TIDMESO TIDMEO.P TIDMEL.P
RNS Number : 5883T
EPE Special Opportunities Limited
21 March 2023
EPE Special Opportunities Limited
("ESO" or the "Company")
Annual Reports and Accounts for the year ended 31 January
2023
The Board of EPE Special Opportunities is pleased to announce
the Company's Annual Report and Accounts for the year ended 31
January 2023.
Summary
-- The performance of the Company's portfolio in the year ended
31 January 2023 has been affected by adverse macro-economic
conditions and a recessionary environment. The Board and Investment
Advisor expect these headwinds to continue through the immediate
period but look forward to the normalisation of trading conditions
over the medium term. Notwithstanding these headwinds, the Company
was pleased to announce the completion of a new investment in
Denzel's Limited ("Denzel's") in October 2022. Looking ahead, the
Board and Investment Advisor will continue to adopt a careful
approach, monitoring economic conditions, maintaining a prudent
level of liquidity at the Company and positioning the portfolio to
navigate the complicated operating environment. As a result of the
uncertainty on market outlook, the Board expects a challenging
environment to complete further acquisitions or disposals within
the portfolio in the near term.
-- The Net Asset Value ("NAV") per share of the Company as at 31
January 2023 was 328 pence, representing a decrease of 28 per cent.
on the NAV per share of 456 pence as at 31 January 2022.
-- The share price of the Company as at 31 January 2023 was 170
pence, representing a decrease of 45 per cent. on the share price
of 309 pence as at 31 January 2022.
-- In March 2023, Luceco plc released its results for the year
ended 31 December 2022. The group announced sales of GBP206
million, with trading impacted by continuing customer destocking.
The business further announced gross margin of 36.0 per cent. and
adjusted operating profit of GBP22 million. The business achieved
record cash generation supporting further deleveraging, with net
debt of 0.8x LTM EBITDA as at 31 December 2022.
-- The Rayware Group's ("Rayware") trading has been impacted by
a confluence of challenges, including customer destocking,
decreased consumer confidence and supply chain disruption. The
business expects performance to strengthen over the coming period,
benefitting from abating input cost, supply chain and customer
destocking pressures. The business has continued to develop its
presence in international markets, and has appointed Alec Taylor,
former director of Bradshaw International, as a non-executive
director and made a number of additions to the US sales team to
support the strategic focus on the US market.
-- Whittard of Chelsea ("Whittard") has performed robustly, with
the business' retail channel trading strongly, benefitting from
strengthening footfall and returning tourist volumes. Whittard has
made encouraging progress in its international channels, with the
business' new South Korean franchise partner progressing its store
rollout, and with new wholesale customers secured in the US and
Europe. The business completed the relocation of its head office to
Milton Park in Oxfordshire in April 2022.
-- David Phillips made good progress, despite the wider
inflationary environment, generating pleasing cash generation in
the period. The business is focussed on achieving further growth in
its existing channels and accessing greater profitability through
efficiencies and scale.
-- Pharmacy2U has continued to experience growth in its core NHS
online prescription channel and has been focussed on building scale
in its primary Bardon facility to increase operational
efficiency.
-- EPIC Acquisition Corp has progressed to advanced discussions
with a number of European consumer brands regarding a potential
business combination. EAC continues to actively source and review a
pipeline of attractive targets. EAC's initial business combination
period ends on the 25 April 2023, with the subsequent option to
extend this period by two intervals of three months.
-- In October 2022, the Company announced a GBP2.0 million
investment in Denzel's. Denzel's is a fast-growing, healthy and
sustainable premium dog snacks brand. Denzel's operates an
omni-channel distribution strategy, underpinned by listings in some
of the UK's leading retailers and hospitality locations as well as
e-commerce channels. The Investment Advisor intends to work closely
with Denzel's to help deliver its growth strategy, which is focused
on the launch of new products, notably high value and functional
dog treats, as well as growth of both offline and online
distribution channels.
-- The Company's investments in Atlantic Credit Opportunities
Fund and Prelude Structured Alternatives Master Fund are in the
process of realisation, with the distribution of proceeds to the
Company to be completed in the coming period.
-- The Company had cash balances of GBP24.5 million(1) as at 31
January 2023. In July 2022, the Company agreed the extension of the
maturity of GBP4.0 million of unsecured loan notes to July 2023,
with an option for the Company to further extend the maturity to
July 2024. The Company has GBP20.7 million zero dividend preference
shares ("ZDP") maturing in December 2026 and no other third-party
debt outstanding.
-- In September and October 2022, the Company completed buybacks
in the market totalling 1.9 million ordinary shares (or 5.4 per
cent. of the Company's issued ordinary share capital) at a weighted
average share price of 139 pence.
-- As at 31 January 2023, the Company's unquoted portfolio was
valued at a weighted average EBITDA to enterprise value multiple of
6.7x (excluding assets investing for growth) and the portfolio had
a low level of third party leverage with net debt at 1.3x EBITDA in
aggregate.
Mr Clive Spears, Chairman, commented: "We have all faced
significant macro-economic headwinds in the period, and the Board
and Investment Advisor have accordingly maintained a careful
approach, positioning the portfolio and the Company. The Company
was pleased to announce the completion of the new investment in
Denzel's and continues to review a pipeline of attractive
investments. The Board would like to note its appreciation of the
Investment Advisor and the portfolio management teams for their
efforts through a complicated period. The Board will monitor the
progress of the portfolio over the coming months and looks forward
to updating shareholders at the half year."
The person responsible for releasing this information on behalf
of the Company is Amanda Robinson of Langham Hall Fund Management
(Jersey) Limited.
Note 1: Company liquidity is stated inclusive of cash held by
subsidiaries in which the Company is the sole investor.
Enquiries:
EPIC Investment Partners LLP +44 (0) 207 269 8865
Alex Leslie
Langham Hall Fund Management (Jersey) Limited +44 (0) 15 3488 5200
Amanda Robinson
Cardew Group Limited +44 (0) 207 930 0777
Richard Spiegelberg
Numis Securities Limited +44 (0) 207 260 1000
Nominated Advisor: Stuart Skinner
Corporate Broker: Charles Farquhar
Chairman's Statement
The performance of the Company's portfolio in the year ended 31
January 2023 has been affected by adverse macro-economic conditions
and a recessionary environment. The Board and Investment Advisor
expect these headwinds to continue through the immediate period but
look forward to the normalisation of trading conditions over the
medium term. Notwithstanding these headwinds, the Company was
pleased to announce the completion of a new investment in Denzel's
Limited ("Denzel's") in October 2022. Looking ahead, the Board and
Investment Advisor will continue to adopt a careful approach,
monitoring economic conditions, maintaining a prudent level of
liquidity at the Company and positioning the portfolio to navigate
the complicated operating environment. As a result of the
uncertainty on market outlook, the Board expects a challenging
environment to complete further acquisitions or disposals within
the portfolio in the near term.
The Net Asset Value ("NAV") per share of the Company as at 31
January 2023 was 328 pence, representing a decrease of 28 per cent.
on the NAV per share of 456 pence as at 31 January 2022. The share
price of the Company as at 31 January 2023 was 170 pence,
representing a decrease of 45 per cent. on the share price of 309
pence as at 31 January 2022.
In March 2023, Luceco plc ("Luceco") released its results for
the year ended 31 December 2022. The group announced sales of
GBP206 million, with trading impacted by continuing customer
destocking. The business further announced gross margin of 36.0 per
cent. and adjusted operating profit of GBP22 million. The business
achieved record cash generation supporting further deleveraging,
with net debt of 0.8x LTM EBITDA as at 31 December 2022.
The Rayware Group's ("Rayware") trading has been impacted by a
confluence of challenges, including customer destocking, decreased
consumer confidence and supply chain disruption. The business
expects performance to strengthen over the coming period,
benefitting from abating input cost, supply chain and customer
destocking pressures. The business has continued to develop its
presence in international markets, and has appointed Alec Taylor,
former director of Bradshaw International, as a non-executive
director and made a number of additions to the US sales team to
support the strategic focus on the US market.
Whittard of Chelsea ("Whittard") has performed robustly, with
the business' retail channel trading strongly, benefitting from
strengthening footfall and returning tourist volumes. Whittard has
made encouraging progress in its international channels, with the
business' new South Korean franchise partner progressing its store
rollout, and with new wholesale customers secured in the US and
Europe. The business completed the relocation of its head office to
Milton Park in Oxfordshire in April 2022.
David Phillips made good progress, despite the wider
inflationary environment, generating pleasing cash generation in
the period. The business is focussed on achieving further growth in
its existing channels and accessing greater profitability through
efficiencies and scale.
Pharmacy2U has continued to experience growth in its core NHS
online prescription channel and has been focussed on building scale
in its primary Bardon facility to increase operational
efficiency.
EPIC Acquisition Corp has progressed to advanced discussions
with a number of European consumer brands regarding a potential
business combination. EAC continues to actively source and review a
pipeline of attractive targets. EAC's initial business combination
period ends on the 25 April 2023, with the option to extend this
period by two intervals of three months.
In October 2022, the Company announced a GBP2 million investment
in Denzel's, a premium dog snacks brand with an omni-channel
distribution strategy. Denzel's is focused on delivering its growth
strategy, progressing new product development and expanding its
offline and e-commerce distribution channels.
The Company had cash balances of GBP24.5 million(1) as at 31
January 2023. In July 2022, the Company agreed the extension of the
maturity of GBP4 million of unsecured loan notes to July 2023, with
an option for the Company to further extend the maturity to July
2024. The Company has GBP20.7 million zero dividend preference
shares ("ZDP") maturing in December 2026 and no other third-party
debt outstanding.
The Board would like to note its appreciation of the Investment
Advisor and the portfolio management teams for their efforts
through a complicated period. The Board will monitor the progress
of the portfolio over the coming months and looks forward to
updating shareholders at the half year.
Clive Spears
Chairman
20 March 2023
Investment Advisor's Report
The Company's portfolio has faced challenging operating
conditions in the period, with pressures on demand from decreasing
consumer confidence and profitability impacted by the inflationary
environment. The Investment Advisor, together with portfolio
management teams, has taken mitigating actions to protect
performance in light of these evolving challenges. The Company has
improved its liquidity via the extension of the maturity of its
GBP4 million unsecured loan notes to July 2023 with an option to
extend for a further year, providing additional headroom to support
the portfolio and make new investments. The Company completed a new
growth capital investment in Denzel's in October 2022. The
Investment Advisor will continue to maintain its prudent approach
and will seek to generate improving performance as the
macro-economic environment begins to stabilise .
The Net Asset Value ("NAV") per share of the Company as at 31
January 2023 was 328 pence, representing a decrease of 28 per cent.
on the NAV per share of 456 pence as at 31 January 2022. The share
price of the Company as at 31 January 2023 was 170 pence,
representing a decrease of 45 per cent. on the share price of 309
pence as at 31 January 2022.
The Company maintains strong liquidity and prudent levels of
third party leverage. The Company had cash balances of GBP24.5
million(1) as at 31 January 2022, which are available to support
the portfolio, meet committed obligations and deploy into
attractive investment opportunities. Net debt in the underlying
portfolio stands at 1.3 x EBITDA in aggregate.
The Company's unquoted portfolio is valued at a weighted average
enterprise value to EBITDA multiple of 6.7 x for mature assets
(excluding assets investing for growth). The valuation has been
derived by reference to quoted comparables, after the application
of a liquidity discount to adjust for the portfolio's scale and
unquoted nature. Given the use of quoted comparables and actual
financial results, the valuation reflects the fair value of assets
as at the balance sheet date. The Investment Advisor notes that the
fair market value of the portfolio remains exposed to a volatile
macro environment and equity market valuations.
In September and October 2022, the Company completed buybacks in
the market totalling 1.9 million ordinary shares (or 5.4 per cent.
of the Company's issued ordinary share capital) at a weighted
average share price of 139 pence.
Luceco released its results for the year ended 31 December 2022
in March 2023. Sales performance was impacted by destocking by
customers in the Retail and Hybrid segments, however this dynamic
has receded during 2023. The business achieved gross margin of 36.0
per cent. Gross margin improved to circa 37.5 per cent. in H2 2022,
following the successful implementation of price increases to
mitigate inflationary pressures and benefitting from reducing input
costs. The business announced adjusted operating profit of GBP22
million or 10.7 per cent.. The business generated an exceptionally
strong free cashflow of GBP30 million as a result of working
capital optimisation, supporting continued deleveraging to a net
debt of 0.8x LTM EBITDA. The business announced 2023 trading in
line with expectations, supported by continued improvement in
trends in customer destocking, gross margin and input costs.
The Rayware Group has faced pressures from customer destocking
and the inflationary environment, impacting trading. The business
has made progress in international channels supported by the
appointment of Alec Taylor to the business' board of directors,
benefitting from his significant experience in growing US homewares
brands during his directorship of Bradshaw International.
Whittard of Chelsea has performed resiliently, despite the wider
market headwinds, with the business' retail channel trading ahead
of budget and the prior year. The business' e-commerce channels
have however seen demand normalising as consumers return to offline
channels. Whittard's South Korean franchise partner opened two new
stores in the period including a flagship Seoul store, the largest
Whittard store globally. In April 2022, the business transitioned
its head office to Milton Park in Oxfordshire, providing improved
access to the greater London area .
David Phillips maintained close control of direct and indirect
costs, with pleasing cash generation and improved profitability.
Project based business lines have seen sales impacted by delayed
project timelines and changes in team members. The business has a
healthy pipeline of new project opportunities for the coming
period, with a growing recurring customer base to support future
ambitions.
Pharmacy2U has continued to build scale in its online pharmacy
platform, as well as developing its more nascent services channels.
Looking ahead, the business is seeking to generate a mature
profitability profile, benefitting from operational leverage at
scale .
EPIC Acquisition Corp has engaged with a number of potential
business combination targets, with active discussions continuing.
EAC continues to focus its deal sourcing efforts on European
consumer brands with strong growth potential in Asian geographies.
EAC's initial business combination period ends on the 25 April
2023, with the option to extend this period by two intervals of
three months.
The Investment Advisor continues to monitor the Company's credit
fund investments. European Capital Private Debt Fund has completed
its investment period and is distributing capital to the Company.
Investments in Atlantic Credit Opportunities Fund and Prelude
Structured Alternatives Master Fund have been discontinued, with
the vehicles distributing proceeds over the coming period.
In October 2022, the Company completed a GBP2 million investment
in Denzel's as lead investor within a GBP3 million growth capital
raise. Denzel's is a fast-growing, healthy and sustainable premium
dog snacks brand. Denzel's operates an omni-channel distribution
strategy, underpinned by listings in some of the UK's leading
retailers and hospitality locations as well as e-commerce channels.
The Investment Advisor intends to work closely with Denzel's to
help deliver its growth strategy, which is focused on the launch of
new products, notably high value and functional dog snacks, as well
as growth of both offline and online distribution channels.
The Investment Advisor would like to thank the portfolio's
management teams and employees for their hard work during a complex
year. The Investment Advisor would like to express its gratitude
for the continuing support of the Board and the Company's
shareholders.
EPIC Investment Partners LLP
Investment Advisor to the Company
20 March 2023
Note 1: Company liquidity is stated inclusive of cash held by
subsidiaries in which the Company is the sole investor.
Biographies of the Directors
Clive Spears (Non- executive David Pirouet (Non - executive
Chairman) Director)
Clive Spears retired from the David Pirouet retired from PricewaterhouseCoopers
Royal Bank of Scotland International Channel Islands LLP in 2009 after
Limited in December 2003 as being an Audit and Assurance
Deputy Director of Jersey after Partner for over 20 years. During
32 years of service. His main his 29 years at the firm Mr Pirouet
activities prior to retirement specialised in the financial
included Product Development, services sector, in particular
Corporate Finance, Trust and in the alternative investment
Offshore Company Services and management area and also led
he was Head of Joint Venture the business's Hedge Fund and
Fund Administration with Rawlinson business recovery practices for
& Hunter. Mr Spears is an Associate over four years. Mr Pirouet currently
of the Chartered Institute for holds a number of non-executive
Securities & Investments. He positions across private equity,
has accumulated a well spread infrastructure and corporate
portfolio of directorships centring debt. Mr Pirouet's was previously
on private equity, infrastructure non-executive Director and Chair
and corporate debt. His current of the Audit and Risk committee
appointments include Chairman for GCP Infrastructure Investments
of Nordic Capital Limited and (FTSE 250 listed company) until
directorships of a series of he retired in February 2021.
ICG plc sponsored funds and He is a resident of Jersey.
funds managed by Kreos Fund
Management. He is a resident
of Jersey.
--------------------------------------------------
Heather Bestwick (Non - executive Nicholas Wilson (Non - executive
Director) Director)
--------------------------------------------------
Heather Bestwick has been a Nicholas Wilson has over 40 years
financial services professional of experience in hedge funds,
for over 25 years, onshore in derivatives and global asset
the City of London and offshore management. He has run offshore
in the Cayman Islands and Jersey. branch operations for Mees Pierson
She qualified as an English Derivatives Limited, ADM Investor
solicitor, specialising in ship Services International Limited
finance, with City firm Norton and several other London based
Rose, and worked in their London financial services companies.
and Greek offices for 8 years. He is a resident of Isle of Man.
Ms Bestwick subsequently practised
and became a partner with global
offshore law firm Walkers in
the Cayman Islands, and Managing
Partner of the Jersey office.
Ms Bestwick sits on the boards
of the Deutsche Bank company
which managed the dbX fund platform
and Rathbones Investment Management
International Limited. She is
a resident of Jersey.
--------------------------------------------------
Michael Gray ( Non - executive
Director)
Michael Gray was at The Royal
Bank of Scotland for over 30
years, latterly as Managing
Director (Corporate) of RBS
International before retiring
in 2015. During his 32 years
at the firm Michael covered
a broad spectrum of financial
services including corporate
and commercial banking, funds,
trusts and real estate. Mr Gray
currently holds a number of
non-executive positions across
private equity, infrastructure
and fund management. Michael's
appointments currently include
non-executive directorships
of Triton Investment Management
(a Swedish private equity group),
GCP Infrastructure Investments
(a FTSE 250 listed company),
J-Star Jersey Company Limited
(a Japanese private equity group),
Foresight 4 VCT plc (a listed
venture capital fund), Jersey
Finance Limited (a Jersey not-for-profit
promotional company), JTC plc
(a FTSE 250 listed trust and
corporate services company)
and TEAM plc (a listed wealth
management company). He is a
resident of Jersey.
Biographies of the Investment Advisor
Giles Brand Hiren Patel
Giles Brand is a Partner and Hiren Patel is a Partner of EPIC.
the founder of EPIC. He is currently He has worked in the investment
Non-executive Chairman of Whittard management industry for the past
of Chelsea and Luceco plc. Before twenty years. Before joining EPIC,
joining EPIC, Giles was a founding Hiren was Finance Director of EPIC
Director of EPIC Investment Partners, Investment Partners. Prior to this,
a fund management business which Hiren was employed at Groupama
at sale had US$5bn under management. Asset Management where he was the
Prior to this, Giles worked in Group Financial Controller.
Mergers and Acquisitions at Baring
Brothers in Paris and London.
Giles read History at Bristol
University.
---------------------------------------------
James Henderson Alex Leslie
---------------------------------------------
James Henderson is a Managing Alex Leslie is a Managing Director
Director of EPIC. He previously of EPIC. He previously worked in
worked in the Investment Banking Healthcare Investment Banking at
division of Deutsche Bank before Piper Jaffray before joining EPIC.
joining EPIC. Whilst at Deutsche Whilst at Piper Jaffray he worked
Bank he worked on a number of on a number of M&A transactions
M&A transactions and IPOs in and equity fundraisings within
the energy, property, retail the Biotechnology, Specialty Pharmaceutical
and gaming sectors, as well as and Medical Technology sectors.
providing corporate broking advice At EPIC, Alex manages the investment
to mandated clients. At EPIC, in Luceco plc, Rayware, Prelude,
James manages the investment Atlantic Credit Opportunities Fund
in Pharmacy2U, Denzel's and EPIC and European Capital Private Debt
Acquisition Corp. James read Fund. He previously managed the
Modern History at Oxford University Company's investments in Process
and Medicine at Nottingham University. Components, BigHead Industries,
David Phillips and Driver Require.
Alex read Human Biological and
Social Sciences at the University
of Oxford and obtained an MPhil
in Management from the Judge Business
School at the University of Cambridge.
---------------------------------------------
Ian Williams
---------------------------------------------
Ian Williams is a Managing Director
of EPIC. He was previously a
Partner at Lyceum Capital Partners
LLP, responsible for deal origination
and engagement, with a primary
focus on the business services
and software sectors, as well
as financial services, education
and health sectors. Prior to
Lyceum, Ian was a Director at
Arbuthnot Securities, involved
in IPO's, secondary fund raisings
and M&A, focused on the support
services, healthcare, transport
& IT sectors. Ian started his
career at Hambros Bank in the
M&A team. Ian read Politics and
Economics at the University of
Bristol.
---------------------------------------------
Risk and Audit Committee Report
The Risk and Audit Committee is chaired by David Pirouet and
comprises all other Directors. Mr Pirouet was appointed as Chairman
of the Committee on 28 June 2019.
The Risk and Audit Committee's main duties are:
-- To review and monitor the integrity of the interim and annual
financial statements, interim statements, announcements and matters
relating to accounting policy, laws and regulations of the
Company;
-- To evaluate the risks to the quality and effectiveness of the financial reporting process;
-- To review the effectiveness and robustness of the internal
control systems and the risk management policies and procedures of
the Company;
-- To review the valuation of portfolio investments;
-- To review corporate governance compliance, including the
Company's compliance with the QCA Corporate Governance Code;
-- To review the nature and scope of the work to be performed by
the Auditors, and their independence and objectivity; and
-- To make recommendations to the Board as to the appointment
and remuneration of the external auditors.
The Risk and Audit Committee has a calendar which sets out its
work programme for the year to ensure it covers all areas within
its remit appropriately. It met four times during the period under
review to carry out its responsibilities and senior representatives
of the Investment Advisor attended the meetings as required by the
Risk and Audit Committee. In between meetings, the Risk and Audit
Committee chairman maintains ongoing dialogue with the Investment
Advisor and the lead audit partner via regular calls and physical
meetings.
During the past year the Risk and Audit Committee carried out an
ongoing review of its own effectiveness. These concluded that the
Risk and Audit Committee is satisfactorily fulfilling its terms of
reference and is operating effectively. In addition, the Committee
undertook a review of the Company's corporate governance and
compliance with the QCA Corporate Governance Code.
Significant accounting matters
The primary risk considered by the Risk and Audit Committee
during the period under review in relation to the financial
statements of the Company is the valuation of unquoted
investments.
The Company's accounting policy for valuing investments is set
out in notes 3i and 12.The Risk and Audit Committee examined and
challenged the valuations prepared by the Investment Advisor,
taking into account the latest available information on the
Company's investments and the Investment Advisor's knowledge of the
underlying portfolio companies through their ongoing monitoring.
The Risk and Audit Committee satisfied itself that the valuation of
investments had been carried out consistently with prior accounting
periods, or that any change in valuation basis was appropriate, and
was conducted in accordance with published industry guidelines.
The Auditors explained the results of their review of the
procedures undertaken by the Investment Advisor in preparation of
valuation recommendations for the Risk and Audit Committee. On the
basis of their audit work, no material adjustments were identified
by the Auditor.
External audit
The Risk and Audit Committee reviewed the audit plan and fees
presented by the auditors, PricewaterhouseCoopers CI LLP ("PwC"),
and considered their report on the financial statements. The fee
for the audit of the annual report and financial statements of the
Company (and subsidiaries) for the year ended 31 January 2023 is
GBP61,350 (2022: GBP68,095).
The Risk and Audit Committee reviews the scope and nature of all
proposed non-audit services before engagement, with a view to
ensuring that none of these services have the potential to impair
or appear to impair the independence of their audit role. The Risk
and Audit Committee receives an annual assurance from the auditors
that their independence is not compromised by the provision of such
services, if applicable. During the period under review, the
auditors provided non-audit services to the Company in relation to
taxation, the Interim Review and Reporting Accountant work
representing total fees of GBP17,000 (2022: GBP75,825 including the
Interim Review, taxation and reporting accountant work).
On 22 April 2022, PwC were appointed as auditors to the Company
for the audit of the year ended 31 January 2023. The Risk and Audit
Committee regularly considers the need to put the audit out to
tender, the auditor's fees and independence, alongside matters
raised during each audit.
The audit was put out to tender by the Committee in September
2021, and at the conclusion of the process it was resolved that
PricewaterhouseCoopers CI LLP be appointed as the Company's Auditor
for the current year.
Other service providers
The Board will review the performance and services offered by
Langham Hall, as fund administrator and EPIC Administration as fund
sub-administrator on an ongoing basis. EPIC Administration
completed its triennial agreed upon procedures review during the
year ended 31 January 2021.
Risk management and internal control
The Company does not have an internal audit function. The Risk
and Audit Committee believes this is appropriate as all of the
Company's operational functions are delegated to third party
service providers who have their own internal control and risk
monitoring arrangements. A report on these arrangements is prepared
by each third party service provider and submitted to the Risk and
Audit Committee which it reviews on behalf of the Board to support
the Directors' responsibility for overall internal control. The
Company does not have a whistleblowing policy and procedure in
place. The Company delegates this function to the Investment
Advisor who is regulated by the FCA and has such policies in place.
The Risk and Audit Committee has been informed by the Investment
Advisor that these policies meet the industry standards and no
whistleblowing took place during the year.
David Pirouet
Chairman of the Risk and Audit Committee
20 March 2023
Corporate Governance
The Board of EPE Special Opportunities is pleased to update
shareholders of the Company's compliance with the 2018 Quoted
Companies Alliance Corporate Governance Code (the "QCA Code").
The Company is committed to the highest standards of corporate
governance, ethical practices and regulatory compliance. The Board
believe that these standards are vital to generate long-term,
sustainable value for the Company's shareholders. In particular the
Board is concerned that the Company is governed in a manner to
allow ef cient and effective decision making, with robust risk
management procedures.
As an investment vehicle, the Company is reliant upon its
service providers for many of its operations. The Board maintains
ongoing and rigorous review of these providers. Speci cally the
Board reviews the governance and compliance of these entities to
ensure they meet the high standards of the Company.
The Board is dedicated to upholding these high standards and
will look to strengthen the Company's governance on an ongoing
basis.
The Company's compliance with the QCA Code is available on the
Company's website (www.epespecialopportunities.com). The Company
will provide annual updates on changes to compliance with the QCA
Code.
Clive Spears
Chairman
20 March 2023
Report of the Directors
Principal activity
EPE Special Opportunities Limited (the "Company") was
incorporated in the Isle of Man as a company limited by shares
under the Laws with registered number 108834C on 25 July 2003. On
23 July 2012, the Company re-registered under the Isle of Man
Companies Act 2006, with registration number 008597V. On 11
September 2018, the Company re-registered under the Bermuda
Companies Act 1981, with registration number 53954. The Company's
ordinary shares are quoted on AIM, a market operated by the London
Stock Exchange, and the Growth Market of the Aquis Stock Exchange
(formerly the NEX Exchange).
The principal activity of the Company and its Subsidiaries is to
arrange income yielding financing for growth, buyout and special
situations and holding the investments with a view to exiting in
due course at a profit.
Incorporation
The Company was incorporated on 25 July 2003 and on 11 September
2018, registered under the Bermuda Companies Act 1981. The
Company's registered office is:
Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.
Place of business
During the year, the Company solely operated out of and was
controlled from:
Liberation House, Castle Street, St Helier, Jersey JE1 2LH
Results of the financial year
Results for the year are set out in the Statements of
Comprehensive Income and in the Statement of Changes in Equity.
Dividends
The Board does not recommend a dividend in relation to the
current year (2022: nil) (see note 10 for further details).
Corporate governance principles
The Directors, place a high degree of importance on ensuring
that the Company maintains high standards of Corporate Governance
and have therefore adopted the Quoted Companies Alliance 2018
Corporate Governance Code (the "QCA Code").
The Board holds at least four meetings annually and has
established Audit and Risk and Investment committees. The Board
does not intend to establish remuneration and nomination committees
given the current composition of the Board and the nature of the
Company's operations. The Board reviews annually the remuneration
of the Directors and agrees on the level of Directors' fees.
Composition of the Board
The Board currently comprises five non-executive directors, all
of whom are independent. Clive Spears is Chairman of the Board,
David Pirouet is Chairman of the Audit and Risk Committee and
Heather Bestwick is Chair of the Investment Committee.
Audit and Risk Committee
The Audit and Risk Committee comprises David Pirouet (Chairman
of the Committee) and all other Directors. The Audit and Risk
Committee provides a forum through which the Company's external
auditors report to the Board.
The Audit and Risk Committee meets twice a year, at a minimum,
and is responsible for considering the appointment and fee of the
external auditors and for agreeing the scope of the audit and
reviewing its findings. It is responsible for monitoring compliance
with accounting and legal requirements, ensuring that an effective
system of internal controls is maintained and for reviewing the
annual and interim financial statements of the Company before their
submission for approval by the Board. The Audit and Risk Committee
has adopted and complied with the extended terms of reference
implemented on the Company's readmission to AIM in August 2010, as
reviewed by the Board from time to time.
The Board is satisfied that the Audit and Risk Committee
contains members with sufficient recent and relevant financial
experience.
Investment Committee
The Board established an Investment Committee, which comprises
Heather Bestwick (Chair of the Committee) and all the other
Directors. The purpose of this committee is to review the portfolio
of the Company, new investment opportunities and evaluate the
performance of the Investment Advisor.
The Board is satisfied that the Investment Committee contains
members with sufficient recent and relevant experience.
Significant holdings
Significant shareholdings are analysed in unaudited schedule of
shareholders holding over 3% of issued shared. The Directors are
not aware of any other holdings greater than 3 per cent. of issued
shares.
Directors
The Directors of the Company holding office during the financial
year and to date are:
Mr. C.L. Spears (Chairman)
Mr. N.V. Wilson
Ms. H. Bestwick
Mr. D.R. Pirouet
Mr. M.M Gray
Staff and Secretary
At 31 January 2023 the Company employed no staff (2022:
none).
Independent Auditors
The current year is the first year in which
PricewaterhouseCoopers CI LLP are undertaking the audit for the
Company. PricewaterhouseCoopers CI LLP have indicated willingness
to continue in office.
On behalf of the Board
Heather Bestwick
Director
20 March 2023
Statement of Directors' Responsibilities
in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
The Directors are required to prepare financial statements for
each financial year. As required by the AIM Rules of the London
Stock Exchange they are required to prepare the financial statement
in accordance with International Financial Reporting Standards
("IFRS") and applicable legal and regulatory requirements of
Bermuda Companies Act 1981.
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 of the Company and of its profit or loss for that
period. In preparing the Company's financial statements, the
Directors are required to:
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with IFRS;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
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
its financial statements comply with the Bermuda Companies Act
1981. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Company and to prevent and detect 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 Bermuda governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Independent auditor's report to the members of EPE Special
Opportunities Limited
Report on the audit of the financial statements
Our opinion
In our opinion, the financial statements give a true and fair
view of the financial position of EPE Special Opportunities Limited
(the "Company") as at 31 January 2023, and of its financial
performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards and
have been properly prepared in accordance with the requirements of
Companies Act 1981 (Bermuda).
What we have audited
The Company's financial statements comprise:
-- the statement of assets and liabilities as at 31 January 2023;
-- the statement of comprehensive income for the year then ended;
-- the statement of changes in equity for the year then ended;
-- the statement of cash flows for the year then ended; and
-- the notes to the financial statements, which include
significant accounting policies and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing ("ISAs"). 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 believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the
International Code of Ethics for Professional Accountants
(including International Independence Standards) issued by the
International Ethics Standards Board for Accountants (IESBA Code).
We have fulfilled our other ethical responsibilities in accordance
with the IESBA Code.
Our audit approach
Overview
Audit scope
* The Company is registered in Bermuda but operates
from Jersey. We conducted our audit work in Jersey.
* We tailored the scope of our audit taking into
account the type of investments held by the Company,
the accounting processes and controls, and the
industry in which the Company operates.
* We have audited the financial statements of the
Company prepared by its financial administrator in
London.
------------------------------------------------------------------
Key audit matters
* Valuation of the underlying Level 2 and Level 3
investments recognised as part of the Investments at
fair value through profit or loss.
------------------------------------------------------------------
Materiality
* Overall materiality: GBP1,948,000 based on 2% of net
assets.
* Performance materiality: GBP974,000.
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we considered where the directors made
subjective judgements; for example, in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all
of our audits, we also addressed the risk of management override of
internal controls, including among other matters, consideration of
whether there was evidence of bias that represented a risk of
material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, 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) identified by the auditors, 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, and any comments we make on the results of our
procedures thereon, 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 audit addressed the
Key audit matter
----------------------------------------- ------------------------------------------------------------------
Valuation of the underlying We evaluated the investment valuation
Level 2 and Level 3 investments accounting policy for compliance
recognised as part of the Investments with IFRS and IPEV Guidelines.
at fair value through profit We also tested that the investment
or loss valuations were accounted for
The Company's Investments at in accordance with their stated
fair value through profit or policy.
loss include underlying Level We obtained an understanding
2 and Level 3 investments amounting and performed an evaluation of
to GBP5,495,557 and GBP50,568,639 the Investment Advisor's processes,
respectively, as at 31 January key controls and methodology
2023. These underlying investments applied in determining the fair
are held through the Company's value of the investment portfolio,
subsidiaries. Details of these along with the subsequent consideration
investments including the valuation and approval by the Directors.
techniques used in determining We tested the classification,
the fair value are disclosed approach and valuation basis
in Note 12 to the financial statements. of the underlying Level 2 and
The Company's underlying investment Level 3 investments held through
in a listed special purpose acquisition the Company's subsidiaries.
company ("SPAC") is classified Level 2
as Level 2 whilst those unquoted Investment in the SPAC - Shares
investments in private equity in the SPAC have limited trading
("direct PE investments") including activity and are therefore classified
the Sponsor of the SPAC and other as Level 2. The fair value for
fund investments are classified this asset is calculated with
as Level 3. reference to the latest observable
The valuation of these investments, market price on the Euronext
where material, has been assessed exchange which is then adjusted
as a key audit matter due to based upon advice from the Investment
the significant judgement required Advisor to reflect the limited
and assumptions applied in determining trading volumes.
the fair value as at 31 January We agreed the market price to
2023. a third party source and challenged
the extent of the adjustment
factor applied to reflect the
limited trading volumes.
Level 3
Investment in Direct PE investments
- We evaluated the appropriateness
of the valuation methodology
for each investment. This included:
* testing the financial metrics applied using
independently obtained latest financial information
from portfolio companies;
* assessing the suitability of selected peers; checking
the valuation multiples used to third party sources;
and
* challenging the reasonableness of the significant
unobservable inputs into the valuation models.
Investment in fund investments
- We obtained the latest audited
financial statements and capital
accounts for all investments
and performed an assessment of
the appropriateness of the confirming
parties supplying us with the
requested valuation support.
We considered the quality of
information obtained through
our confirmation process, as
well as the date of the latest
available information used to
support these valuations at year
end. This included a review of
the latest audited financial
statements of the underlying
investment companies or funds
and an assessment of the appropriateness
of the confirming parties supplying
us with the requested valuation
support.
We have not identified any matters
to report to those charged with
corporate governance.
----------------------------------------- ------------------------------------------------------------------
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
Company, the accounting processes and controls, and the industry in
which the Company operates.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Overall materiality GBP1,948,000
How we determined it 2% of net assets
------------------------------------------
Rationale for the materiality We believe that net assets is the most
benchmark appropriate benchmark because this is
the key metric of interest to investors.
It is also a generally accepted measure
used for companies in this industry.
------------------------------------------
We use performance materiality to reduce to an appropriately low
level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the scope of our
audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures, for example in determining
sample sizes. Our performance materiality was 50% of overall
materiality, amounting to GBP974,000 for the financial
statements.
In determining the performance materiality, we considered a
number of factors - risk assessment and aggregation risk and the
effectiveness of controls - and concluded that an amount at the
lower end of our normal range was appropriate.
We agreed with the Risk and Audit committee and those charged
with governance that we would report to them misstatements
identified during our audit above GBP97,000, as well as
misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
Reporting on other information
The other information comprises all the information included in
the Report and Accounts (the "Annual Report") but does not include
the financial statements and our auditor's report thereon. The
directors are responsible for the other information.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, 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
audit, or otherwise appears to be materially misstated. 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 based on these
responsibilities.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors'
Responsibilities, the directors are responsible for the preparation
of the financial statements that give a true and fair view in
accordance with International Financial Reporting Standards, the
requirements of Bermuda law 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 has 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 will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
-- Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control.
-- Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- Conclude on the appropriateness of the directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company's
ability to continue as a going concern over a period of at least
twelve months from the date of approval of the financial
statements. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditor's report to the
related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our
auditor's report.
-- Evaluate the overall presentation, structure and content of
the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation
precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Use of this report
This independent auditor's report, including the opinions, has
been prepared for and only for the members as a body in accordance
with Section 90 of the Companies Act 1981 (Bermuda) and for no
other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Michael Byrne
For and on behalf of PricewaterhouseCoopers CI LLP
Chartered Accountants
Jersey, Channel Islands
20 March 2023
Statement of Comprehensive Income
For the year ended 31 January 2023
31 January 31 January
2023 2022
Total Total
Note GBP GBP
---------------------------------------- ------------- ------------
Income
4 Interest income 79,899 514
11 Net fair value movement on investments* (39,438,551) 10,280,363
---------------------------------------- ------------- ------------
Total (loss) / income (39,358,652) 10,280,877
---------------------------------------- ------------- ------------
Expenses
5 Investment advisor's fees (1,755,442) (2,054,555)
6 Directors' fees (172,000) (149,000)
7 Share based payment expense (555,225) (822,166)
8 Other expenses (557,416) (1,052,268)
---------------------------------------- ------------- ------------
Total expense (3,040,083) (4,077,989)
---------------------------------------- ------------- ------------
(Loss) / profit before finance
costs and tax (42,398,735) 6,202,888
------------- ------------
Finance charges
Interest on unsecured loan note
15 instruments (309,382) (319,685)
Zero dividend preference shares
15 finance charge (1,128,093) (156,983)
(Loss) / profit for the year
before taxation (43,836,210) 5,726,220
9 Taxation - -
---------------------------------------- ------------- ------------
(Loss) / profit for the year (43,836,210) 5,726,220
---------------------------------------- ------------- ------------
Other comprehensive income - -
---------------------------------------- ------------- ------------
Total comprehensive (loss) /
income (43,836,210) 5,726,220
---------------------------------------- ------------- ------------
Basic (loss) / earnings per
17 ordinary share (pence) (141.77) 17.86
---------------------------------------- ------------- ------------
Diluted (loss) /earnings per
17 ordinary share (pence) (141.77) 17.86
---------------------------------------- ------------- ------------
* The net fair value movements on investments is allocated to
the capital reserve and all other income and expenses are allocated
to the revenue reserve in the statement of changes in equity. All
items derive from continuing activities.
Statement of Assets and Liabilities
At 31 January 2023
31 January 31 January
2023 2022
Note GBP GBP
-------------------------------- -------------------------- -----------------
Non-current assets
Investments at fair value
11 through profit or loss 100,412,977 140,525,060
-------------------------------- -------------------------- -----------------
100,412,977 140,525,060
-------------------------------- -------------------------- -----------------
Current assets
13 Cash and cash equivalents 22,226,008 27,545,042
Trade and other receivables
and prepayments 87,899 95,147
-------------------------------- -------------------------- -----------------
22,313,907 27,640,189
-------------------------------- -------------------------- -----------------
Current liabilities
14 Trade and other payables (596,790) (982,655)
15 Unsecured loan note instruments (3,987,729) (3,977,427)
-------------------------------- -------------------------- -----------------
(4,584,519) (4,960,082)
-------------------------------- -------------------------- -----------------
Net current assets 17,729,388 22,680,107
-------------------------------- -------------------------- -----------------
Non-current liabilities
Zero dividend preference
15 shares (20,721,001) (19,580,190)
-------------------------------- -------------------------- -----------------
(20,721,001) (19,580,190)
-------------------------------- -------------------------- -----------------
Net assets 97,421,364 143,624,977
-------------------------------- -------------------------- -----------------
Equity
16 Share capital 1,730,828 1,730,828
Share premium 13,619,627 13,619,627
Capital reserve 97,139,389 136,577,940
Revenue reserve and other
equity (15,068,480) (8,303,418)
-------------------------------- -------------------------- -----------------
Total equity 97,421,364 143,624,977
-------------------------------- -------------------------- -----------------
Net asset value per share
18 (pence) 328.41 455.66
-------------------------------- -------------------------- -----------------
The financial statements were approved by the Board of Directors
on 20 March 2023 and signed on its behalf by:
Clive Spears David Pirouet
Director Director
Statement of Changes in Equity
For the year ended 31 January 2023
Year ended 31 January 2023
Revenue
reserve
and
Share Share Capital other
capital premium reserve equity Total
Note GBP GBP GBP GBP GBP
------------------------- ---------- ----------- ---------------- ------------- -------------
Balance at 1 February
2022 1,730,828 13,619,627 136,577,940 (8,303,418) 143,624,977
Total comprehensive
loss for the year - - (39,438,551) (4,397,659) (43,836,210)
------------------------- ---------- ----------- ---------------- ------------- -------------
Contributions by and
distributions to owners
Share-based payment
7 charge - - - 555,225 555,225
Share ownership scheme
participation - - - 149,568 149,568
16 Purchase of shares - - - (2,587,375) (2,587,375)
Share acquisition for
16 JOSP scheme - - - (484,821) (484,821)
------------------------- ---------- ----------- ---------------- ------------- -------------
Total transactions
with owners - - - (2,367,403) (2,367,403)
------------------------- ---------- ----------- ---------------- ------------- -------------
Balance at 31 January
2023 1,730,828 13,619,627 97,139,389 (15,068,480) 97,421,364
------------------------- ---------- ----------- ---------------- ------------- -------------
Year ended 31 January 2022
Revenue
reserve
and
Share Share Capital other
capital premium reserve equity Total
Note GBP GBP GBP GBP GBP
---------------------------------- ---------- ----------- --------------- ------------ ------------
Balance at 1 February
2021 1,730,828 13,619,627 126,297,577 (955,424) 140,692,608
Total comprehensive income/(loss)
for the year - - 10,280,363 (4,554,143) 5,726,220
---------------------------------- ---------- ----------- --------------- ------------ ------------
Contributions by and
distributions to owners
7 Share-based payment charge - - - 822,166 822,166
Share ownership scheme
participation - - - 625 625
16 Purchase of shares - - - (2,117,866) (2,117,866)
Share acquisition for
16 JOSP scheme - - - (1,498,776) (1,498,776)
---------------------------------- ---------- ----------- --------------- ------------ ------------
Total transactions with
owners - - - (2,793,851) (2,793,851)
---------------------------------- ---------- ----------- --------------- ------------ ------------
Balance at 31 January
2022 1,730,828 13,619,627 136,577,940 (8,303,418) 143,624,977
---------------------------------- ---------- ----------- --------------- ------------ ------------
Statement of Cash Flows
For the year ended 31 January 2023
31 January 31 January
2023 2022
Note GBP GBP
-------------------------------------- ----------------------- ---------------------
Operating activities
Interest income received 79,899 514
Expenses paid (2,853,467) (3,231,866)
11 Purchase of investments (3,174,948) (31,253,480)
11 Proceeds from investments 3,848,880 18,364,193
-------------------------------------- ----------------------- ---------------------
19 Net cash used in operating activities (2,099,636) (16,120,639)
-------------------------------------- ----------------------- ---------------------
Financing activities
Unsecured loan note interest
paid (299,080) (299,080)
Purchase of shares (3,072,196) (3,616,642)
Issue of zero dividend preference
shares - 20,000,000
Issue costs for zero dividend
preference shares - (273,923)
Share ownership scheme participation 149,568 625
-------------------------------------- ----------------------- ---------------------
Net cash (used in) / generated
from financing activities (3,221,708) 15,810,980
-------------------------------------- ----------------------- ---------------------
Decrease in cash and cash equivalents (5,321,344) (309,659)
Effect of exchange rate fluctuations
on cash and cash equivalents 2,310 -
Cash and cash equivalents at
start of year 27,545,042 27,854,701
-------------------------------------- ----------------------- ---------------------
Cash and cash equivalents at
13 end of year 22,226,008 27,545,042
-------------------------------------- ----------------------- ---------------------
Comparative cash flows have been restated to reclassify Purchase
of investments and Proceeds from investments previously presented
under Investing activities section to Operating activities
section.
Reconciliation of net debt
Cash and cash equivalents On 31 January Cash flows Other non-cash On 31 January
2022 charge 2023
GBP GBP GBP GBP
--------------------------- -------------- ------------ --------------- --------------
Cash at bank 27,545,042 (5,321,344) 2,310 22,226,008
Unsecured loan note
instruments (3,977,427) 299,080 (309,382) (3,987,729)
Zero dividend preference
shares (19,580,190) - (1,140,811) (20,721,001)
--------------------------- -------------- ------------ --------------- --------------
Net debt 3,987,425 (5,022,264) (1,447,883) (2,482,722)
--------------------------- -------------- ------------ --------------- --------------
Notes to the Financial Statements
For the year ended 31 January 2023
1 General Information
The Company was incorporated with limited liability in the Isle
of Man on 25 July 2003. The Company then re-registered under the
Isle of Man Companies Act 2006, with registration number 008597V.
On 11 September 2018, the Company re-registered under the Bermuda
Companies Act 1981, with registration number 53954. The Company
moved its operations to Jersey with immediate effect on 17 May 2017
and has subsequently operated from Jersey only.
The Company's ordinary shares are quoted on AIM, a market
operated by the London Stock Exchange, and the Growth Market of the
Aquis Stock Exchange (formerly the NEX Exchange).
The Company's portfolio investments are held in three
subsidiaries, ESO Investments 1 Limited, ESO Investments 2 Limited
and ESO Alternative Investments LP (together the
"Subsidiaries").
Direct interests in the individual portfolio investments are
held by the following Subsidiaries;
-- ESO Investment 1 Limited: Rayware, Whittard, David Phillips and Denzel's
-- ESO Investments 2 Limited: Luceco and Pharmacy2U
-- ESO Alternative Investments LP: European Capital Private Debt
Fund LP, EPE Junior Aggregator LP, Atlantic Credit Opportunities
Fund Limited, EPIC Acquisition Corp and EAC Sponsor Limited
The principal activity of the Company is to arrange income
yielding financing for growth, buyout and special situations
investments with a view to exiting in due course at a profit.
The Company has no employees.
2 Basis of prepa ration
a. Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and applicable
legal and regulatory requirements of Bermuda Companies Act 1981.
They were previously prepared in accordance with IFRS as adopted by
the EU until 31 January 2021. This change has had no impact on the
financial statements. The following accounting policies have been
adopted and applied consistently. The financial statements comply
with IFRS as issued by the International Accounting Standards Board
(IASB).
b. Basis of measurement
The financial statements have been prepared on the historical
cost convention except for financial instruments at fair value
through profit or loss which are measured at fair value (note 12).
T he following are amendments that the Company has decided not to
adopt early:
-- Standards and amendments to existing standards effective 1 January 2022
There are no standards, amendments to standards or
interpretations that are effective for annual periods beginning on
1 January 2022 that have a material effect on the financial
statements of the Company.
-- New standards, amendments and interpretations effective after
1 January 2022 and have not been early adopted
A number of new standards, amendments to standards and
interpretations are effective for annual periods beginning after 1
January 2022, and have not been early adopted in preparing these
financial statements. None of these are expected to have a material
effect on the financial statements of the Company.
c. Functional and presentation currency
These financial statements are presented in Sterling, which is
the Company's functional and presentation currency. All financial
information presented in Sterling has been rounded to the nearest
pound.
'Functional currency' is the currency of the primary economic
environment in which the Company operates. The expenses (including
investment advisory and administration fees) and investments are
denominated and paid in Sterling. Accordingly, management has
determined that the functional currency of the Company is
Sterling.
A foreign currency transaction is recorded initially at the rate
of exchange at the date of the transaction. Assets and liabilities
are translated from foreign currency to the functional currency at
the closing rate at the end of the reporting period. The resulting
gains or losses are included in the statement of comprehensive
income.
d. Use of estimates and judgements
The preparation of financial statements in conformity with IFRS
requires the Directors and the Investment Advisor to make
judgements, estimates and assumptions that affect the application
of policies and the reported amounts of assets and liabilities,
income and expense. The estimates and associated assumptions are
based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of
which form the basis of making the judgements about carrying values
of assets and liabilities that are not readily apparent from other
sources. The Directors have, to the best of their ability, provided
as true and fair a view as is possible. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
e. Critical accounting estimates and assumption
Critical accounting estimates and assumptions made by Directors
and the Investment Advisor in the application of IFRS that have a
significant effect on the financial statements and estimates with a
significant risk of material adjustments in the year relate to the
determination of fair value of financial instruments with
significant unobservable inputs (see note 12).
f. Critical judgements
The critical judgements made by the Directors and the Investment
Advisor in preparing these financial statements are:
-- Classification of the zero dividend preference share as a
non-current liability in the Statement of Assets and Liabilities.
The zero dividend preference shares meet the definition of a
non-current liability as detailed in note 3(l). Please refer to
note 15 for further details.
-- Categorisation of ESO Alternative Investments LP, ESO
Investments 1 Limited and ESO Investments 2 Limited as
Subsidiaries. The Company is deemed to have control over these
subsidiaries. Please refer to note 3(a) for details.
g. Unconsolidated structured entities
The Company invests in portfolio investments through its
Subsidiaries. See note 3(a) for an explanation of why these
entities are considered controlled subsidiary investments. The
purpose of the Subsidiaries is to hold investments. The
Subsidiaries meet the definition of unconsolidated structured
entities under IFRS 12. There are letters of support in place
between the Company and ESO Investments 1 Limited and ESO
Investments 2 Limited for the payment of expenses.
The total fair value of the Subsidiaries, and the amount
recognised in the Company's financial statements (as investments at
fair value) is GBP102,135,274.
In respect of ESO Alternative Investments LP, the Company has
100% beneficial ownership of the entity.
In respect of ESO Investments 1 Limited, the Company has 80%
beneficial ownership of the entity.
In respect of ESO Investments 2 Limited, the Company has 80%
beneficial ownership of the entity.
There are no restrictions on the ability of the above
Subsidiaries to transfer funds to the Company in the form of cash
dividends or loan repayments.
The Company's maximum exposure to loss from its interest in its
Subsidiaries is equal to the total fair value of its investment in
its Subsidiaries.
T h e Co mpany 's Subsidiaries invest in qu o ted and u n qu o t
ed securities, in line with the Company's investment policy. The
value of these investments may be impacted by m a r ket price r isk
a r i s i n g from u n certainty ab o u t the future market val u e
o f these holdings as well as the risk of underperformance of the
underlying portfolio companies.
The exposure to investments in Subsidiaries measured at fair
value is disclosed in the following table :
31 January 2023 31 January 2022
GBP GBP
----------------------------- ---------------- ----------------
ESO Investments 1 Limited 43,217,307 35,526,865
ESO Investments 2 Limited 44,330,483 90,461,860
ESO Alternative Investments
LP 12,865,187 14,536,335
------------------------------ ---------------- ----------------
100,412,977 140,525,060
----------------------------- ---------------- ----------------
Du r i ng t h e y e ar en ded 31 Ja n uary 2 023 to tal n et
loss i n cu rred o n the f air val ue movement o n i n v estments i
n Su bs idiar i es was GBP 39,438,551 (2022: profit of
GBP10,280,363) (as set out in note 11).
h. Going concern
The Company's management has assessed the Company's ability to
continue as a going concern and is satisfied that the Company has
the adequate resources to continue in business for at least twelve
months from the date of approval of financial statements.
Furthermore, the management is not aware of any material
uncertainties that may cast significant doubt upon the Company's
ability to continue as a going concern. Therefore, the financial
statements continue to be prepared on the going concern basis.
3 Significant accounting policies
a. Subsidiaries and consolidation
Subsidiaries
The Company has subsidiaries which have been determined to be
controlled subsidiary investments. Controlled subsidiary
investments are measured at fair value through profit or loss and
are not consolidated in accordance with IFRS 10. The fair value of
controlled subsidiary investments is determined on a consistent
basis to all other investments measured at fair value through
profit or loss, and as described in note 3.i.
A controlled subsidiary investment involves holding companies
over which the Company has the power to govern the financial and
operating policies. These holding companies are subsidiaries that
have been incorporated for the purpose of holding underlying
investments on behalf of the Company. Such holding companies have
no operations other than providing a vehicle for the acquisition,
holding and onward sale of certain portfolio investment companies.
The holding companies are also reflected at its fair value, with
the key fair value driver thereof being the investment in the
underlying portfolio company investments that the holding company
holds on behalf of the Company. The holding companies require no
consolidation, because the holding companies are not deemed to be
providing investment related services, as defined by IFRS 10.
Where the Company is deemed to have control over an underlying
portfolio company, either directly or indirectly, and whether the
control is via voting rights or through the ability to direct the
relevant activities in return for access to a significant portion
of the variable gains and losses derived from those relevant
activities, the Company does not consolidate the underlying
portfolio company; instead, the Company reflects its investment at
fair value through profit or loss.
b. Segmental reporting
The Directors are of the opinion that the Company is engaged in
a single segment of business and geographic area, being arranging
financing for growth, buyout and special situations investments in
the United Kingdom. Information presented to the Board of Directors
for the purpose of decision making is based on this single
segment.
c. Income
Interest income is recognised as it accrues in profit or loss,
using the effective interest method. Dividend income is accounted
for when the right to receive such income is established.
d. Expenses
All expenses are accounted for on an accrual basis.
e. Cash and cash equivalents
Cash and cash equivalents comprise of current cash deposits with
banks only. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash
and which are subject to insignificant risk of changes in
value.
f. Finance charges
Other finance charges are recognised as an expense.
g. Trade and other payables
Trade and other payables are stated at amortised cost in
accordance with IFRS 9.
h. Unsecured loan note instruments
Unsecured loan note instruments are stated at amortised cost in
accordance with IFRS 9.
i. Financial assets and financial liabilities
A. Classification
Financial assets
When the Company first recognises a financial asset, it
classifies it based on the business model for managing the asset
and the asset's contractual cash flow characteristics, as
follows:
-- Amortised cost: a financial asset is measured at amortised
cost if both of the following conditions are met:
- the asset is held within a business model whose objective is
to hold assets in order to collect contractual cash flows; and
- the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
-- Fair value through other comprehensive income: financial
assets are classified and measured at fair value through other
comprehensive income if they are held in a business model whose
objective is achieved by both collecting contractual cash flows and
selling financial assets.
-- Fair value through profit or loss: any financial assets that
are not held in one of the two business models mentioned are
measured at fair value through profit or loss.
When, and only when, the Company changes its business model for
managing financial assets it must reclassify all
affected financial assets.
Financial liabilities
All financial liabilities are measured at amortised cost, except
for financial liabilities at fair value through profit or loss.
Such liabilities include derivatives (other than derivatives that
are financial guarantee contracts or are designated and effective
hedging instruments), other liabilities held for trading, and
liabilities that an entity designates to be measured at fair value
through profit or loss.
B. Recognition
The Company recognises financial assets and financial
liabilities on the date it becomes a party to the contractual
provisions of the instrument.
C. Measurement
Equity and debt investments, including those held by
Subsidiaries, are stated at fair value. Loans and Receivables are
stated at amortised cost less any impairment losses.
The Investment Advisor determines asset values using the
valuation principles of IFRS 13.
'Fair value' is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the
principal or, in its absence, the most advantages market to which
the Company has access at that date. The fair value of a liability
reflects its non-performance risk.
When available, the Company measures the fair value of an
instrument using the quoted price in an active market for that
instrument. A market is regarded as 'active' if transactions for
the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis. The
Company measures instruments quoted in an active market at
mid-price.
If there is no quoted price in an active market, then the
Company uses valuation techniques that maximise the use of relevant
observable inputs and minimise the use of unobservable inputs. The
chosen valuation technique incorporates all of the factors that
market participants would take into account in pricing a
transaction.
The Company recognises transfers between levels of the fair
value hierarchy as at the end of the reporting period during which
the change has occurred.
The amortised cost of a financial asset or financial liability
is the amount at which the financial asset or financial liability
is measured at initial recognition, minus principal repayments,
plus or minus the cumulative amortisation using the effective
interest method of any difference between the initial amount
recognised and the maturity amount, minus any reduction for
impairment. Financial assets that are not carried at fair value
though profit and loss are subject to an impairment test. For loans
to portfolio companies the impairment test is undertaken as part of
the assessment of the fair value of the enterprise value of the
related business, as described above. If expected life cannot be
determined reliably, then the contractual life is used.
D. Impairment
12-month expected credit losses
12-month expected credit losses are calculated by multiplying
the probability of a default occurring in the next 12 months with
the total (lifetime) expected credit losses that would result from
that default, regardless of when those losses occur. Therefore,
12-month expected credit losses represent a financial asset's
lifetime expected credit losses that are expected to arise from
default events that are possible within the 12 month period
following origination of an asset, or from each reporting date for
those assets in initial recognition stage.
Lifetime expected credit losses
Lifetime expected credit losses are the present value of
expected credit losses that arise if a borrower defaults on its
obligation at any point throughout the term of a lender's financial
asset (that is, all possible default events during the term of the
financial asset are included in the analysis). Lifetime expected
credit losses are calculated based on a weighted average of
expected credit losses, with the weightings being based on the
respective probabilities of default.
E. Derecognition
The Company derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire or it
transfers the financial asset and the transfer qualifies for
derecognition in accordance with IFRS 9.
The Company uses the weighted average method to determine
realised gains and losses on derecognition. A financial liability
is derecognised when the obligation specified in the contract is
discharged, cancelled or expired.
j. Share capital
Ordinary share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares and share
options are recognised as a deduction from equity, net of any tax
effects.
Repurchase of share capital (treasury shares)
When share capital recognised as equity is repurchased, the
amount of the consideration paid, which includes directly
attributable costs, net of any tax effects, is recognised as a
deduction from equity. Repurchased shares are classified as
treasury shares and are presented as a deduction from total equity.
When treasury shares are sold or reissued subsequently, the amount
received is recognised as an increase in equity, and the resulting
surplus or deficit on the transaction is transferred to/from
revenue reserves.
Capital Reserve and Revenue Reserve
The capital reserve comprises net gains and losses on
investments. The revenue reserve comprises other income and
expenses plus other items recorded directly in equity (excluding
items recorded as share capital/share premium).
k. Jointly owned share plan ("JOSP") and share-based
payments
Directors of the Company and certain employees of the Investment
Advisor (together "Participants") receive remuneration in the form
of equity-settled share-based payment transactions, through a JOSP
Scheme.
Equity-settled share-based payments are measured at fair value
at the date of grant. The fair value is determined based on the
share price of the equity instrument at the grant date. The fair
value determined at the grant date of the equity-settled
share-based payment is expensed on a straight-line basis over
the vesting period, based on the Company's estimate of the number
of shares that will eventually vest. The instruments are subject to
a three-year service vesting condition from the grant date, and
their fair value is recognised as a share-based expense with a
corresponding increase in revenue reserves within equity over the
vesting period. Contributions received from employees as part of
the JOSP arrangement are recognised directly in equity in the line
share ownership scheme participation.
The assets (other than investments in the Company's shares),
liabilities, income and expenses of the trust established to
operate the JOSP scheme (the "Trust") are recognised by the
Company. The Trust's investment in the Company's shares is deducted
from shareholders' funds in the Statement of Asset and Liabilities
as if they were treasury shares (see note 7).
l. Zero dividend preference shares ("ZDP")
Under IAS 32 - Financial Instruments: Presentation, the ZDP
Shares are classified as financial liabilities and are held at
amortised cost. An accrual for the final capital entitlement of the
ZDP Shares is included in the Statement of Comprehensive Income as
a finance cost and is calculated using the effective interest rate
method ("EIR"). The costs of issue of the ZDP Shares are amortised
over the period to the ZDP Share redemption date.
m. Future changes in accounting policies
Several new standards are effective for annual periods beginning
after 1 January 2021 and earlier application is permitted; however,
the Company has not adopted early the new or amended standards in
preparing these financial statements.
The Directors do not expect the adoption of the standards and
interpretations to have a material impact on the Company's
financial statements in the period of initial application.
n. Change in categorisation of holding companies
During the current year, the Directors reassessed its
categorisation of ESO Alternative Investments LP, ESO Investments 1
Limited and ESO Investments 2 Limited from associates to
subsidiaries. These entities were set up by the Company as holding
vehicles for investments acquired for the benefit of the Company.
The holding companies are structured entities and as such voting
rights or similar rights are not the dominant factor in
decision-making power over them. As a result, the Directors deem
the classification of these entities as subsidiaries to be more
appropriate.
This change has no impact on the current year's financial
statements as the investments in these holding companies continue
to be measured at fair value.
4 Interest income
2023 2022
Company Company
GBP GBP
--------------- -------- --------
Cash balances 79,899 514
---------------- -------- --------
Total 79,899 514
---------------- -------- --------
5 Investment advisory, administration and performance fees
Investment advisory fees
The investment advisory fee payable to EPIC Investment Partners
LLP ("EPIC") is assessed and payable at the end of each fiscal
quarter and is calculated as 2 per cent. of the Company's NAV where
the Company's NAV is less than GBP100 million; otherwise the
investment advisory fee is calculated as the greater of GBP2.0
million or the sum of 2 per cent. of the Company's NAV comprising
Level 2 and Level 3 portfolio assets, 1 per cent. of the Company's
NAV comprising Level 1 assets, no fees on assets which are managed
or advised by a third-party manager, 0.5 per cent. of the Company's
net cash (if greater than nil), and 2 per cent. of the Company's
net cash (if less than nil) (i.e. reducing fees for net debt
positions).
The charge for the current year was GBP1,755,442 (2022:
GBP2,054,555). The amount outstanding as at 31 January 2023 was
GBP487,107 (2022: GBP500,000) (see note 14).
Administration fees
EPIC Administration Limited provides accounting and financial
administration services to the Company. The fee payable to EPIC
Administration Limited is assessed and payable at the end of each
fiscal quarter and is calculated as 0.15 per cent. of the Company's
NAV where the Company's NAV is less than GBP100 million (subject to
a minimum fee of GBP35,000); otherwise the advisory fee shall be
calculated as 0.15 per cent. of GBP100 million plus a fee of 0.1
per cent. of the excess of the Company's NAV above GBP100
million.
The charge for the current year was GBP147,043 (year ended 31
January 2022: GBP212,431).
Other administration fees during the year were GBP76,302 (2022:
GBP72,196).
Performance fees paid by Subsidiaries
The Subsidiaries are stated at fair value. Performance fees are
paid to the Investment Advisor based on the performance of the
Subsidiaries and deducted in calculating the fair value of
Subsidiaries.
Performance fee in ESO Investments 1 Limited
The distribution policy of ESO Investments 1 Limited includes an
allocation of profits to the Investment Advisor such that, for each
investment where a returns hurdle of 8 per cent. per annum has been
achieved, the Investment Advisor is entitled to receive 20 per
cent. of the increase above the base value of investment. As at 31
January 2023, GBPnil has been accrued in the profit share account
of the Investment Advisor in the records of ESO Investments 1
Limited (2022: GBPnil accrued).
Performance fee in ESO Investments 2 Limited
The distribution policy of ESO Investments 2 Limited includes an
allocation of profit to the Investment Advisor such that, for each
investment where a returns hurdle of 8 per cent. per annum has been
achieved, the Investment Advisor is entitled to receive 20 per
cent. of the increase above the base value of investment. As at 31
January 2023, GBP9,112,002 has been accrued in the profit share
account of the Investment Advisor in the records of ESO Investments
2 Limited (2022: GBP20,027,085 accrued).
Joint Owned Share Plan ("JOSP") and share-based payments
Directors of the Company and certain employees of the Investment
Advisor (together "Participants") receive remuneration in the form
of equity-settled share-based payment transactions, through a JOSP
Scheme (see note 7).
6 Directors' fees
2023 2023 2022 2022
Share-based Share-based
Company payment Company payment
GBP GBP GBP GBP
------------------------ -------- ------------ -------- ------------
C.L. Spears (Chairman) 42,000 9,388 32,000 13,445
R.B.M. Quayle - - 15,000 4,754
N.V. Wilson 32,000 9,216 30,000 13,132
H. Bestwick 32,000 9,388 30,000 13,445
D.R. Pirouet 34,000 6,132 32,000 6,648
M.M. Gray 32,000 2,093 10,000 1,197
------------------------- -------- ------------ -------- ------------
Total 172,000 36,217 149,000 52,621
------------------------- -------- ------------ -------- ------------
In addition to the fees noted above, C.L. Spears, H. Bestwick
and M.M Gray received during the year;
-- GBP3,750 each as Directors' fees for their directorship of ESO Investments 1 Limited; and
-- GBP3,750 each as Directors' fees for their directorship of ESO Investments 2 Limited.
Aggregate Directors' fees for ESO Investments 1 Limited and ESO
Investments 2 Limited for the year ended 31 January 2023 amounted
to GBP22,500.
R.B.M Quayle resigned in June 2021 and thereby did not receive
director fees or accrue for share based payment during the year
ended 31 January 2023. The share-based payment expense is
calculated as set out in note 7.
7 Share-based payment expense
The cost of equity-settled transactions to Participants in the
JOSP Scheme are measured at fair value at the grant date. The fair
value is determined based on the share price of the equity
instrument at the grant date.
The Trust was created to award shares to Participants as part of
the JOSP. Participants are awarded a certain number of shares
("Matching Shares") which are subject to a three-year service
vesting condition from the grant date. In order to receive their
Matching Share allocation Participants are required to purchase
shares in the Company on the open market ("Bought Shares"). The
Participant will then be entitled to acquire a joint ownership
interest in the Matching Shares for the payment of a nominal
amount, on the basis of one joint ownership interest in one
Matching Share for every Bought Share they acquire in the relevant
award period.
The Trust holds the Matching Shares jointly with the Participant
until the award vests. These shares carry the same rights
as the rest of the ordinary shares.
The Trust held 1,290,202 (2022: 1,871,753) matching shares at
the year-end which have historically not voted (see note 16).
862,290 shares vested to Participants in the year ended 31
January 2023 (2022: 3,775). 156,173 shares were awarded to
Participants in the year ended 31 January 2023 (2022: 185,779).
The share-based payment expense in the Statement of
Comprehensive Income has been calculated on the basis of the fair
value of the equity instruments at the grant date and the estimated
number of equity instruments to be issued after the vesting period,
less the amount paid for the joint ownership interest in the
Matching Shares.
The total share-based payment expense in the year ended 31
January 2023 was GBP555,225 (2022: GBP822,166). Of the total
share-based payment expense in the year ended 31 January 2023,
GBP36,217 related to the Directors (2022: GBP52,621) and the
balance related to members, employees and consultants of the
Investment Advisor.
8 Other expenses
The breakdown of other expenses presented in the statement of
comprehensive income is as follows:
31 January 31 January
2023 2022
Total Total
GBP GBP
------------------------------------ ----------- ------------
Administration fees (223,345) (284,627)
Directors' and officers' insurance (27,464) (24,453)
Professional fees (94,442) (480,554)
Board meeting and travel expenses (1,085) (588)
Auditors' remuneration (61,350) (68,095)
Interim review remuneration (17,000) (8,325)
Bank charges (1,705) (3,261)
Irrecoverable VAT - (360)
Foreign exchange movement 2,687 (52,948)
Nominated advisor and broker fees (62,322) (61,962)
Listing fees (52,769) (48,446)
Sundry expenses (18,621) (18,649)
------------------------------------- ----------- ------------
Other expenses (557,416) (1,052,268)
------------------------------------- ----------- ------------
9 Taxation
The Company is a tax resident of Jersey and is subject to 0 per
cent. corporation tax (2022: 0 per cent.).
ESO Alternative Investments LP is transparent for tax
purposes.
ESO Investments 1 Limited and ESO Investments 2 Limited are tax
resident in Jersey and are subject to 0 per cent. (2022: 0 per
cent.) corporation tax.
10 Dividends paid and proposed
No dividends were paid or proposed for the year ended 31 January
2023 (2022: GBPnil).
11 Investments at fair value through profit or loss
31 January 31 January
2023 2022
GBP GBP
----------------------------------- -------------- -----------------------
Investments at fair value through
profit and loss* 100,412,977 140,525,060
------------------------------------ -------------- -----------------------
100,412,977 140,525,060
----------------------------------- -------------- -----------------------
Investments
31 January 31 January
2023 2022
GBP GBP
------------------------------------ ----------------------------- -------------------------
Investments at fair value at 1
February 140,525,060 117,256,810
Purchase of investments 3,174,948 31,253,480
Proceeds from investments (3,848,880) (18,364,193)
Net fair value movements (39,438,551) 10,280,363
Reclassification of debtor balance
to investee 400 98,600
------------------------------------- ----------------------------- -------------------------
Investments at fair value 100,412,977 140,525,060
------------------------------------- ----------------------------- -------------------------
*Comprises Subsidiaries stated at fair value in accordance with
accounting policy set out in note 3(a) ( ESO Investments 1 Limited,
ESO Investments 2 Limited and ESO Alternative Investments LP).
12 Fair value of financial instruments
The Company determines the fair value of financial instruments
with reference to IPEV guidelines and the valuation principles of
IFRS 13 (Fair Value Measurement). The Company measures fair value
using the IFRS 13 fair value hierarchy, which reflects the
significance and certainty of the inputs used in deriving the fair
value of an asset:
-- Level 1: Inputs that are quoted market prices (unadjusted) in
active markets for identical instruments;
-- Level 2: Inputs other than quoted prices included within
Level 1 that are observable either directly (i.e. as prices) or
indirectly (i.e. derived from prices). This category includes
instruments valued using quoted market prices in active markets for
similar instruments, quoted prices for identical or similar
instruments in markets that are considered less than active or
other valuation techniques in which all significant inputs are
directly or indirectly observable from market data;
-- Level 3: Inputs that are unobservable. This category includes
all instruments for which the valuation technique includes inputs
not based on observable data and the unobservable inputs have a
significant effect on the instrument's valuation. This category
include s instruments that are valued based on quoted prices for
similar instruments but for which significant unobservable
adjustments or assumptions are required to reflect differences
between the instruments.
The Investment Advisor undertakes the valuation of financial
instruments required for financial reporting purposes. Recommended
valuations are reviewed and approved by the Investment's Advisor's
Valuation Committee for circulation to the Company's Board. The
Risk and Audit committee of the Company's Board meets at least once
every six months, in line with the Company's semi-annual reporting
periods, to review the recommended valuations and approve final
valuations for adoption in the Company's financial statements.
Valuation framework
The Company employs the valuation framework detailed below with
respect to the measurement of fair values. A valuation of the
Company's investments held via its Subsidiaries are prepared by the
Investment Advisor with reference to IPEV guidelines and the
valuation principles of IFRS 13 (Fair Value Measurement). The
Investment Advisor recommends these valuations to the Board of
Directors. The Risk and Audit committee of the Company's Board
considers the valuations recommended by the Investment Advisor,
determines any amendments required and thereafter adopts the fair
values presented in the Company's financial statements. Changes in
the fair value of financial instruments are recorded in the
Statement of Comprehensive Income in the line item "Net fair value
movement on investments".
Quoted investments
Quoted investments traded in an active market are classified as
Level 1 in the IFRS 13 fair value hierarchy. The investment in
Luceco is a Level 1 asset. For Level 1 assets, the holding value is
calculated from the latest market price (without adjustment).
Quoted investments traded in markets that are considered less
than active are classified as Level 2 in the IFRS 13 fair value
hierarchy. The investment in EPIC Acquisition Corp is a Level 2
asset. For Level 2 assets, the holding value is calculated with
reference to the latest available adjusted market price, where the
adjustment factor is close to nil.
Unquoted private equity investments and unquoted fund
investments
Private equity investments and fund investments are classified
as Level 3 in the IFRS 13 fair value hierarchy. The investments in
Whittard, David Phillips, Rayware, Denzel's, Pharmacy2U, European
Capital Private Debt Fund LP, EPE Junior Aggregator LP, Atlantic
Credit Opportunities Fund Limited and EAC Sponsor Limited are
considered to be Level 3 assets. Various valuation techniques may
be applied in determining the fair value of investments held as
Level 3 in the fair value hierarchy;
-- For recently acquired assets, the investment cost may be
considered as an applicable fair value for the asset if this is
deemed appropriate ;
-- For underperforming assets, net asset or recovery valuation
is considered more applicable, in particular where the business'
performance be contingent on shareholder financial support;
-- For performing assets, market approach is considered to be
the most appropriate with a specific focus on trading comparables,
applied on a forward basis. Transaction comparables, applied on a
historic basis may also be considered;
-- For assets managed and valued by third party managers, the
valuation methodology of the third party manager is reviewed. If
deemed appropriate and consistent with reporting standards, the
valuation prepared by the third-party manager will be used.
The Investment Advisor believe that it is appropriate to apply
an illiquidity discount to the multiples of comparable companies
when using them to calculate valuations for small, private
companies. This discount adjusts for the difference in size between
generally larger comparable companies and the smaller assets being
valued. The illiquidity discount also incorporates the premium the
market gives to comparable companies for being freely traded or
listed securities. The Investment Advisor has determined between 15
per cent. and 25 per cent. to be an appropriate illiquidity
discount with reference to market data and transaction multiples
seen in the market in which the Investment Advisor operates.
Where portfolio investments are held through subsidiary holding
companies, the net assets of the holding company are added to the
value of the portfolio investment being assessed to derive the fair
value of the holding company held by the Company.
EPIC Acquisition Corp and EAC Sponsor Limited
Management have prepared scenario analysis for the holdings in
EPIC Acquisition Corp and EAC Sponsor Limited to calculate a
probability weighted range of implied values under potential
realisation scenarios. Management have also considered alternative
option pricing methodologies to cross reference market valuations
for the EPIC Acquisition Corp warrants.
For Level 2 assets, significant unobservable inputs are
developed as follows:
-- Probability of EPIC Acquisition Corp business combination,
combination period extension or liquidation
-- Option pricing methodology and inputs
EAC's management have identified six key factors which it
believes play a material role in the probability of EAC's ability
to complete a business combination. These factors are: i) business
combination opportunity pipeline; ii) EAC's competitive advantage
vs other SPACs / sources of capital; iii) quality of EAC's network;
iv) macro environment; v) availability of PIPE funding; and vi)
prevailing investor redemption rates in the SPAC market. Each
factor has been assigned a weighting based on management's
judgement of its importance in completing the business combination.
Management has also assigned a minimum and maximum score (out of
10) to each factor based on its judgement of the relevant factor (a
higher score indicates the factor is supportive of a business
combination and vice versa). Management has then calculated a
weighted average probability range and median probability for
completion of a business combination.
Although management believes that its estimates of fair value
are appropriate, the use of different methodologies or assumptions
could lead to different measurements of fair value. For fair value
measurements of EPIC Acquisition Corp and EAC Sponsor Limited's
assets, changing one or more of the assumptions used to reasonably
possible alternative assumptions would have the following effects
on the investment valuations. The key inputs into the preparation
of the valuations of EPIC Acquisition Corp and EAC Sponsor Limited
were the unit price of the underlying securities. If these inputs
had been taken to be 25 per cent. higher, the value of these assets
and profit for the year would have been GBP1,813,784 higher. If
these inputs had been taken to be 25 per cent. lower, the value of
these assets and profit for the year would have been GBP1,813,784
lower.
Fair value hierarchy - Financial instruments measured at fair
value
The Company's investments in the Subsidiaries at 31 January 2023
are classified as Level 3 (in line with 31 January 2022), given the
variation in classification of the underlying assets. The Company
values these investments on the basis of the net asset value of
these holdings .
The table below analyses the underlying investments held by the
Subsidiaries measured at fair value at the reporting date by the
level in the fair value hierarchy into which the fair value
measurement is categorised. The Board assesses the fair value of
the total investment, which includes debt and equity.
The amounts are based on the values recognised in the Statement
of Assets and Liabilities of the Subsidiaries.
Level Level Level
1 2 3 Total
31 January 2023 GBP GBP GBP GBP
------------------------------------- --- ----------- ---------- ----------- ------------
Financial assets at fair value
through profit or loss
Unquoted private equity investments
(including debt) - - 47,383,890 47,383,890
Unquoted fund investments - - 3,184,749 3,184,749
Quoted investments 41,757,541 5,495,557 - 47,253,098
------------------------------------------ ----------- ---------- ----------- ------------
Investments at fair value through
profit or loss 41,757,541 5,495,557 50,568,639 97,821,737
------------------------------------------ ----------- ---------- ----------- ------------
Other asset and liabilities
(held at cost) - - - 2,591,240
------------------------------------------ ----------- ---------- ----------- ------------
Total 41,757,541 5,495,557 50,568,639 100,412,977
------------------------------------------ ----------- ---------- ----------- ------------
Level Level Level
1 2 3 Total
31 January 2022 GBP GBP GBP GBP
------------------------------------- --- ----------- ---------- ----------- ------------
Financial assets at fair value
through profit or loss
Unquoted private equity investments
(including debt) - - 41,897,143 41,897,143
Unquoted fund investments - - 5,989,711 5,989,711
Quoted investments 87,206,277 5,166,896 - 92,373,173
------------------------------------------ ----------- ---------- ----------- ------------
Investments at fair value through
profit or loss 87,206,277 5,166,896 47,886,854 140,260,027
------------------------------------------ ----------- ---------- ----------- ------------
Other asset and liabilities
(held at cost) - - - 265,033
------------------------------------------ ----------- ---------- ----------- ------------
Total 87,206,277 5,166,896 47,886,854 140,525,060
------------------------------------------ ----------- ---------- ----------- ------------
There have been no changes in the designation of level of fair
value hierarchy in the reporting periods under review.
The following table, detailing the value of portfolio
investments only, shows a reconciliation of the opening balances to
the closing balances for fair value measurements in level 3 of the
fair value hierarchy for the underlying investments held by the
Subsidiaries.
31 January 31 January
2023 2022
Unquoted investments (including debt) GBP GBP
------------------------------------------ ----------------- ------------
Balance as at 1 February 47,886,854 28,422,329
Additional investments 2,086,948 25,786,074
Capital distributions from investments (2,235,136) (330,247)
Change in fair value through
profit & loss 2,829,973 (5,991,302)
------------------------------------------- ----------------- ------------
Balance as at 31 January 50,568,639 47,886,854
------------------------------------------- ----------------- ------------
Significant unobservable inputs used in measuring fair value
The table below sets out information about significant
unobservable inputs used at 31 January 2023 in measuring financial
instruments categorised as Level 3 in the fair value hierarchy.
Description Fair value Significant
at unobservable inputs
31 January
2023
------------------------------------ ----------------------
GBP
------------------------------------ -------------------- ----------------------
Unquoted private equity investments 47,383,890 Sales/EBITDA multiple
(including debt) or investment cost
Unquoted fund investments 3,184,749 Reported net asset
value
------------------------------------ -------------------- ----------------------
The valuation methodology employed as at 31 January 2023 for the
investment in Rayware was changed from the acquisition cost
methodology used in the prior year to an EBITDA multiple
methodology, given that the acquisition occurred greater than 12
months prior to the valuation date.
Significant unobservable inputs are developed as follows:
-- Trading comparable multiple: valuation multiples used by
other market participants when pricing comparable assets. Relevant
comparable assets are selected from public companies determined to
be proximate to the investment based on similarity of sector, size,
geography or other relevant factors. The valuation multiple for a
comparable company is determined by calculating the enterprise
value of the company implied by its market price as at the
reporting date and dividing by the relevant financial metric (sales
or EBITDA).
-- Reported net asset value: for assets managed and valued by a
third party, the manager provides periodic valuations of the
investment. The valuation methodology of the third-party manager is
reviewed. If deemed appropriate and consistent with reporting
standards, the Board will adopt the valuation prepared by the
third-party manager. Adjustments are made to third party valuations
where considered necessary to arrive at the Director's estimate of
fair value.
-- Investment cost: for recently acquired assets (typically
completed in the last twelve months), the Investment Advisor
considers the investment cost an appropriate fair value for the
asset.
Although management believes that its estimates of fair value
are appropriate, the use of different methodologies or assumptions
could lead to different measurements of fair value. For fair value
measurements of Level 3 assets, changing one or more of the
assumptions used to reasonably possible alternative assumptions
would have the following effects on the Level 3 investment
valuations:
-- For the Company's investment in mature Level 3 assets, the
valuations used in the preparation of the financial statements
imply an average EV to EBITDA multiple of 6.7x (weighted by each
asset's total valuation) (2022: 6.2x). The key unobservable inputs
into the preparation of the valuation of mature Level 3 assets was
the EBITDA multiple applied to the asset's financial forecasts. A
sensitivity of 25 per cent. has been applied to these multiples, in
line with the maximum liquidity discount employed in the
valuations. If these inputs had been taken to be 25 per cent.
higher, the value of the Level 3 assets and profit for the year
would have been GBP11,982,622 higher. If these inputs had been
taken to be 25 per cent. lower, the value of the Level 3 assets and
profit for the year would have been GBP15,338,259 lower. A
corresponding increase or decrease in the asset's financial
forecasts would have a similar impact on the Company's assets and
profit.
-- For the Company's investment in growth Level 3 assets, the
valuations used in the preparation of the financial statements
imply an average EV to sales multiple of 1.4x (weighted by each
asset's total valuation) (2022: 1.0x). The key unobservable inputs
into the preparation of the valuation of growth Level 3 assets were
the sales multiple applied to the asset's financial forecasts. A
sensitivity of 25 per cent. has been applied to these multiples, in
line with the maximum liquidity discount employed in the
valuations. If these inputs had been taken to be 25 per cent.
higher, the value of the Level 3 assets and profit for the year
would have been GBP970,343 higher. If these inputs had been taken
to be 25 per cent. lower, the value of the Level 3 assets and
profit for the year would have been GBP735,831 lower. A
corresponding increase or decrease in the asset's financial
forecasts would have a similar impact on the Company's assets and
profit.
Classification of financial assets and liabilities
The table below sets out the classifications of the carrying
amounts of the Company's financial assets and liabilities into
categories of financial instruments.
31 January 2023
At fair At amortised
value cost Total
Financial assets GBP GBP GBP
---------------------------------- -------------------------- ----------------------- -----------------------
Investments at fair value
through profit or loss 100,412,977 - 100,412,977
Cash and cash equivalents - 22,226,008 22,226,008
Trade and other receivables - 87,899 87,899
----------------------------------- -------------------------- ----------------------- -----------------------
100,412,977 22,313,907 122,726,884
---------------------------------- -------------------------- ----------------------- -----------------------
Financial liabilities
---------------------------------- -------------------------- ----------------------- -----------------------
Trade and other payables - 596,790 596,790
Unsecured loan note instruments* - 3,987,729 3,987,729
Zero dividend preference
shares** - 20,721,001 20,721,001
----------------------------------- -------------------------- ----------------------- -----------------------
- 25,305,520 25,305,520
---------------------------------- -------------------------- ----------------------- -----------------------
31 January 2022
At fair At amortised
value cost Total
Financial assets GBP GBP GBP
---------------------------------- -------------------------- ----------------------- -----------------------
Investments at fair value
through profit or loss 140,525,060 - 140,525,060
Cash and cash equivalents - 27,545,042 27,545,042
Trade and other receivables - 95,147 95,147
----------------------------------- -------------------------- ----------------------- -----------------------
140,525,060 27,640,189 168,165,249
---------------------------------- -------------------------- ----------------------- -----------------------
Financial liabilities
---------------------------------- -------------------------- ----------------------- -----------------------
Trade and other payables - 982,655 982,655
Unsecured loan note instruments* - 3,977,427 3,977,427
Zero dividend preference
shares** - 19,580,190 19,580,190
----------------------------------- -------------------------- ----------------------- -----------------------
- 24,540,272 24,540,272
---------------------------------- -------------------------- ----------------------- -----------------------
*The Directors consider that the fair value of the unsecured
loan note instruments is the same as its carrying value.
**The Directors consider that the fair value of the zero
dividend preference shares is GBP19,100,000 (2022: GBP21,000,000)
calculated on the basis of the quoted price of the instrument on
the London Stock Exchange of 95.50 pence as at 31 January 2023
(2022: 105.00 pence).
13 Cash and cash equivalents
2023 2022
GBP GBP
--------------------------- ----------- ---------------------
Current and call accounts 22,226,008 27,545,042
--------------------------- ----------- ---------------------
22,226,008 27,545,042
--------------------------- ----------- ---------------------
The current and call accounts have been classified as cash and
cash equivalents in the Statement of Cash Flows.
14 Trade and other payables
2023 2022
GBP GBP
--------------------------------- -------- --------
Trade payables 1,008 13,657
Accrued administration fee 36,533 48,406
Accrued audit fee 9,920 54,078
Accrued professional fee 45,489 65,811
Accrued investment advisor fees 487,107 500,000
Accrued Directors' fees 14,333 12,833
Provision for ZDP issue costs - 285,870
Other payables 2,400 2,000
---------------------------------- -------- --------
Total 596,790 982,655
---------------------------------- -------- --------
15 Liabilities
Unsecured Loan Notes ("ULN")
The Company has issued ULN's which pay interest at 7.5 per cent.
Per annum and are redeemable on 24 July 2023, following an approval
of an extension of their maturity in July 2022. At 31 January 2023,
GBP3,987,729 (2022: GBP3,987,729) of ULNs in principal amount were
outstanding. Issue costs totalling GBP144,236 have been offset
against the value of the loan note instrument and are being
amortised over the life of the instrument. The total issue costs
expensed in the year ended 31 January 2023 was GBP10,303 (2022:
GBP20,605). The carrying value of the ULNs in issue at the year-end
was GBP3,987,729 (2022: GBP3,977,427). The total interest expense
for the ULNs for the year is GBP309,382 (2022: GBP319,685). This
includes the amortisation of the issue costs. The carrying value of
ULN is presented under current liabilities in the current period as
they are redeemable within 12-month period from the Statement of
Assets and Liabilities date.
Zero Dividend Preference Shares ("ZDP Shares")
On 17 December 2021 the Company issued 20,000,000 ZDP Shares at
a price of GBP1 per share, raising GBP20,000,000. The ZDP Shares
will not pay dividends but have a final capital entitlement at
maturity on 16 December 2026 of 129.14 pence. It should be noted
that the predetermined capital entitlement of a ZDP Share is not
guaranteed and is dependent upon the Company's gross assets being
sufficient on 16 December 2026 to meet the final capital
entitlement. Issue costs totalling GBP573,796 have been offset
against the value of the ZDP Shares and are being amortised over
the life of the instrument. The total issue costs expensed in the
year ended 31 January 2023 was GBP115,359 (2022: GBP14,358). The
carrying value of the ZDP Shares in issue at the year-end was
GBP20,721,001 (2022: GBP19,580,190). The total finance charge for
the ZDP Shares for the year is GBP1,128,093 (2022: GBP156,983).
This includes the ZDP Share finance charge and the amortisation of
the Issue costs.
16 Share capital
2023 2023 2022 2022
Number GBP Number GBP
---------------------------- ------------ ---------- ------------ ----------
Authorised share capital
Ordinary shares of 5p each 45,000,000 2,250,000 45,000,000 2,250,000
----------------------------- ------------ ---------- ------------ ----------
Called up, allotted and
fully paid
Ordinary shares of 5p each 34,616,554 1,730,828 34,616,554 1,730,828
Ordinary shares of 5p each
held in treasury (4,951,575) - (3,096,575) -
----------------------------- ------------ ---------- ------------ ----------
29,664,979 1,730,828 31,519,979 1,730,828
---------------------------- ------------ ---------- ------------ ----------
No shares were issued during the year ended 31 January 2023 and
year ended 31 January 2022.
During the year ended 31 January 2023, the Company repurchased
1,855,000 shares (2022: 628,844 shares) with a total value of
GBP2,587,375 (2022: GBP2,117,866). These shares are held as
treasury shares.
During the year ended 31 January 2023, the Trust purchased
280,739 shares (2022: 456,524 shares) with a total value of
GBP484,821 (2022: GBP1,498,776). 862,290 shares vested to
Participants in the year ended 31 January 2022 (2022: 3,775). At 31
January 2023 1,290,202 shares were held by the Trust (2022:
1,871,753) (see note 7).
17 Basic and diluted loss per share (pence)
Basic loss per share for the year ended 31 January 2023 is
141.77 pence (2022: basic profit per share of 17.86 pence). This is
calculated by dividing the loss of the Company for the year
attributable to the ordinary shareholders of GBP43,836,210 (2022:
profit of GBP5,726,220) divided by the weighted average number of
shares outstanding during the year of 30,921,130 after excluding
treasury shares (2022: 32,065,616 shares).
Diluted loss per share for the year ended 31 January 2023 is
141.77 pence (2022: diluted profit per share of 17.86 pence). This
is calculated by dividing the loss of the Company for the year
attributable to ordinary shareholders of GBP43,836,210 (2022:
profit of GBP5,726,220) divided by the weighted average number of
ordinary shares outstanding during the year, as adjusted for the
effects of all dilutive potential ordinary shares, of 30,921,130
after excluding treasury shares (2022: 32,065,616 shares).
18 NAV per share (pence)
The Company's NAV per share of 328.41 pence (2022: 455.66 pence)
is based on the net assets of the Company at the year-end of
GBP97,421,364 (2022: GBP143,624,977) divided by the shares in issue
at the end of the year of 29,664,979 after excluding treasury
shares (2022: 31,519,979). The Company's unaudited estimate of the
NAV per share of 334 pence announced on 6 February 2023 has been
updated for final audit conclusions.
The Company's diluted NAV per share of 328.41 pence (2022:
455.66 pence) is based on the net assets of the Company at the
year-end of GBP97,421,364 (2022: GBP143,624,977) divided by the
shares in issue at the end of the year of 29,664,979 (2022:
31,519,979) after excluding treasury shares, as there are no
adjustments for the effects of dilutive potential ordinary
shares.
19 Net cash used in operating activities
Reconciliation of profit before finance cost and tax to net cash
used in operating activities:
2023 2022
Company Company
GBP GBP
--------------------------------------------- ------------- -------------
Loss / profit for the year before taxation (43,836,210) 5,726,220
Adjustments for non-cash income / expense
Net fair value movement on investments 39,438,551 (10,280,363)
Interest on unsecured loan note instruments 309,382 319,685
Zero dividend preference shares finance
charge 1,128,093 156,983
Loss before finance cost (2,960,184) (4,077,475)
Adjustments:
Share-based payment expense 555,225 822,166
Purchase of investments (3,174,948) (31,253,480)
Proceeds from investments 3,848,880 18,364,193
--------------------------------------------- ------------- -------------
(1,731,027) (16,144,596)
Non-cash items
Movement in trade and other receivables 6,848 3,817
Movement in trade and other payables (373,147) 20,140
Effect of exchange rate fluctuations on (2,310)
cash and cash equivalents -
Net cash used in operating activities (2,099,636) (16,120,639)
--------------------------------------------- ------------- -------------
Comparative cash flows have been restated to reclassify Purchase
of investments and Proceeds from investments previously presented
under Investing activities section to Operating activities
section.
20 Financial instruments
The Company's financial instruments comprise:
-- Investments in listed and unlisted companies held by
Subsidiaries, comprising equity and loans
-- Cash and cash equivalents, ZDP shares and unsecured loan note instruments; and
-- Accrued interest and trade and other receivables, accrued expenses and sundry creditors.
Financial risk management objectives and policies
The main risks arising from the Company's financial instruments
are liquidity risk, credit risk, market price risk and interest
rate risk. None of those risks are hedged. These risks arise
through directly held financial instruments and through the
indirect exposures created by the underlying financial instruments
in the Subsidiaries. These risks are managed by the Directors in
conjunction with the Investment Advisor. The Investment Advisor is
responsible for day to day management of financial instruments in
the Subsidiaries.
Capital management
The Company's capital comprises share capital, share premium and
reserves and is not subject to externally imposed capital
requirements.
Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The Company's liquid assets comprise cash and cash
equivalents and trade and other receivables, which are readily
realisable.
Residual contractual maturities of financial assets
Less than 1 - 3 months 1 - 5 Over No stated
31 January 1 Month 3 Months to 1 year years 5 years maturity
2023 GBP GBP GBP GBP GBP GBP
---------------------- ----------- ---------- ----------- ------- --------- ----------
Financial liabilities
Trade and other
receivables
and prepayments 87,899 - - - - -
Cash and cash
equivalents 22,226,008 - - - - -
Total 22,313,907 - - - - -
---------------------- ----------- ---------- ----------- ------- --------- ----------
Less than 1 - 3 months 1 - 5 Over No stated
31 January 1 Month 3 Months to 1 year years 5 years maturity
2022 GBP GBP GBP GBP GBP GBP
---------------------- ----------- ---------- ----------- ------- --------- ----------
Financial liabilities
Trade and other
receivables
and prepayments 95,147 - - - - -
Cash and cash
equivalents 27,545,042 - - - - -
Total 27,640,189 - - - - -
---------------------- ----------- ---------- ----------- ------- --------- ----------
Residual contractual maturities of financial liabilities
Less than 1 - 3 months 1 - 5 Over No stated
31 January 1 Month 3 Months to 1 year years 5 years maturity
2023 GBP GBP GBP GBP GBP GBP
----------------------- ---------- ---------- ----------- ------------- --------- ----------
Financial liabilities
Trade and other
payables 596,790 - - - - -
Loan note instruments - - 3,987,729 - - -
Zero dividend
preference shares - - - 25,827,284 - -
-----------------------
Total 596,790 - 3,987,729 25,827,284 - -
------------------------- ---------- ---------- ----------- ------------- --------- ----------
Less than 1 - 3 months 1 - 5 Over No stated
31 January 1 Month 3 Months to 1 year years 5 years maturity
2022 GBP GBP GBP GBP GBP GBP
----------------------- ---------- ---------- ----------- ------------- --------- ----------
Financial liabilities
Trade and other
payables 982,655 - - - - -
Loan note instruments - - 3,987,729 - - -
Zero dividend
preference shares - - - 25,827,284 - -
----------------------- ---------- ---------- ----------- ------------- --------- ----------
Total 982,655 - 3,987,729 25,827,284 - -
------------------------- ---------- ---------- ----------- ------------- --------- ----------
Credit risk
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to meet a commitment that it has entered into
with the Company.
The Company, through its interests in Subsidiaries, has advanced
loans to a number of private companies which exposes the Company to
significant credit risk. The loans are advanced to unquoted private
companies, which have no credit risk rating. They are entered into
as part of the investment strategy of the Company and its
Subsidiaries, and credit risk is managed by taking security where
available (typically a floating charge) and the Investment Advisor
taking an active role in the management of the borrowing
companies.
Although the Investment Advisor looks to set realistic repayment
schedules, it does not necessarily view a portfolio company not
repaying on time and in full as 'underperforming' and seeks to
monitor each portfolio company on a case-by-case basis. However, in
all cases the Investment Advisor reserves the right to exercise
step in rights. In addition to the repayment of loans advanced, the
Company and Subsidiaries will often arrange additional preference
share structures and take significant equity stakes so as to create
shareholder value. It is the performance of the combination of all
securities including third party debt that determines the Company's
view of each investment.
At the reporting date, the Company's financial assets exposed to
credit risk amounted to the following (excluding exposure in the
underlying Subsidiaries):
2023 2023
GBP GBP
--------------------------- ----------- -----------
Cash and cash equivalents 22,226,008 27,545,042
---------------------------- ----------- -----------
Total 22,226,008 27,545,042
---------------------------- ----------- -----------
Cash balances are placed with HSBC Bank plc, Barclays Bank plc,
both of which have the credit rating of A1 Negative (Moody's) and
Santander International which has the credit rating of A2
(Moody's).
Market price risk
Market price risk is the risk that the value of a financial
instrument will fluctuate as a result of changes in market prices
(other than those arising from interest rate risk or currency
risk). The Company is exposed to a market price risk via its equity
investments held through its interests in Subsidiaries, which are
stated at fair value.
Market price risk sensitivity
The Company is exposed to market price risk with regard to its
underlying equity interests in a number of quoted and unquoted
companies which are stated at fair value. Luceco plc was quoted on
the Main Market of the London Stock Exchange at 31 January 2023.
EPIC Acquisition Corp's shares and warrants were quoted on the
Euronext Amsterdam Stock Exchange at 31 January 2023.
If Luceco plc's share price had been 5.0 per cent. higher than
actual close of market on 31 January 2023, EPE Special
Opportunities Limited's NAV per share would have been 2.03 per
cent. higher than reported. If Luceco's share price had been 5.0
per cent. lower than actual close of market on 31 January 2023, EPE
Special Opportunities Limited's NAV per share would have been 2.03
per cent. lower than reported. These movements would have had a
corresponding effect on the profit for the year.
If EPIC Acquisition Corp's share price had been 5.0 per cent.
higher than actual close of market on 31 January 2023, EPE Special
Opportunities Limited's NAV per share would have been 0.27 per
cent. higher than reported. If EPIC Acquisition Corp's share price
had been 5.0 per cent. lower than actual close of market on 31
January 2023, EPE Special Opportunities Limited's NAV per share
would have been 0.27 per cent. lower than reported. These movements
would have had a corresponding effect on the profit for the
year.
Interest rate risk
The Company is exposed to interest rate risk through its
unsecured loan note instruments and on its cash balances. Most of
the loans are at fixed rates. Cash balances earn interest at
variable rates. The unsecured loan note instruments carry fixed
interest rates.
The table below summarises the Company's exposure to interest
rate risks. It includes the Company's financial assets and
liabilities at the earlier of contractual re-pricing or maturity
date, measured by the carrying values of assets and
liabilities:
Less than 1 month 1 - Over Non- interest
31 January 2023 1 month to 1 year 5 years 5 years bearing Total
Assets GBP GBP GBP GBP GBP GBP
----------------------------- ----------- ------------ --------- --------- -------------- ------------
Receivables and
cash
Trade and other receivables - - - - - -
Cash and cash equivalents 22,226,008 - - - - 22,226,008
------------------------------ ----------- ------------ --------- --------- -------------- ------------
Total financial
assets 22,226,008 - - - - 22,226,008
------------------------------ ----------- ------------ --------- --------- -------------- ------------
Liabilities
Financial liabilities
measured
at amortised cost
Trade and other payables - - - - (596,790) (596,790)
Unsecured loan note
instruments - (3,987,729) - - - (3,987,729)
------------------------------ ----------- ------------ --------- --------- -------------- ------------
Total financial
liabilities - (3,987,729) - - ( 596,790) (4,584,519)
------------------------------ ----------- ------------ --------- --------- -------------- ------------
Less than 1 month 1 - Over Non- interest
31 January 2022 1 month to 1 year 5 years 5 years bearing Total
Assets GBP GBP GBP GBP GBP GBP
----------------------------- ----------- ------------ --------- --------- -------------- ------------
Receivables and cash
Trade and other receivables - - - - - -
Cash and cash equivalents 27,545,042 - - - - 27,545,042
----------------------------- ----------- ------------ ---------
Total financial assets 27,545,042 - - - - 27,545,042
----------------------------- ----------- ------------ --------- --------- -------------- ------------
Liabilities
Financial liabilities
measured
at amortised cost
Trade and other payables - - - - (982,655) (982,655)
Unsecured loan note
instruments - (3,977,427) - - - (3,977,427)
----------------------------- ----------- ------------ --------- --------- -------------- ------------
Total financial liabilities (3,977,427) - - (982,655) (4,960,082)
----------------------------- ----------- ------------ --------- --------- -------------- ------------
Interest rate sensitivity
The Company is exposed to market interest rate risk via its cash
balances and unsecured loan note instruments. A sensitivity
analysis has not been provided as it is not considered significant
to Company performance.
Currency risk
The Company's has no significant exposure to foreign currency
risk.
Exposure to other market price risk
The investment advisor monitors the concentration of risk for
equity and debt securities based on counterparties and industries
(and geographical location). The Company's underlying investments
including bank deposits held through its Subsidiaries are
concentrated in the following industries.
2023 2022
% %
--------------------------------------------- -------------------------- ------------------
Consumer and Retail 41.2 26.1
Engineering, Manufacturing and Distribution 34.1 52.0
Healthcare 2.1 1.9
Credit Funds 2.6 3.6
Bank Deposits 20.0 16.4
--------------------------------------------- -------------------------- ------------------
100.0 100.0
--------------------------------------------- -------------------------- ------------------
The Company notes that there was a concentration on the Consumer
and Retail sector, representing 41.2 per cent. of investments for
the year ended 31 January 2023 (31 January 2022: Engineering,
Manufacturing and Distribution sector representing 52.0 per cent.).
The Company monitors carefully the sector concentration risk across
the portfolio.
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 (both at the Company and at its service providers) 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 limitation of financial losses and damage to its
reputation with achieving its investment objective of generating
returns to investors.
The primary responsibility for the development and
implementation of controls over 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 at the service
providers and the establishment of service levels with the service
providers, in the following areas:
-- documentation of controls and procedures;
-- requirements for:
- appropriate segregation of duties between various functions, roles and responsibilities;
- reconciliation and monitoring of transactions; and
- periodic assessment of operational risk faced;
-- the adequacy of controls and procedures to address the risks identified;
-- compliance with regulatory and other legal requirements;
-- development of contingency plans;
-- training and professional development;
-- ethical and business standards; and
-- risk mitigation, including insurance if this is effective.
The Company's key service providers include the following:
-- Administrator: Langham Hall Fund Management (Jersey) Limited
-- Investment Advisor: EPIC Investment Partners LLP
-- Financial Administrator: EPIC Administration Limited
-- Nominated Advisor and Broker: Numis Securities Limited
The Directors' assessment of the adequacy of the controls and
processes in place at the service providers with respect to
operational risk is carried out via regular discussions with the
service providers as well as site visits to their offices. The
Company also undertakes periodic third-party reviews of service
providers' activities.
21 Directors' interests
Five of the Directors have interests in the shares of the
Company as at 31 January 2023 (2022: five). Nicholas Wilson holds
144,690 ordinary shares (2022: 131,265). Clive Spears holds 51,841
ordinary shares (2022: 136,314). Heather Bestwick holds 39,431
ordinary shares (2022: 22,307). David Pirouet holds 17,309 ordinary
shares (2022: 14,073). Michael Gray holds 5,614 ordinary shares
(2022: 2,378)
22 Related parties
The Company has no ultimate controlling party.
Directors' fees expense during the year amounted to GBP172,000
(year ended 31 January 2022: GBP149,000) of which GBP14,333 is
accrued as at 31 January 2023 (2022: GBP12,833)
Certain Directors of the Company and other participants are
incentivised in the form of equity settled share-based payment
transactions, through a Jointly Owned Share Plan (see note 7).
Details of remuneration payable to key service providers are
included in note 5 to the financial statements.
Performance fees are paid to the Investment Advisor based on the
performance of the Subsidiaries and deducted in calculating the
fair value of Subsidiaries (see note 5).
In August 2020, the Investment Advisor acquired a controlling
interest in EPIC Investment Partners (Ireland) (previously known as
"ACML") . ACML is the manager of Atlantic Credit Opportunities Fund
and the sub-advisor to the segregated account of Prelude Structured
Alternatives Master Fund LP. On 1 September 2020, the Company
completed a GBP1.9 million investment into Atlantic Credit
Opportunities Fund. On 12 November 2020, the Company completed a
further $2.5 million investment in a segregated account of Prelude
Structured Alternatives Master Fund LP. The Company will not pay
any management or performance fees to ACML in relation to these two
investments.
In December 2021, ESO Alternative Investments LP invested EUR10
million into EPIC Acquisition Corp ("EAC"), a newly incorporated
special purpose acquisition company ("SPAC") and EAC's sponsor, EAC
Sponsor Limited (the "Sponsor"). The Sponsor is jointly led by the
Investment Advisor and TT Bond Partners (an independent party).
In July 2022, the Company agreed the extension of the maturity
of GBP4.0 million unsecured loan notes to 24 July 2023. Delphine
Brand, a connected party of Giles Brand (a person discharging
managerial responsibilities ("PDMR") for the Company), is a
minority holder of the unsecured loan notes.
Giles Brand, Managing Partner of the Investment Advisor, is a
director of certain portfolio investments of the Subsidiaries,
including Luceco plc and Hamsard 3145 Limited.
23 Subsequent events
There were no significant subsequent events that would require
adjustments to or disclosure in these financial statements .
Unaudited schedule of shareholders holding over 3% of issued
shares
As at 31 January 2023
Percentage
holding
--------------------------------------------------- -----------------------------
Giles Brand 35.5%
Corporation of Lloyds 9.9%
Premier Miton Investors 5.3%
Boston Trust Company Limited (Trustee to the ESO
JOSP Scheme) 4.2%
Lombard Odier Darier Hentsch 3.5%
First Equity 3.5%
Total over 3% holding 62.0%
--------------------------------------------------- -----------------------------
Company Information
Directors Administrator and Company
Address
C.L. Spears (Chairman) Langham Hall Fund Management
(Jersey) Limited
H. Bestwick Liberation House
D. Pirouet Castle Street, St Helier
N.V. Wilson Jersey JE1 2LH
M.M. Gray
Investment Advisor Financial Administrator
EPIC Investment Partners LLP EPIC Administration Limited
Audrey House Audrey House
16-20 Ely Place 16-20 Ely Place
London EC1N 6SN London EC1N 6SN
Independent Auditors and Reporting Nominated Advisor and Broker
Accountants
PricewaterhouseCoopers CI LLP Numis Securities Limited
37 Esplanade 45 Gresham Street
St Helier, Jersey London EC2V 7BF
Channel Islands JE1 4XA
Appointed 22 April 2022
Bankers Registered Agent (Bermuda)
Barclays Bank plc Conyers Dill & Pearman
1 Churchill Place Clarendon House, 2 Church Street
Canary Wharf Hamilton HM 11
London E14 5HP Bermuda
HSBC Bank plc Registrar and CREST Providers
1st Floor Computershare Investor Services
(Jersey) Limited
60 Queen Victoria Street Queensway House
London EC4N 4TR Hilgrove Street
St. Helier JE1 1ES
Santander International Investor Relations
PO Box 545 Richard Spiegelberg
19-21 Commercial Street Cardew Company
St Helier, Jersey, JE4 8XG 5 Chancery Lane
London EC4A 1BL
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END
FR FLFVTVEIIFIV
(END) Dow Jones Newswires
March 21, 2023 03:00 ET (07:00 GMT)
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