Final Results | Company Announcement | Investegate
Source: investegate.co.uk
Beaumont Cornish Limited ("Beaumont Cornish") is the Company's Nominated Adviser and is authorised and regulated by the FCA. Beaumont Cornish's responsibilities as the Company's Nominated Adviser, including a responsibility to advise and guide the Company on its responsibilities under the AIM Rules for Companies and AIM Rules for Nominated Advisers, are owed solely to the London Stock Exchange. Beaumont Cornish is not acting for and will not be responsible to any other persons for providing protections afforded to customers of Beaumont Cornish nor for advising them in relation to the proposed arrangements described in this announcement or any matter referred to in it.
· Successful redemption of the Company's debt and equity linked portfolio for cash
· Cash balance of circa £1.1 million at the period end, rising to a current balance of circa £2.6 million through the partial redemption of its debt and equity linked portfolio for £2.15 million
· Net asset value of 0.68 pence per share at the period end compared to a pre suspension price of 0.22 pence per share
· Profitable partial realisation of the Company's investment in Smarttech247 Group plc ("Smarttech247")
· Currently pursuing an opportunity to become a listed operating company in the wellness sector and generate additional value for stakeholders
We are pleased to report our results for the year to 31 December 2023 for the Company.
During H1 2023, the Company made a limited number of investments and focused on accumulating and preserving cash given the difficult prevailing economic background. At the start of H2 2023, demand for the Company's capital increased with an improvement in investment terms and a number of investments were therefore made, principally into companies in which the Company had previously successfully invested.
However, as the year progressed, the share price of certain of its investments such as Smarttech247 and Mindflair plc ("Mindflair") decreased, notwithstanding the positive underlying performance of these companies. This was primarily due to a weakness in the market for technology companies.
In December 2023, the Company announced that it had been informed by one of its investments, Emergent Entertainment Ltd ("Emergent"), that this company was engaging with insolvency advisers and, in January 2024, this company entered voluntary liquidation.
At the same time, certain investments within the Company's debt and equity linked portfolio started to struggle which became more apparent post year end. Valoe OYJ, a Finnish company specialising in photovoltaic technology, entered into restructuring proceedings in Finland on 22 January 2024. Gaussin SA, a technology company that designs and assembles zero emission smart vehicles, had also just announced that it expected to report a significant shortfall in sales for 2023 putting further pressure on its share price and liquidity.
The events referred to above, combined with the results of the full year end impairment review of the portfolio, resulted in a significant reduction in the value of the investment portfolio.
Against this background, the Board has been conscious that small investment companies listed on AIM have become increasingly less attractive to investors and that the Company's share price has continued to trade at a significant discount to its underlying net asset value. The Board had therefore already embarked on a review of various options for the Company to provide better value and returns for its shareholders.
The conclusion reached in early 2024, was to first generate cash by initially redeeming part of its outstanding debt and equity linked portfolio. Historically, the Company made the majority of its investments by way of participation certificates in RiverFort Global Opportunities PCC Limited ("RGO PCC"), a Gibraltar based fund and so cash from this portfolio was realised by effectively redeeming these participation certificates.
An opportunity was then identified where, subject to shareholder approval, RGO would become a focused operating business by acquiring the trading assets of S-Ventures plc ("SVEN"), a company listed on the AQSE Growth Market and active in the wellness sector, for circa £3.5 million in new shares in RGO. For the 15 months to 31 December 2023, SVEN expects the group to generate gross revenue from continuing operations of around £21.6 million and EBITDA of £1 million. The company is led by Scott Livingston who has a successful track record of managing and developing brands in the wellness sector.
The Board believes that the proposed acquisition represents an exciting opportunity and would enable RGO to become an operating business with attractive potential for growth and the creation of shareholder value. RGO would bring additional funding to SVEN's operations and provide them with an AIM listing and better access to capital. Going forward, the enlarged group would continue to improve its existing businesses, taking advantage of economies of scale and consolidation of infrastructure to support their growth. At the same time, the Board believes that there are a number of interesting acquisition opportunities available which would benefit from the team's expertise and existing infrastructure and enable the enlarged group to further scale its operations.
The redemption of the debt and equity linked portfolio attracted a further reduction in the year end portfolio valuation by circa £1 million due to a lack of liquidity of this portfolio and its inherent risk which has subsequently been borne out by certain post period end events in connection with investments in this portfolio. A cash consideration of £2.15 million was received for the redemption of this portfolio in March 2024 and whilst certain of these transactions took place post period end, the overall financial impact has been included in the financial position of the Company as at the year end in order to provide a clear starting position for the Company as it moves forward into 2024. Furthermore, the advisory contract with RiverFort Global Capital Limited has been terminated as there is now no need for this arrangement and it will save significant costs.
Currently, the Company comprises cash plus a small number of investments, principally in listed companies such as Smarttech247 and Mindflair and a loan to S-Ventures and therefore is very well positioned to embark on a new strategy. Furthermore, post year end the Company disposed of part of its stake in Smarttech247, to provide it with additional cash funds going forward.
2023 has clearly been a difficult year in terms of investment performance given the events that have taken place within its investment portfolio, however, the Company is now very well positioned, with a significant cash balance and listed assets, to embark on a new direction which we firmly believe will be beneficial for all stakeholders. We are currently actively progressing the acquisition of the trading assets of S-Ventures and will provide further updates for shareholders in due course.
The Company is an investing 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. Since the year end, the debt and equity linked portfolio has been redeemed and the Company is focused on becoming an operating company in the wellness sector through the potential acquisition of S-Ventures plc.
For the year to 31 December 2023, the Company made a loss from continuing operations of £5,342,542 (2022: loss £866,430). The net asset value of the Company as at 31 December 2023 was £5,245,196 (2022: £10,587,738), representing a decrease compared to the previous year as explained in the Chairman's Statement.
The Company's investment portfolio at 31 December 2023 is divided into the following categories:
During the year, the Company continued to invest in and realise cash from this portfolio. As referred to in the Chairman's Statement, this portfolio has struggled during 2023 with a number of impairments required at the period end.
In early 2024 it was decided to look at the possibility of revising the Company's strategy to become an operating company and therefore this portfolio was redeemed to realise cash. Given the subsequent redemption of this portfolio in 2024, its value at the period end was reduced to the subsequent redemption value.
The Company now comprises cash plus a small number of investments, principally in listed companies such as Smarttech247 and Mindflair and therefore is very well positioned to embark on a new strategy.
Also, post period end, a new investment was made in SVEN in the form of a £1 million loan repayable in 12 months with a 20% coupon.
At the year end, the Company's equity portfolio comprised the following:
At the end of 2022, shares in Smarttech247 Group plc ("Smarttech247") were admitted to trading on the London Stock Exchange's AIM market raising gross proceeds of £3.7 million through a placing at a price of 29.66 pence per new ordinary share. Smarttech247's share price reduced during the year to 21 pence per share as at the period end, however, this still represented an uplift compared to the level at which the investment was initially made into this company. Recent full year and interim results of Smarttech247 have demonstrated positive growth by this company with a number of new contracts with leading companies being won.
Since the year end, around half of the Company's shareholding in Smarttech247 has been profitably sold due to demand from new investors.
During the period, Pires Investments plc changed its name to Mindflair plc ("Mindflair"). This company continues to invest in AI focused technology investments through three separate venture capital funds managed by Sure Valley Ventures which are cornerstoned by Enterprise Ireland and the British Business Bank. Furthermore, this company also had a significant investment in Emergent that filed for liquidation during 2024. This, combined with the fact that the technology sector has generally struggled during the year, has resulted in a disappointing share price performance for Mindflair. However, this company has some exciting investments in its portfolio and certain realisations are expected in the short to medium term.
The Company's principal investment in this category was Emergent. Emergent was focused on becoming a next-generation entertainment company, bringing audiences and storytellers together by harnessing emerging technologies. Whilst in the earlier part of 2023, the management team had been working on reducing the company's cost base and had revised its 2023 revenue forecasts upwards, as the year progressed trading deteriorated. Then in December 2023, the Company announced that Emergent was engaging with insolvency advisers and expected shortly to be placed into liquidation which then took place on 10 January 2024 with a resolution to voluntarily wind up the company. This investment has therefore been provided for in full.
At the year end the Company had cash resources of £1.1 million. Since then, a combination of the redemption of the debt and equity linked portfolio, settlement of fees with the Company's investment advisor, the sale of around half of its shareholding in Smarttech247 and the making of a £1 million loan to S-Ventures has increased this balance to a current value of around £2.6 million.
Investment income derived principally from the fees and interest income in relation to our debt and equity linked debt investments. The net loss from financial instruments at FVTPL represents the impact of impairing and redeeming the investment portfolio.
A significant operating loss was recognised during the year as a result of the impairment of certain assets as described earlier, the write off of the Company's investment in Emergent and the redemption of the debt and equity linked portfolio.
The key performance indicators are set out below:
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 the Company's financial risk management objectives and policies are set out in Note 21 to these financial statements.
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 2023 they have continued to focus on implementing the investment strategy previously approved by shareholders in 2018.
In addition, the application of s172 requirements can be demonstrated in relation to some of the key decisions made during 2023:
* Commitment to developing and applying high standards of corporate governance
* The making of further investments to generate returns for the Company and its shareholders.
* The potential revision of the Company's strategy in order to create more value for 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.
The Company's assets now comprise mainly cash 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 2025 that show that the Company has sufficient cash resources for the foreseeable future. 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.
The Directors present their annual report on the affairs of the Company, together with the audited financial statements for the year ended 31 December 2023.
The Company's principal activity is that of an investment company focused on making investments in a number of sectors including the natural resources, technology and healthcare sectors.
The Company made a loss after taxation of £5,342,542 (2022: loss £866,430). It is not expected that a dividend will be declared for 2023 (2022: £Nil).
The key performance indicators are shown in the Strategic Report.
The Directors of the Company, together with their beneficial interests in the shares of the Company at the end of the year, are listed below. All served on the Board throughout the year, unless otherwise stated. There is a qualifying third party indemnity provision in force for the benefit of the Directors and officers of the Company.
The Company is aware that as at 17 June 2024, the following, other than the Directors shown above, held in excess of 3% of the issued share capital of the Company:
The Board recognises its responsibility for the proper management of the Company and is committed to maintaining a high standard of corporate governance. Further details with regard to corporate governance are set out in the Corporate Governance Report.
The Company supports the concept of an effective Board leading and controlling the Company. The Board is responsible for approving Company policy and strategy. It meets regularly and has a schedule of matters specifically reserved to it for decision. Management supplies the Board with appropriate and timely information and the Directors are free to seek any further information they consider necessary. All Directors have access to advice from the Company Secretary and independent professionals at the Company's expense. Training is available for new Directors and other Directors as necessary.
The Board currently consists of four directors, the Investment Director, Nicholas Lee and three non-executive directors, Amanda van Dyke, Andrew Nesbitt and Philip Haydn-Slater. Each Director appointed by the Board since the last AGM holds office until the next AGM and is then eligible for reappointment. Furthermore, one third of Directors who were directors at the time of the two immediately preceding AGMs and who did not retire at such meetings, retire from office by rotation and are then eligible for reappointment.
Given the size of the Board, there is no separate nomination committee. All Director appointments are approved by the Board as a whole.
Communications with shareholders are given a high priority. In addition to the publication of an annual report and an interim report, there is regular dialogue with shareholders and analysts. The Annual General Meeting is viewed as a forum for communicating with shareholders, particularly private investors. Shareholders may question the Chairman and other members of the Board at the Annual General Meeting.
The Directors acknowledge they are responsible for the Company's system of internal control and for reviewing the effectiveness of these systems. The risk management process and systems of internal control are designed to manage rather than eliminate the risk of the Company failing to achieve its strategic objectives. It should be recognised that such systems can only provide reasonable and not absolute assurance against material misstatement or loss. The Company has well established procedures which are considered adequate given the size of the business.
POST YEAR END EVENTS
On 22 March 2024, the Company announced an investment in S-Ventures plc ("SVEN") in the form of a £1 million secured loan for a period of 12 months carrying a fixed return of 20% and the redemption of its debt and equity-linked portfolio for £2.15 million in cash. In addition, the Company has signed a non-binding term sheet and is advancing discussions that may lead to the acquisition of 100% of the assets and liabilities (the "Business") of SVEN ("Proposed Acquisition").
The Proposed Acquisition will constitute a reverse takeover ("RTO") under the AIM Rules for Companies (the "AIM Rules") as, inter alia, the Proposed Acquisition will fundamentally change the Company from an Investing Company into an operating business and therefore, in accordance with Rule 14 of the AIM Rules, will require application to be made for the enlarged share capital to be readmitted to AIM ("Admission"), the publication of an AIM admission document ("Admission Document") and approval by the shareholders of the Company at a general meeting. Also, in accordance with Rule 14 of the AIM Rules, trading in the Company's ordinary shares of 0.01 pence each ("Ordinary Shares") were suspended on AIM from 7.30 am on 22 March 2024, until the publication of the Admission Document or an announcement that the Proposed Transaction is not proceeding.
The Directors are responsible for preparing the report of the directors and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare financial statements in accordance with UK adopted international accounting standards. Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the company for that period.
In preparing these financial statements, the directors are required to:
· select suitable accounting policies and then apply them consistently
· make judgments and accounting estimates that are reasonable and prudent
· state whether they have been prepared in accordance with UK adopted international accounting standards, subject to any material departures disclosed and explained in the financial statements
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.
The Company is compliant with AIM Rule 26 regarding the Company's website.
So far as each of the directors are aware at the time this report was approved:
· there is no relevant audit information of which the Company's auditor is unaware: and
· the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
The auditors, PKF Littlejohn LLP have indicated their willingness to continue in office, and a resolution that they be re-appointed will be proposed at the annual general meeting.
This report was approved by the Board on 17 June 2024 and signed on its behalf.
A cash consideration of £2.15 million was received for the partial redemption of the debt and equity linked portfolio in March 2024 and, whilst certain of these transactions took place post period end, the overall financial impact has been included in the financial position of the Company as at the year end in order to provide a clear starting position for the Company as it moves forward into 2024.
*P Haydn-Slater's remuneration of £50,000 was invoiced by Musgrave Financial Ltd, a company controlled by him. In 2022, £48,000 of his remuneration was invoiced by Musgrave Financial Ltd
Diluted earnings per share are the same as basic earnings per share as all options currently issued are antidilutive in the current year.
The Directors consider that the carrying amount of other receivables is approximately equal to their fair value.
The Directors consider the carrying amount of cash and cash equivalents approximates to their fair value.
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.