Eight Capital Ptnrs. - Restated Final Results for year ended 31 Dec 2021
12/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230912:nRSL0842Ma&default-theme=true
RNS Number : 0842M Eight Capital Partners PLC 12 September 2023
12 September 2023
EIGHT CAPITAL PARTNERS PLC
("Eight Capital", "ECP" or "the Company")
Annual Report and Financial Statements
For the year ended 31 December 2021
Eight Capital (AQSE: ECP), the investing company whose investment strategy
focuses on technology, media, telecoms and financial services businesses,
including listed investing companies, announced, further to its announcement
of 3 July 2023, its reissued final results for the year ended 31 December
2021.
As announced on 3 July 2023, a delay in the audit process for the financial
year to 31 December 2022 arose as a result of the directors' decision, in
consultation with its auditors and the Financial Reporting Council (FRC), to
reclassify the accounting treatment of its 1AF2 Ltd Sec. Bonds 21-24 fixed
rate bonds. The reclassification has resulted in the issue of these revised
audited accounts for the year to 31 December 2021.
The delayed final results to 31 December 2022 will also be released shortly.
For further information, please visit www.eight.capital or contact:
Eight Capital Partners plc +44 20 3808 0029
Dominic White, Chairman info@eight.capital
Luciano Maranzana, Group CEO
Cairn Financial Advisers LLP +44 20 7213 0880
AQSE Corporate Adviser
Jo Turner / Liam Murray
Walbrook PR Limited +44 20 7933 8780
Paul Vann/Nick Rome Paul.vann@walbrookpr.com
About Eight Capital Partners:
Eight Capital partners plc is a financial services operating company that aims
to grow revenue through businesses engaged in "Fintech" operations including
in the digital banking and lending sectors.
ECP seeks to grow its group revenue in these high growth fintech sub-sectors,
which it expects to also increase in value, such that they generate an
attractive rate of return for shareholders, predominantly through capital
appreciation.
www.eight.capital (http://www.eight.capital)
Eight Capital Partners operates two subsidiary businesses:
Epsion Capital:
Epsion Capital is an independent corporate advisory firm based in London with
an extensive experience in UK and European capital markets. The team of senior
and experienced ECM and M&A professionals is specialised across multiple
markets, sectors and geographies and it prides itself on a commercial approach
that allows the clients to achieve their growth ambitions.
www.epsioncapital.com (http://www.epsioncapital.com)
Innovative Finance:
Innovative Finance is a corporate finance advisory business that develops
mergers and acquisitions and financing solutions across multiple sectors,
primarily in Europe, with access to international transactions. It focuses on
investments in Europe which are linked to technological developments in the
financial services industry. www.innovfinance.com
(http://www.innovfinance.com)
Extract from the audited reissued report and accounts for the year ended 31
December 2021
Revision of Financial Statements by Replacement
The following Annual Report and Financial Statements replaces the original
reports filed with the Registrar of Companies on 22 July 2022. These are now
the statutory accounts of the Company for the year ended 31 December 2021.
This replacement Annual Report and Financial Statements has been prepared at
the date of the original accounts and not as at the date of this revision and
accordingly does not deal with events between those dates.
Financial Reporting Council (FRC)
The Company was notified by the FRC that the Company's original FY 2021
Audited Annual Report and Financial Statements had been subject to a limited
scope review in accordance with Part 2 of the FRC Corporate Reporting Review
Operating Procedures. A full review of the original FY 2021 Annual Report
and Financial Statements was not undertaken and the review was subject to the
following scope and limitations of the FRC review.
The FRC also provides no assurance that the revised annual report and accounts
are correct in all material respects, including (but not limited to) the
carrying amounts of the assets and liabilities affected by the revisions
described below. The FRC has not verified the assumptions made by management
or the information provided.
Scope and limitations of the FRC review
The FRC review is based on a review of the annual report and accounts and does
not benefit from detailed knowledge of the Company's business or an
understanding of the underlying transactions entered into. It was however
conducted by staff of the FRC who have an understanding of the relevant legal
and accounting framework. The FRC provides no assurance that the annual
report and accounts are correct in all material respects, the FRC's role is
not to verify the information provided but to consider compliance with
reporting requirements.
Amendments to 2021 Audited Annual Report and Financial Statements arising from
FRC review and additional review by the Company and its Auditor.
As a result of the FRC review and additional review carried out by the Company
and its Auditor, several amendments have been agreed by the Board to be made
to the Annual Audited Report and Financial Statements.
Amendments arising from FRC review where the original Annual Audited Report
and Financial Statements did not meet the requirements of the Companies Act
2006
1. Correction of 2021 entries in the cash flow statement relating to
the issue and redemption of loan liabilities, where the transactions were
non-cash exchanges of bonds.
The consolidated and company cash flow statements reported an investing cash
outflow of £33,620,000 and financing cash inflows of £20,969,000 and
£13,185,000. These non-cash transactions should have been excluded from
cash inflows and outflows presented in the statements of cash flows.
2. Correction of the hierarchy level in which the fair value
measurement of the investment in bonds issued by 1AF2 Limited ('1AF2 Bonds')
belongs, and additional disclosures required for Level 3 measurement in
accordance with paragraphs 93(d), (e), (f), (g) and (h) of IFRS 13; correction
of 2021 entries relating to the carrying amount of the 1AF2 Bonds at 31
December 2021 and recognition of fair value movements on the 1AF2 Bonds in the
income statement.
The Directors had previously reviewed the 1AF2 Bonds and concluded that whilst
the bonds benefitted from an exit fee based on the performance of the
underlying securitised assets in a listed entity, they
considered the likelihood of achieving the exit fee to be remote, and as such
did not take it into account as part of the assessment of the bonds. The
Directors took the view that the Bonds should have been held at amortised
cost, whereas the FRC's view upon review is that they should have been held at
fair value based on an appropriate valuation method.
Following a review with its Auditor, the Directors now consider that the fair
value measurement of the 1AF2 Bonds should have been categorised within Level
3. As part of the Level 3 disclosure it should have set out that there were
no suitable quoted prices for trading in the 1AF2 Bonds. The valuation
method disclosed should then have explained the methodologies used to value
the bonds based on 1) a valuation of the underlying securities and 2) a
discounted cash flow analysis, which involve the use of significant
unobservable inputs.
Underlying securities valuation methodology
Quoted shares were priced by the mid-point of the reporting date.
Unquoted shares, the valuation was based on an average of 4 scenarios which
included a 3 and 5 year financial plan discounted using a Weighted Average
Cost of Capital ('WACC').
The WACC included the following elements:
Risk-free rate - calculated as the 12 months weighted average value of the 10Y
US Government Bond
Equity risk premium - sourced from Ashwath Damodaran, a Professor of Finance
at the Stern School of Business at New York University who is recognised as a
provider of comprehensive data for valuation purposes.
Beta - calculated as the median of the betas (2 years, weekly) observed in a
panel of comparable listed companies operating in the regulatory and ICT
industry
Small size premium - in order to take into account the different size of the
Company compared to the comparable entities used in the management assessment
of WACC.Execution risk premium - in order to reflect the risk related to the
projections
Country risk premium - it reflects the risk related to the main regional areas
where the company operates in each scenario
Cost of debt - equal to the sum of risk-free rate, the spread resulting from
the S&P credit spreads of the comparable and the Italian default spread.
Tax rate - equal to the Italian corporate tax rate of 24%
WACC was converted from USD to EUR by using the inflation rates in both
jurisdictions.
Each scenario produced a different WACC, ranging from 14.5% to 16.6%.
Long Term Growth Rate ('LTGR') was prudently set at 1.9%.
Using the Financial plans for each scenario applying the DCF method using the
associated WACC and terminal value based on the LTGR, the valuations given for
the Company's share of the underlying security package were between €40m and
€63m. The mid-range was taken as the average.
Weighted Average Cost of Capital
A summary of the unobservable inputs used in the WACC calculation is set out
below:
Scenario
Base 1 2 3
Risk Free Rate 0.9% 0.9% 0.9% 0.9%
Market Risk Premium 4.7% 4.7% 4.7% 4.7%
Beta Unlevered 0.8 0.8 0.8 0.8
D/E Target 8.8% 8.8% 8.8% 8.8%
Tax Rate 24.0% 24.0% 24.0% 24.0%
Relevered Beta 0.9 0.9 0.9 0.9
Additional Risk Premium 11.1% 12.1% 12.5% 13.4%
Cost of Equity (Ke) 16.3% 17.3% 17.7% 18.5%
Base rate 0.9% 0.9% 0.9% 0.9%
Default spread 1.9% 1.9% 1.9% 1.9%
Spread 2.0% 2.0% 2.0% 2.0%
Gross cost of Debt 4.8% 4.8% 4.8% 4.8%
Tax rate 24.0% 24.0% 24.0% 24.0%
Net cost of Debt (Kd) 3.7% 3.7% 3.7% 3.7%
E/(E+D) 91.9% 91.9% 91.9% 91.9%
D/(E+D) 8.1% 8.1% 8.1% 8.1%
WACC (USD) 15.2% 16.2% 16.6% 17.3%
US inflation 2.4% 2.4% 2.4% 2.4%
WACC Real 12.6% 13.5% 13.6% 14.6%
EU inflation 1.8% 1.8% 1.8% 1.8%
WACC (EUR) 14.5% 15.5% 15.9% 16.6%
Bond Discounted Cash Flow valuation Methodology ("DCF")
A DCF valuation on the bond incorporating the four monthly interest payments
and repayment of the bond principal at 30 June 2024 was also carried out. We
used the Base scenario WACC of 14.5% which prudently includes an equity return
as well as debt return. When discounting the cashflows a value of €28.3m
was computed (the element held by the Company). The valuation did not
include any upside that may be due as part of the Exit Fee.
The board acknowledged that a valuation of the security and a DCF valuation of
the bond would meet the requirements of IFRS 13 and note this to be included
in the 2022 accounts.
As a result of the change in valuation methodology, an additional loss of
£9.8m was reported in the Consolidated Income Statement.
3. Recognition of a loss on modification of the loan liabilities
During the year under review the Company undertook a restructuring of its debt
liabilities to restructure a €40m 1.5% interest vendor loan issued by IWEP
into €15m 4.8% five-year bonds and to modify the terms of the remaining
€25m to remove the interest charge. The Company had treated this
transaction as part of the same facility as it was with the same lender and
only arose due to a delay in the creation of the bond instrument. Despite
this, the FRC's view was that, while not a substantial modification in
accordance with paragraph 3.3.2 of IFRS 9, 'Financial Instruments', the
restructuring gave rise to a modification loss owing to an increase in the
liability measured by discounting revised future cash flows at the original
effective interest rate.
The Board has accepted the FRC's view and has calculated a €2.2m
modification loss (£1.88m) that has been reported in the Consolidated Income
Statement. The modification loss was calculated by comparing the amortised
cost value of the original loan with the discounted net present value of the
new structure.
4. Commentary in the Strategic Reports, reflecting the revised
performance and position as at 31 December 2021, so as to provide a fair,
balanced and comprehensive review of each period.
The Board considers that the summary of results in the year in the Chairman's
Statement that is referenced in the Strategic Report is the only commentary in
the Strategic Reports that is required in conjunction with this new section
that sets out the amendments required to the Accounts.
The updated commentary is as follows:
Results
Through its two subsidiaries, the Group recorded revenues for the year under
review of £444,000 with a gross margin of over 70%. This income was further
supplemented by ECP itself providing management services to certain investees
and thereby recovering £128,000 of overhead costs. Interest income less
finance expense was a net deficit of £1.7m and the net movement in fair value
of both realised and unrealised gains and losses on investments at fair value
(explained further below) was a loss of £9.5m. Overheads were relatively
high, at £0.7 million; partly a reflection of the substantial professional
support for the change in status outlined in the September update, and the
Group result for the year was a loss before tax of £11.5m.
Additional narrative has also been added to the Chairman's statement in
relation to the Fair Value Adjustment on the 1AF2 bond, as follows:
Fair value adjustment on 1AF2 Bond
The valuation exercise undertaken on the 1AF2 Bond based on a valuation of the
underlying securities and a discounted cash flow valuation assessed the value
of the bond at €28.3m (£23.8m), resulting in a fair value loss in the
accounts of £9.8m.
5. Revision of the Consolidated Income Statement, Consolidated
Statement of Changes in Equity and Consolidated Cash Flow Statement to correct
the incorrect reporting of trading results for the period.
During the Company's and its Auditor's review of the 2021 Financial Statements
following the FRC enquiries, it became apparent that the Consolidated Income
Statement incorrectly included 12 months of trading for the two subsidiaries,
when the effective date of consolidation upon the change in nature of the
group from an investment group to an operating group was 1 July 2021, a
shorter period. For the period from 1 January 2021 to 30 June 2021, the
Company was an investment vehicle and none of its investment met the
requirement of IFRS 10 for an investment company. On 1 July 2021, the Company
changed its status from an investment vehicle to an operating company, and as
a result, the Company's investments in its subsidiaries have been consolidated
from 1 July 2021. The net effect was a reduction in the net loss before tax
of £165,000.
The opening retained losses shown within the Consolidated Statement of Changes
in Equity needed to be revised to £3,493,000 to align with the Company's 2020
retained losses.
This report was approved by the Board of Directors on 30 June 2022 and signed
on behalf of the board by:
Dominic White
Chairman
Chairman's Statement
Dear Shareholder,
I am pleased to report on the Company's financial results for the year ended
31 December 2021 and on a number of far-reaching corporate developments that
have occurred during the year, particularly during the second half and which
have continued into the first half of 2022.
Change of status to an Operating Group
The most important development during the period under review, and announced
in an extensive market update on 27 September 2021, was the change in status
from being an investing company to becoming an operating Group with an
effective date of 1 July 2021. This Report, therefore, for the first time,
presents Eight Capital Partners Plc's ("ECP" or "Eight Capital") financial
statements under IFRS reporting standards, consolidating the results and
balance sheets of its wholly owned subsidiaries, Epsion Capital Limited
("Epsion"), and Innovative Finance Srl ("InnFin"), the latter acquired in May
2021 (together "the operating subsidiaries"), from the effective date of 1
July 2021 onwards.
ECP has therefore evolved into an international financial services operating
Group, whereby Epsion and InnFin source, advise on, finance, and deliver
transactions, primarily involving SME businesses within the technology, media,
telecoms and financial services sectors and in which ECP itself will
potentially invest.
Results
Through its two subsidiaries, the Group recorded revenues for the year under
review of £444,000 with a gross margin of over 70%. This income was further
supplemented by ECP itself providing management services to certain investees
and thereby recovering £128,000 of overhead costs. Interest income less
expense was a net deficit of £1.7m and the net movement in fair value of both
realised and unrealised gains and losses on investments at fair value
(explained further below) was a loss of £9.5m. Overheads were relatively
high, at £0.7 million; partly a reflection of the substantial professional
support for the change in status outlined in the September update, and the
Group result for the year was a loss before tax of £11.5m.
Subsidiary activities
Epsion, our wholly owned UK Corporate Finance subsidiary, concentrated on two
related companies, providing advice ahead of potential standard listings,
during the period since its results were consolidated upon the group becoming
an operating group (1 July 2021 onwards). If these companies are listed,
there will be commensurate fee earnings derived from these clients.
Innovative Finance S.r.l ("InnFin") our wholly owned unregulated Italian
Corporate Finance subsidiary, was acquired in May 2021 and has been
consolidated since 1 July 2021, the effective date when the group became an
operating group. Infin concentrated in the period since consolidation on
providing advice to investors and companies ahead of listing on the Standard
List of the LSE. Approximately €350,000 of the fees are from advising
investors and the remaining €50,000 are fees for initial consulting work for
companies considering a listing. If these companies are listed InnFin will
earn appropriate fees.
Eight Capital: update on prior year's investments
ECP's investment portfolio now and as at 31 December 2021 is comprised
exclusively of quoted companies. The private investments included in last
year's report have either been sold (FPG - see below) or integrated into the
Group (Epsion and InnFin).
Finance Partners Group ("FPG"): Financial Services
This investment was disposed of during the year, originally consisting of a
receivable of €2 million with an ability to convert into equity acquired for
€1.9 million. The ability to convert was exercised and the resultant
holding in FPG of 28.7% was sold for €2.15 million (equivalent to £1.83
million), of which €1.57 million (£1.34 million) was paid on closing and
the balance of €580,000 (£487,000) payable in 2022. The gain on disposal
figure included in these accounts is £130,000
Retained investments: combined loss in value recorded in these accounts:
£116,000.
Supply@ME Capital Plc ("SYME): Inventory securitisation
SYME is an inventory monetisation business based on a novel asset
securitisation concept, enabled by an innovative software platform. SYME is
listed on the Standard List of the London Stock Exchange. SYME's share price
has not performed well and ECP's £250,000 investment, acquired at a share
price of £0.11 has seen a drop to £0.0017 at the year-end, with a total fall
in value of over £200,000 since purchase. The movement during the year under
review, included in the income statement, is a loss of £90,000. Although the
share price reduction has been a source of concern, the Board recognises that
the concept and possibilities for SYME were, and still are, interesting once a
critical mass of investment capital to support securitisations can be
delivered by SYME's management.
Evrima Plc ("EVA"): Mining and exploration investment
Evrima was formerly Sports Capital Group ("SCG") and ECP invested in a
football related project from which SCG withdrew. They reverted to their
previous sector of investment: mining and associated exploration and changed
their name. The Company's investment was approximately £140,000 and is
currently £131,000, based on its quote on AQSE Growth Market. We will dispose
of this investment in due course.
Greencare Capital Plc ("GRE"): Investment in Cannabis health products and
general wellness.
The Company invested both prior to and at IPO when GRE listed on the AQSE
Growth Market in December 2019. The total investment was £280,000 and the
average price paid per share was 10.9p. The shares at the year-end - and
currently - were quoted at 30.5p, having fallen slightly since the end of
2020. It was recently announced that Dominic White, Chairman of ECP, has
become chairman of GRE. We await positive developments.
Fair value adjustment on contingent liability
The terms of the acquisition of InnFin included an earn-out formula contingent
upon the attainment of certain levels of profitability in future years,
creating a contingent liability towards the vendor at the date of acquisition
in May 2021. The fair-valuing of this liability at 31 December 2021 has
resulted in a positive adjustment in the income statement of £300,000.
Fair value adjustment on 1AF2 Bond
The valuation exercise undertaken on the 1AF2 Bond based on a valuation of the
underlying securities and a discounted cash flow valuation assessed the value
of the bond at €28.3m, resulting in a fair value loss in the accounts of
£9.8m.
Refined Growth Strategy
As part of its transformation into an operating group, ECP has recently
refined its growth strategy to focus increasingly on those businesses engaged
in "Fintech" operations, including the digitisation of banking services and
blockchain-backed decentralised finance and other disruptive financial
services technologies, all of which seek to improve and automate the delivery
and use of financial services. Your Board also considers there to be many
value creation opportunities for shareholders from the further aligning and
expansion of the activities of Epsion and InnFin.
By combining their advisory and transactional expertise with the strategic
utilisation of ECP's growing in-house capital resources, ECP is able to
provide significant support to the transactions managed by the operating
subsidiaries through the provision of early-stage and growth co-investment
capital to growing companies seeking finance for expansion, development,
consolidation or acquisition, or as pre-IPO/RTO funding.
The competitive advantage of ECP's new operating structure is its flexibility
in terms of where it invests in the "capital stack" pyramid, being equally
comfortable with private or public debt and/or equity positions, convertibles
and structured equity or debt facilities. Much of the financial services
advisory market only delivers third party capital and advice, without direct
access to supportive in-house capital, or having access to in-house capital
lines with a less flexible mandate.
Corporate Transactions during the year
Eight Capital successfully completed a number of corporate transactions during
the year, each one forming part of its strategic objective to grow the market
capitalisation of the Company towards and beyond £50 million, and
establishing a strong balance sheet base from which to significantly expand
its operations and its own equity valuation.
To this end, in May 2021, the Company acquired InnFin, based in Milan, which
develops mergers and acquisitions and financing solutions across multiple
sectors, primarily in Europe.
In August, ECP disposed of its investment in Finance Partners Group SPA
("FPG"), an Italian-based financial services business, realising
€2.15million. The profitable sale of this minority stake has provided ECP
with a better strategic alignment between the Company's two remaining wholly
owned subsidiaries and its other activities with a primary focus on
technological developments within the financial services industry, such as
fintech SME funding solutions and digitisation of banking including
decentralised finance technology, to be key growth areas.
As announced on 4 August 2021 the purchaser agreed to pay ECP a total of
€2.15 million for the acquisition of FPG. The cash element of €1.57
million was paid immediately. Discussions are ongoing relating to the final
part of the settlement €0.58 million, which remains due, and against which
an extra amount of Euros 10,000 has been paid to ECP plus further asset
security backing provided to support the receivable, to the benefit of the
Company. The agreed repayment is for 20 equal payments from 15 June 2023.
In addition to these corporate transactions, and as part of the Board's key
strategic objective to build scale to the business by further strengthening
the Balance Sheet, in August the Company purchased €40m 2.5% Fixed Rate
Secured Bonds at Par from IWEP Limited, a company controlled by Dominic White,
ECP's chairman and ECP's major shareholder, which significantly increased
ECP's gross assets. Consideration for the acquisition of the Bonds was settled
by a one-year vendor loan which was subsequently restructured into a €15
million 4.8% Bond described below and a €25 million interest-free vendor
loan ("Vendor Loan").
In September, the Company launched a €25million 4.8% Fixed Rate five-year
Bond Programme, with an initial tranche, placed at launch and listed on The
Vienna Stock Exchange. This Bond programme also provided a logical next step
towards the continuing expansion of the Balance Sheet, whilst also providing
better medium-term visibility for the refinancing of ECP's existing 7% listed
bonds which mature in July of this year.
Corporate Transactions after the year end
On 23 May 2022, the Company announced that it had issued a further €5
million tranche of its 7% Bond to a third party that had acquired €5 million
of the Vendor Loan from IWEP. In that announcement, ECP also reinforced its
commitment to a transformational strengthening of the Company's balance sheet
through IWEP seeking to convert, subject to regulatory and shareholder
consent, as much as possible of its debt with the Company into equity.
These current and proposed balance sheet transactions are intended to
consolidate and expand the Company's service offering as well as helping it to
develop a platform from which it can develop as a multi-faceted financial
services company, whilst also providing a stronger base from which it can
raise third party capital.
Planned Placing and Open Offer
As announced in the Corporate Update in September 2021, it is the Company's
intention to raise new equity capital via a placing once the restructuring of
debt is completed. Your Board recognises that those who have already invested
in the Company may wish to increase their investment and it is therefore
anticipated that current shareholders will be invited to participate in the
fundraise on the same terms as the debt conversions and equity placing.
Further information will be given in due course.
The Company also intends to provide an opportunity for all debt investors to
convert debt to equity on the same terms, including the current outstanding 7%
Bonds.
Strengthening of the Management Team
Integral to the success of the Company's transition to an operating business
has been the strengthening of its senior management team, with the appointment
to the Board in June 2021 of former Bank of England Chief Accountant, David
Bull, who joined initially as a Non-Executive Director and then, following the
Company's successful transition to operating group status, was appointed
full-time Chief Executive Officer.
David has responsibility for leading the further development of ECP's
financial services business, both organically and through acquisition, all
within the context of fintech services. His knowledge and experience of
technology and the way it relates to asset and commercial finance,
international banking and the digitisation of banking services, combined with
his strong risk management skills and proven business leadership qualities are
already proving invaluable as we move towards more advanced technologies in
the financial services sector. He will also be strengthening the operational
management team with further additions in financial management and compliance,
which will be at the heart of the Company's operating activities.
The Group is also delighted to have announced on 13 May 2022, the appointment
of Richard Day to the Board of Epsion as its Non-Executive Chairman. Richard
was co-founder of institutional stockbroker Arden Partners plc, where, from
2002 to when he left in 2015, he was head of corporate finance for much of
that time, whilst playing an important role in building its sectoral and
geographical presence. He currently holds chairmanships of two quoted
companies: Pelatro plc, a "Big Data" analytics company on AIM and The British
Honey Company plc, the premium British honey and craft spirits producer. He
also chairs Eden Geothermal Limited, a private company drilling its first of
two geothermal wells, adjacent to the Eden Project in Cornwall in the
south-west of England. Richard's broad experience of public markets, corporate
finance and corporate governance across diverse business sectors is already
having a significant influence and will without doubt be a huge asset not only
to Epsion, but to the Group as a whole.
Outlook
2021 was a watershed year for Eight Capital. It successfully transitioned into
a financial service operating group, completing a number of complementary
corporate and financial transactions, strengthening both the Company's
operational capabilities and putting in place actions to radically strengthen
its Balance Sheet. It has a clear strategy in place for the transformation of
the business in terms of its size, market value and influence within the
fintech sector of financial services and through our wholly-owned
subsidiaries, Epsion and InnFin.
The Board's strategy is to grow the business both organically through the
development of new financial, "fintech-led" services and by selective
acquisitions to boost revenue and market presence, thereby significantly
increasing shareholder returns.
The Group has made a good start to the current financial year. We are
nurturing earnings potential and structuring the business and the Balance
Sheet for future sustained growth, while building value for shareholders. We
have a strong and growing pipeline of opportunities that we intend to deliver
through our business model and the management team in place to deliver
significant growth over the next two years. The Board views the future with
increasing confidence.
Dominic White
Chairman
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021
£'000
Revenue 444
Cost of Sales (127)
Gross Profit 317
Administrative expenses (734)
Net change in unrealised/realised gains and losses on investments at fair (9,822)
value through profit or loss
Net gains and losses on fair value through profit or loss 300
Other income 128
Operating loss (9,811)
Interest income 418
Finance expense (2,151)
Loss before tax (11,544)
Taxation -
Loss for the financial year (11,544)
Total comprehensive income attributable to the owners of the Parent (11,544)
Earnings per share (pence) from continuing operations attributable to owners (0.78)
of the
Company - Basic & Diluted
Consolidated Statement Of Financial Position
As At 31 December 2021
2021
£'000
Non-current assets
Goodwill 3,867
Intangible Assets 13
Property, plant & equipment 23
Total non-current assets 3,903
Current assets
Investments 24,734
Trade and other receivables 1,270
Cash and cash equivalents 202
Total current assets 26,206
Current liabilities
Trade and other payables 330
Borrowings 21,380
Total current liabilities 21,710
Non-current liabilities
Long term bond 17,866
Liability for contingent consideration 1,311
Borrowings 643
Total non-current liabilities 19,820
Net liabilities (11,421)
Capital and reserves
Share capital 1,453
Share premium 2,068
Share option & warrant reserve 15
Convertible loan note 84
Currency translation reserve (4)
Retained earnings (15,037)
Total equity (11,421)
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Share capital Share premium Share option Convertible loan note Currency translation reserve Retained earnings Total
& warrant reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 31 December 2020 1,431 2,001 11 84 - (3,493) 34
Loss for the year - - - - (11,544) (11,544)
Other comprehensive income for the year - - - - - - -
Total Comprehensive Income - - - - - (11,544) (11,544)
Movement in reserves - - - - (4) - (4)
Share based payment - - 4 - - - 4
Issue of shares 22 67 - - - - 89
Total Transactions with Owners 22 67 4 - (4) - 89
As at 31 December 2021 1,453 2,068 15 84 (4) (15,037) (11,421)
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
GROUP
2021
£'000
Cash from operating activities
Loss before tax (11,544)
Adjustments for:
Net interest expense /(income) 1,733
Net change in unrealised gains on investments at fair value through profit and 9,822
loss
Net gains and losses on fair value through profit or loss (300)
Share based payment expense 4
Provisions -
Foreign exchange 97
Increase in trade and other receivables (685)
Increase/(decrease) in trade and other payables 119
Net cash used in operating activities (754)
Cash flow from investing activities
Proceeds on disposal of investments 1,343
Acquisition of subsidiary, net of cash acquired (InnFin) (814)
Acquisition of subsidiary, net of cash acquired (Epsion) 120
Purchase of property, plant and equipment (10)
Purchase of intangible assets (2)
Interest income 380
Net cash from investing activities 1,017
Cash flows from financing activities
Loans received 1,097
Proceeds from bond issue 43
Repayment of loans (949)
Finance charges (455)
Net cash from financing activities (264)
Net cash flow for the year (1)
Cash and cash equivalents at beginning of year 203
Cash and cash equivalents at end of year 202
Net change in cash and cash equivalents (1)
Excluded from the consolidated statement of cash flows are the following items included in the consolidated statement of financial position :
· Additions included within current asset investments amounting to
£32.8m (at cost value);
· Additions included within non-current assets relating to goodwill
on the acquisition of subsidiaries amounting to £3.0m; and
· Bond, loan and equity funding amounting to £37.7m.
The notes on pages 30 to 64 form part of these financial statements.
Notes to the consolidated financial statements
For the year ended 31 December 2021
1. General information
Eight Capital Partners Plc ("the Company") is a public limited company limited
by shares and incorporated in England. Its registered office is Kemp House,
160 City Road, London, EC1V 2NX.
The Company's shares are traded on the Aquis Stock Exchange Growth Market
under ticker ECP and ISIN number GB00BYT56612.
The consolidated financial statements of the Company consist of the following
companies (together "the Group"):
Eight Capital Partners plc UK registered company
Epsion Capital Limited UK registered company
Innovative Finance srl ("InnFin") Italian registered company
The Group's objective is to generate an attractive rate of return for
shareholders, predominantly through capital appreciation, by taking advantage
of opportunities to invest in the financial services and technology, media,
and telecoms (TMT) sectors.
The information contained in this announcement has been extracted from the
reissued report and accounts for the year to 31 December 2021. Therefore
certain events may now be superseded and references, notes and page numbers
may be incorrect. Shareholders are encouraged to read the full reissued
report and accounts, a copy of which is available on the Company's website..
2. Accounting policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below.
Basis of preparation
These consolidated financial statements have been prepared and approved by the Directors in accordance with the UK-adopted international accounting standards. These are the Group's first financial statements prepared in accordance with the UK-adopted international accounting standards.
The Company was classified as an investment vehicle in the prior years ending
31 December 2021. On 1 July 2021 Eight Capital Plc changed its status from an
investment vehicle to an operating company. As a result, and in accordance
with IFRS 10, some of the Company's investments have been consolidated from
this date. No consolidated comparative information has been disclosed as the
Company was an investment vehicle and none of its investments met the
requirements of IFRS 10 for an investment company.
These consolidated financial statements are prepared on a going concern basis, under the historical cost convention, as modified by the recognition of listed investments at fair value.
These consolidated financial statements are presented in Pounds Sterling,
rounded to the nearest thousand (£'000), which is the Company's presentation
and functional currency.
The presentational currency for Epsion Limited is Pounds Sterling and for
InnFin is Euro as the subsidiary is registered in Italy.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3 of the full report and accounts.
Basis of consolidation
The Group financial statements consolidate the financial statements of the
Company and all its subsidiaries ("the Group").
Subsidiaries include all entities over which the Group is exposed, or has
rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. The
existence and effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether the Group controls
another entity. Subsidiaries are consolidated from the date on which control
commences until the date that control ceases. Intra-group balances and any
unrealised gains and losses on income or expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial
statements.
The acquisition method of accounting is used to account for business
combinations. The cost of an acquisition is measured as the fair value of the
assets given, equity instruments issued, and liabilities incurred or assumed
at the date of exchange, and the equity interests issued. Identifiable assets
acquired, and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair value at the acquisition
date. Acquisition related costs are expensed as incurred. Where necessary,
amounts reported by subsidiaries have been adjusted to conform with the
Group's accounting policies.
Going concern
As at 31 December 2021, the Group had cash of £183,000 and current
investments of £24,734,000.
As an operating business, the Group has fee income from its corporate finance
activities and the performance and income from its investments, supported by
aggregate bond facilities of up to €35 million (of which €24 million has
been utilised to date). Annualised normal running costs of the Company are
circa £1.5 million including debt service, reduced by rebilling of shared
services of approximately £120,000 and interest income of £860,000. As at
the date of this report, the Company had approximately £100,000 cash at bank
and anticipated near-term divesting revenues of up to £650,000, of which
£500,000 is contractual for delivery in September 2022, and with a further
£750,000 of investment assets at current market value earmarked for
disinvestment in the second half of 2022. At Group level additional fee income
of circa £1.2 million is expected.
The Directors are therefore of the opinion that the Group has adequate
financial resources to enable it to continue in operation for the foreseeable
future. For this reason, it continues to adopt the going concern basis in
preparing the financial statements.
3. First-time adoption of IFRS
These financial statements, for the year ended 31 December 2021, are the first
the Group has prepared in accordance with IFRS. For periods up to and
including the year ended 31 December 2020, the Parent Company prepared its
financial statements in accordance with United Kingdom Accounting Standards,
including Financial Reporting Standard 102, "The Financial Reporting Standard
applicable in the United Kingdom and the Republic of Ireland" ("FRS 102").
Accordingly, the Group has prepared financial statements that comply with
UK-adopted international accounting standards as at 31 December 2021, as
described in the summary of significant accounting policies. In preparing the
financial statements, the Group's opening statement of financial position was
prepared as at 1 January 2020, the Group's date of transition to IFRS.
There were no material adjustments applied to the Group financial statements
during the transition to IFRS.
4. Earnings per share
2021
Earnings (£)
Loss used in calculating basic and diluted earnings:
Loss for the year (£11,544,000)
Number of shares
Weighted average number of shares for the purposes of basic and diluted 1,479,362,244
earnings per share
Loss per share (pence) (0.78)
The calculation of basic earnings per share of (0.78) pence is based on the
loss attributable to equity owners of the Company of £11,544,000 and on the
weighted average number of ordinary shares of 1,479,362,244 in issue during
the period. Dilutive instruments are ignored when the overall result is a
loss.
8. Related party transactions
Administrative services
During the year, the Company was invoiced £15,500 (2020: £31,400) for
administrative services provided by Marker Management Services Ltd, a company
controlled by Martin Groak, a director of Eight Capital.
Acquisition of a €2 million receivable from Finance Partners Group and
conversion to equity
On 7 August 2019 the Company announced the acquisition from IWEP Ltd. ("IWEP")
of a €2 million convertible receivable (the "Receivable") from Finance
Partners Group SpA ("FPG"), an Italian financial services company that invests
in private companies seeking future listings on public markets and whose
principal investment was in The AvantGarde Group.
On 14 May 2021, the Company converted £27,000 of the loan with IWEP Ltd into
67,699,173 new ordinary shares at a price of £0.00039 per share.
IWEP is a company connected to Eight Capital Partners' Chairman Dominic White.
In August 2019 Dominic White agreed to become a non-executive board member of
The Avantgarde Group to monitor the Company's and IWEP's interests.
Related party funding
Included within current borrowing at year end was:
£367,138 shareholder loan from IWEP Ltd (2020: £435,911); and
£21,012,485 vendor loan in relation to the €40m IAF2 bond acquisition from
IWEP Ltd
Included in non-current borrowing at year end was:
£184,910 (2020: £nil) loan from Maximum Return Systems Limited, an entity
controlled by Eight Capital Partners' Chairman Dominic White;
£127,350 (2020: £nil) loan from Concreta Srl, a shareholder in the company;
and
£318,297 (2020: £nil) vendor loan from DB Investor in connection to the
acquisition of Innovative Finance S.r.l.
9. Post balance sheet events
On 23 May 2022, the Company announced that it had issued a further €5
million tranche of its 7% Bond to a third party that had acquired €5 million
of the Vendor Loan from IWEP. In that announcement, ECP also reinforced its
commitment to a transformational strengthening of the Company's balance sheet
through IWEP seeking to convert, subject to regulatory and shareholder
consent, as much as possible of its debt with the Company into equity.
On 24 June 2022, the company announced that at a Bondholder meeting held on 23
June, an Extraordinary Resolution approved a proposal to modify the terms and
conditions of the 7% Bond such that the terms align with the more recently
issued €25m 4.8% Bond repayable on 3 September 2026.
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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END NEXLBMBTMTTBTRJ