REG - Red Capital PLC - Interim Results
14/09/2022 07:01
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RNS Number : 3319Z Red Capital PLC 14 September 2022
14 September 2022
RED CAPITAL PLC
("Red" or the "Company")
Interim Results for the six months ended 30 June 2022
Red Capital Plc (LSE: REDC) announces its unaudited condensed interim results
for the six month period to 30 June 2022 (the "Interim Report").
Strategy
Red was established in 2021 to undertake one or more investment and / or
acquisition opportunities of businesses operating within the UK or
internationally across certain sectors.
The Company retains a flexible investment and acquisition strategy which will,
subject to appropriate levels of due diligence, enable it to deploy capital in
target companies by way of minority or majority investments, or full
acquisitions where it is in the interests of shareholders to do so.
The Company's strategic aim is to drive shareholder value through the
acquisition of target companies in certain sectors where the Board believes
there to be sustainable growth opportunities both organically, and through
acquisition. Sectors of particular focus include business services and
technology.
Results and developments in the six month period to 30 June 2022
The Company's loss after taxation was £96,510 (period to 30 June 2021: loss
of £59,940). This principally reflected operating expenses incurred as a
listed business of £95,847. The Company generated a loss per share of
£0.01 (period to 30 June 2021: loss per share of £29,970).
As a result of tight cost control and moderate operating expenses, as at 30
June 2022, Red's cash balance was £709,493 (as at 31 December 2021:
£829,065).
On 28 June 2022, the Company held its inaugural Annual General Meeting in
which all resolutions were unanimously passed.
Risks
As the Company has yet to complete an investment or acquisition, it has
limited financial statements and / or historical financial data, and limited
trading history. As such, the Company during the period was subject to the
risks and uncertainties associated with an early-stage acquisition company.
The Directors are of the opinion that these risks, which were detailed further
in Red's published final results for the financial year ended 31 December
2021, remain applicable to the Company.
Dividend
At this point in the Company's development, it does not anticipate declaring
any dividends in the foreseeable future. Following the Company's inaugural
investment or acquisition, the Directors will determine an appropriate
dividend policy for Red.
Outlook
During the period and post period end, Red has continued to pursue its
investment and acquisition strategy and is currently assessing opportunities
within its chosen sectors of interest. These include successful businesses
with the potential for high growth that have considered a listing and are
seeking to partner with, and leverage the benefits of, the Board's experience
and that of the wider Red team. The Directors look forward to updating
shareholders on progress in due course.
David Williams
Chairman
13 September 2022
Enquiries:
Tessera Investment Management Limited
Tony Morris +44 (0) 7742 189145
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period 1 January 2022 to 30 June 2022
Note Unaudited 6 month Unaudited 3 month period ended 30 June 2021
period ended 30 £
June 2022
£
Revenue - -
Cost of sales - -
Gross profit - -
Operating expenses (96,630) (59,940)
Operating loss (96,630) (59,940)
Net finance income 5 120 -
Loss before tax (96,510) (59,940)
Taxation - -
Loss for the period (96,510) (59,940)
Loss attributable to the Company (96,510) (59,940)
Loss per share expressed in pounds per share
From continuing and total operations: 10 (0.01) (29,970)
Basic & diluted loss per share, £
The Company has no items of other comprehensive income.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
Note Unaudited Audited
As at 30 June As at 31 December 2021
2022 £
£
Assets
Current assets
Trade and other receivables 7 6,252 2,583
Cash 8 709,493 829,065
Total current assets 715,745 831,648
Current liabilities
Trade and other payables 9 (37,104) (57,281)
Net assets 678,641 774,367
Net assets
Share capital 12 100,000 100,000
Share premium 13 894,998 894,998
Capital redemption reserve 13 2 2
Share based payment reserve 13 994 210
Retained earnings 13 (317,353) (220,843)
Total equity attributable to equity holders of the Company 678,641 774,367
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period from incorporation on 31 March 2021 to 30 June 2021
Share Capital Share Premium Retained Earnings Total
£ £ £ Equity
£
Balance as at 31 March 2021 - - - -
Loss for period - (59,940) (59,940)
Total comprehensive loss - - (59,940) (59,940)
Shares issued 2 - - 2
Balance as at 30 June 2021 2 - (59,940) (59,938)
For the period 1 January 2022 to 30 June 2022
Share Capital Capital Redemption Reserve Share Based Payments Reserve Share Premium Retained Earnings Total
£ £ £ £ £ Equity
£
Balance as at 31 December 2021 100,000 2 210 894,998 (220,843) 774,367
Share based payment charge - - 784 - - 784
Loss for period - - - - (96,510) (96,510)
Total comprehensive loss - - 784 - (96,510) (95,726)
Balance as at 30 June 2022 100,000 2 994 894,998 (317,353) 678,641
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period 1 January 2022 to 30 June 2022
Unaudited 6 month Unaudited 3 month
Period ended 30 June 2022 Period ended 30 June 2021
£ £
Cash flows from operating activities
Loss before income tax (96,510) (59,940)
Share based payment charge 784 -
(Increase)/decrease in trade and other receivables (3,669) -
Increase/(decrease) in trade and other payables (20,177) 59,940
Net cash from operating activities (119,572) -
Cash flows from financing activities
Cash received from issue of Ordinary Shares - 2
Net cash flow from financing activities - 2
Net increase in cash and cash equivalents (119,572) 2
Cash and cash equivalents at beginning of period 829,065 -
Cash and cash equivalents at end of period 709,493 2
NOTES TO THE GROUP FINANCIAL INFORMATION
1. General information
The Company was incorporated on 31 March 2021 as Red Capital Limited, a
private limited company under the laws of Jersey with registered number
134737. On 8 September 2021 the Company was re-registered as an unlisted
public limited company and its name was changed to Red Capital Plc. On 19
November 2021 the Company shares were admitted to trading onto the Main Market
of the London Stock Exchange. The Company is the parent company of Red Capital
Subco Limited (a private limited company under the laws of Jersey with
registered number 134741). The Company and its subsidiary together form the
Group.
The address of its registered office is 28 Esplanade, St. Helier, Channel
Islands, JE2 3QA, Jersey.
The Group has been incorporated for the purpose of identifying suitable
acquisition opportunities in accordance with the Group's investment and
acquisition strategy with a view to creating shareholder value. The Group will
retain a flexible investment and acquisition strategy which will, subject to
appropriate levels of due diligence, enable it to deploy capital in target
companies by way of minority or majority investments, or full acquisitions
where it is in the interests of shareholders to do so. This will include
transactions with target companies located in the UK and internationally.
2. Basis of preparation
These interim condensed consolidated financial statements and accompanying
notes have neither been audited nor reviewed by the Company's auditor.
The principal accounting policies applied in the preparation of the Interim
Report are set out below. These policies have been consistently applied to the
period presented, unless otherwise stated.
The Interim Report has been prepared in accordance with IFRS using the
measurement bases specified by IFRS for each type of asset, liability, income
and expense.
The Interim Report is presented in £ unless otherwise stated.
The Interim Report was approved by the Board of Directors on 13 September
2022.
Comparative figures
Comparative figures which have been presented cover the period from
incorporation on 31 March 2021 to 30 June 2021. The statement of financial
position comparative figures are shown as at 31 December 2021.
Going concern
The interim condensed consolidated financial statements have been prepared on
a going concern basis.
The basis for this conclusion is as a result of the projected monthly
financial forecasts prepared and reviewed by the Directors contained in the
working capital board memorandum approved by the Board of the Company as part
of its approval of these interim condensed consolidated financial statements.
The Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future.
Thus, they continue to adopt the going concern basis of accounting in
preparing the interim condensed consolidated financial statements.
3. Significant accounting policies
The interim condensed consolidated financial statements are based on the
following policies which have been consistently applied:
Basis of consolidation
The interim condensed consolidated financial statements incorporate the
results of Red Capital Plc and its subsidiary.
Control is achieved when 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. Specifically, the Group
controls an investee if, and only if, the Group has:
· Power over the investee (i.e., existing rights that give it the
current ability to direct the relevant activities of the investee)
· Exposure, or rights, to variable returns from its involvement
with the investee
· The ability to use its power over the investee to affect its
returns
Generally, there is a presumption that a majority of voting rights results in
control. To support this presumption and when the Group has less than a
majority of the voting or similar rights of an investee, the Group considers
all relevant facts and circumstances in assessing whether it has power over an
investee, including:
· The contractual arrangement(s) with the other vote holders of the
investee
· Rights arising from other contractual arrangements
· The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of
the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated
financial statements from the date the Group gains control until the date the
Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are
attributed to the equity holders of the parent of the Group and to the
non-controlling interests, even if this results in the non-controlling
interests having a deficit balance.
When necessary, adjustments are made to the interim condensed consolidated
financial statements of subsidiaries to bring their accounting policies into
line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in
full on consolidation.
Functional and presentational currency
The Group's functional and presentational currency for these financial
statements is the pound sterling.
Employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis
and are expensed as the related service is provided. A liability is
recognised for the amount expected to be paid under short-term cash bonus or
profit-sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Debtors
Short term debtors are measured at transaction price, less any impairment.
Creditors
Short term trade creditors are measured at the transaction price.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and on demand
deposits due within three months with banks and other financial institutions,
that are readily convertible into known amounts of cash and which are subject
to an insignificant risk of changes in value.
Equity
Equity comprises of share capital, share premium, capital redemption reserve,
shared based payment reserve, and retained earnings.
Share capital is measured at the par value.
Share premium and retained earnings represent balances conventionally
attributed to those descriptions. The transaction costs relating to the issue
of shares was deducted from share premium.
Capital redemption reserve includes amounts in relation to deferred shared
capital.
Taxation
Income tax for the period is based on the taxable income for the year. Taxable
income differs from profit as reported in the statement of comprehensive
income for the period as there are some items which may never be taxable or
deductible for tax and other items which may be deductible or taxable in other
periods. Income tax for the period is calculated on the basis of the tax laws
enacted or substantively enacted at the end of the reporting period. Current
and deferred tax is recognised in profit or loss, except to the extent that it
relates to items recognised in other comprehensive income or directly in
equity. In this case, the tax is also recognised in other comprehensive income
or directly in equity, respectively.
Deferred income tax is recognised, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the interim condensed consolidated financial statements.
Deferred income tax is determined using tax rates (and laws) that have been
enacted, or substantially enacted, by the end of the reporting period and are
expected to apply when the related deferred income tax asset is realised, or
the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is
probable that future taxable profit will be available against which the
temporary differences can be utilised.
Financial assets and liabilities
The Group's financial assets and liabilities comprise cash and trade and other
payables. Trade and other payables are not interest bearing and are stated at
their amortised cost.
Share-based payments
The Group operates an equity-settled share-based payment plan. The fair value
of the employee services received in exchange for the grant of options is
recognised as an expense over the vesting period, based on the Group's
estimate of awards that will eventually vest, with a corresponding increase in
equity as a share-based payment reserve.
This plan includes market-based vesting conditions for which the fair value at
grant date reflects and are therefore not subsequently revisited. The fair
value is determined using a binomial model.
Warrants
Warrants issued as part of share issues have been determined as equity
instruments under IAS 32. Since the fair value of the shares issued at the
same time as the warrants is equal to the price paid, these warrants, by
deduction, are considered to have been issued at fair value.
Related party transactions
The Company discloses transactions with related parties which are not wholly
owned with the same group. It does not disclose transactions with members of
the same group that are wholly owned.
4. Critical accounting estimates and judgments
In preparing the interim condensed consolidated financial statements, the
Directors have to make judgments on how to apply the Group's accounting
policies and make estimates about the future. The Directors do not consider
there to be any critical judgments that have been made in arriving at the
amounts recognised in the interim condensed consolidated financial statements.
5. Net finance income
Unaudited 6 month period ended 30 June 2022 Unaudited 3 month period ended 30 June 2021
£ £
Interest income 120 -
6. Investments
Principal subsidiary undertakings of the Group
The Company directly owns the ordinary share capital of its subsidiary
undertakings as set out below:
Subsidiary Nature of business Country of incorporation Proportion of A ordinary shares held by Company Proportion of B ordinary shares held by Company
Red Capital Subco Limited Intermediate holding company Jersey, Channel Islands 100 per cent. 0 per cent.
The address of the registered office of Red Capital Subco Limited (the
"Subco") is 28 Esplanade, St. Helier, Channel Islands, JE2 3QA, Jersey. The
Subco was incorporated on 31 March 2021 and prepares its own financial
statements for the period ended 31 December each year.
The A ordinary shares have full voting rights, full rights to participate in a
dividend and full rights to participate in a distribution of capital. The B
ordinary shares have been issued pursuant to the Company's Subco Incentive
Scheme and hold no voting or dividend rights or rights to distribution.
7. Trade and other receivables
As at 30 June As at 31 December 2021
2022 £
£
Prepayments 6,252 2,583
Total 6,252 2,583
8. Cash and cash equivalents
As at 30 June As at 31 December 2021
2022 £
£
Cash at bank and in hand 709,493 829,065
9. Trade and other payables
As at 30 June As at 31 December 2021
2022 £
£
Accruals 37,104 57,281
Total 37,104 57,281
10. Earnings per share
30 June 2022 30 June 2021
Loss attributable to the equity holders of the Company (96,510) (59,940)
Weighted number of shares in issue 10,000,000 2
Loss per share (£) (0.01) (29,970)
11. Financial instruments
As at 30 June As at 31 December 2021
2022 £
£
Financial assets
Cash and cash equivalents 709,493 829,065
As at 30 June As at 31 December 2021
2022 £
£
Financial liabilities
Accruals 37,104 57,281
Financial risk management objectives and policies
The Group's financial assets and liabilities comprise cash, and trade and
other payables. The risks associated with these financial instruments, and the
policies on how to mitigate this risk are set out below. The Directors manage
and monitor these exposures to ensure appropriate measures are implemented in
a timely and effective manner.
Credit risk
The Group's credit risk is wholly attributable to its cash balance. All cash
balances are held at a reputable bank in Jersey. The credit risk from its cash
and cash equivalents is deemed to be low due to the nature and size of the
balances held as of 30 June 2022.
Interest rate risk
As of 30 June 2022, the Group had no exposure to interest rate risk.
Currency risk
All monetary assets and liabilities and all transactions of the Group are
denominated in its functional currency. As such, the Group is exposed to no
foreign currency risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due.
The Group's approach to liquidity risk is to ensure that sufficient liquidity
is available to meet foreseeable requirements and to invest funds securely and
profitably.
Fair value of financial assets and liabilities
There is no material difference between the fair value of the Group's
financial asset and its carrying value in the interim condensed consolidated
financial statements.
12. Share capital
Allocated, called up and fully paid
30 June 30 June 31 December 2021 31 December 2021
2022 2022
Number £ Number £
Ordinary shares of 1p each 10,000,000 100,000 10,000,000 100,000
13. Reserves
Share premium and retained earnings represent balances conventionally
attributed to those descriptions. The transaction costs relating to the issue
of shares were deducted from share premium.
The Capital redemption reserve is made up on amounts arising from the
cancellation of the deferred shares.
The Group having no regulatory or similar requirements, its primary capital
management focus is on maximising earnings per share and therefore shareholder
return.
14. Share incentive plan
On 12 November 2021, the Group created a Subco Incentive Scheme within its
wholly owned subsidiary Red Capital Subco Limited ("Subco"). Under the terms
of the Subco Incentive Scheme, scheme participants are only rewarded if a
predetermined level of shareholder value is created over a three to five year
period or upon a change of control of the Company or Subco (whichever occurs
first), calculated on a formula basis by reference to the growth in market
capitalisation of the Company, following adjustments for the issue of any new
Ordinary shares and taking into account dividends and capital returns
("Shareholder Value"), realised by the exercise by the beneficiaries of a put
option in respect of their shares in Subco and satisfied either in cash or by
the issue of new ordinary shares at the election of the Company.
Under these arrangements in place, participants are entitled to up to 15
percent of the Shareholder Value created, subject to such Shareholder Value
having increased by at least 12.5 percent per annum compounded over a period
of between three and five years from admission or following a change of
control of the Company or Subco.
15. Share based payments
The Subco Incentive Scheme detailed in Note 14 is an equity-settled share
option plan which allows employees and advisors of the Group to sell their B
shares to the Company in exchange for a cash payment or for shares in the
Company (at the Company's election) if certain conditions are met.
These conditions include good and bad leaver provisions and that growth in
Shareholder Value of 12.5 per cent. compound per annual is delivered over a
three to five year period for the scheme to vest. This second condition is
therefore a market condition which has been taken into account in the
measurement at grant date of the fair value of the options.
The B share options have a weighted average contractual life of 4 years 10
months. No B share options were issued in the 6 month period to 30 June 2022
and all B share options remained outstanding at the period end. No B share
options were exercised in the period. The weighted average exercise price of
the outstanding 110,000 B share options is Nil.
The Group recognised £784 of expenditure in the statement of total
comprehensive income in relation to equity-settled share-based payments in the
period.
The fair value of options granted during the period is determined by applying
a binominal model. The expense is apportioned over the vesting period of the
option and is based on the number which are expected to vest and the fair
value of these options at the date of grant.
The inputs into the binomial model in respect of options granted in the period
are as follows:
Opening share price 10.0p
Expected volatility of share price 16.67%
Expected life of options 5 years
Risk-free rate 0.92%
Target increase in share price per annum 12.5%
Fair value of options 7.152p
Expected volatility was estimated by reference to the average 5-year
volatility of the FTSE SmallCap Index.
The target increase in Shareholder Value is laid out in the Articles of
Association of the Subco and represents the compounded target annual increase
in market capitalisation (adjusted for capital raises and dividends) that
needs to be met between the third and fifth anniversary of the Group's
admission onto the Main Market of the London Stock Exchange in order for the
scheme to vest.
The Group did not enter into any share-based payment transactions with parties
other than employees and advisors during the current period.
16. Related party transactions
The Chairman and Non-Executive Director are each entitled to fees of £30,000
and £20,000 per annum for their respective roles within the Company, as per
their service agreements entered into on 15 November 2021. All Director fees
have been accrued in the period. There are no other benefits paid to
Directors outside of their service fees, save for ordinary course reimbursable
expenses properly incurred in the performing their duties as Directors. The
Company does not operate a pension scheme.
17. Ultimate controlling party
In the opinion of the Directors, there is no single ultimate controlling
party.
18. Post balance sheet events
There are no events subsequent to the reporting date which would have a
material impact on the financial statements.
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