REG - Sherborne Inv. C Ld - Half-year Report
04/09/2024 07:00
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RNS Number : 7793C Sherborne Investors (Guernsey)C Ltd 04 September 2024
SHERBORNE INVESTORS (GUERNSEY) C LIMITED
Interim Report and Unaudited Condensed Financial Statements
For the period from 1 January 2024 to 30 June 2024
Company Summary
The Company Sherborne Investors (Guernsey) C Limited (the "Company") is a Guernsey
domiciled limited company and its shares are admitted to trading on the London
Stock Exchange's Specialist Fund Segment ("SFS"). The Company was incorporated
on 25 May 2017. The Company commenced dealings on the SFS on 12 July 2017.
Investment Objective To realise capital growth from investment in a target company identified by
the Investment Manager, with the aim of generating a significant capital
return for Shareholders.
Investment Policy To invest in a company which is publicly quoted which it considers to be
undervalued as a result of operational deficiencies and which it believes can
be rectified by the Investment Manager's active involvement, thereby
increasing the value of the investment. The Company will only invest in one
target company at a time.
Investment Manager Sherborne Investors Management LP (including affiliates, the "Investment
Manager") provides investment management services to SIGC LLC and other funds
in which the Company is indirectly an investor (the "Funds"). See Note 1 and
Note 9 for details of changes in the period.
Chairman's Statement
For the period ended 30 June 2024
Dear Shareholder,
I am pleased to present the Interim Report of Sherborne Investors (Guernsey) C
Limited (the "Company") for the period 1 January 2024 to 30 June 2024.
As at 30 June 2024, the net asset value ("NAV") attributable to shareholders
of the Company was £454.7 million (30 June 2023: £570.6 million and 31
December 2023: £566.3 million) or 65.0 pence per share (30 June 2023: 81.5
pence per share and 31 December 2023: 80.9 pence per share) (see Note 8). As
at 31 August 2024 the estimated (unaudited) NAV, as reported, was 71.0 pence
per share.
The Company co‐invests in Navient Corporation ("Navient") with other
investors through Newbury Investors LLC ("Newbury") which is managed by
Sherborne Investors Management LP ("Sherborne Investors"). Newbury currently
owns 26.9% of Navient's outstanding shares, making it the largest shareholder
in Navient. Newbury also currently owns a 24.9% interest in the outstanding
shares of the Company. The Company is pursuing its investment strategy through
its indirect shareholding in Navient.
In December 2023, Mr Edward Bramson, a partner in Sherborne Investors, was
appointed Vice Chairman of the board of directors of Navient. Through this
role, Sherborne Investors assisted the Navient board with the formulation of
the first phase of Navient's strategic review update announced on 30 January
2024. The strategic review consisted of three primary objectives: outsourcing
of loan servicing, divestiture of a non-core division, and a reduction in
operating expenses. Navient subsequently confirmed in its Q2 earnings release
on 24 July 2024 that these objectives were being achieved as previously set
out.
On 13 August 2024, Navient announced further progress on the strategic review
by reaching an agreement to sell its Healthcare Services segment of the
Business Processing Solutions division for $365 million in cash. This
transaction is expected to close by the end of September. For further
information on Navient, including its strategy and performance, please refer
to its publicly available financial statements and presentations available at
www.sec.gov or Navient's website at www.navient.com (http://www.navient.com) .
I am pleased to announce that the Company is declaring a 0.5 pence per share
dividend to be paid on 4 October 2024 to shareholders of record on 13
September 2024. The present intention is to pay a further 0.5 pence per share
to shareholders following the full year results.
The principal risks and uncertainties of the Company are in relation to
performance risk, market risk, relationship risk and operational risk. These
are unchanged from 31 December 2023, and further details may be found in the
Directors' Report within the Annual Report and Audited Consolidated Financial
Statements of the Company for the year ended 31 December 2023. The Directors
will continue to assess the principal risks and uncertainties relating to the
Company for the remaining six months of the year but expect these to remain
unchanged.
Details of related party transactions during the period are included in Note 9
of the Condensed Financial Statements.
Responsibility statement
We confirm that to the best of our knowledge:
• The condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted in the
European Union;
• The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and their impact on the condensed financial statements and
description of principal risks and uncertainties for the remaining six months
of the year);
• The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein);
• The condensed set of financial statements, which has been
prepared in accordance with the applicable set of accounting standards, gives
a true and fair view of the assets, liabilities, financial position and profit
or loss of the issuer, or the undertakings included in the consolidation as a
whole as required by DTR 4.2.4R; and
• The condensed set of financial statements have not been subject
to an audit or review by an independent auditor.
Going Concern
The Condensed Financial Statements have been prepared on the going concern
basis. The net current asset position as at 30 June 2024 is £0.6 million. The
Directors have considered the impact to the Company, as well as to Navient
Corporation's ("Navient") and the Company's stock prices, of the current
economic environment, including the current interest rates and inflationary
environment, and have concluded that there is no impact on the going concern.
At 30 June 2024 the Company had a NAV of £454.7 million. The Company, via its
investment in SIGC LLC and other funds in which the Company is indirectly an
investor (the "Funds"), has sufficient liquid assets to meet expected costs.
The Investment Manager has the full intent and ability to provide the Company
with funds as and if required. Therefore, after making enquiries and based on
the sufficient cash reserves as at 30 June 2024, the Directors are of the
opinion that the Company has adequate resources to continue its operational
activities for the foreseeable future. The Board is therefore of the opinion
that the going concern basis should be adopted in the preparation of the
Condensed Financial Statements.
Condensed Statement of Comprehensive Income (Unaudited)
For the period from 1 January 2024 to 30 June 2024
1 January 2024 to 1 January 2023 to 1 January 2023 to
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
(Restated)*
Notes £ £ £ £ £ £
Income 1(e)
Unrealised (loss)/gain on financial assets at fair value through profit or 1(d),5 52,737,183 46,852,537
loss
(107,634,577)
Interest income 3,595 2,400 6,807
Total income/(loss) (107,630,982) 52,739,583 46,859,344
Expenses 1(f)
Management fees - - 2,087,689
Professional fees 108,579 149,062 253,526
Directors' fees 2, 9 97,500 105,318 203,054
Administrative fees 60,236 22,713 133,273
Other fees 87,033 61,396 178,718
Foreign exchange gain - - 82,104
Total operating expenses 352,609 338,489 2,938,364
Comprehensive loss/(income) (107,983,591) 52,401,094 43,920,980
Weighted average number of shares outstanding 4 700,000,000 700,000,000 700,000,000
Basic and diluted (deficit)/earnings per share 4 (15.43p) 7.48p 6.27p
All income and expenses are derived from continuing operations. There are no
items of other comprehensive income.
* Refer to note 1 in the notes to the Financial Statements.
Although not required by IAS 34 - 'Interim Financial Reporting', the
comparative figures for the preceding year and the related notes have been
included on a voluntary basis.
The accompanying notes form an integral part of these Condensed Financial
Statement.
Condensed Statement of Financial Position (Unaudited)
As at 30 June 2024
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
(Restated)*
Notes £ £ £ £ £ £
Non-Current Assets
Financial assets at fair value through profit or loss 1(d), 5 454,130,975 569,043,450 565,515,552
454,130,975 569,043,450 565,515,552
Current Assets
Cash and cash equivalents 1(h) 674,929 1,552,622 816,593
Prepaid expenses 48,982 50,934 18,715
723,911 1,603,556 835,308
Current Liabilities
Trade and other payables 1(i), 6 87,944 73,282 100,327
87,944 73,282 100,327
Net Current Assets 635,967 1,530,274 734,981
Net Assets 454,766,942 570,573,724 566,250,533
Capital and Reserves
Called up share capital and share premium 7 688,939,403 688,939,403 688,939,403
Retained reserves (234,172,461) (118,365,679) (122,688,870)
Equity attributable to the Company 454,766,942 570,573,724 566,250,533
Total Equity 454,766,942 570,573,724 566,250,533
NAV Per Share 8 64.97p 81.51p 80.89p
The Condensed Financial Statements were approved by the Board of Directors for
issue on 03 September 2024.
* Refer to note 1 in the notes to the Financial Statements.
Although not required by IAS 34 - 'Interim Financial Reporting', the
comparative figures for the preceding year and the related notes have been
included on a voluntary basis.
The accompanying notes form an integral part of these Condensed Financial
Statements.
Condensed Statement of Changes in Equity (Unaudited)
For the period from 1 January 2024 to 30 June 2024
Share Capital Retained
and Share Reserves Total
Premium Equity
Notes £ £
£
Balance at 1 January 2024 (unaudited) 688,939,403 (122,688,869) 566,250,534
Comprehensive loss - (107,983,591) (107,983,591)
Distributions 11 - (3,500,000) (3,500,000)
Balance at 30 June 2024 (unaudited) 688,939,403 234,172,461 454,766,942
Share Capital Retained Non-Controlling Interests Total
and Share Reserves Equity
Premium
£ £ £
Balance at 1 January 2023 (Audited) 688,939,403 (159,610,954) 110,731 529,439,180
Adjustment for deconsolidation - (7,655,819) (110,731) (7,766,550)
Balance at 1 January 2023 (as restated) 688,939,403 (167,266,773) - 521,672,630
Comprehensive gain - 52,401,094 - 52,401,094
Distributions 11 - (3,500,000) - (3,500,000)
Balance at 30 June 2023 (unaudited) 688,939,403 (118,365,679) - 570,573,724
Share Capital Retained Non-Controlling Interests Total
and Share Reserves Equity
Premium
£ £ £
Balance at 1 January 2023 (Audited) 688,939,403 (159,610,954) 110,731 529,439,180
Adjustment for deconsolidation - (7,655,819) (110,731) (7,766,550)
Balance at 1 January 2023 (as restated) 688,939,403 (167,266,773) - 521,672,630
Comprehensive gain - 43,920,980 - 43,920,980
Distributions 11 - (7,000,000) - (7,000,000)
Reclassification for transfer of balance* - 7,656,924 - 7,656,924
Balance at 31 December 2023 (unaudited) 688,939,403 (122,688,869) - 566,250,534
* Refer to note 1 in the notes to the Financial Statements.
Although not required by IAS 34 - 'Interim Financial Reporting', the
comparative figures for the preceding year and the related notes have been
included on a voluntary basis.
The accompanying notes form an integral part of these Condensed Financial
Statements.
Condensed Statement of Cash Flows (Unaudited)
For the period from 1 January 2024 to 30 June 2024
Notes 1 January 2024 to 30 June 2024
(unaudited) 1 January 2023 1 January 2023 to
£ to 30 June 2023 31 December 2023
(unaudited) (unaudited)
£ £
(Restated)* (Restated)*
Cash flows from operating activities
Comprehensive income/(loss) (107,983,591) 52,401,094 51,541,495
Adjustments for:
Unrealised (gain)/loss on financial assets at fair value through profit or 5 107,634,577 (52,737,183) (52,209,285)
loss
Movement in prepaid (30,267) (21,103) 11,116
expenses
Movement in trade and other payables 6 (12,383) (104,196) (77,152)
Interest income (3,595) (2,400) (5,911)
Net cash flow used in operating (395,259) (463,788) (739,737)
activities
Investing activities
Distributions from 5 3,750,000 3,500,285 6,536,695
investments
Interest income 3,595 2,400 5,911
Net cash flow from investing activities 3,753,595 3,502,685 6,542,606
Financing activities
Distributions to shareholders 11 (3,500,000) (3,500,000) (7,000,000)
Net cash flow used in financing activities (3,500,000) (3,500,000) (7,000,000)
Net movement in cash and cash equivalents (141,665) (461,103) (1,197,131)
Opening cash and cash equivalents 816,594 2,013,725 2,013,725
Closing cash and cash equivalents 674,929 1,552,622 816,594
* Refer to note 1 in the notes to the Financial Statements.
Although not required by IAS 34 - 'Interim Financial Reporting', the
comparative figures for the preceding year and the related notes have been
included on a voluntary basis.
The accompanying notes form an integral part of these Condensed Financial
Statements.
Notes to the Condensed Financial Statements
For the period from 1 January 2024 to 30 June 2024
1. Summary of significant accounting policies
Reporting entity
Sherborne Investors (Guernsey) C Limited (the "Company") is a closed-ended
investment company with limited liability formed under the Companies
(Guernsey) Law, 2008 (as amended). The Company was incorporated and registered
in Guernsey on 25 May 2017. The Company's registered office is 1 Royal Plaza,
Royal Avenue, St Peter Port, Guernsey, Channel Islands, GY1 2HL.
The Company commenced dealings on the London Stock Exchange's Specialist Fund
Segment on 12 July 2017
The Company, via SIGC Midco Limited ("Midco"), a former wholly owned
subsidiary of the Company, which was dissolved and liquidated in 2023, owned
99.98% of the capital interest in SIGC, LP (Incorporated) (the "Investment
Partnership"), a former subsidiary of the Company which was also dissolved and
liquidated in 2023 as described further below.
In 2023, the investment manager of the Investment Partnership, Sherborne
Investors Management (Guernsey) LLC, advised that following the Company's
distribution of proceeds from its indirect investment in Navient Corporation
("Navient"), it did not intend to seek to recall any funds for further
investment. To effectuate this, the Investment Partnership's investment
manager assigned to the Company the Investment Partnership's interest in SIGC
LLC, as the constitutional documents of SIGC LLC do not permit the recall of
distributed capital for reinvestment. As a result of this assignment, the
Investment Partnership was dissolved by operation of its limited partnership
agreement.
The "Group" was defined as the Company and its former subsidiaries, Midco and
the Investment Partnership. Both subsidiaries were established/incorporated
in Guernsey. Midco's and the Investment Partnership's results for the year
were included in the consolidated financial statements up until their
respective liquidations. In the opinion of the Directors, there is no single
ultimate controlling party.
Basis of preparation
The Company's Condensed unaudited Financial Statements have been prepared in
accordance with International Financial Reporting Standards ("IFRS") as
adopted in the European Union, which comprise standards and interpretations
approved by the International Accounting Standards Board ("IASB") and
International Accounting Standards and Standing Interpretations Committee,
Interpretations approved by the International Accounting Standards Committee
that remain in effect, together with applicable legal and regulatory
requirements of Guernsey law.
The Condensed unaudited Financial Statements of the Company have been prepared
in accordance with International Accounting Standard 34, 'Interim Financial
Reporting' ("IAS 34") as adopted in the European Union, together with
applicable legal and regulatory requirements of Guernsey Law.
The Directors of the Company have taken the exemption in Section 244 of the
Companies (Guernsey) Law, 2008 (as amended) and have therefore elected to only
prepare standalone Financial Statements for the period.
These Condensed Financial Statements have been prepared on the historical cost
basis, as modified by the measurement at fair value of investments. The
accounting policies adopted are consistent with those of the previous
financial year and corresponding interim period.
Going concern
The Condensed Financial Statements have been prepared on the going concern
basis. The net current asset position as at 30 June 2024 is £0.6 million. The
Directors have considered the impact to the Company, as well as to Navient
Corporation's ("Navient") and the Company's stock prices, of the current
economic environment, including the current interest rates and inflationary
environment, and have concluded that there is no impact on the going concern.
At 30 June 2024 the Company had a NAV of £454.7 million. The Company, via its
investment in SIGC LLC and other funds in which the Company is indirectly an
investor (the "Funds"), has sufficient liquid assets to meet expected costs.
The investment manager of the Funds, Sherborne Investors Management LP
(including affiliates, the "Investment Manager"), has the full intent and
ability to provide the Company with funds as and if required. After making
enquiries of the Investment Manager and Apex Fund and Corporate Services
(Guernsey) Limited (the "Administrator") and based on the sufficient cash
reserves as at 30 June 2024, the Directors have a reasonable expectation that
the Company has adequate resources to continue its operational activities for
the foreseeable future. Accordingly, they continue to adopt a going concern
basis in preparing these Condensed Financial Statements.
Critical accounting judgments and key sources of estimation uncertainty
The preparation of the Company's Condensed Financial Statements requires
management to make estimates and assumptions that affect the reported amounts
of assets, liabilities and contingencies at the date of the Company's
Condensed Financial Statements and revenue and expenses during the reported
period. Actual results could differ from those estimated.
i) Critical accounting judgement: Incentive allocation
As more fully described in Note 9, until 24 May 2023 when the Investment
Partnership was dissolved, the Special Limited Partner was entitled to receive
an incentive allocation once aggregate distributions to partners of the
Investment Partnership exceed a certain level. After the Investment
Partnership's dissolution, the incentive allocation is incurred at SIGC LLC on
the same economic term as previously incurred at the Investment Partnership
and accounted on the same basis. The basis of the incentive calculation
differs depending on how the investment in the Selected Target Company ("STC")
is ultimately characterised (i.e., as a Turnaround or Stake Building
Investment). The incentive allocation has been computed on a Stake Building
Investment basis, as it does not meet the criteria of a Turnaround investment.
ii) Critical accounting judgement: Consolidation of entities
As described further in Note 5, as at 30 June 2024 the Company holds a
non-controlling interest in SIGC LLC. Whilst the Company holds a majority
interest in SIGC LLC and holds access to the rewards and benefits, it does not
exercise control over the day-to-day operations, nor does it have the ability
to remove the controlling party. As such, SIGC LLC is not considered a
subsidiary and is not consolidated but held and measured at fair value through
profit or loss.
iii) Source of estimation uncertainty: Financial assets at fair value through
profit or loss
The Company's investments are measured at fair value for financial reporting
purposes. The fair value of financial assets is based on the net asset value
("NAV") of the investment. The main contribution to their NAV is the quoted
closing price of the STC and the Company at 30 June 2024, together with cash
balances. Please see Note 5 for further details.
Adoption of new and revised standards
(i) New standards adopted as at 1 January 2024:
The following standards are effective for the first time for the financial
period beginning 1 January 2024 and are relevant to the Company's operations:
· Amendments to IAS 1 - Classification of Liabilities as Current or
Non-Current,
· Amendments to IAS 1 - Non-current Liabilities with Covenants,
· Amendments to IAS 7 - Statement of Cash Flows,
· Amendments to IFRS 7 - Financial Instruments,
· IFRS S1 - General Requirements for Disclosure of
Sustainability-related Financial Information,
· IFRS S2 - Climate-related Disclosures.
The above standards have been adopted and did not have a material impact on
the financial statements.
(ii) Standards, amendments and interpretations early adopted by the Company:
There were no standards, amendments and interpretations early adopted by the
Company.
(iii) Standards, amendments and interpretations in issue but not yet
effective:
· Amendments to IAS 21 - Lack of Exchangeability
· IFRS 18 - Presentation and Disclosure in Financial Statements.
Unless stated otherwise, the Directors do not consider the adoption of any new
and revised accounting standards and interpretations to have a material impact
as the new standards or amendment are not relevant to the operations of the
Company.
c. Functional currency
Items included in the Condensed Financial Statements of the Company are
measured using the currency of the primary economic environment in which the
entity operates. The Condensed Financial Statements are presented in Pound
Sterling ("£"), which is the Company's functional and presentational
currency.
Transactions in currencies other than £ are translated at the rate of
exchange ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the date of the Condensed
Statement of Financial Position are retranslated into £ at the rate of
exchange ruling at that date. Exchange differences are reported in the
Condensed Statement of Comprehensive Income.
d. Financial assets at fair value through profit or loss
Investments, including equity investments in associates, are designated as
fair value through profit or loss in accordance with IFRS 9 'Financial
instruments', as the Company's business model is to invest in financial assets
with a view to profiting from their total return in the form of interest and
changes in fair value. Under International Accounting Standard 28 'Investments
in Associates', the fund can hold its investments at fair value through profit
or loss rather than as an associate as the Investment Partnership is a
closed-ended fund.
Investments in voting shares and derivative contracts are initially recognised
at cost and are subsequently re-measured at fair value, as determined by the
Directors. Unrealised gains or losses arising from the revaluation of
investments in voting shares and derivative contracts are taken directly to
the Condensed Statement of Comprehensive Income.
The Company's investments are measured at fair value for financial reporting
purposes as described earlier in Note 1 under critical accounting judgements
and key sources of estimation uncertainty.
In determining fair value in accordance with IFRS 13 'Fair Value Measurement'
("IFRS 13"), investments measured and reported at fair value are classified
and disclosed in one of the following categories within the fair value
hierarchy:
Level I - An unadjusted quoted price for identical assets and liabilities in
an active market provides the most reliable evidence of fair value and is used
to measure fair value whenever available. As required by IFRS 13, the Company
will not adjust the quoted price for these investments, even in situations
where it holds a large position, and a sale could reasonably impact the quoted
price.
Level II - Inputs are other than unadjusted quoted prices in active markets,
which are either directly or indirectly observable as of the reporting date,
and fair value is determined through the use of models or other valuation
methodologies.
Level III - Inputs are unobservable for the investment and include situations
where there is little, if any, market activity for the investment. The inputs
into the determination of fair value require significant management judgement
or estimation.
The Company's investments are summarised by Level in Note 5. On disposal of
shares, cost of investments is allocated on a first in, first out basis.
e. Revenue recognition
Investment income and interest receivable from short-term deposits and
Treasury gilts are recognised on an accruals basis. Where receipt of
investment income is not likely until the maturity or realisation of an
investment then the investment income is accounted for as an increase in the
fair value of the investment.
f. Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the Condensed Statement of Comprehensive Income in the period in which
they occur.
g. Prepaid expenses and trade receivables
Trade and other receivables are initially recognised at fair value and
subsequently, where necessary, re-measured at amortised cost using the
effective interest method. A provision for impairment of trade receivables is
established when there is objective evidence the Company will not be able to
collect all amounts due according to the original terms of the receivables.
The Company only holds trade receivables with no financing component and which
have maturities of less than 12 months at amortised cost and has therefore
applied the simplified approach to expected credit loss.
h. Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, call and current balances
with banks and similar institutions, which are readily convertible to known
amounts of cash and which are subject to insignificant risk of changes in
value. This definition is also used for the Condensed Statement of Cash Flows.
The carrying amount of these assets approximate their fair value, unless
otherwise stated.
i. Trade and other payables
Trade and other payables are initially recognised at fair value and
subsequently, where necessary, re-measured at amortised cost using the
effective interest method.
j. Financial instruments
Financial assets and liabilities are recognised in the Company's Condensed
Statement of Financial Position when the Company becomes a party to the
contractual provisions of the instrument.
k. Segmental reporting
As the Company invests in one investee company, there is no segregation
between industry, currency or geographical location and therefore no further
disclosures are required in conjunction with IFRS 8 'Operating Segments'.
l. Incentive allocation
Until 24 May 2023 when the Investment Partnership was dissolved, the incentive
allocation was accounted for on an accruals basis (see also Note 9). After the
Investment Partnership's dissolution, the incentive allocation is incurred at
SIGC LLC on the same economic term as previously incurred at the Investment
Partnership and accounted on the same basis. Please see note 9 for further
details. The incentive allocation was payable to the non-controlling interest
and would therefore be recognised in the Condensed Statement of Changes in
Equity rather than recognised as an expense in the Condensed Statement of
Comprehensive Income.
m. Change in reporting entity
In the current period, the Company has transitioned from presenting
consolidated financial statements to unconsolidated financial statements due
to the liquidation of its subsidiaries. This change has been applied
retrospectively to ensure comparability with the current year's financial
statements, in accordance with IFRS 10 and IAS 1.
The financial statements for the period ended 30 June 2023 and 31 December
2023 have been restated to reflect the changes as if the entities were not
consolidated.
As per IFRS10, upon the dissolution of a subsidiary, the parent shall account
for all amounts previously recognised in other comprehensive income in
relation to that subsidiary on the same basis as would be required if the
parent had disposed of the related assets or liabilities. In December 2023,
the Company recognised an amount of £7.6 as reclassification for transfer of
balances directly to retained reserves relation to the amount that was booked
at the Investment Partnership prior to the dissolution. This is reflected in
the Condensed Statement of Changes in Equity on line item 'Reclassification
for transfer of balances'.
2. Comprehensive income/(loss)
The comprehensive income/(loss) has been arrived at after charging:
1 January 2024 to 30 June 2024 1 January 2023 to 30 June 2023 1 January 2023 to 31 December 2023
£ £ £
Directors' fees 97,500 105,318 203,054
Auditor's remuneration - Audit 55,000 31,000 55,000
Auditor's remuneration - Interim review - 28,000 28,000
3. Tax on ordinary activities
The Company has been granted exemption from income tax in Guernsey under the
Income Tax (Exempt Bodies) (Bailiwick of Guernsey) Ordinance 1989 and is
liable to pay an annual fee (currently £1,600) under the provisions of the
Ordinance. As such it will not be liable to income tax in Guernsey other than
on Guernsey source income (excluding deposit interest on funds deposited with
a Guernsey bank). No withholding tax is applicable to distributions to
Shareholders by the Company.
The Investment Partnership was not itself subject to taxation in Guernsey. No
withholding tax is applicable to distributions to partners of the Investment
Partnership.
Income which is wholly derived from the business operations conducted on
behalf of the Investment Partnership with, and investments made in, persons or
companies who are not resident in Guernsey will not be regarded as Guernsey
source income. Such income will not therefore be liable to Guernsey tax in
the hands of non-Guernsey resident limited partners.
4. Earnings per share
The calculation of basic and diluted earnings per share is based on the return
on ordinary activities less total comprehensive income attributable to the
non-controlling interest and on there being 700,000,000 weighted average
number of shares in issue during the period (30 June 2023: 700,000,000 and 31
December 2023: 700,000,000). The earnings per share attributable to
shareholders for the period ended 30 June 2024 amounted to a deficit of 15.43
pence per share (period ended 30 June 2023: 7.48 pence per share and year
ended 31 December 2023: 7.36 pence per share).
Date Shares Days in issue Weighted Average Shares
30 June 2024 700,000,000 181 700,000,000
31 December 2023 700,000,000 365 700,000,000
5. Financial assets at fair value through profit or loss
As at 30 June 2024 As at 30 June As at 31 December 2023
2023
£ £ £
Opening fair value 565,515,552 519,806,267 519,806,267
Contribution to investments - - -
Distributions from investments (3,750,000) (3,500,000) (6,500,000)
Unrealised gain on financial assets at fair value through profit or loss (107,634,577) 52,737,183 52,209,285
Closing fair value 454,130,975 569,043,450 565,515,552
The following tables summarise by level within the fair value hierarchy the
Company's financial assets and liabilities at fair value as follows:
Level I Level II Level III Total
30 June 2024 £ £ £ £
Financial assets at fair value through profit and loss - - 454,130,975 454,130,975
30 June 2023 £ £ £ £
Financial assets at fair value through profit and loss - - 569,043,450 569,043,450
31 December 2023 £ £ £ £
Financial assets at fair value through profit and loss - - 565,515,552 565,515,552
As at 30 June 2024, the Company's investment consists solely of a
non-controlling interest in SIGC LLC which was organised to invest in the STC.
With SIGC LLC's balance sheet being measured at fair value, the NAV of SIGC
LLC provides the best estimate of fair value for the Company's investment in
SIGC LLC. SIGC LLC's investment, via an intermediary, consisted of its
non-controlling interest in Newbury Investors LLC ("Newbury"). Newbury's
investment in the STC consisted of both common stock of Navient and of the
Company.
The Investment Manager continually evaluates the optimal allocation of
Newbury's ownership of shares in Navient versus those of the Company. The
Investment Manager may from time to time buy or sell shares in Navient and the
Company to adjust the allocation. Some of the factors in the allocation
decision include the relative liquidity of the shares of Navient and the
Company, the discount to net asset value at which the Company's shares trade
and various tactical considerations, and general market conditions.
Furthermore, the Level III investments disclosed in the financial statements
are solely comprised of the Company's non-controlling interest in SIGC LLC.
The value of those investments equated to the Company's maximum exposure to
loss from SIGC LLC and Newbury.
A reconciliation of fair value measurements in Level III is set out in the
following table:
As at 30 June 2024 As at 30 June 2023 As at 31 December 2023
£ £ £
Opening fair value 565,515,552 519,806,267 519,806,267
Distributions from investments (3,750,000) (3,500,000) (6,500,000)
Unrealised gain/(loss) on financial assets at fair value through profit or (107,634,577)
loss
52,737,183 52,209,285
Closing fair value 454,130,975 569,043,450 565,515,552
Capital distributions made during the period ended 30 June 2024 were made to
fund the Company's dividend payment.
Capital distributions made during the year ended 31 December 2023 were made to
fund the Company's dividend payment. Capital distributions made during the
period ended 30 June 2023 were made to fund the Company's dividend payment.
The key unobservable inputs in the valuation of the Level III investment is
the value of SIGC LLC's indirect non-controlling interests in the underlying
intermediaries which is impacted by the share price of Navient and the
Company.
6. Trade and other payables
As at 30 June 2024 As at 30 June 2023 As at 31 December 2023
£ £ £
Professional fees payable 30,565 12,697 15,298
Administration fees payable 30,025 11,440 30,025
Audit fees payable 27,350 43,500 55,000
Other payables 4 5,645 4
Total 87,944 73,282 100,327
7. Share capital and share premium
As at 30 June 2024 As at 30 June 2023 As at 31 December 2023
Authorised share capital No. No. No.
Ordinary Shares of no par value Unlimited Unlimited Unlimited
Issued and fully paid No. No. No.
Ordinary Shares of no par value 700,000,000 700,000,000 700,000,000
8. Net asset value per share attributable to the Company
As at 30 June 2024 As at 30 June 2023 As at 31 December 2023
Share premium account £ £ £
Share premium account upon issue 700,000,000 700,000,000 700,000,000
Less: Costs of issue (11,060,597) (11,060,597) (11,060,597)
Closing balance 688,939,403 688,939,403 688,939,403
No. of Shares Pence per Share
30 June 2024 700,000,000 64.97
30 June 2023 700,000,000 81.51
31 December 2023 700,000,000 80.90
9. Related party transactions
The Investment Partnership and its General Partner engaged Sherborne Investors
Management (Guernsey) LLC to serve as investment manager until the Investment
Partnership's dissolution as disclosed in Note 1. The Investment Manager was
entitled to receive from the Investment Partnership a monthly management fee
equal to one-twelfth of 1% of the net asset value of the Investment
Partnership, less cash and cash equivalents and certain other adjustments.
During the period ended 30 June 2024, management fees of £Nil (period ended
30 June 2023: £Nil and year ended 31 December 2023: £2,087,689) were paid by
the Investment Partnership. No balance was outstanding at the period end
(period ended 30 June 2023: £Nil and year ended 31 December 2023: £Nil).
The Special Limited Partner interest was held by Sherborne Investors LP until
the Investment Partnership's dissolution as disclosed in Note 1. The Special
Limited Partner was entitled to receive an incentive allocation once aggregate
distributions to partners of the Investment Partnership, of which one was the
Company, exceeded a certain level of capital contributions to the Investment
Partnership, excluding amounts contributed attributable to management fees.
For Turnaround investments, the incentive allocation was computed at 10% of
the distributions to all partners in excess of 110%, increasing to 20% of the
distributions to all partners in excess of 150% and increasing to 25% of the
distributions to all partners in excess of 200% of capital contributions,
excluding amounts contributed attributable to management fees. An investment
was considered a Turnaround investment when a member of the General Partner is
appointed chairman of, or accepts an executive role at, the STC.
If, after acquiring a shareholding, the share price of the STC rises to a
level at which further investment and the effort of a Turnaround is, in the
Investment Manager's opinion, no longer justified or otherwise no longer
presents a viable Turnaround opportunity, the Investment Partnership intends
to sell (and distribute the proceeds to the Company) or distribute in kind the
holding to the limited partners (in each case after deductions for any costs
and expenses and for the Investment Partnership's Minimum Capital Requirements
and subject to applicable law and regulation), rather than seeking to join the
Board of Directors or otherwise engage with the STC (a "Stake Building
Investment").
For Stake Building Investments, the incentive allocation was computed at 20%
of net returns on the investment of the Investment Partnership, such amount to
be payable after each partner in the Investment Partnership has had
distributed to it an amount equal to its aggregate capital contribution to the
Investment Partnership in respect to the Stake Building Investment (excluding
any capital contributions attributable to management fees). The Special
Limited Partner may waive or defer all or any part of any incentive allocation
otherwise due.
At 30 June 2024, there is no incentive allocation payable by the Investment
Partnership. At 30 June 2023 and 31 December 2023, the incentive allocation
was calculated based on a stake building basis and amounted to £nil.
Pursuant to its constitutional documents, the management fee and incentive
allocation, incurred at SIGC LLC are on the same economic terms as incurred at
the Investment Partnership as described above.
During the period ended 30 June 2024, each of the Directors (other than the
Chairman) received a fee payable by the Company at the rate of £35,000 per
annum. The Chairman of the Audit Committee received £5,000 per annum in
addition to such fee. The Chairman received a fee payable by the Company at
the rate of £50,000 per annum. As such fees had not been increased since the
Company's incorporation in 2017, the fees were increased as from 1 July 2024.
The Directors now receive a fee of £40,000 per annum. The Chairman of the
Audit Committee receives an additional sum of £5,600 per annum and the
Chairman now receives £57,000 per annum.
Individually and collectively, the Directors of the Company hold no shares of
the Company as at 30 June 2024 (30 June 2023: Nil and 31 December 2023: Nil).
Sherborne Investors GP, LLC has granted to the Company a non-exclusive licence
to use the name "Sherborne Investors" in the UK and the Channel Islands in the
corporate name of the Company and in connection with the conduct of the
Company's business affairs. The Company may not sub-licence or assign its
rights under the Trademark Licence Agreement. Sherborne Investors GP, LLC
receives a fee of £70,000 per annum for the use of the licenced name.
10. Financial risk factors
The Company's investment objective is to realise capital growth from
investment in the STC, identified by the Investment Manager, with the aim of
generating significant capital return for Shareholders. Consistent with that
objective, the Company's financial instruments mainly comprise an investment
in a STC. In addition, the Company holds cash and cash equivalents as well as
having trade and other receivables and trade and other payables that arise
directly from its operations.
Liquidity risk
The Company's cash and cash equivalents are placed in demand deposits with a
range of financial institutions. The listed investment in the STC could be
partially redeemed relatively quickly (within 3 months) should the Company
need to meet obligations or ongoing expenses as and when they fall due.
The following table details the liquidity analysis for financial liabilities
at the date of the Condensed Statement of Financial Position:
As at 30 June 2024 Less than 1 month 1 - 12 months Total
£ £ £
Trade and other payables - 87,944 87,944
- 87,944 87,944
As at 30 June 2023 Less than 1 month 1 - 12 months Total
£ £ £
Trade and other payables 4,000 69,282 73,282
4,000 69,282 73,282
As at 31 December 2023 Less than 1 month 1 - 12 months Total
£ £ £
Trade and other payables 4,120 96,207 100,327
4,120 96,207 100,327
Credit risk
The Company is exposed to credit risk in respect of its cash and cash
equivalents, arising from possible default of the relevant counterparty, with
a maximum exposure equal to the carrying value of those assets. The credit
risk on liquid funds is mitigated through the Company depositing cash and cash
equivalents across several banks. The Company is exposed to credit risk in
respect of its trade receivables and other receivable balances with a maximum
exposure equal to the carrying value of those assets. The Bank of New York
Mellon currently has a stand-alone credit rating of AA- with Standard &
Poor's (31 December 2023: AA- with Standard & Poor's), Royal Bank of
Scotland International has a stand-alone credit rating of AA- with Standard
& Poor's (31 December 2023: A- with Standard & Poor's) whilst Barclays
Bank PLC has a standalone credit rating of A+ with Standard & Poor's (31
December 2023: A+ with Standard & Poor's). The Company considers these
ratings to be acceptable.
Market price risk
Market price risk arises as a result of the Company's exposure to the future
values of the share price of the STC, including the share price of Navient and
the Company. It represents the potential loss that the Company may suffer
through investing in the STC.
As at 30 June 2024, the share price of Navient and the Company were 14.56 US
dollars per share and 47.80 pence per share, respectively, which produced the
Company's NAV of £ 454.8 million. At 30 June 2024 a 10% increase/decrease in
the share prices of Navient and the Company would increase/decrease the
Company's NAV by approximately £ 42.2 million.
Foreign exchange risk
Foreign currency risk arises as the value of future transactions, recognised
monetary assets and monetary liabilities denominated in other currencies
fluctuate due to changes in foreign exchange rates. The Investment Manager
monitors the Company's monetary and non-monetary foreign exchange exposure on
a regular basis. The Company has limited direct foreign exchange risk
exposure. SIGC LLC's investment in the US based STC during the year exposes
SIGC LLC to foreign currency risk, however, as a Company this is considered as
part of market price risk.
Interest rate risk
The Company is subject to risks associated with changes in interest rates in
respect of interest earned on its cash and cash equivalents. The Company seeks
to mitigate this risk by monitoring the placement of cash balances on an
ongoing basis in order to maximise the interest rates obtained.
As at 30 June 2024 Interest bearing
Less than 1 month to 3 months to Non- interest bearing Total
1 month 3 months 1 year
£ £ £ £ £
Assets
Cash and cash equivalents 674,929 - - - 674,929
Financial assets at fair value through profit or loss - - - 454,130,975 454,130,975
Prepaid expenses - - - 48,982 48,982
Total Assets 674,929 - - 454,179,957 454,854,886
Liabilities
Other payables - - - 87,944 87,944
Total Liabilities - - - 87,944 87,944
As at 30 June 2023 Interest bearing
Less than 1 month to 3 months to Non- interest bearing Total
1 month 3 months 1 year
£ £ £ £ £
Assets
Cash and cash equivalents 1,552,623 - - - 1,552,623
Financial assets at fair value through profit or loss - - - 570,573,724 570,573,724
Prepaid expenses - - - 50,933 50,933
Total Assets 1,552,623 - - 570,624,657 572,177,280
Liabilities
Other payables - - - 73,282 73,282
Total Liabilities - - - 149,329 149,329
As at 31 December 2023 Interest bearing
Less than 1 month to 3 months to Non- interest bearing Total
1 month 3 months 1 year
£ £ £ £ £
Assets
Cash and cash equivalents 816,593 - - - 816,593
Financial assets at fair value through profit or loss - - - 565,515,552 565,515,552
Total Assets 816,593 - - 565,515,552 566,332,145
Liabilities
Other payables - - - 100,327 100,327
Total Liabilities - - - 100,327 100,327
As at 30 June 2024, the total interest sensitivity gap for interest bearing
items was a surplus of £674,929 (30 June 2023: surplus of £1,665,200 and 31
December 2023: surplus of £816,593).
As at 30 June 2024, interest rates reported by the Bank of England were 5.25%
(30 June 2023: 5.0% and 31 December 2023: 5.25%) which would equate to net
income of £35,434 (period ended 30 June 2023: £83,269 and year ended 31
December 2023: £42,871) per annum if interest bearing assets remained
constant. If interest rates were to fluctuate by 100 basis points (period
ended 30 June 2023: 100 basis points and year ended 31 December 2023: 100
basis points), this would have a positive or negative effect of £6,749
(period ended 30 June 2023 a positive or negative effect of £16,654 and year
ended 31 December 2023: a positive or negative effect of £8,166) on the
Company's annual income.
Capital risk management
The capital structure of the Company consists of proceeds raised from the
issue of Ordinary Shares. As at 30 June 2024, the Company is not subject to
any external capital requirement.
The Directors believe that at the date of the Condensed Statement of Financial
Position there were no other material risks associated with the management of
the Company's capital.
11. Distributions
There were no distributions paid by the company to non-controlling interests
during the period ended 30 June 2024. (period ended 30 June 2023: £103,982
and year ended 31 December 2023: £109,627). On 31 December 2023, the Company
paid a dividend of 1.0 pence per share as follows: 0.5 pence per share, or
£3.5 million was paid, on 26 May 2023 to shareholders on the register at 5
May 2023 and 0.5 pence per share, or £3.5million, was paid on 6 October 2023
to shareholders on the register at 15 September 2023.
12. Subsequent events
The Company has declared a dividend of 0.5 pence per share, payable on 4
October 2024 to shareholders on the register at 13 September 2024.
There were no other material subsequent events that require disclosure in the
condensed financial statements.
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