ------ ----------------------- ----------------------- --------------
Capital and
Reserves
Called up share
capital and
share premium 8 302,696,145 302,696,145 302,696,145
Retained
reserves (285,202,655) (271,779,930) (268,373,437)
----------------- ------ ----------------------- ----------------------- --------------
Equity
attributable
to the Company 17,493,490 30,916,215 34,322,708
----------------- ------ ----------------------- ----------------------- --------------
Non-controlling 1(b),
interest (NCI) 11 5,323,899 10,320,794 12,626,696
----------------- ------ ----------------------- ----------------------- --------------
Total Equity 22,817,389 41,237,009 46,949,404
----------------- ------ ----------------------- ----------------------- --------------
NAV Per Share
(excluding NCI) 9 5.56p 9.83p 10.91p
----------------- ------ ----------------------- ----------------------- --------------
The Condensed Consolidated Financial Statements were approved by
the Board of Directors for issue on 19 August 2020.
Although not required by IAS 34 - 'Interim Financial Reporting',
the comparative figures for the interim period and the related
notes have been included on a voluntary basis.
The accompanying notes form an integral part of these Condensed
Consolidated Financial Statements.
Condensed Consolidated Statement of Changes in Equity
(Unaudited)
For the period from 1 January 20 20 to 30 June 2020
Share Capital Non-
and Share Retained Controlling Total
Premium Reserves Interest Equity
Notes GBP GBP GBP GBP
------------------------- -------- -------------- -------------- ------------- -------------
Balance at 1 January
2020 302,696,145 (268,373,437) 12,626,696 46,949,404
------------------------- -------- -------------- -------------- ------------- -------------
Comprehensive loss - (22,296,360) (1,030,692) (23,327,052)
Incentive allocation 1(l),11 - 5,467,142 (5,467,142) -
Distribution 10 - - (804,963) (804,963)
Balance at 30 June 2020 302,696,145 (285,202,655) 5,323,899 22,817,389
------------------------- -------- -------------- -------------- ------------- -------------
Share Capital Non-
and Share Retained Controlling Total
Premium Reserves Interest Equity
Notes GBP GBP GBP GBP
----------------------------- -------- -------------- -------------- ------------- ------------
Balance at 1 January
2019 302,696,145 (266,850,453) 11,742,147 47,587,839
----------------------------- -------- -------------- -------------- ------------- ------------
Comprehensive income/(loss) - (125,979) 2,259 (123,720)
Incentive allocation 1(l),11 - (85,290) 85,290 -
Dividends 10 - (4,718,208) - (4,718,208)
Distribution 10 - - (1,508,902) (1,508,902)
Balance at 30 June 2019 302,696,145 (271,779,930) 10,320,794 41,237,009
----------------------------- -------- -------------- -------------- ------------- ------------
Share Capital Non-
and Share Retained Controlling Total
Premium Reserves Interest Equity
Notes GBP GBP GBP GBP
--------------------------- --------- -------------- -------------- ------------- ------------
Balance at 1 January 2019 302,696,145 (266,850,453) 11,742,147 47,587,839
--------------------------- --------- -------------- -------------- ------------- ------------
Comprehensive income - 7,279,201 354,031 7,633,232
Incentive allocation 1(l),11 - (2,039,420) 2,039,420 -
Dividends 10 - (6,762,765) - (6,762,765)
Distribution 10 - - (1,508,902) (1,508,902)
Balance at 31 December
2019 (audited) 302,696,145 (268,373,437) 12,626,696 46,949,404
--------------------------- --------- -------------- -------------- ------------- ------------
Although not required by IAS 34 - 'Interim Financial Reporting',
the comparative figures for the preceding year and the related
notes have been included on a voluntary basis.
The accompanying notes form an integral part of these Condensed
Consolidated Financial Statements.
Condensed Consolidated Statement of Cash Flows (Unaudited)
For the period from 1 January 2020 to 30 June 2020
1 January
20 20 1 January 1 January
to 30 June 201 9 201 9 to 31
20 20 to 30 June December 201
201 9 9 (audited)
Notes GBP GBP GBP
--------------------------------------------- ------------- ------------- ---------------
Net cash flow from operating activities
See below 3,156,176 5,738,768 5,279,274
---------------------------------------------- ------------- ------------- ---------------
Investing activities
Bank interest income 281 1,186 1,543
Net cash flow from investing activities 281 1,186 1,543
---------------------------------------------- ------------- ------------- ---------------
Financing activities
Dividend paid 10 (2,044,557) (4,718,208) (4,718,208)
Distributions to Non-controlling
interest 10 (804,963) (1,508,902) (1,508,902)
Net cash flow used in financing
activities (2,849,520) (6,227,110) (6,227,110)
---------------------------------------------- ------------- ------------- ---------------
Net movement in cash and cash equivalents 306,937 (487,156) (946,293)
Opening cash and cash equivalents 696,863 1,643,156 1,643,156
Closing cash and cash equivalents 1,003,800 1,156,000 696,863
---------------------------------------------- ------------- ------------- ---------------
Net cash flow from operating
activities
----------------------------------------- --- ------------- ------------- ---------------
Comprehensive income/(loss) (23,327,052) (123,720) 7,633,232
Unrealised loss on financial
assets held at fair value
through profit or loss 5 22,920,788 5,837,504 1,201,839
Movement in prepaid expenses 5,869 - (1,260)
Movement in trade and other
payables 7 8,565 26,170 (4,707)
Bank interest income (281) (1,186) (1,543)
Dividend receipt/(receivable) 6 3,548,287 - (3,548,287)
Net cash flow from operating activities 3,156,176 5,738,768 5,279,274
---------------------------------------------- ------------- ------------- ---------------
Although not required by IAS 34 - 'Interim Financial Reporting',
the comparative figures for the preceding year and the related
notes have been included on a voluntary basis.
The accompanying notes form an integral part of these Condensed
Consolidated Financial Statements.
Notes to the Condensed Consolidated Financial Statements
For the period from 1 January 2020 to 30 June 2020
1. Summary of significant accounting policies
Reporting entity
Sherborne Investors (Guernsey) B Limited (the "Company") is a
closed-ended investment company with limited liability formed under
the Companies (Guernsey) Law, 2008 (as amended). The Company was
incorporated and registered in Guernsey on 8 November 2012. The
Company commenced dealings on the London Stock Exchange's AIM
market on 29 November 2012 and moved from AIM to the London Stock
Exchange's Specialist Fund Segment ("SFS") on 7 May 2013. The
Company's registered office is 1 Royal Plaza, Royal Avenue, St
Peter Port, Guernsey, Channel Islands, GY1 2HL. The "Group" is
defined as the Company and its subsidiary, SIGB, LP (the
"Investment Partnership").
Basis of preparation
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards
("IFRSs") as adopted in the European Union. The financial
information for the year ended 31 December 2019, as included in
this Interim Report, is derived from the financial statements
delivered to the Listing Authority and does not constitute
statutory accounts as defined by the Companies (Guernsey) Law, 2008
(as amended). The Auditor reported in the statutory financial
statements for the year ended 31 December 2019: their report was
unqualified; did not draw attention to any matters by way of
emphasis; and did not contain a statement under Section 263(2) or
263(3) of the Companies (Guernsey) Law, 2008 (as amended).
The Condensed Consolidated Financial Statements of the Group
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting' ("IAS 34") as adopted in
the European Union, together with applicable legal and regulatory
requirements of Guernsey Law. The Directors of the Company have
taken the exemption in Section 244 of the Companies (Guernsey) Law,
2008 (as amended) and have therefore elected to only prepare
Condensed Consolidated Financial Statements for the period.
These Condensed Consolidated Financial Statements have been
prepared on the historical cost basis, as modified by the
measurement at fair value of investments. The accounting policies
adopted are consistent with those of the previous financial year
and corresponding interim period.
Going concern
During the period, the coronavirus ("COVID-19") outbreak has
caused extensive disruptions to businesses and economic activities
globally. The uncertainties over the emergence and spread of
COVID-19 have caused market volatility on a global scale. In March
2020 Electra's largest investment, TGI Fridays, a restaurant chain
operating principally in the UK, temporarily closed all of its
restaurants in accordance with a government mandate and during this
period another investment of Electra, Hotter, the UK's largest shoe
manufacturer, paused its manufacturing and closed its retail
locations but continued operating its ecommerce platform.
Subsequently, on 29 July 2020 Electra announced that TGI Fridays
had opened substantially all of its restaurants and was
experiencing positive year over year gains in revenue. Electra also
announced that Hotter had undertaken a company voluntary
arrangement ("CVA") and had received approval from creditors to
close the majority of Hotter's retail locations, resulting in a pro
forma EBITDA margin increase of 30%. Electra also confirmed that,
despite the pandemic, it remained on track to complete the
liquidation of all of its investments by the end of 2021. While the
results of Electra are currently encouraging, the situation is
constantly evolving as governments and businesses continue to
combat the impact of the pandemic. As an investment company, for
day to day operations the Company is ultimately dependent on the
Investment Manager, Administrator and Company Secretary all of whom
have robust business continuity plans in place to ensure that they
can continue to service the Company. These business continuity
plans have been in place and have been proven effective over the
period.
In addition to making enquiries of the Investment Manager and
the Administrator, the Directors have undertaken a rigorous review
of the Group's ability to continue as a going concern including
reviewing the on-going cash flows and the level of cash balances as
of the reporting date as well as taking forecasts of future cash
flows and Electra's position as a non-going concern into
consideration and are of the opinion that the Group has adequate
cash on hand at the reporting date to continue its operational
activities for at least the next twelve months. This is not
impacted by any potential future decline in the Electra share
price. Electra is undergoing a "managed wind-down" and has
determined that it's no longer a going concern. However, this has
not impacted Electra's reporting basis and the board of Electra
still believes that it will be viable for the foreseeable future.
Accordingly, the Company continues to adopt a going concern basis
in preparing these Condensed Consolidated Financial Statements.
Critical accounting judgments and key sources of estimation
uncertainty
The preparation of the Group's Condensed Consolidated Financial
Statements requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities and
contingencies at the date of the Group's Condensed Consolidated
Financial Statements and revenue and expenses during the reported
period. Actual results could differ from those estimated.
There are no critical accounting judgements or significant
estimates utilised for the preparation of the Group's Condensed
Consolidated Financial Statements as at 30 June 20 20 due to the
nature of the activities that have occurred in this period,
together with the sole investment held by the Group being quoted on
the London Stock Exchange. Fair value of financial assets held
through profit or loss is therefore based on the quoted closing bid
price at 30 June 2020.
Adoption of new and revised standards
(i) New standards adopted as at 1 January 2020:
All new standards effective from 1 January 2020 have been
adopted and do not have a material impact on the financial
statements.
(ii) Standards, amendments and interpretations early adopted by
the Group:
There were no standards, amendments and interpretations early
adopted by the Group.
(iii) Standards, amendments and interpretations in issue but not
yet effective:
Unless stated otherwise, the Directors do not consider the
adoption of any new and revised accounting standards and
interpretations to have a material impact as the new standards or
amendments are not relevant to the operations of the Group.
a. Basis of consolidation
The Condensed Consolidated Financial Statements incorporate the
financial statements of the Company and an entity controlled by the
Company (its subsidiary). Control is achieved where the Company has
the power to govern the financial and operating policies of an
investee entity so as to obtain benefits from its activities.
Non-controlling interests in the net assets of the consolidated
subsidiary are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the
non-controlling entities' share of changes in equity since the date
of the combination. Losses applicable to the non-controlling
entities in excess of their interest in the subsidiary's equity are
allocated against their interests to the extent that this would
create a negative balance.
Where necessary, adjustments are made to the financial
statements of the subsidiary to bring the accounting policies used
into line with those used by the Group.
All intra-group transactions, balances and expenses are
eliminated on consolidation.
The Company owns 95.55% (2019: 95.55%) of the capital interest
in the Investment Partnership. Whilst the General Partner of the
Investment Partnership, a company registered in Delaware, USA, is
responsible for directing the day to day operations of the
Investment Partnership, the Company, through its majority interest
in the Investment Partnership, has control and therefore the
ability to approve the proposed investment of the Investment
Partnership and to remove the general partner. Hence, the Company
has consolidated the Investment Partnership in its financial
statements.
b. Non-controlling interest
The interest of non-controlling parties in the subsidiary is
measured at their proportion of the net fair value of the assets,
liabilities and contingent liabilities recognised.
For the period from 1 January 2020 to 30 June 2020
1. Summary of significant accounting policies (continued)
c. Functional currency
Items included in the Condensed Consolidated Financial
Statements of the Group are measured using the currency of the
primary economic environment in which the entity operates (the
"functional currency"). The Condensed Consolidated Financial
Statements are presented in Pound Sterling ("GBP"), which is the
Group's functional and presentational currency. Transactions in
currencies other than GBP are translated at the rate of exchange
ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the date of the
Condensed Consolidated Statement of Financial Position are
retranslated into GBP at the rate of exchange ruling at that date.
Exchange differences are reported in the Condensed Consolidated
Statement of Comprehensive Income.
d. Financial assets at fair value through profit or loss
Investments are designated as fair value through profit or loss
in accordance with IFRS 9 'Financial Instruments', as the Group's
business model is to invest in financial assets with a view to
profiting from their total return in the form of interest and
changes in fair value. Despite the large holding, under
International Accounting Standard 28 'Investments in Associates',
the fund can hold the investment in Electra Private Equity plc
("Electra") shares at fair value through profit or loss rather than
as an associate as the Investment Partnership is a closed-ended
fund.
Investments in voting shares are initially recognised at cost
and are subsequently re-measured at fair value, as determined by
the Directors. Unrealised gains or losses arising from the
revaluation of investments in voting shares are taken directly to
the Condensed Consolidated Statement of Comprehensive Income.
In determining fair value in accordance with IFRS 13 'Fair Value
Measurement' ("IFRS 13"), investments measured and reported at fair
value are classified and disclosed in one of the following
categories within the fair value hierarchy:
Level I - An unadjusted quoted price for identical assets and
liabilities in an active market provides the most reliable evidence
of fair value and is used to measure fair value whenever available.
As required by IFRS 13, the Group will not adjust the quoted price
for these investments, even in situations where it holds a large
position and a sale could reasonably impact the quoted price.
Level II - Inputs are other than unadjusted quoted prices in
active markets, which are either directly or indirectly observable
as of the reporting date, and fair value is determined through the
use of models or other valuation methodologies.
Level III - Inputs are unobservable for the investment and
include situations where there is little, if any, market activity
for the investment. The inputs into the determination of fair value
require significant management judgement or estimation.
The investments held by the Group at the period end are
classified as meeting the definition of Level I (period ended 30
June 2019: Level I and year ended 31 December 2019: Level I). On
disposal of shares, cost of investments are allocated on a first
in, first out basis.
e. Revenue recognition
Dividend income is recognised when the Group's right to receive
payment has been established. Tax suffered on dividend income for
which no relief is available is treated as an expense.
Interest receivable from short-term deposits and investment
income are recognised on an accruals basis. Where receipt of
investment income is not likely until the maturity or realisation
of an investment then the investment income is accounted for as an
increase in the fair value of the investment.
f. Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged through the Condensed Consolidated Statement of
Comprehensive Income in the period in which they occur.
g. Prepaid expenses and trade receivables
Trade and other receivables are initially recognised at fair
value and subsequently, where necessary, remeasured at amortised
cost using the effective interest method. A provision for
impairment of trade receivables is established when there is
objective evidence the Group will not be able to collect all
amounts due according to the original terms of the receivables. The
Group only holds trade receivables with no financing component and
which have maturities of less than 12 months at amortised cost and
has therefore applied the simplified approach to expected credit
loss.
h. Cash and cash equivalents
Cash and cash equivalents comprise cash in hand as well as call
and current balances with banks and similar institutions, which are
readily convertible to known amounts of cash and which are subject
to insignificant risk of changes in value. This definition is also
used for the Condensed Consolidated Statement of Cash Flows. The
carrying amount of these assets approximate their fair value,
unless otherwise stated.
i. Trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently, where necessary, re-measured at amortised cost
using the effective interest method.
j. Financial instruments
Financial assets and liabilities are recognised in the Group's
Condensed Consolidated Statement of Financial Position when the
Group becomes a party to the contractual provisions of the
instrument.
k. Segmental reporting
As the Group invests in one investee company, there is no
segregation between industry, currency or geographical location and
therefore no further disclosures are required in conjunction with
IFRS 8 'Operating Segments'.
l. Incentive allocation
The incentive allocation is accounted for on an accruals basis
and the calculation is disclosed in Note 11. The incentive
allocation is payable to the non-controlling interest and therefore
recognised in the Condensed Consolidated Statement of Changes in
Equity rather than recognised as an expense in the Condensed
Consolidated Statement of Comprehensive Income.
m. Dividends to shareholders
Dividends are recognised in the Group's Condensed Consolidated
Financial Statements in the period in which they are declared and
approved by the Board of Directors.
2. Comprehensive income/(loss)
The comprehensive income/(loss) has been arrived at after
charging:
1 January
1 January 2020 1 January 2019 to 31
to 30 June 2019 to 30 December 201
2020 June 201 9 9
GBP GBP GBP
-------------------------- --------------- ------------ --------------
Directors' fees 62,500 62,500 125,000
Auditor's remuneration -
Audit 15,977 15,174 32,130
Auditor's remuneration -
Interim Review 14,600 14,600 14,600
-------------------------- --------------- ------------ --------------
In addition to the audit and half-yearly review related
remuneration above a further GBP15,089 was due to the Auditor in
relation to tax compliance services (period ended 30 June 2019:
GBP14,600 and year ended 31 December 2019: GBP19,758).
3. Tax on ordinary activities
The Company has been granted exemption from income tax in
Guernsey under the Income Tax (Exempt Bodies) (Bailiwick of
Guernsey) Ordinance 1989, and is liable to pay an annual fee
(currently GBP1,200) under the provisions of the Ordinance. As such
it will not be liable to income tax in Guernsey other than on
Guernsey source income (excluding deposit interest on funds
deposited with a Guernsey bank). No withholding tax is applicable
to distributions to Shareholders by the Company.
The Investment Partnership will not itself be subject to
taxation in Guernsey. No withholding tax is applicable to
distributions to partners of the Investment Partnership.
Income which is wholly derived from the business operations
conducted on behalf of the Investment Partnership with, and
investments made in, persons or companies who are not resident in
Guernsey will not be regarded as Guernsey source income. Such
income will not therefore be liable to Guernsey tax in the hands of
non-Guernsey resident limited partners.
Dividend income is shown gross of any withholding tax.
4. Earnings per share
The calculation of basic and diluted earnings per share is based
on the return on ordinary activities less total comprehensive
income attributable to the non-controlling interest and on there
being 314,547,259 (30 June 2019: 314,547,259 and 31 December 2019:
314,547,259) weighted average number of shares in issue. The
earnings per share for the period ended 30 June 2020 amounted to a
deficit of 5.35 pence per share (period ended 30 June 2019: a
deficit of 0.07 pence per share and year ended 31 December 2019: a
surplus of 1.67 pence per share).
5. Financial assets at fair value through profit or loss
As at 30 As at 31 December
As at 30 June 2019
June 2020 2019
GBP GBP GBP
------------------------------------- ------------- ------------ ------------------
Opening fair value 44,811,427 46,013,266 46,013,266
Unrealised loss on financial assets
at fair value through profit or
loss (22,920,788) (5,837,504) (1,201,839)
Closing fair value 21,890,639 40,175,762 44,811,427
------------------------------------- ------------- ------------ ------------------
Percentage holding of Electra 29.90% 29.90% 29.90%
------------------------------------- ------------- ------------ ------------------
The change in fair value of Electra is largely due to the
decline in multiples used to value the investments of Electra as
well as the widening of the discount to NAV. As at 30 June 2020,
the Group held 11,446,086 shares of Electra (30 June 2019:
11,446,086 and 31 December 2019: 11,446,086), which is a London
Stock Exchange listed investment trust focused on private equity
investments. In accordance with the Group's investment policy, the
Investment Manager does not intend to effect a purchase of shares
such that it would be required to make a mandatory bid for the
entire share capital of Electra.
6. Dividend income
On 12 December 2019, Electra declared the first special dividend
of financial year 2020 of 31 pence per share, paid on 24 January
2020 to shareholders on record on 27 December 2019 which equated to
GBP3,548,287 attributable to the Group and was therefore recognised
as dividend income in 2019 (period ended 30 June 2019: GBP6,180,886
and year ended 31 December 2019: GBP9,729,173).
7. Trade and other payables
As at 30 As at 31 December
As at 30 June 201 201 9
June 20 20 9
GBP GBP GBP
--------------------------- ------------ ----------- --------------------
Professional fees payable 26,845 49,086 29,497
Other payables 67,136 67,207 55,919
--------------------------- ------------ ----------- --------------------
Total 93,981 116,293 85,416
--------------------------- ------------ ----------- --------------------
8. Consolidated share capital and share premium
As at 30 June As at 30 June As at 31 December
2020 2019 2019
Authorised share capital No. No. No.
Ordinary Shares of no
par value Unlimited Unlimited Unlimited
-------------------------- -------------- -------------- ------------------
Issued and fully paid No. No. No.
Ordinary Shares of no
par value 314,547,259 314,547,259 314,547,259
-------------------------- -------------- -------------- ------------------
As at 30 June As at 30 June As at 31 December
2020 2019 2019
Share premium account GBP GBP GBP
Share premium account
upon issue 302,696,145 302,696,145 302,696,145
Closing balance 302,696,145 302,696,145 302,696,145
----------------------- -------------- -------------- ------------------
Each Ordinary Share has no par value with no right to fixed
income.
9. Net asset value per share attributable to the Company
Pence per
No. of Shares Share
------------------- -------------- ----------
30 June 2020 314,547,259 5.56
30 June 201 9 314,547,259 9.83
31 December 201 9 314,547,259 10.91
10. Dividends and distributions
On 6 March 2019, a dividend of 1.5 pence per share was declared
by the Company and was paid on 26 April 2019 to shareholders on
record on 29 March 2019 which equated to GBP4,718,208.
On 17 December 2019, a dividend of 0.65 pence per share was
declared by the Company and was paid on 7 February 2020 to
shareholders on record on 17 January 2020 which equated to
GBP2,044,557.
Dividends are paid subject to the discretion of the Directors
following the receipt of any distributions from the Investment
Partnership. This will be dependent on the frequency with which the
Selected Target Company ("STC") pays dividends to its
shareholders.
There were no dividends declared during the period (period ended
30 June 2019: GBP4,718,208 and year ended 31 December 2019:
GBP6,762,765) or 0% of 31 December 2019 Net Asset Value ("NAV")
(period ended 30 June 2019: 9.91% of 31 December 2018 NAV and year
ended 31 December 2019: 14.21% of 31 December 2018 NAV).
Total distributions paid by the Group to non-controlling
interests during the period were GBP804,963 (period ended 30 June
2019: GBP1,508,902 and year ended 31 December 2019: GBP1,508,902).
Distributions to non-controlling interests are made at the
discretion of the general partner to the Investment Partnership
following the receipt of any distributions from the STC.
Distributions are therefore dependent on the frequency with which
the STC pays dividends to its shareholders.
11. Related party transactions
The Investment Partnership and its General Partner, Sherborne
Investors (Guernsey) GP, LLC, have engaged Sherborne Investors
Management (Guernsey) LLC to serve as Investment Manager who is
responsible for identifying the STC, subject to approval by the
Board of Directors of the Company, as well as day to day management
activities of the Investment Partnership. The Investment Manager is
entitled to receive from the Investment Partnership a monthly
management fee equal to one-twelfth of 1% of the NAV of the
Investment Partnership, less cash and cash equivalents and certain
other adjustments. During the period, management fees of GBP157,544
(period ended 30 June 2019: GBP213,285 and year ended 31 December
2019: GBP406,209) had been paid by the Partnership. No balance was
outstanding at the period end (period ended 30 June 2019: GBPNil
and year ended 31 December 2019: GBPNil).
The sole member of Sherborne Investors (Guernsey) GP, LLC is
Sherborne Investors LP (the non-controlling interest), which also
serves as the Special Limited Partner of the Investment
Partnership. The Special Limited Partner is entitled to receive an
incentive allocation once aggregate distributions to partners of
the Investment Partnership, of which one is the Company, exceed a
certain level of capital contributions to the Investment
Partnership, excluding amounts contributed attributable to
management fees.
Sherborne Strategic Fund D, LLC ("SSFD"), an affiliate of the
General Partner to the Investment Partnership, holds a 4.43%
capital interest in the Investment Partnership. Management and
incentive fees are assessed based on the capital interest of SSFD's
interest.
For Turnaround investments, the incentive allocation is computed
at 10% of the distributions to all partners in excess of 110%,
increasing to 20% of the distributions to all partners in excess of
150% and increasing to 25% of the distributions to all partners in
excess of 200% of capital contributions, excluding amounts
contributed attributable to management fees.
At the period end, the incentive allocation has been computed
based on a Turnaround investment and amounts to GBP4,521,989 (30
June 2019: GBP8,864,101 and 31 December 2019: GBP10,890,498) of
which GBP200,435 (30 June 2019: GBP362,548 31 December 2019
GBP434,814) relates to SSFD. The amount paid in the period was
GBP697,924 (period ended 30 June 2019: GBP1,287,809 and year ended
31 December 2019: GBP1,287,810) of which GBP30,936 relates to SSFD
(period ended 30 June 2019: GBP57,083 and year ended 31 December
2019: GBP57,083).
Incentive Allocation movement SIGB Ltd SSFD Total
GBP GBP GBP
Movement to 30 June 2020 (5,467,142) (203,443) (5,670,585)
Movement to 30 June 2019 85,290 2,897 88,187
Movement to 31 December 2019 2,039,420 75,165 2,114,585
Sherborne Investors LP, SSFD and the General Partner also earned
their share of the Total Comprehensive Loss for the period of
GBP1,030,692 (period ended 30 June 2019: Total Comprehensive Income
of GBP2,259 and year ended 31 December 2019: Total Comprehensive
Income of GBP354,031).
Each of the Directors (other than the Chairman) receives a fee
payable by the Company currently at a rate of GBP35,000 per annum.
The Chairman of the Audit Committee receives GBP5,000 per annum in
addition to such fee. The Chairman receives a fee payable by the
Company currently at the rate of GBP50,000 per annum.
Individually and collectively, the Directors of the Company hold
no shares in the Company as at 30 June 20 20 (30 June 2019: Nil and
31 December 2019: Nil).
Sherborne Investors GP, LLC has granted to the Company a
non-exclusive licence to use the name "Sherborne Investors" in the
UK and the Channel Islands in the corporate name of the Company and
in connection with the conduct of the Company's business affairs.
The Company may not sub-licence or assign its rights under the
Trademark Licence Agreement. Sherborne Investors GP, LLC receives a
fee of GBP10,000 (2019: GBP20,000) per annum for the use of the
licensed name.
12. Financial risk factors
The Group's investment objective is to realise capital growth
from investment in the STC, identified by the Investment Manager
with the aim of generating significant capital return for
Shareholders. Consistent with that objective, the Group's financial
instruments mainly comprise of an investment in a STC. In addition,
the Group holds cash and cash equivalents as well as having trade
and other receivables and trade and other payables that arise
directly from its operations.
Liquidity risk
The Group's cash and cash equivalents are placed in demand
deposits with a range of financial institutions and are sufficient
to cover the Group's obligations. Additionally, the listed
investment in Electra could be partially redeemed relatively
quickly (within 3 months) should it be necessary for the Group to
meet additional obligations or pay ongoing expenses as and when
they fall due.
The following table details the liquidity analysis for financial
assets and liabilities at the date of the Condensed Consolidated
Statement of Financial Position:
Less than
As at 30 June 2020 1 month 1 - 12 months 1 - 2 years Total
GBP GBP GBP GBP
-------------------------- ---------- -------------- -------------- ---------
Trade and other payables (36,559) (57,422) - (93,981)
-------------------------- ---------- -------------- -------------- ---------
(36,559) (57,422) - (93,981)
-------------------------- ---------- -------------- -------------- ---------
Less than
As at 30 June 2019 1 month 1 - 12 months 1 - 2 years Total
GBP GBP GBP GBP
-------------------------- ---------- -------------- -------------- ----------
Trade and other payables (40,583) (75,710) - (116,293)
(40,583) (75,710) - (116,293)
-------------------------- ---------- -------------- -------------- ----------
Less than 1 - 2
As at 31 December 2019 1 month 1 - 12 months years Total
GBP GBP GBP GBP
-------------------------- ---------- -------------- -------- ------------
Dividend receivable 3,548,287 - - 3,548,287
Dividend payable - (2,044,557) - (2,044,557)
Trade and other payables (36,639) (48,777) - (85,416)
3,511,648 (2,093,334) - (1,418,314)
-------------------------- ---------- -------------- -------- ------------
Credit risk
The Company is exposed to credit risk in respect of its cash and
cash equivalents, arising from possible default of the relevant
counterparty, with a maximum exposure equal to the carrying value
of those assets. The credit risk on liquid funds is mitigated
through the Group depositing cash and cash equivalents across
several banks. The Group is exposed to credit risk in respect of
its trade receivables and other receivable balances with a maximum
exposure equal to the carrying value of those assets. UBS Financial
Services Inc. & HSBC Holdings PLC currently have a stand alone
credit rating of A-, whilst Barclays Bank PLC has a sandalone
credit rating of A with Standard & Poor's (30 June 2019: UBS
Financial Services Inc. & HSBC Holdings PLC A- whilst Barclays
Bank PLC A with Standard & Poor's and 31 December 2019: UBS
Financial Services Inc. & HSBC Holdings PLC A- whilst Barclays
Bank PLC A with Standard & Poor's).
Market price risk
Market price risk arises as a result of the Group's exposure to
the future values of the share price of the STC. It represents the
potential loss that the Group may suffer through investing in the
STC. Further information can be found in the 31 December 2019
Annual Consolidated Financial Statements.
Foreign exchange risk
Foreign currency risk arises as the value of future
transactions, recognised monetary assets and monetary liabilities
denominated in other currencies fluctuate due to changes in foreign
exchange rates. The Investment Manager monitors the Group's
monetary and non-monetary foreign exchange exposure on a regular
basis. The Group has limited foreign exchange risk exposure.
Interest rate risk
The Group is subject to risks associated with changes in
interest rates in respect of interest earned on its cash and cash
equivalents. The Group seeks to mitigate this risk by monitoring
the placement of cash balances on an ongoing basis in order to
maximise the interest rates obtained.
As at 30 June
2020 Interest bearing
--------------------------------------------
1 month 3 months
Less than to to Over Non- interest
1 month 3 months 1 year 1 year bearing Total
GBP GBP GBP GBP GBP GBP
------------------- ---------- ---------- --------- --------- -------------- -----------
Assets
Cash and cash
equivalents 1,003,800 - - - - 1,003,800
Financial assets
at fair value
through profit
or loss - - - - 21,890,639 21,890,639
Prepaid expenses - - - - 16,931 16,931
------------------- ---------- ---------- --------- --------- -------------- -----------
Total Assets 1,003,800 - - - 21,907,570 22,911,370
------------------- ---------- ---------- --------- --------- -------------- -----------
Liabilities
Other payables - - - - 93,981 93,981
Total Liabilities - - - - 93,981 93,981
------------------- ---------- ---------- --------- --------- -------------- -----------
As at 30 June
2019 Interest bearing
--------------------------------------------
1 month 3 months
Less than to to Over Non- interest
1 month 3 months 1 year 1 year bearing Total
GBP GBP GBP GBP GBP GBP
------------------- ---------- ---------- --------- --------- -------------- -----------
Assets
Cash and cash
equivalents 1,156,000 - - - - 1,156,000
Financial assets
at fair value
through profit
or loss - - - - 40,175,762 40,175,762
Prepaid expenses - - - - 21,540 21,540
------------------- ---------- ---------- --------- --------- -------------- -----------
Total Assets 1,156,000 - - - 40,197,302 41,353,302
------------------- ---------- ---------- --------- --------- -------------- -----------
Liabilities
Other payables - - - - 116,293 116,293
Total Liabilities - - - - 116,293 116,293
------------------- ---------- ---------- --------- --------- -------------- -----------
As at 31 December
2019 Interest bearing
--------------------------------------------
1 month 3 months
Less than to to Over 1 Non- interest
1 month 3 months 1 year year bearing Total
GBP GBP GBP GBP GBP GBP
--------------------- ---------- ---------- --------- --------- -------------- -----------
Assets
Cash and cash
equivalents 696,863 - - - - 696,863
Financial assets
at fair value
through profit
or loss - - - - 44,811,427 44,811,427
Dividend receivable - - - - 3,548,287 3,548,287
Prepaid expenses - - - - 22,800 22,800
--------------------- ---------- ---------- --------- --------- -------------- -----------
Total Assets 696,863 - - - 48,382,514 49,079,377
--------------------- ---------- ---------- --------- --------- -------------- -----------
Liabilities
Dividend payable - - - - 2,044,557 2,044,557
Trade and other
payables - - - - 85,416 85,416
--------------------- ---------- ---------- --------- --------- -------------- -----------
Total Liabilities - - - - 2,219,973 2,129,973
--------------------- ---------- ---------- --------- --------- -------------- -----------
As at 30 June 2020, the total interest sensitivity gap for
interest bearing items was a surplus of GBP1,003,800 (30 June 2019:
surplus of GBP1,156,000 and 31 December 2019: surplus of
GBP696,863).
As at 30 June 20 20, interest rates reported by the Bank of
England were 0.10% which would equate to income of GBP1,004 (period
ended 30 June 2019: interest rates were 0.75% which would equate to
income of GBP8,670 and year ended 31 December 2019: interest rates
were 0.75% which would equate to net income of GBP5,226) per annum
if interest bearing assets remained constant. If interest rates
were to fluctuate by 50 basis points, this would have a positive
effect of GBP5,019 or negative effect of GBP1,004 (period ended 30
June 2019: GBP5,780 and year ended 31 December 2019: GBP3,484) on
the Group's annual income.
Capital risk management
The capital structure of the Company consists of proceeds raised
from the issue of Ordinary Shares. As at 30 June 20 20, the Group
is not subject to any external capital requirement.
The Directors believe that at the date of the Condensed
Consolidated Statement of Financial Position there were no other
material risks associated with the management of the Group's
capital.
13. Subsequent events
Since 30 June 2020, the share price of Electra has decreased
from 191.25 pence to 179.50 pence as at 17 August 2020. If this
share price was used to value the Electra shares at 30 June 2020,
it would have resulted in a decrease in the closing fair value from
GBP21,890,639 to GBP20,545,724.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR KKLFFBVLFBBD
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