REG - RiverFort Global Opp - Final Results
24/06/2022 07:00
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RNS Number : 0439Q RiverFort Global Opportunities PLC 24 June 2022
For immediate
release
24 June 2022
RiverFort Global Opportunities plc (the "Company")
Financial Statements
for the year ended 31 December 2021
RiverFort Global Opportunities plc, the investment company listed on AIM, is
pleased to announce its audited final results for the year ended 31 December
2021 (extracts from which are set out below) and that the financial statements
will shortly be posted to shareholders and made available on the website
www.riverfortglobalopportunities.com
(http://www.riverfortglobalopportunities.com)
For more information please contact:
RiverFort Global Opportunities plc +44 20 3368 8978
Philip Haydn-Slater, Non-executive Chairman
Nicholas Lee, Investment Director
Nominated Adviser +44 20 7628 3396
Beaumont Cornish
Roland Cornish/Felicity Geidt
Joint Broker +44 20 7186 9950
Shard Capital Partners LLP
Damon Heath/ Erik Woolgar
Joint Broker +44 20 7562 3351
Peterhouse Capital Limited
Lucy Williams
This announcement contains inside information for the purposes of Article 7 of
Regulation 2014/596/EU which is part of domestic UK law pursuant to the Market
Abuse (Amendment) (EU Exit) regulations (SI 2019/310).
CHAIRMAN'S STATEMENT
HIGHLIGHTS
· Total operating income generated of £2,469,441
· Net profit generated of £1,040,012
· Net asset value of £11,748,821 - an increase of 27% since the beginning of
the year
· Net asset value of 1.49 pence per share - an increase of 10% for the year
· Substantial cash balance available for further investment
· New funds raised for investment
· Investments made in pre-IPO opportunities in technology, including the
cyber security sector
· Expected payment of a dividend for 2021 of 0.038 pence per share
representing a current gross yield of 4%
INTRODUCTION
We are very pleased to report our results for the year to 31 December 2021.
This period has been another active period for the Company and the Board is
pleased with the results that have been achieved.
REVIEW OF THE YEAR
The Company has been actively deploying its investment capital by investing
principally in listed junior companies through debt and equity linked
products. These investment structures lower volatility and risk and enable
the Company to drive profits and cash income. We believe that this is an
attractive investment strategy and by investing in the Company, investors are
able to gain access to this investment strategy via a publicly listed vehicle.
Activity during the early part of the year was lower due to the strength of
the equity markets, however, activity has increased as the period has
progressed. As at the end of the year, the Company held around £5.8 million
of its investment portfolio in this type of investment, with investments in
over 20 different companies.
At the same time, as previously announced, the Board has identified pre-IPO
investment opportunities as an attractive area of investment focus where there
is potential to achieve gains between the pre-IPO stage and a listing or exit.
The logic for this being that, at this stage of an investee company's
development, valuations can be noticeably lower, notwithstanding the proximity
to an exit or listing.
Consequently, during the year, the Company has deployed capital in this area
as demonstrated by its investments in Pluto Digital plc ("Pluto") and
Smarttech247. Pluto is a crypto technology and operations company with a
focus on Decentralised Finance (DeFi) and the Metaverse (blockchain gaming and
NFTs).
Smarttech247 is a global managed detection and response company with a leading
market position in security operations. Its platform provides threat
intelligence with managed detection and response. Smarttech247's service is
geared towards proactive prevention using the latest in cloud, big data
analytics and machine learning, along with its incident response team.
Smarttech247 is an established profitable business and is actively progressing
a listing on AIM.
The Company's principal listed equity investment comprises its shareholding in
Pires Investments plc ("Pires"). Pires is an investment company listed on
AIM focused on investing in next generation technology which has been
extremely active over the period. The majority of its investments have been
revalued upwards during the period and the company has made a number of new
investments, including into a new Sure Valley Ventures venture capital fund
alongside the British Business Bank. Pires has recently published its
results for the year to 31 December 2021, which clearly demonstrate the
progress that this company is making. Furthermore, it is also now subject to
a share for share offer from Tern plc, on terms that equate to 8 pence per
Pires share, representing a 53.6% premium to the Pires share price prior to
announcement, based on the respective companies share prices just prior to
announcement. This offer is subject to approval by both Pires and Tern plc
shareholders. The Company has provided an irrevocable undertaking to accept
this offer in respect of its shareholding. If the offer proceeds on the terms
envisaged then based upon the share price of Tern plc at the point of
announcement, the Company's carrying value of this investment, including
warrants, would be £2.67 million compared to the value as at 31 December 2021
of £2.31 million.
On 10 May 2021, the Company announced a placing to raise £1.64 million, at
the prevailing market price of 1.7 pence per share, in order to provide funds
for further investment and to specifically fund the investment in Smarttech247
which was also announced at that time. This fund raising was supported both
by current and new investors.
The Company also expects to declare a dividend of 0.038 pence per share in
relation to 2021, which would equate to a current gross yield of 4%. This
continues the Company's track record of providing a cash return to
shareholders.
OUTLOOK AND STRATEGY
The Company has continued to generate attractive returns through investing by
way of structured financings in order to provide funding for junior
companies. This strategy continues to have the benefit of providing both
cash returns and downside protection. Furthermore, given the recent
developments in global equity markets, the demand for the Company's investment
capital has been growing strongly. This strategy is now complemented with
the pre-IPO investments that have been made, with Smarttech247 actively
progressing towards a listing.
In summary, we are pleased that the results for 2021 demonstrate a continuing
trend of progress for the Company. The current year has also started well and
we look forward to some exciting results for 2022.
Philip Haydn-Slater
Non-Executive Chairman
23 June 2022
REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS
Introduction
The Company is an investment company listed on the AIM market of the London
Stock Exchange. It is focused on investing in junior listed companies by way
of debt or equity-linked debt investments. Returns are principally generated
through a combination of fees, interest and other equity linked or
performance-based instruments. This investing strategy enables the Company
to reduce the risk and volatility normally associated with investing in junior
companies solely by way of equity, and to generate cash income and returns. It
also seeks to invest in exciting pre-IPO opportunities that are attractively
valued and where there is a clear path to a liquidity event.
For the year to 31 December 2021, the Company made a profit from continuing
operations of £1,040,012 (2020: £1,497,305). The net asset value of the
Company as at 31 December 2021 was £11,748,821 (2020: £9,239,936),
representing a significant increase compared to the previous year. Whilst the
operating income figure was similar to the previous year, profit after tax was
lower due to the impact of a non-cash accounting charge in relation to share
based payments and higher investment advisory fees.
The Company's investment portfolio at 31 December 2021 is divided into the
following categories:
Category Cost or valuation (£000)
2021 2020
Debt and equity-linked debt investments 5,807 5,099
Equity and other investments 2,562 2,059
Pre IPO investments 2,703 -
Cash resources 2,012 4,047
Total 13,084 11,205
Debt and equity linked portfolio
During the year, the Company has continued to develop its portfolio and, as at
the year end, the value of these investments amounted to £5.8 million. The
portfolio currently includes over 20 companies such as Jubilee Metals plc,
Challenger Exploration Limited, Deepverge plc and Troy Resources Ltd.
These investments principally generate income in the form of fees and
interest. Investments are either made directly or by way of participation
certificates in RiverFort Global Opportunities PCC Limited ("RGO PCC"), a
Gibraltar based fund. These certificates are reference linked financial
instruments that provide similar economic benefits to the holder as if they
were co-investing directly in the underlying investment. Whilst there is no
direct security into the underlying investment, the holder will benefit from
the enforcement of any such security.
Equity and other portfolio
At the year end, the Company's equity portfolio comprised the following:
Company Description Value of investment
£000
Pires Investments plc An investment company listed on AIM 2,272
Other Various small holdings in listed companies and warrants 290
Total 2,562
During the course of 2021, the Company has exercised warrants that it held in
Pires and therefore its shareholding had increased to 19.5% or 30,914,193
shares as at the period end. It also still held 4,814,200 warrants in Pires,
exercisable at 4 pence per share, although these have subsequently been
exercised post period end.
Pires has continued to invest in next generation technology and, during this
period, a number of its investments have significantly increased in
value.
The company recently invested in a new Sure Valley Ventures ("SVV") fund
("SVV2"), alongside the British Business Bank ("BBB") who have committed £50
million to the new fund with other private investors, including Pires
investing up to £35 million. SVV2 is being managed by the same team which,
to date, has been highly successful in achieving a number of cash realisations
from, and upward revaluations of, companies in the first SVV fund ("SVV1").
Furthermore, the profit share arrangements within SVV2 are designed to
encourage the involvement of private investors alongside the BBB, meaning that
Pires and the other private investors would expect to receive a significantly
enhanced share of the total return generated by the fund compared to industry
standard.
Also, Getvisibility, one of Pires' investments that it holds both directly and
via its holdings in SVV1 and Sure Ventures plc, has recently raised €10
million at a significantly higher valuation compared to when Pires first
invested.
Getvisibility, is a leader in data visibility and control, using
state-of-the-art artificial intelligence ("AI") to classify and secure
unstructured information. Getvisibility also provides risk and compliance
assessments as well as enforcing protection on sensitive data.
The company operates across the US, Europe and the Middle East and North
Africa with a presence in several industry sectors including banking,
healthcare and the public sector. Getvisibility's clients include a leading
global producer of energy and chemicals, a major airport group, one of the
largest financial institutions in the Middle East as well as US government
entities in the pharmaceutical and manufacturing sectors.
Pires' direct stake in Getvisibility (including its recent additional
investment) is now valued at circa €1,500,000 or over 4 times its total
investment cost to date since it made its first investment two years ago. In
addition, Pires has a further interest in Getvisibility via its 13% interest
in SVV1 and an indirect interest through its holding in Sure Ventures plc,
which together are now valued at circa €1,330,000. Pires' interest in
Getvisibility, in aggregate, is therefore now valued at circa €2,830,000.
As at the period end, RGO had a 19.54% stake in Pires.
On 1 June 2022, Tern plc ("Tern") announced a recommended share offer for the
issued and to be issued share capital of Pires on the basis of 0.51613 Tern
shares for each share in Pires. This valued each share in Pires at 8 pence
based on the closing price of Tern shares on 31 May 2022 and represented a
premium of 53.8% to the closing price of a Pires share on 31 May 2022. This
offer is subject to approval by both Tern and Pires shareholders.
On 15 June 2022, Pires published its results for the year to 31 December 2021,
which clearly demonstrated the progress that this company is making.
Often as part of the Company's investment, the investee company will issue
warrants. The value of the warrants attributable to the Company's
investments are calculated using the Black-Scholes option pricing model and
the resulting figure is discounted by 75% to reflect the level of expected
return associated with such holdings given their highly volatile nature.
This balance is included within Other as set out in the table above.
Pre IPO investments
Pluto is a crypto technology and operations company with a focus on
Decentralised Finance (DeFi) and the Metaverse (blockchain gaming and NFTs).
During the period, Pluto has invested in Maze Theory Limited ("Maze Theory"),
a London‐based digital entertainment studio, with a view to developing high
quality games that incorporate token economics. As part of this arrangement,
Pluto and Maze Theory formed a new gaming blockchain and metaverse studio
joint venture called Emergent Games. Given the experience of the team at Maze
Theory and the work that they have done, Pluto is planning to extend its
relationship with Maze Theory as it believes that this is a sector that
provides an exciting growth opportunity. Also, during 2021 Pluto fully
acquired the YOP platform and has been actively developing this platform to
help enable users to operate in and navigate the DeFi space, which has been
growing rapidly.
As at 31 December 2021, the Company's equity holding in Pluto was valued at
£1.3 million based on a price of 6 pence per share, which is the price at
which the company's most recent funding raising took place.
Good progress continues to be made on the listing of Smarttech247, by way of a
proposed reverse takeover of Smarttech247 by Conduity Capital plc.
Smarttech247 is a global managed detection and response company with a leading
market position in security operations. Its platform provides threat
intelligence with managed detection and response. Smarttech247's service is
geared towards proactive prevention using the latest in cloud, big data
analytics and machine learning, along with its incident response team.
The company also recently hosted a global cybersecurity conference in Dublin
which included over 25 speakers from organisations around the world who
discussed many aspects of cybersecurity, from new technologies and new attack
vectors to regulations that are reshaping cyber and business risks. Notable
speakers included representatives from Microsoft, IBM, NCIS and the Institute
of Cancer Research.
Following on from Smarttech247's performance for the period ended 31 July
2021, where revenue and profits increased by circa 50% compared to the
previous year, the company has continued to win new clients. The company is
also progressing the roll out of its stable of internally developed automated
security products currently consisting of the successful ThreatHub (threat and
vulnerability modelling and management) and NoPhish (an AI driven phishing
response solution to threat emails).
Smarttech247 continues to go from strength to strength as the world is
increasingly exposed to cybersecurity attacks which can wreak havoc at
companies and institutions around the globe.
Cash resources
The prior period end cash balance was higher as it included amounts that were
due to RGO PCC at the year end in connection with the investment made in
Tanzanian Gold Corporation which was partly held by the Company on behalf of
RGO PCC. However, the Company still has a significant cash balance available
for investment.
Income breakdown 2021 2020
£000 £000
Investment income 1,801 1,251
Net gain from financial instruments at FVTPL 680 1,476
Net foreign exchange losses on other financial instruments (12) (284)
Total income 2,469 2,443
Administration costs (715) (404)
Investment advisory fees (594) (375)
Other gains and losses (120) (167)
Operating profit 1,040 1,497
Investment income derives principally from the fees and interest income in
relation to our debt and equity linked debt investments. The net gain from
financial instruments at FVTPL represents the impact of valuing the investment
portfolio at fair value as required under IFRS 9.
Whilst the total income figure was similar to the previous year, operating
profit was lower due to the impact of a non-cash accounting charge in relation
to share based payments and the payment of higher investment advisory fees.
KEY PERFORMANCE INDICATORS
The key performance indicators are set out below:
COMPANY STATISTICS 31 December 31 December Change %
2021 2020
Net asset value £11,748,821 £9,239,936 +27%
Net asset value - fully diluted per share 1.49p 1.36p +10%
Closing share price 1.45p 0.965p +50%
Net asset value premium to the share price 3% 41%
Market capitalisation £11,243,000 £6,552,000 +72%
KEY RISKS AND UNCERTAINTIES
Investments in junior companies can carry a high level of risk and
uncertainty, although the returns can be attractive. At this stage there can
be no certainty of outcome and the Company may have difficulty in realising
the full value from its investments in a forced sale. Furthermore, the
Company limits the amount of each commitment, both as to the absolute amount
and percentage of the target company. Details of other financial risks and
their management are given in Note 22 to the financial statements.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Details of the Company's financial risk management objectives and policies are
set out in Note 21 to these financial statements.
Covid 19 - Due to the nature of the Company's activities, the impact of Covid
19 on the Company has been minimal, with continuing interest from junior
companies for our investment capital. Management will, however, continue to
assess its impact on the Company.
PROMOTION OF THE COMPANY FOR THE BENEFIT OF THE MEMBERS AS A WHOLE
S172 of the Companies Act 2006 requires the Board to promote the Company for
the benefit of the members as a whole. In particular, the requirements of s172
are for the Directors to:
· Consider the likely consequences of any decision in the long
term
· Act fairly between the members of the Company
· Maintain a reputation for high standards of business conduct
· Consider the interests of the Company's employees
· Foster the Company's relationships with suppliers, customers
and others and
· Consider the impact of the Company's operations on the
community and the environment.
The Directors are collectively responsible for formulating the Company's
investment strategy, and during 2021 they have continued to focus on
implementing the investment strategy previously approved by shareholders in
2018 which has resulted in a significant improvement in financial performance
compared to previous years.
In addition, the application of s172 requirements can be demonstrated in
relation to some of the key decisions made during 2021:
• Raising of additional funds for the Company for investment purposes; and
• The making of further investments that have generated significant returns
for the Company and its shareholders.
The Board places equal importance on all shareholders and strives for
transparent and effective external communications, within the regulatory
confines of a listed company. The primary communication tool for regulatory
matters and matters of material substance is through the Regulatory News
Service, ("RNS"). We also provide an environment where shareholders can
interact with the Board and management, ask questions and raise any concerns
they may have. The Directors believe they have acted in a way they consider
most likely to promote the success of the Company for the benefit of its
members as a whole, as required by Section 172 (1) of the Companies Act 2006.
GOING CONCERN
The Company's assets comprise mainly cash, debt securities and quoted
securities. As at the year end, the Company held a significant balance of
cash. Furthermore, the Company has prepared cash forecasts to June 2023 that
show that the Company has sufficient cash resources for the foreseeable
future. The Directors have also considered the impact of Covid-19 and have
concluded that, given the cash reserves in place and the level of the
Company's ongoing costs, there are no material factors which are likely to
affect the ability of the Company to continue as a going concern. Accordingly,
the Directors believe that as at the date of this report it is appropriate to
continue to adopt the going concern basis in preparing the financial
statements.
ON BEHALF OF THE BOARD
Nicholas Lee
Investment Director
23 June 2022
INDEPENDENT AUDITOR'S REPORT
Opinion
We have audited the financial statements of Riverfort Global Opportunities plc
(the 'company') for the year ended 31 December 2021 which comprise the
Statement of Comprehensive Income, the Statement of Financial Position, the
Statement of Changes in Equity, the Statement of Cash Flows and notes to the
financial statements, including significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and UK-adopted international accounting standards.
In our opinion, the financial statements:
• give a true and fair view of the state of the company's affairs as
at 31 December 2021 and of its profit for the year then ended;
• have been properly prepared in accordance with UK-adopted
international accounting standards; and
• have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the company in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the company's ability to continue to adopt the going concern
basis of accounting included a review of the directors' statement in note 2 to
the financial statements and the company's budgets for the period of twelve
months from the date of approval of the financial statements, including
checking the mathematical accuracy of the budgets and discussion and challenge
of significant assumptions used by the management.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the company's ability to continue
as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
For the purposes of determining whether the financial statements are free from
material misstatement, we define materiality as the magnitude of misstatement
that makes it probable that the economic decisions of a reasonably
knowledgeable person, relying on the financial statements, would be changed or
influenced. We also determine a level of performance materiality which we use
to assess the extent of testing needed, to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a whole.
Materiality for the company financial statements as a whole was set at
£334,000 (2020: £225,000). This has been calculated based on 2.5% (2020: 2%)
of Gross Assets, being the same basis as applied in the prior year. Using our
professional judgement, we have determined this to be the principal benchmark
within the financial statements as it is most relevant to stakeholders in
assessing the financial performance of the company, based on the growth in the
value of the company's investments.
Performance materiality was set at £233,800 (2020: £157,500), being 70% of
materiality for the financial statements as a whole respectively.
We agreed to report to those charged with governance all corrected and
uncorrected misstatements we identified through our audit with a value in
excess of £16,700 (2020: £11,250). We also agreed to report any other
misstatements below that threshold that we believe warranted reporting on
qualitative grounds.
Our approach to the audit
Our audit is risk based and is designed to focus our efforts on the areas at
greatest risk of material misstatement, aspects subject to significant
management judgement as well as greatest complexity and size.
The financial asset investments balance is highly material and incorporates
both equity investments and structured finance investments. We carried out a
detailed review of the classification of the financial assets as fair value
through profit and loss (FVTPL) and assessed the fair value of the instruments
on a sample basis to ensure they are materially stated in these financial
statements. This also incorporated the review of the net income from financial
instruments at FVTPL.
We consider the impact of the risks related to management override of controls
and related party transactions and relationships to be material. We have
tested manual and automated journal entries occurring throughout the period,
including journal entries at year end. Additionally, as part of our audit
procedures to address fraud risk, we assessed the overall control environment
and reviewed whether there had been any reported actual or alleged instances
of fraudulent activity during the year. Our work on related parties included
assessment of the company's procedures, as well as discussions with the
directors.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key audit matter How our scope addressed this matter
Valuation and classification of Financial asset investments (Note 15) Our work in this area included:
At the year end, the company held non-current and current financial asset · Performing a review of the fair value of debt investment assets
investments of £11,072,148, which included Equity investments, Structured at the year end, to determine whether it is materially misstated;
Finance investments and share warrants.
· Perform an impairment review of investments in debt outstanding
There is a risk that the financial asset investments are classified and valued at the year-end by assessing their ability to repay through review of post
incorrectly and are not owned by the company. year end bank statements and share price of customer.
This matter was considered to be one of most significance in the audit due to · Obtain copies of contracts throughout the period and reconcile
the size, complexity and significance of estimates and judgements required in back to the investments held within the financial statements.
valuing the financial asset investments.
· Testing a sample of investments to certificate of title to ensure
rights and ownership of investments;
· Verify a sample of investment carrying amounts to supporting
information (e.g. stock market prices, cost information, other information
available);
· For investments in privately owned entities, obtain details of
recent fund-raising activities to assess their fair value; and review their
latest financial statements to consider whether there are any impairment
indicators;
· Discuss with management the business model of the company and
ensure this has not changed from the prior period;
· Ensure that any gains / losses charged through the Profit and
Loss are correctly accounted for and classified appropriately.
· Obtain copies of the loan agreements in place at the year end and
reconcile to the financial asset balance.
· Ensure disclosure is adequate as per IFRS 7 requirements and the
significant estimates section is disclosed in appropriate detail and accuracy
Our work did not highlight any material misstatements.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the
directors' report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its
environment obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not visited by us;
or
• the financial statements are not in agreement with the
accounting records and returns; or
• certain disclosures of directors' remuneration specified by
law are not made; or
• we have not received all the information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors' responsibilities, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
· We obtained an understanding of the company and the sector in
which they operate to identify laws and regulations that could reasonably be
expected to have a direct effect on the financial statements. We obtained our
understanding in this regard through discussions with management and
application of cumulative audit knowledge.
· We determined the principal laws and regulations relevant to
the company in this regard to be those arising from AIM rules, local tax law
and regulations, UK-adopted international accounting standards and the
Companies Act 2006.
· We designed our audit procedures to ensure that the audit team
considered whether there were any indications of non-compliance by the company
with those laws and regulations. This is evidenced by our discussion of laws
and regulations with management, reviewing minutes of meetings of those
charged with governance and review of regulatory news.
· We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by the group
with those laws and regulations. These procedures included, but were not
limited to:
· Making enquiries of management;
· A review of Board minutes;
· A review of legal ledger accounts;
· A review of Regulatory News Service ("RNS") announcements.
· We addressed the risk of fraud arising from management override
of controls by performing audit procedures which included, but were not
limited to: the testing of journals; reviewing accounting estimates for
evidence of bias; and evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of business or
where the business rationale is not clear.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
https://www.frc.org.uk/auditorsresponsibilities
(https://www.frc.org.uk/auditorsresponsibilities) . This description forms
part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditors' 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 and the company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Eric Hindson (Senior Statutory Auditor)
15 Westferry Circus
For and on behalf of PKF Littlejohn
LLP
Canary Wharf
Statutory
Auditor
London E14 4HD
Date 23 June 2022
2021 2020
STATEMENT OF COMPREHENSIVE INCOME
FFOR THE YEAR ENDED 31 DECEMBER 2021
Note £ £
CONTINUING OPERATIONS:
Investment income 4 1,801,432 1,251,681
Net gain from financial instruments at FVTPL 5 680,286 1,476,201
Foreign exchange losses on other financial instruments 6 (12,272) (284,484)
TOTAL OPERATING INCOME 2,469,446 2,443,398
Administrative expenses 7 (715,195) (403,564)
Investment advisory fees 8 (593,990) (375,446)
Other gains and losses 9 (120,249) (167,083)
PROFIT BEFORE TAXATION 1,040,012 1,497,305
Taxation 12 - -
PROFIT FOR THE YEAR AND TOTAL COMPREHENSIVE INCOME 1,040,012 1,497,305
EARNINGS PER SHARE 13
Basic earnings per share 0.140p 0.221p
Fully diluted earnings per share 0.138p 0.221p
2021 2020
STATEMENT OF FINANCIAL POSITION Note £ £
FOR THE YEAR ENDED 31 DECEMBER 2021
NON-CURRENT ASSETS
Financial asset investments 15 8,105,633 4,249,249
8,105,633 4,249,249
CURRENT ASSETS
Financial asset investments 15 2,966,515 2,908,855
Trade and other receivables 16 317,539 246,149
Cash and cash equivalents 17 2,012,483 4,046,856
5,296,537 7,201,860
TOTAL ASSETS 13,402,170 11,451,109
CURRENT LIABILITIES
Trade and other payables 18 1,653,349 2,211,173
1,653,149 2,211,173
NET ASSETS 11,748,821 9,239,936
EQUITY
Share capital 19 77,540 67,893
Share premium account 19 1,568,353 -
Share options reserve 201,034 -
Retained profits/(losses) 9,901,894 9,172,043
TOTAL EQUITY 11,748,821 9,239,936
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Share Share premium Capital redemption reserve Share options reserve Retained Total
capital profits equity
£ £ £ £ £ £
BALANCE AT 1 JANUARY 2020 10,042,273 3,191,257 27,000 - (5,382,113) 7,878,417
Total comprehensive income - - - - 1,497,305 1,497,305
Capital reduction (9,974,380) (3,191,257) (27,000) - 13,192,637 -
Dividend payment - - - - (135,786) (135,786)
BALANCE AT 31 December 2020 67,893 - - - 9,172,043 9,239,936
Total comprehensive income - - - - 1,040,012 1,040,012
Share issue 9,647 1,568,353 - - - 1,578,000
Grant of share options - - - 201,034 - 201,034
Dividend payment - - - - (310,161) (310,161)
BALANCE AT 31 December 2021 77,540 1,568,353 - 201,034 9,901,894 11,748,821
STATEMENT OF CASH FLOWS 2021 2020
FOR THE YEAR ENDED 31 DECEMBER 2021
Note £ £
CASH FLOWS FROM OPERATING ACTIVITIES
Investment income received 1,195,653 1,178,181
Operating expenses paid (1,091,429) (489,020)
NET CASH INFLOW FROM OPERATING ACTIVITIES 104,224 689,161
INVESTING ACTIVITIES
Purchase of investments (9,618,440) (4,854,799)
Disposal of investments 15 493,332 2,562,113
Debt instrument repayments 15 5,730,944 3,405,246
Settlement of forward currency contracts - (212,456)
NET CASH (USED IN)/GENERATED FROM INVESTING ACTIVITIES (3,394,164) 900,104
FINANCING ACTIVITIES
Proceeds from share issues 1,578,000 -
Dividend payment 14 (310,161) (135,786)
NET CASH GENERATED FROM/(USED IN) FINANCING ACTIVITIES 1,267,839 (135,786)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (2,022,101) 1,453,479
Cash and cash equivalents at the beginning of the year 4,046,856 2,624,480
Effect of foreign currency exchange on cash (12,272) (31,103)
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 17 2,012,483 4,046,856
1 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
GENERAL INFORMATION
RiverFort Global Opportunities plc is a public limited company, limited by
shares, incorporated in England and Wales. The shares of the Company are
listed on the Alternative Investment Market (AIM). The address of its
registered office is Suite 39, 18 High Street, High Wycombe, Buckinghamshire,
HP11 2BE.
The Company's principal activities are described in the Directors' Report.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been consistently
applied throughout all periods presented in the financial statements.
The Company's financial statements have been prepared in accordance with UK
adopted international accounting standards and in accordance with the
requirements of the Companies Act 2006. The financial statements have been
prepared under the historical cost convention, as modified by financial assets
and financial liabilities (including derivative instruments) measured at fair
value through profit or loss. The measurement basis is more fully described in
the accounting policies below.
The financial statements are presented in pounds sterling (£) which is the
functional currency of the Company. The comparative figures are for the year
ended 31 December 2020.
GOING CONCERN
The Company's assets comprise mainly cash, debt securities and quoted
securities. Since the year end, the Company's cash resources have continued
to increase and the Company has prepared cash forecasts to June 2023 that show
that the Company has sufficient cash resources for the foreseeable future. The
directors have also considered the impacts of Covid-19 and have concluded that
there are no material factors which are likely to affect the ability of the
Company to continue as a going concern, as a result of the cash reserves in
place and given the Company's ongoing costs. Accordingly, the Directors
believe that as at the date of this report it is appropriate to continue to
adopt the going concern basis in preparing the financial statements.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with IFRS requires the
use of estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting year. These estimates
and assumptions are based upon management's knowledge and experience of the
amounts, events or actions. Actual results may differ from such estimates.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
In certain circumstances, where fair value cannot be readily established, the
Company is required to make judgements over carrying value impairment and
evaluate the size of any impairment required.
CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
New standards, amendments and interpretations adopted by the Company
The Company has applied the following standards and amendments for the first
time for its annual reporting period commencing 1 January 2021:
· Amendments to IFRS 17 "Insurance Contracts"
· Amendments to IFRS 16 "Leases"
· Amendments to IFRS 9 "Financial Instruments"
· Amendments to IAS 39 "Financial Instruments: Recognition and
Measurement"
· Amendments to IFRS 7 "Financial Instruments: Disclosures"
The amendments listed above did not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or
future periods.
New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are
effective for annual periods beginning after 1 January 2021 and have not been
applied in preparing these financial statements. None of these are expected to
have a significant effect on the financial statements of the Company.
There are no other IFRSs or IFRIC interpretations that are not yet effective
that would be expected to have a material impact on the Company.
REVENUE RECOGNITION
INVESTMENT INCOME
Interest on fixed interest debt securities, designated at fair value through
profit or loss, is recognised in the statement of comprehensive income using
the effective interest rate method. The effective interest rate is the rate
that exactly discounts the estimated future cash payments and receipts through
the expected life of the financial asset or liability (or, where appropriate,
a shorter period) to the carrying amount of the financial asset or liability.
Other structured finance fees are recognised on the date of the relevant
agreement. Income may be recognised at a point in time or over the time. Over
time revenue recognition is proportional to progress towards satisfying a
performance obligation by transferring control of promised services to a
customer. Income which does not qualify for recognition over time is
recognised at a point in time when the service is rendered. The Company has no
material receivables and contract liabilities from contracts with customers as
non-refundable up-front fees are not charged to customers upon commencement of
contracts with customers.
Bank deposit interest is recognised on an accruals basis.
FOREIGN CURRENCY TRANSLATION
The functional and presentation currency of the Company is Sterling. Foreign
currency transactions are translated into Sterling using the exchange rates
prevailing at the dates of the transactions or valuation where items are
re-measured. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement, except when deferred in other
comprehensive income as qualifying cash flow hedges and qualifying net
investment hedges. Foreign exchange gains and losses that relate to debt
securities and equity investments denominated in currencies other than
Sterling and measured at FVTPL are also presented in the income statement
within Operating income. All other foreign exchange gains and losses are
presented on a net basis in the income statement within 'Other gains and
losses".
SHARE BASED PAYMENTS
The Company operates an equity-settled, share-based compensation plan. The
fair value of the employee services received in exchange for the grant of the
options is recognised as an expense and credited to the share option reserve
within equity. The total amount to be expensed over the vesting period is
determined by reference to the fair value of the options granted, excluding
the impact of any non-market vesting conditions (for example, profitability
and sales growth targets). Options that lapse before vesting are credited back
to income. The proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and, if applicable, share
premium when the options are exercised.
CURRENT AND DEFERRED TAX
Tax is recognised in the income statement, except to the extent that it
relates to items recognised directly in equity. In this case the tax is also
recognised directly in other comprehensive income or directly in equity,
respectively.
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the end of the reporting period in the
countries where the Company operates and generates taxable income.
Management periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred income taxes are calculated using the liability method on temporary
differences. Deferred tax is generally provided on the difference between
the carrying amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of an asset or
liability unless the related transaction is a business combination or affects
tax or accounting profit. Temporary differences include those associated
with shares in subsidiaries and joint ventures and are only not recognised if
the Company controls the reversal of the difference and it is not expected for
the foreseeable future. In addition, tax losses available to be carried
forward as well as other income tax credits to the Company are assessed for
recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against
future taxable income. Current and deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the
statement of financial position date. Changes in deferred tax assets or
liabilities are recognised as a component of tax expense in the income
statement, except where they relate to items that are charged or credited to
equity in which case the related deferred tax is also charged or credited
directly to equity.
SEGMENTAL REPORTING
The accounting policy for identifying segments is based on internal management
reporting information that is regularly reviewed by the chief operating
decision maker, which is identified as the Board of Directors.
In identifying its operating segments, management generally follows the
Company's service lines which represent the main products and services
provided by the Company. The Directors believe that the Company's continuing
investment operations comprise one segment.
FINANCIAL ASSETS
The Company's financial assets comprise investments, cash and cash equivalents
and loans and receivables, and are recognised in the Company's statement of
financial position when the Company becomes a party to the contractual
provisions of the instrument.
FINANCIAL ASSETS INVESTMENTS
CLASSIFICATION OF FINANCIAL ASSETS
The Company holds financial assets including equities and debt securities. The
classification and measurement of financial assets at 31 December 2021 is in
accordance with IFRS 9.
On the initial recognition, the Company classifies financial assets as
measured at amortised cost or FVTPL. A financial asset is measured at
amortised cost if it meets both of the following conditions and is not
designated as at FVTPL:
· It is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
· its contractual terms give rise on specific dates to cash flows
that are Solely Payments of Principal and Interest (SPPI).
All other financial assets of the Company are measured at FVTPL.
BUSINESS MODEL ASSESSMENT
In making an assessment of the objective of the business model in which a
financial asset is held, the Company considers all of the relevant information
on how the business is managed, including:
· the documented investment strategy and the execution of this
strategy in practice. This includes whether the investment strategy focuses on
earning contractual interest income, maintaining a particular interest rate
profile, matching the duration of the financial assets to the duration of any
related liabilities or expected cash outflows or realised cash flows through
the sale of the assets;
· how the performance of the portfolio is evaluated and reported to
the Company's management;
· the risks that affect the performance of the business model (and
the financial assets held within that business model) and how those risks are
managed;
· how the investment advisor is compensated e.g. whether
compensation is based on the fair value of the assets managed or the
contractual cashflows collected
IFRS 9 subsection B4.1.1-B4.1.2 stipulates that the objective of the entity's
business model is not based on management's intentions with respect to an
individual instrument, but rather determined at a higher level of aggregation.
The assessment needs to reflect the way that an entity manages its business.
The company has determined that it has two business models.
· Held-to-collect business model: this includes cash and cash
equivalents, balances due from brokers and other receivables. These financial
assets are held to collect contractual cash flows.
· Other Business model: this includes structured finance products,
equity investments, investments in unlisted private equities and derivatives.
These financial assets are managed and their performance is evaluated, on a
fair value basis with frequent sales taking place in respect to equity
holdings.
VALUATION OF FINANCIAL ASSET INVESTMENTS
Investment transactions are accounted for on a trade date basis. Assets are
de-recognised at the trade date of the disposal. Assets are sold at their fair
value, which comprises the proceeds of sale less any transaction cost.
Financial asset investments are categorised as either Level 1, Level 2 or
Level 3 investments as set out in Note 15. The fair value of Level 1 financial
asset investments in the balance sheet is based on the quoted bid price at the
balance sheet date, with no deduction for any estimated future selling cost.
The valuation of Level 2 and Level 3 financial asset investments are set out
in note 15 on page 37. Changes in the fair value of investments held at fair
value through profit or loss and gains and losses on disposal are recognised
in the consolidated statement of comprehensive income as "Net gains/(losses)
on investments". Investments are initially measured at fair value plus
incidental acquisition costs. Subsequently, they are measured at fair value.
This is either the bid price or the last traded price, depending on the
convention of the exchange on which the investment is quoted.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments include forward currency contracts.
Derivatives are initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair
value. All derivatives are carried as assets when their fair value is positive
and as liabilities when their fair value is negative. Changes in the fair
value of derivatives are recognised immediately in the statement of
comprehensive income. The company is engaged in hedging activities of its
foreign exchange risk. The company does not apply hedge accounting. Given the
low level of trading activity, the Company has estimated that any valuation
adjustments are not material and has therefore not incorporated these into the
fair value of derivatives.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and demand deposits, together
with other short-term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of
changes in value. They are initially recognised at fair value and subsequently
at amortised cost using the effective interest rate method.
OTHER RECEIVABLES
Other receivables from third parties are initially recognised at fair value
and subsequently carried at amortised cost using the effective interest rate
method.
IMPAIRMENT OF FINANCIAL ASSETS
Financial assets, other than those at FVTPL, are assessed for indicators of
impairment at each balance sheet date. Financial assets are impaired where
there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated
future cash flows of the investment have been impacted.
A provision for impairment is made when there is objective evidence that, as a
result of one or more events that occurred after the initial recognition of
the financial asset, the estimated future cash flows have been affected.
Impaired debts are derecognised when they are assessed as uncollectible.
FINANCIAL LIABILITIES
The Company's financial liabilities comprise trade payables. Financial
liabilities are obligations to pay cash or other financial assets and are
recognised when the Company becomes a party to the contractual provisions of
the instruments.
TRADE PAYABLES
Trade payables are initially measured at fair value and are subsequently
measured at amortised cost, using the effective interest rate method.
EARNINGS PER SHARE
Earnings per share are calculated by dividing the profit or loss for the year
after tax by the weighted average number of shares in issue and is measured in
pence per share.
EQUITY
Equity comprises the following:
· "Share capital" represents the nominal value of equity
shares.
· "Share premium" represents the excess over nominal value of
the fair value of consideration received for equity shares, net of expenses of
the share issue.
· "Capital redemption reserve" represents the nominal value of
shares repurchased or redeemed by the Company.
· Share option reserve represents the value of share options
granted but not exercised.
· "Retained losses" represents retained losses.
3 SEGMENTAL INFORMATION
The Company is organised around business class and the results are reported to
the Chief Operating Decision Maker according to this class. There is one
continuing class of business, being the investment in junior listed and
unlisted companies.
Given that there is only one continuing class of business, operating within
the UK no further segmental information has been provided.
4 INVESTMENT INCOME
2021 2020
£ £
Structured finance fees 727,089 414,265
Other interest receivable 1,074,343 837,416
1,801,432 1,251,681
5 NET GAIN ON INVESTMENTS
2021 2020
£ £
Net realised gains on disposal of investments 372,378 843,515
Net movement in fair value of investments 242,873 680,795
Net foreign exchange gain/(loss) on investments 65,035 (48,109)
Net gain on investments 680,286 1,476,201
6 FOREIGN EXCHANGE LOSSES ON OTHER FINANCIAL INSTRUMENTS
2021 2020
£ £
Net loss on foreign currency forward contracts - (253,381)
Exchange loss on foreign currency cash balances (12,272) (31,103)
(12,272) (284,484)
7 ADMINISTRATIVE EXPENSES
2021 2020
£ £
Profit for the year has been arrived at after charging:
Wages and salaries 210,023 163,055
Share based payments 201,034 -
Professional and regulatory expenses 218,436 163,613
Audit and tax compliance 35,616 28,170
Other administrative expenses 50,086 48,726
Total administrative expenses as per the statement of comprehensive income 715,195 403,564
AUDITOR'S REMUNERATION
During the year the Company obtained the following services from the Company's
auditor:
2021 2020
£ £
Fees payable to the Company's auditor for the audit of the parent company and 30,000 25,200
the Company financial statements
Fees payable to the Company's auditor and its associates for other services:
Other services relating to taxation - 2,970
30,000 28,170
8 INVESTMENT ADVISORY FEES
The charge of £593,990 (2020: £375,446) is payable to the Company's
investment adviser, RiverFort Global Capital Limited. In 2020, these fees
had been waived in exchange for an extension of the investment adviser
contract in order to allow the Company to build up its investment portfolio
prior to incurring advisory fees. These charges are based on the level of
Company's net assets and the performance of its investments.
9 OTHER GAINS AND LOSSES
2021 2020
£ £
Currency exchange differences (120,249) (167,083)
(120,249) (167,083)
10 DIRECTORS' EMOLUMENTS
2021 2020
£ £
Aggregate emoluments 199,000 152,500
Social security costs 11,023 10,555
Share based payment expense 201,034 -
411,057 163,055
Name of director Salaries Bonuses Total Total
and fees 2021 2020
£ £ £ £
P Haydn-Slater *45,000 30,000 75,000 52,500
N Lee 52,000 50,000 102,000 78,000
A van Dyke 22,000 - 22,000 22,000
A Nesbitt - - - -
119,000 80,000 199,000 152,500
*£33,000 of P Haydn-Slater's salary and fees was invoiced by Musgrave
Merchant Ltd, a company controlled by him.
11 EMPLOYEE INFORMATION
2021 2020
£ £
Wages and salaries 166,000 129,500
Consultancy fees 33,000 23,000
Social security costs 11,023 10,555
Share based payment expense 201,034 -
411,057 163,055
Average number of persons employed:
2021 2020
Number Number
Office and management 3 3
COMPENSATION OF KEY MANAGEMENT PERSONNEL
There are no key management personnel other than the Directors of the Company.
12 INCOME TAX EXPENSE
2021 2020
£ £
Current tax - continuing operations - -
The tax on the Company's profit before tax differs from the theoretical amount
that would arise using the weighted average rate applicable to profits of the
Consolidated entities as follows:
2021 2020
£ £
Profit/(loss) before tax from continuing operations 1,040,012 1,497,305
Profit/(loss) before tax multiplied by rate of corporation tax in the UK of 197,602 284,488
19% (2020: 19%)
Expenses not deductible for tax purposes 38,667 7,091
Offset against tax losses brought forward (236,269) (291,579)
Total tax - -
Unrelieved tax losses of approximately £3,962,000 (2020: £5,206,000) remain
available to offset against future taxable trading profits. No deferred tax
asset has been recognised in respect of the losses as recoverability is
uncertain.
13 EARNINGS PER SHARE
The basic earnings per share is based on the loss for the year divided by the
weighted average number of shares in issue during the year. The weighted
average number of ordinary shares for the year assumes that all shares have
been included in the computation based on the weighted average number of days
since issue.
2021 2020
£ £
Profit attributable to equity holders of the Company:
Profit from continuing operations 1,040,012 1,497,305
Profit for the year attributable to equity holders of the Company 1,040,012 1,497,305
Weighted average number of ordinary shares in issue for basic earnings 741,044,800 678,933,600
Weighted average number of ordinary shares in issue for fully diluted earnings 751,278,700 678,933,600
EARNINGS PER SHARE
BASIC AND FULLY DILUTED:
- Basic earnings per share from continuing and total operations 0.140p 0.221p
- Fully diluted earnings per share from continuing and total operations 0.138p 0.221p
DIVIDENDS
14
2021 2020 2021 2020
Pence Pence £ £
Amounts recognised as distributions to shareholders in the year
Interim dividend for 2020 - 0.02p - 135,786
Final dividend for 2020 0.04p - 310,161 -
0.04p 0.02p 310,161 135,786
15 FINANCIAL ASSET INVESTMENTS
All financial asset investments are designated at fair value through profit
and loss ("FVTPL")
2021 2020
£ £
At 1 January - fair value 7,158,104 5,197,846
Purchase of investments designated at FVTPL 11,028,551 5,877,989
Equity investment disposals (2,063,849) (1,988,686)
Debt security repayments (5,730,944) (3,405,246)
Net gain/(loss) on disposal of investments 372,378 843,515
Movement in fair value of investments 242,873 680,795
Net foreign exchange loss on debt securities 65,035 (48,109)
At 31 December - fair value 11,072,148 7,158,104
Current Non-current
2021 2020 2021 2020
£ £ £ £
Categorised as:
Level 1 - Quoted investments - - 2,372,323 1,706,712
Level 2 - Unquoted investments 2,966,515 2,908,855 2,840,270 2,166,674
Level 3 - Unquoted investments - - 2,893,040 375,863
2,966,515 2,908,855 8,105,633 4,249,249
The table of investments sets out the fair value measurements using the IFRS 7
fair value hierarchy. Categorisation within the hierarchy has been
determined on the basis of the lowest level of input that is significant to
the fair value measurement of the relevant asset as follows:
Level 1 - valued using quoted prices in active markets for identical assets.
Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted prices included within Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable market data.
The valuation techniques used by the company for Level 1 financial asset
investments are explained in the accounting policy note, "Valuation of
financial asset investments". The valuation of Level 2 and Level 3 financial
assets are explained on the following page.
Investments categorised as current are debt securities repayable by 31
December 2022.
LEVEL 2 FINANCIAL ASSET INVESTMENTS
Level 2 financial asset investments comprise debt securities valued by
reference to their principal value, less appropriate allowance where there is
a doubt as to whether the principal amount will be fully repaid in accordance
with the contractual terms of the obligation.
LEVEL 3 FINANCIAL ASSET INVESTMENTS
Reconciliation of Level 3 fair value measurement of financial asset
investments
2021 2020
£ £
Brought forward 375,863 38,931
Purchase of investments 2,402,153 -
Movement in fair value 115,024 336,932
Carried forward 2,893,040 375,863
The Company's level 3 investments include a number of unquoted share warrants.
which have been valued using the Black-Scholes valuation model, discounted by
75% to allow for there being no trading market for the warrant instruments and
the underlying shares are quoted on the London Stock Exchange's secondary
Alternative Investment Market.
The company's pre-IPO investments principally comprise, Pluto Digital plc,
whose shares are valued at the price of the last fund raise and convertible
loan stock in Smarttech247 which is valued at face value which management
considers approximates their fair value.
In line with the investment strategy adopted by the Company, Nicholas Lee is
on the board of the following investee company:
% held by the Company
2021 2020
Pires Investments plc 19.2% 18.2%
16 TRADE AND OTHER RECEIVABLES
2021 2020
£ £
Prepayments and accrued income 317,539 246,149
317,539 246,149
The Directors consider that the carrying amount of other receivables is
approximately equal to their fair value.
17 CASH AND CASH EQUIVALENTS
2021 2020
£ £
Cash and cash equivalents 2,012,483 4,046,856 d
The Directors consider the carrying amount of cash and cash equivalents
approximates to their fair value.
TRADE AND OTHER PAYABLES
18
2021 2020
£ £
Trade payables 41,942 31,346
Other payables 969,753 1,665,751
Accrued expenses 641,654 514,076
1,653,349 2,211,173
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
Trade payables and Other payables are all due within 6 months of the year end.
19 SHARE CAPITAL
Number of shares Share capital Share
Deferred Ordinary Deferred Ordinary premium
£ £ £
ISSUED AND FULLY PAID:
At 1 January 2020
Deferred shares of 9.9p each 32,857,956 - 3,252,938 - -
Ordinary shares of 0.1p each - 6,789,335,226 - 6,789,335 3,191,257
32,857,956 6,789,335,226 3,252,938 6,789,335 3,191,257
Issue of shares - 774 - 1 -
32,857,956 6,789,336,000 3,252,938 6,789,336 3,191,257
Share reorganisation 67,893,400 (6,110,402,400) 6,721,443 (6,721,443)
Capital reduction (100,751,356) (9,974,381) (3,191,257)
Ordinary shares of 0.01p each - 678,933,600 - 67,893 -
At 31 December 2020 - 678,933,600 - 67,893 -
Issue of shares - 96,470,587 - 9,647 1,630,353
Share issue costs - - - - (62,000)
At 31 December 2021 - 775,404,187 - 77,540 1,568,353
On 10 May 2021, the Company issued 96,470,587 new ordinary shares at 1.7p per
share, raising £1,640,000 before expenses, as a result of a private placing.
The placees also received one warrant for each share subscribed for,
exercisable at 3.4p per share for a period of two years from the date of
issue.
20 SHARE OPTIONS AND WARRANTS
OPTIONS
On 12 February 2021, the Company granted 16,900,000 options each to Philip
Haydn-Slater and Nicholas Lee. The share options have an exercise price of
1.00p per share and will vest as to 50% on grant and 50% upon the Company's
volume weighted average share price being 1.50 pence or greater (being 50%
above the Exercise Price) for a period of 10 consecutive days. The options
have a 10 year term from the date of grant.
The fair value of the share options at the date of grant was calculated by
reference to the Black-Scholes model. The significant inputs to the model in
respect of the options granted in the year were as follows:
Grant date 12 Feb 2021
Share price at date of grant 1.25p
Exercise price per share 1.00p
No. of warrants 33,800,000
Risk free rate 0.9%
Expected volatility 78.8%
Expected life of warrant 10 years
Calculated fair value per share 0.59478p
The share options outstanding at 31 December 2021 and their weighted average
exercise price are as follows:
2021 2020
Weighted average exercise price Weighted average exercise price
Number Pence Number Pence
Outstanding at 1 January - - - -
Granted 33,800,000 1.00 - -
Outstanding at 31 December 33,800,000 1.00 - -
The fair value of the share options recognised as an expense in the income
statement was £201,034 (2020: £Nil).
WARRANTS
On 10 May 2021, the Company issued 96,470,587 warrants to the subscribers for
a private placing, exercisable for a period of 2 years at 3.4p per share.
The share warrants outstanding at 31 December 2021 and their weighted average
exercise price are as follows:
2021 2020
Weighted average exercise price Weighted average exercise price
Number Pence Number Pence
Outstanding at 1 January - - - -
Issued 96,470,587 3.40 - -
Outstanding at 31 December 96,470,587 3.40 - -
21 RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company is exposed to a variety of financial risks which result from both
its operating and investing activities. The Company's risk management is
coordinated by the Board of Directors and focuses on actively securing the
Company's short to medium term cash flows by minimising the exposure to
financial markets.
The main risks the Company is exposed to through its financial instruments are
credit risk, foreign currency risk, liquidity risk, market price risk and
operational risk.
CAPITAL RISK MANAGEMENT
The Company's objectives when managing capital are:
· to safeguard the Company's ability to continue as a going
concern, so that it continues to provide returns and benefits for
shareholders;
· to support the Company's growth; and
· to provide capital for the purpose of strengthening the Company's
risk management capability.
The Company actively and regularly reviews and manages its capital structure
to ensure an optimal capital structure and equity holder returns, taking into
consideration the future capital requirements of the Company and capital
efficiency, prevailing and projected profitability, projected operating cash
flows, projected capital expenditures and projected strategic investment
opportunities. Management regards total equity as capital and reserves, for
capital management purposes. The Company is not subject to externally imposed
capital requirements.
CREDIT RISK
The Company's financial instruments that are subject to credit risk are cash
and cash equivalents and loans and receivables. The credit risk for cash and
cash equivalents is considered negligible since the counterparties are
reputable financial institutions. The credit risk for loans and receivables
is mainly in respect of short term loans, made on market terms, which are
monitored regularly by the Board.
The Company's maximum exposure to credit risk is £2,029,573 (2020:
£4,046,856) comprising cash and cash equivalents and other receivables.
The ageing profile of trade and other receivables was:
2021 2020
Total book value Total book value
£ £
Current - -
Overdue for less than one year - -
- -
LIQUIDITY RISK
Liquidity risk arises from the possibility that the Company might encounter
difficulty in settling its debts or otherwise meeting its obligations related
to financial liabilities. The Company manages this risk through maintaining a
positive cash balance and controlling expenses and commitments. The
Directors are confident that adequate resources exist to finance current
operations.
FOREIGN CURRENCY RISK
The Company invests in financial instruments and enters into transactions that
are denominated in currencies other than its functional currency, primarily in
US dollars (USD). Consequently, the Company is exposed to the risk that the
exchange rate of its currency relative to other foreign currencies may change
in manner that has an adverse effect on the fair value of the future cashflows
of the Company's financial assets denominated in currencies other than the
GBP.
The Company's policy is to use derivatives to manage its exposure to foreign
currency risk. The instruments used are foreign currency forward contracts.
The Company does not apply hedge accounting.
The carrying amounts of the Company's foreign currency denominated monetary
assets and monetary liabilities at the reporting date are as follows:
Assets Liabilities
31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020
£ £ £ £
US Dollars 3,216,128 4,847,200 - 1,074,487
Euro 1,185,685 152,196 1,079,034 -
Canadian Dollars 535,106 - 477,704 -
Australian Dollars 1,028,669 - 132,325 -
Swiss Francs 658,389 - 129,213 -
6,623,977 4,999,396 1,818,276 1,074,487
The following table details the Company's sensitivity to a 5 per cent increase
and decrease in GBP against other currencies. 5 per cent is the sensitivity
rate used when reporting foreign currency risk internally to key management
personnel and represents management's assessment of the reasonably possible
change in the foreign exchange rates. The sensitivity analysis includes only
outstanding foreign currency denominated monetary items and adjusts their
translation at the year-end for a 5 per cent change in the foreign currency
exchange rates. A positive number below indicates an increase in profit and
other equity where GBP weakens 5 per cent against the relevant currency. For a
5 per cent strengthening of GBP against the relevant currency, there would be
a comparable impact on the profit and other equity, and the balances below
would be negative.
Effect on Profit and Loss
31 Dec 2021 31 Dec 2020
£ £
US Dollars 160,806 151,938
Euro 5,332 7,610
Canadian Dollars 2,870 -
Australian Dollars 44,817 -
Swiss Francs 26,459 -
INTEREST RATE RISK
Interest rate risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates. The risk is mitigated by the Company only entering into fixed rate
interest agreements, therefore detailed analysis of interest rate risk is not
disclosed.
MARKET PRICE RISK
The Company's exposure to market price risk mainly arises from potential
movements in the fair value of its investments. The Company manages this
price risk within its long-term investment strategy to manage a diversified
exposure to the market. If each of the Company's equity investments were to
experience a rise or fall of 10% in their fair value, this would result in the
Company's net asset value and statement of comprehensive income increasing or
decreasing by £508,000 (2020: £171,000).
Exposure to market price risk also arises in respect of the Company's
investments in debt securities which are mainly denominated in US Dollars.
The Company's strategy for the management of market risk is driven by the
Company's investment objective, which is focused on deploying its capital in
investments that provide both income and downside protection. It is expected
that the Company will deliver returns to shareholders through a combination of
capital growth and dividend income.
The Company's market risk is managed on a continuous basis by the Investment
Advisor in accordance with the policies and procedures in place. The Company's
market positions are monitored on a quarterly basis by the board of directors.
OPERATIONAL RISK
Operational Risk is the risk of direct or indirect loss arising from a wide
variety of causes associated with the processes, technology and infrastructure
supporting the Company's activities with financial instruments, either
internally within the Company or externally at the Company's service providers
such as cash custodians/brokers, and from external factors other than credit,
market and liquidity risks such as those arising from legal and regulatory
requirements and generally accepted standards of investment management
behaviour.
The Company's objective is to manage operational risk so as to balance the
limiting of financial losses and damage to its reputation with achieving its
investment objective of generating returns to shareholders.
The primary responsibility for the development and implementation of controls
over the operational risk rests with the board of directors. This
responsibility is supported by the development of overall standards for the
management of operational risk, which encompasses the controls and processes
over the investment, finance and financial reporting functions internally and
the establishment of service levels with various service providers, in the
following areas:
- Appropriate segregation of duties between various functions,
roles and responsibilities;
- Reconciliation and monitoring of transactions
- Compliance with regulatory and other legal requirements;
The directors' assessment of the adequacy of the controls and processes at the
service providers with respect to operational risk is carried out via ad hoc
discussions with the service providers. Substantially all the of the assets of
the Company are held by Barclays Bank UK and Shard Capital Brokers. The
bankruptcy or insolvency of the Company's cash custodian/brokers may cause the
Company's rights with respect to the securities or cash and cash equivalents
held by cash custodian/ broker to be limited. The board of directors' monitors
capital adequacy and reviews other publicly available information of its cash
custodian/broker on a quarterly basis.
22 FINANCIAL INSTRUMENTS
The Company uses financial instruments, other than derivatives, comprising
cash to provide funding for the Company's operations.
CATEGORIES OF FINANCIAL INSTRUMENTS
The IFRS 9 categories of financial asset included in the statement of
financial position and the headings in which they are included are as follows:
2021 2020
£ £
FINANCIAL ASSETS:
Cash and cash equivalents 2,012,483 4,046,856
Financial assets at amortised cost - -
Financial assets at fair value through profit or loss 11,072,148 7,158,104
FINANCIAL LIABILITIES AT AMORTISED COST:
The IFRS 9 categories of financial liabilities included in the statement of
financial position and the headings in which they are included are as follows:
2021 2020
£ £
Trade and other payables 1,011,695 1,697,097
23 RELATED PARTY TRANSACTIONS
The compensation payable to Key Management personnel comprised £199,000
(2020: £152,500) paid by the Company to the Directors in respect of services
to the Company. Full details of the compensation for each Director are
provided in the Directors' Remuneration Report.
Nicholas Lee's directorships of companies in which Riverfort Global
Opportunities plc has an investment are detailed in Note 15.
24 Contingent LIABILITIES AND CAPITAL COMMITMENTS
There were no contingent liabilities or capital commitments at 31 December
2021 or 31 December 2020.
25 POST YEAR END EVENTS
On 1 June 2022, Tern plc ("Tern") announced a recommended share offer for the
issued and to be issued share capital of Pires on the basis of 0.51613 Tern
shares for each share in Pires. This valued each share in Pires at 8 pence
based on the closing price of Tern shares on 31 May 2022 and represented a
premium of 53.8% to the closing price of a Pires share on 31 May 2022. This
offer is subject to approval by both Tern and Pires shareholders.
On 15 June 2022, Pires published its results for the year to 31 December 2021,
which clearly demonstrated the progress that this company is making.
On 16 June 2022, the Company exercised 4,812,200 warrants in Pires at a price
of 4 pence.
26 ULTIMATE CONTROLLING PARTY
The Directors do not consider there to be a single ultimate controlling party.
NOTE TO THE ANNOUNCEMENT
In accordance with Section 435 of the Companies Act 2006, the directors advise
that the information set out in this announcement does not constitute the
Company's statutory financial statements for the year ended 31 December 2021
or 2020 but is derived from these financial statements. The financial
statements for the year ended 31 December 2020 have been delivered to the
Registrar of Companies. The financial reporting framework that has been
applied in their preparation is applicable law and international accounting
standards in conformity with the requirements of the Companies Act 2006 and
will be forwarded to the Registrar of Companies following the Company's Annual
General Meeting. The Auditors have reported on these financial statements;
their reports were unqualified and did not contain statements under Section
498(2) or the Companies Act 2006.
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