TIDMWCH
RNS Number : 4471U
Wilmcote Holdings PLC
25 November 2019
LEI number: 2138004EUUU11OVHZW75
Wilmcote Holdings plc
Publication of Annual Report & Financial Statements for the
year ended 30 June 2019
25 November 2019
Wilmcote Holdings plc (the "Company") announces the publication
of its results for the year ended 30 June 2019.
The Annual Report & Financial Statements are also available
on the 'Shareholder Documents' page of the Company's website at
www.wilmcoteplc.com
Enquiries:
Wilmcote
Tel: +44(0)207 004 2700
Mark Brangstrup Watts
James Corsellis
Axio Capital Solutions Limited (Company Secretary)
Tel: +44(0)1534 761 256
Scott Danks
Numis Securities Limited (Nominated Adviser)
Tel: +44(0)207 260 1000
Kevin Cruickshank
Jamie Loughborough
Wilmcote Holdings Plc
Annual Report and Audited Financial Statements
For the year ended 30 June 2019
WILMCOTE HOLDINGS PLC
CHAIRMAN'S STATEMENT AND STRATEGIC REPORT
I present to shareholders the Annual Report and audited
Financial Statements (the "Financial Statements") of Wilmcote
Holdings plc (the "Company") for the year ended 30 June 2019,
consolidating the results of Wilmcote Holdings plc, WHJ Limited,
Wilmcote Group Limited, WCH Group Limited, Arrow US Holdings Inc
and Arrow Canadian Holdings Limited (collectively the "Group" or
"Wilmcote").
Overview of the Year
Since listing on the AIM Market ("AIM"), operated by the London
Stock Exchange, in August 2017, the Company has pursued its stated
strategy, as described below. Following on from the announcement in
June 2018 that discussions with Platform Speciality Products
Corporation regarding the potential acquisition of Arysta
LifeScience had ceased, Wilmcote continued to explore a number of
opportunities in line with its strategy. In 2019, the Company
entered into discussions in relation to the potential acquisition
of Arclin Inc ("Arclin"). The Company subsequently announced in
October 2019 that the Company and Arclin had mutually agreed to
conclude negotiations and as such, discussions had ceased.
Following the cessation of these discussions, it was mutually
agreed that Adrian Whitfield (Chief Executive Officer ("CEO")),
Kevin Dangerfield (Chief Financial Officer ("CFO")) and John McAdam
(Non-Executive Director) step down from their positions and leave
the Company.
As the Company continued to identify and analyse potential
acquisition targets during the period, the Company has no reported
revenue. Operational and transaction-related expenses incurred are
set out in note 7 to the Financial Statements.
Strategy
Wilmcote was established with the objective of creating value
for its investors through the acquisition and development of a
target business in the downstream and specialty chemicals sector
("Platform Acquisition").
Outlook
Since incorporation, the Company has pursued a number of
investment opportunities in line with its stated investment
strategy and in doing so has incurred material third party
transaction-related expenses. As the Company now does not have
sufficient financial resources to continue to execute its
investment strategy, in a circular dated 25 November 2019 the
Directors have proposed that the Company be recapitalised by a
further GBP6.5 million to fund future operating and
transaction-related expenses and allow the Company to continue to
pursue acquisition opportunities (the "Recapitalisation"). Marwyn
Asset Management Limited, the manager of the Company's largest
shareholder, has undertaken that it will subscribe for its
entitlement of Ordinary Shares under the Recapitalisation. It is
also proposed that the Company's stated investment strategy be
expanded to consider opportunities in other sectors and a broader
range of potential investment structures. The Directors are
confident that significant investment opportunities exist and the
Company will be able to deliver considerable shareholder value
through the execution of its investment strategy, made possible
following shareholder approval and completion of the
Recapitalisation.
Results
The Group's loss after taxation for the year to 30 June 2019 was
GBP10.3 million (period from incorporation to 30 June 2018: GBP13.2
million). The Group incurred GBP10.3 million of administrative
expenses during the year (period ended 30 June 2018: GBP13.3
million), received interest of GBP0.05 million (period ended 30
June 2018: GBP0.1 million) and at 30 June 2019 held a cash balance
of GBP7.5 million (30 June 2018: GBP19.5million). After deducting
costs accrued in respect of operating and transaction-related
expenses, the net asset position was GBP1.3 million.
Dividend Policy
It is the Board's policy that prior to the Platform Acquisition,
no dividends will be paid. The Company has not yet acquired a
trading operation and the Directors therefore consider it
inappropriate to make a forecast of the likelihood of any future
dividends. Following the Platform Acquisition, and subject to the
availability of distributable reserves, dividends will be paid to
shareholders when the Directors believe it is appropriate and
commercially prudent to do so.
James Corsellis
Chairman
25 November
2019
WILMCOTE HOLDINGS PLC
GOVERNANCE REPORT OF THE DIRECTORS
The Directors present their Annual Report and audited Financial
Statements for the year to 30 June 2019.
Principal Activities
The Company was formed to acquire a platform trading asset in
the downstream and specialty chemicals sector. As detailed in a
circular to shareholders dated 25 November 2019, in order to
continue to pursue a Platform Acquisition, it is proposed that the
Company be recapitalised by GBP6.5 million and its investment
strategy broadened. Following completion of such a Platform
Acquisition, the Directors intend to implement an operating
strategy focused on generating shareholder value through organic
and inorganic growth, including potential complementary bolt-on
acquisitions.
Prior to the Recapitalisation, the Company has raised GBP25
million, in aggregate, on incorporation and at the time of its
initial public offering, with such funds being used for the purpose
of carrying out due diligence on potential Platform Acquisitions
and for general working capital purposes. Since incorporation, the
Company has pursued a number of acquisition opportunities and in
doing so has incurred material third party transaction-related
expenses.
Results and Dividends
For the year to 30 June 2019, the Group's loss was GBP10.3
million (period from incorporation to 30 June 2018: GBP13.2
million).
It is the policy of the Company's board of Directors (the
"Board") that prior to the Platform Acquisition, no dividends will
be paid. Following this, and subject to the availability of
distributable reserves, dividends will be paid to shareholders when
the Directors believe it is appropriate and commercially prudent to
do so.
Statement of Going Concern
The Financial Statements have been prepared on a going concern
basis, which assumes that the Group will continue to be able to
meet its liabilities as they fall due for the foreseeable future.
The Directors closely monitor and manage available cash resources
to ensure that the Company can meet its liabilities as they fall
due, but the current cash position of the Company is not sufficient
to enable active pursuit of a Platform Acquisition. Consequently,
as announced on 25 November 2019, the Company is undertaking an
open offer of Ordinary Shares to raise a further GBP6.5 million of
capital. The manager of the Company's largest shareholder has
committed to subscribe for its pro-rata entitlement, being 60.44per
cent of Ordinary Shares to be issued under the open offer and to
vote in favour of the resolutions proposed at the Company's Annual
General Meeting on 12 December 2019. The Directors are confident
that the Group will, following completion of the Recapitalisation,
have significant and sufficient cash reserves to pursue its
investment strategy and have concluded that it remains appropriate
to use the going concern basis of accounting for the Financial
Statements.
The capital generated from the open offer will enable the
Company to consider and appoint, if appropriate, an experienced
management team and continue to pursue a Platform Acquisition.
Further capital may be required to fund the Platform Acquisition
and, dependent on the size of the proposed transaction, to fund
transaction-related expenses.
Financial Risk Profile
The Group's financial instruments are mainly comprised of cash,
payables and receivables that arise directly from the Group's
operations. Details of the risks relevant to the Group are included
on pages 47 to 53.
Substantial Shareholdings
The Company has been notified that the shareholders listed below
held a beneficial interest of 3 per cent. or more of the Company's
issued share capital as at the date of approval of the Financial
Statements.
Ordinary Shares Percentage
Held of Issued
Share Capital
=================================
Marwyn Asset Management Limited 12,591,670 60.44%
================ ===============
Invesco Asset Management
Limited 4,062,500 19.50%
================ ===============
Canaccord Genuity Group Inc 2,083,333 10.00%
================ ===============
Threadneedle Asset Management
Limited 803,324 3.86%
================ ===============
Stated Capital
Details of the stated capital of the Company during the year are
set out in note 14 to the Financial Statements.
Directors
The Directors of the Company who served during the period and/or
subsequent to the date of this report are:
James Corsellis, Executive Chairman
James has over 15 years of investment management and corporate
finance expertise. Marwyn's 16 portfolio platforms to date have
issued over GBP2.7bn of equity capital, with James having
experienced a broad array of sectors and developed an extensive
network of relationships with co-investors, advisors and other
business leaders.
James brings an entrepreneurial mind-set to the management team,
having co-founded Marwyn alongside Mark Brangstrup Watts, and prior
to that founded one of the earliest strategic technology
consultancies. James was also previously Chief Executive Officer of
icollector Plc, a leading provider of live auction trading
platforms, later negotiating its joint venture with eBay.
James is a Managing Partner of Marwyn Capital LLP, Marwyn
Investment Management LLP and is a non-executive director of Marwyn
Asset Management Limited. Portfolio level executive directorships
include Safe Harbour Holdings Plc and Le Chameau Group Plc.
James was previously on the board of BCA Marketplace Plc,
Breedon Aggregates Ltd and Advanced Computer Software Plc, and was
Chairman of Entertainment One Ltd, amongst others.
Mark Brangstrup Watts, Executive Director
As co-founder of Marwyn in 2002, Mark has many years of
experience deploying private equity investment strategies in the
public markets. Marwyn's highly acquisitive portfolio companies
have delivered approximately 100 bolt-on acquisitions with Mark
offering significant M&A, ECM and corporate finance
experience.
Mark brings his background in strategic consultancy to the
management team having been responsible for strategic development
projects for international clients including Ford Motor Company
(US), Cummins (Japan) and 3M (Europe).
Mark is a Managing Partner in Marwyn Capital LLP and Marwyn
Investment Management LLP. Mark is currently an Executive Director
of Le Chameau Group Plc and Safe Harbour Holdings Plc and a
non-executive director of Marwyn Asset Management Limited and
Zegona Communications Plc. Mark was previously a non-executive
director of BCA Marketplace Plc, Advanced Computer Software Plc,
Entertainment One Ltd, Melorio Plc, Inspicio Plc and Talarius Plc,
amongst others.
Adrian Whitfield, CEO (resigned 21 October 2019)
Adrian is an experienced chief executive who previously spent
eight years at Synthomer plc (previously called Yule Catto & Co
plc), the FTSE 250 specialty polymer operator, where he
successfully implemented a turnaround and growth strategy.
Synthomer is a global manufacturer of specialty polymers for the
coatings, construction, textiles, paper and healthcare
industries.
Adrian was appointed Chief Executive Officer of Synthomer in
2006 and led the transformation of a traditional chemical
conglomerate into a segment-leading specialty polymer chemical
business. In doing so, he grew revenue from GBP340 million to
nearly GBP1 billion, while also improving profit before tax margins
from 5.7 per cent. to 8.7 per cent. During Adrian's tenure,
Synthomer's market capitalisation increased 13 times from
turnaround lows, and free cash flow increased six times.
As part of the transformation of Synthomer, Adrian led a number
of successful non-core disposals and strategic acquisitions,
including the acquisition and integration of PolymerLatex, a major
competitor of Synthomer, in 2010 for GBP376 million, extracting
annual cost synergies of over GBP20 million per year. In
recognition of his efforts, he was awarded Turnaround of the Year
at the 2011 UK PLC Awards.
Prior to his role at Synthomer, Adrian was a divisional chief
executive at DS Smith, a manufacturer of paper and packaging
products, for seven years. There he set up a new plastics division,
growing its turnover to GBP200 million organically and through the
acquisition of six international businesses.
John McAdam, Independent Non-Executive Director (appointment
effective 1 October 2018, resigned 21 October 2019)
John has served as a board director on a range of global
businesses since 1999.
John spent 24 years at Unilever where he held a number of senior
management positions and later joined Imperial Chemical Industries
plc (ICI), taking the position of Group Chief Executive in 2003.
John has held a wide range of board positions, including Senior
Independent Director at J Sainsbury plc, Non-Executive Director of
Sara Lee Corporation in America, Non-Executive Director of
Rolls-Royce plc, Senior Independent Director for Electra Private
Equity plc, a London Stock Exchange listed investment trust,
Chairman of Rentokil Initial plc, Non-Executive and Senior
Independent Director of Cobham plc and Chairman of United Utilities
Group Plc.
John received a B.Sc. honours degree in Chemical Physics at
Manchester University and later gained a Ph.D. before becoming a
research fellow.
Kevin Dangerfield, CFO (appointed effective 1 July 2019,
resigned 21 October 2019)
Kevin joined the Wilmcote Board on 1 July 2019 having previously
served as Chief Financial Officer to Laird, the leading UK
electronic components maker, where he has held this position since
October 2016. During his tenure at Laird, Kevin successfully led
the group through a re-organisation and strategic re-focus,
significantly improving margins and cash flow, and subsequently
negotiating the sale to Advent International in 2018.
Kevin has a robust knowledge of global manufacturing operations,
and prior to joining Laird, Kevin spent 16 years at Morgan Advanced
Materials, a global manufacturer of specialist products, serving as
CFO Chief Financial Officer from 2006-2016.
Directors' Interests
The Directors have no direct interests in the Ordinary Shares of
the Company. The Executive Directors have interests in the
participation shares, as detailed in note 17 to the Financial
Statements.
James Corsellis and Mark Brangstrup Watts are non-executive
directors and ultimate beneficial owners of Marwyn Asset Management
Limited which holds 60.44 per cent. of the issued share capital as
at 30 June 2019 and has committed to subscribe its pro rata
entitlement of Ordinary Shares under the Recapitalisation. James
Corsellis and Mark Brangstrup Watts are also managing partners of
Marwyn Capital LLP, a firm which provides corporate finance advice
to the Company and are the ultimate beneficial owners of Axio
Capital Solutions Limited ("Axio") which provides accounting and
company secretarial services. Details of the related party
transactions which occurred during the period are disclosed in note
18.
Save for the issue of participation shares as disclosed in note
17, no Director has or has had any interest in any transaction
which is or was unusual in its nature or conditions or significant
to the business of the Group. There were no loans or guarantees
granted or provided by the Company and/or any of its subsidiaries
to or for the benefit of any of the Directors.
Directors' Emoluments
Director's emoluments during the year are disclosed on page
21.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare Financial
Statements for each financial period. Under that law the Directors
have prepared the Group Financial Statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union. Under company law the Directors must not
approve the Financial Statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group
and of the profit or loss of the Group for that period. In
preparing the Financial Statements, the Directors are required
to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable IFRS as adopted by the European
Union have been followed for the Group Financial Statements,
subject to any material departures disclosed and explained in the
Financial Statements;
-- make judgments and accounting estimates that are reasonable and prudent; and
-- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Group will continue
in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that the
Financial Statements comply with the Companies Law (Jersey) 1991,
AIM Rules for Companies and, as regards the Group Financial
Statements, Article 4 of the IAS Regulation.
The Directors are also responsible for safeguarding the assets
of the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of Financial Statements
may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Groups performance, business model and strategy.
Independent Auditors
PricewaterhouseCoopers LLP ("PwC") was appointed auditor of the
Company and its subsidiaries on 6 July 2017 and subsequently
reappointed at the Company's Annual General Meeting ("AGM") held on
20 November 2018. PwC has expressed its willingness to continue to
act as auditors to the Group and a resolution for its
re-appointment has been proposed at the forthcoming Annual General
Meeting on 12 December 2019.
Disclosure of Information to Auditors
Each of the Directors, whose names and functions are listed in
the Report of the Directors confirm that, to the best of their
knowledge:
-- the Group Financial Statements, which have been prepared in
accordance with IFRS as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
loss of the Group; and
-- the Report of the Directors includes a fair review of the
development and performance of the business and the position of the
Group and Company, together with a description of the principal
risks and uncertainties that it faces.
In the case of each Director in office at the date Report of the
Directors' is approved:
-- so far as he is aware, there is no relevant audit information
of which the Group's auditors are unaware; and
-- he has taken all the steps that he ought to have taken as a
Director in order to make himself aware of any relevant audit
information and to establish that the Group's auditors are aware of
that information.
On behalf of the Board
James Corsellis
Chairman
25 November 2019
WILMCOTE HOLDINGS PLC
GOVERNANCE CORPORATE GOVERNANCE REPORT
Overview
The Company has elected to adopt the Quoted Companies Alliance
Corporate Governance Code ("QCA Code" or the "Code"). During the
year ended 30 June 2019, the Company established an Audit and Risk
Committee and Nomination and Remuneration Committee. John McAdam
was appointed to the Board on 1 October 2018 as Non-Executive
Director and member of the Audit and Risk Committee and Nomination
and Remuneration Committee. Kevin Dangerfield was appointed to the
Board as CFO effective 1 July 2019. John, Kevin and Adrian stepped
down from their position as Directors in October 2019, following
the cessation of discussions in respect of the potential
acquisition of Arclin.
The Board currently consists of James Corsellis and Mark
Brangstrup Watts. Based on the current composition of the Board and
the nature of the Company's ongoing activities, the Board will
implement simplified corporate governance arrangements to best meet
the needs of the business at this time. James and Mark are the sole
members of the Audit and Risk Committee and Nomination and
Remuneration Committee as at the date of this report. The Directors
are committed to maintaining the appropriate levels of corporate
governance for the nature and extent of the activities of the
Company and will therefore revisit the corporate governance
arrangements, including Board and committee composition, as the
nature of the business evolves.
James Corsellis and Mark Brangstrup Watts are both knowledgeable
and considered to be best placed to lead the Company at this
particular time. The biographies of the Board are detailed on pages
5 and 6.
The purpose of this report is to broadly set out how the Company
complies with the QCA Code and explain the areas of non-compliance
(see the deviations from the code section below). The Company
provides a detailed assessment of its compliance with the Code on
its website
http://www.wilmcoteplc.com/investors/Corporate-Governance and will
continue to provide updates on its compliance with the QCA Code via
the website and in each annual report.
Detail on the Company's strategy is included on page 2 and the
Group's principal risks are described on pages 47 to 53.
Board and Committee updates
John McAdam (October 2018) and Kevin Dangerfield (July 2019)
were appointed to the Board as Non-Executive Director and CFO
respectively. Both appointments strengthened the capabilities and
knowledge of the Board. However, following the cessation of
discussions in respect of the potential acquisition of Arclin it
was mutually agreed that both Kevin and John, along with Adrian
Whitfield (CEO), step down from their position as Directors of the
Company. As such, the Board now consists of James Corsellis as
Executive Chairman and Mark Brangstrup Watts as Executive
Director.
Having incurred significant third party related transaction
costs, the Company has limited cash resources, but is pursuing the
Recapitalisation alongside a broadening of its investment strategy.
Given the nature of the Company's ongoing activities, it is
believed that the Board composition is appropriate for the
Company's current operations and provides the skills, experience
and knowledge necessary to lead the business at this time.
The Board will continue to revisit Board composition as the size
and nature of the business evolves.
Board Interaction
The Board meets formally at least six times a year but also
meets on an ad hoc basis where necessary. During the year and
subsequently, the Company closely monitored the cash position of
the business alongside developments in the potential acquisition of
Arclin, resulting in frequent ad hoc meetings. The Chairman is
primarily responsible for the running of the Board. The Board
understands that it is critical for Board meetings to be well
managed and balanced in order for the business to successfully
deliver and achieve its strategy. The Chairman is responsible for
the Board meeting agenda, which, for periodic meetings, is agreed
in advance of each Board meeting and prepared based on an agreed
Board standing agenda and for ad hoc meetings this is agreed in
advance and published as soon as practicable. Board packs are
circulated to the Board in advance of each meeting and capture all
ongoing corporate governance requirements. The Board is presented
with papers from management to support its discussions including
timely financial information, shareholder analysis and investor
relation information, subsidiary management reporting and details
of acquisition targets and deal progress.
The Group's culture is to openly and frequently discuss any
important issues both at and outside of formal meetings.
All Board members have full access to the Group's advisers for
seeking professional advice at the Company's expense.
Board Attendance
Kevin Dangerfield was not a Director during the year ended 30
June 2019, as his appointment was effective 1 July 2019 and
therefore has not been included in the Board attendance summary
below. John McAdam was appointed effective 1 October 2018 and
therefore was not a director for the entire year.
Formal Board meetings Ad hoc Board meetings
Held Attended Held Attended
======================= ======== ======== ==============
Adrian Whitfield 5 5 6 5
======== ============== ======== ==============
Mark Brangstrup Watts 5 5 6 6
======== ============== ======== ==============
James Corsellis 5 5 6 5
======== ============== ======== ==============
John McAdam 4 4 4 3
======== ============== ======== ==============
The ad hoc Board meetings were held principally to discuss the
potential acquisition of the Arclin business from Lone Star Funds,
and the cash position of the business. Since the year end to the
date of this report, a further 14 Board meetings have been
held.
Deviations from the Code
One of the ten principles of the QCA Code is to maintain 'the
board as a well-functioning, balanced team led by the chair'. To
achieve this principle, the QCA Code requires a balance between
executive and non-executive Directors and at least two independent
non-executive directors to be in place. The Company deviates from
the QCA Code in this respect, as the Company's Board currently
consists of two Executive Directors.
The Board believes that the Board composition is appropriate for
the Company's current operations and provides an appropriate mix of
experience, expertise and skills to support the business of the
Group in its current form. The Board remains committed to regularly
reviewing its composition to ensure it remains appropriate as the
Company's operations evolve.
Board Committees
On 1 October 2018, the Board established two principal
committees, the Audit and Risk Committee and the Nomination and
Remuneration Committee (the "Committees"), to assist the Board in
the execution of its duties. If the need should arise, the Board
may set up additional committees as appropriate. The Committees'
terms of reference are available on the Company's website,
www.wilmcoteplc.com, or by request from the Company Secretary. Each
of the Committees is authorised, at the Company's expense, to
obtain legal or other professional advice to assist in carrying out
its duties. No person other than a Committee member is entitled to
attend the meetings of these Committees, except by invitation of
the Chairman of that Committee. The Company's auditor PwC, is
invited to attend meetings of the Audit and Risk Committee.
John McAdam was a member of both committees until he stepped
down from the Board in October 2019. The current committee
membership for both the Audit and Risk Committee and the Nomination
and Remuneration Committee is the same as the Board membership,
being Mark Brangstrup Watts (chairman of both committees) and James
Corsellis. The Directors are aware that Committee composition
should differ to that of the Board and where possible should
consist of a majority of independent directors. The Directors are
committed to re-considering the Board and Committee composition as
the nature and activities of the Company evolves.
For the year ended 30 June 2019 the following committee meetings
were held:
Audit and Risk Committee meetings Nomination and Remuneration Committee meetings
Held Attended Held Attended
======================= ============= ================= ==============================
Adrian Whitfield 2 2 3 3
============= ===================== ================= ==============================
Mark Brangstrup Watts 2 2 3 3
============= ===================== ================= ==============================
James Corsellis 2 2 3 3
============= ===================== ================= ==============================
John McAdam 2 2 3 3
============= ===================== ================= ==============================
The Audit and Risk Committee report and Nomination and
Remuneration Committee annual report are included on pages 16 and
17 respectively of these Financial Statements.
The Company also recognises the importance of having systems and
procedures in place to ensure compliance by the Board, the Company,
and its applicable employees in relation to dealings in securities
of the Company and the management of inside information in
accordance with the EU Market Abuse Regulation (2014/596/EU). The
Board has established a Disclosure Committee, which currently
consists of Mark Brangstrup Watts and James Corsellis and adopted a
share dealing code for this purpose. The Directors believe that
these procedures and policies adopted by the Board are appropriate
for the Company's size and complexity and that it complies with the
EU Market Abuse Regulation (2014/596/EU).
Board Diversity
The Board considers diversity to be much broader than the
traditional definition which focuses on: race, gender, age,
beliefs, disability, ethnic origin, marital status, religion or
sexual orientation. Productive Board discussions require a breadth
of experience and perspectives achieved through hiring board
members with diverse experience. Board directors shall be appointed
in order to bring required skills, knowledge and experience and are
expected to positively impact the chemistry and dynamics of the
Board.
The Board currently consists of two directors, both of whom are
male. It is believed that the Board has the experience and skills
for the Group to manage the Group's current cash resources execute
the Recapitalisation and appropriately broaden the strategy of the
Company. Details on the experience of the Directors are included on
pages 5 to 6 of these Financial Statements.
Following shareholder approval of the Recapitalisation as the
Company progresses with its Platform Acquisition, the Board and
committee composition will be revisited to ensure that it meets the
changing needs of the business. During the recruitment process for
new directors, the Nomination and Remuneration Committee will
ensure that the diversity of the Board is considered.
Board Effectiveness
The Board intended to undertake a board effectiveness review
prior to publishing its annual report and Financial Statements for
the year ended 30 June 2019. During 2019, as the Board pursued a
Platform Acquisition, it was determined that a board effectiveness
review should take place following its completion, as a number of
additional directors were expected to be appointed to the board at
that point. Following the cessation of discussions in respect of
the potential acquisition, it was mutually agreed that three board
directors, John McAdam, Adrian Whitfield and Kevin Dangerfield,
step down from their position as directors of the Company. The
Board no longer believe that it will be beneficial to undertake a
board effectiveness review whilst the board consists of two
directors. The Board intend to establish a formal board
effectiveness review once the board composition is expanded in due
course.
Risk Management and Internal Controls
The Board is responsible for establishing and maintaining the
Company's systems for both risk management and internal controls
and reviewing the effectiveness of both. Internal control systems
are designed to meet the particular needs of the Company and Group
and the particular risks to which it is exposed. The procedures are
designed to manage rather than eliminate risk and, by their nature,
can only provide reasonable but not absolute assurance against
material misstatement or loss.
The role of reviewing and challenging the risk identification
and risk management process across the business including the risks
in connection with a potential acquisition has been delegated to
the Audit and Risk Committee.
The Group does not have a separate internal audit function as
the Board does not feel this is necessary due to the current size
of the business and the simplicity and low volume of transactions,
coupled with the nature and the extent of internal controls,
management and Board oversight and involvement.
The Group has a formal and informal risk management process. The
size of the Board and the frequency in which they interact ensures
that identified risks are communicated both formally, upon review
and consideration of the risk register, and informally in regular
conversations between Directors on business operations and
strategic progress.
The risk register categorises risks into key business risks,
risks associated with the successful completion of the Platform
Acquisition, shareholder risks and financial and procedural risks.
A risk assessment has been performed identifying the potential
impact and likelihood of each risk and mitigating factors/actions
have also been identified. The risk register, including the risk
assessment is reviewed and discussed by the Board and the Audit and
Risk Committee.
As part of the preparation work undertaken for the prospective
acquisition of the Arclin business during the year, the Group
supported by a number of industry experts, reassessed and analysed
the Group's exposure to risk (both in respect of the Company and as
an enlarged Group) and reflected any changes in the Group's risk
register.
Principal risks faced by the Group are explained in detail on
pages 47 - 53. The immediate key risk faced by the Group is the
limited cash resources within the business and therefore the
liquidity and solvency of the Group. Following the completion of
the Recapitalisation the main risks are those which might
jeopardise the successful completion of a Platform Acquisition. The
Company has implemented financial procedures including controls
over cash management, the safeguarding of cash, and monthly cash
forecasting and budgeting.
The Company has in place numerous internal controls in relation
to financial reporting, such as the segregation of roles between
those preparing and those reviewing financial information. In
addition, the Company has established a multi-tier review process
with reviews undertaken by individuals with the appropriate level
of seniority and experience, reducing the risk of misstatement and
fraud.
Currently, the Directors review a cash flow forecast weekly and
are provided with summary financial information monthly, including
a balance sheet, profit and loss and actual cash flow.
The Board are aware of the importance of an effective risk
management process reflective of the size and complexity of the
business and believe that the processes described above are
suitable for the business in its current form. At or around the
time an operating business is acquired, the Board will review the
risks to which the new enlarged group is exposed and an appropriate
risk management process will be put in place.
Company Culture
The Board promotes a dynamic, entrepreneurial and transparent
culture. The recruitment of highly skilled, adaptable, driven and
experienced directors are fundamental to executing the Company's
strategy. The Board therefore fosters a forum whereby openness,
constructive challenge and innovation are actively encouraged.
The Company is small, and as at the date of this report consists
of two directors, The Company's culture is therefore set by the
Board and demonstrated through Board interaction. The Chairman in
his role of leading the Board, managing Board meetings and
encouraging constructive challenge between Board members is central
to setting the tone from the top.
Once additional directors are appointed, a Board effectiveness
review will be the key method in which the Company's culture is
monitored and reviewed.
Succession Planning
Given the size, composition and nature of the Company at this
stage in its evolution, the creation and implementation of
succession plans are not considered to be appropriate or relevant
and as such no succession planning is in place. Once a Platform
Acquisition has been made, succession planning will be revisited by
the Board.
Directors' Terms of Service
The Articles of Association of the Company require that, at each
annual general meeting of the Company, one third of the Directors
retire from office and offer themselves for re-election, and each
Director shall retire from office and stand for re-election at
least every three years. Furthermore, each Director appointed in
the period since the previous annual general meeting shall stand
for election at the subsequent annual general meeting. Accordingly,
Mark Brangstrup Watts will retire from office at the Company's
forthcoming annual general meeting and seek to be re-elected by the
Company's shareholders. The Chairman is satisfied that Mark's
performance continues to be effective and demonstrates his ongoing
commitment to the role and as such supports his re-election.
The Directors' service contracts establish the time commitment
each Director must devote to the Company. Mark Brangstrup Watts and
James Corsellis are to devote the time necessary to ensure the
proper performance of their duties.
Continued Professional Development
The Board considers and reviews the requirement for continued
professional development. The Board undertakes to ensure that their
awareness of developments in corporate governance and the
regulatory framework is current, as well as remaining knowledgeable
of any industry specific updates. The Company Secretary, Nomad and
specialised external advisers all serve to strengthen this
development by providing guidance and updates as required. During
the year, director training covering corporate governance, listing
rules and the Market Abuse Regime (amongst other points) was
provided by Linklaters to the Board.
Chairman
The Chairman is responsible for leading the Board effectively
and overseeing the adoption, delivery and communication of the
company's corporate governance model. The Chairman displays a clear
vision and focus on strategy, capitalising on the skills,
experience, characteristics and qualities of the Board and
fostering a positive governance culture throughout the Group.
Company Secretary
The QCA Code provides details on the roles and responsibilities
of the Company Secretary within a Company. The Company Secretary
for the Group is Axio who were appointed on 29 March 2017.
Axio performs the function of Company Secretary as outlined in
the Code. The role includes preparing for and running effective
Board and committee meetings, including the timely dissemination of
appropriate information. In addition, the Company Secretary is
responsible for assisting the Directors in ensuring that the Group
entities are managed, controlled and administered within the
parameters of their governing documents and are compliant with
regulatory compliance and filing obligations.
Axio has established direct lines of communication with each of
the Directors and provides information, advice and guidance as
required.
Axio plays an active and central role in ensuring good
governance and acts as an additional point of contact between the
Company and the shareholders on matters of governance and investor
relations.
External Advisors
The Company is currently pursuing a Recapitalisation and since
incorporation has pursued its investment strategy and as such has
engaged several advisors to help facilitate this. In particular,
whilst the Board was in discussions with Lone Star Funds regarding
the potential acquisition of the Arclin business, it engaged with
multiple service providers to help undertake the required due
diligence and other associated work. A list of current key external
service providers is included on page 54.
Relationships with key resources and external advisers are
developed and maintained through an open dialogue to ensure that
the Company is able to draw upon their expertise and assistance
when required.
Conflicts of Interest
The Articles of Association of the Company provide for a
procedure for the disclosure and management of risks associated
with Directors' conflicts of interest. At each Board meeting, a
list of directorships for each Director is tabled to the meeting
with any potential conflicts being discussed in detail.
Notwithstanding that no material conflict of interest has arisen in
the period, the Board considers these procedures to have operated
effectively.
Relations with Shareholders
The Board is always available for communication with
shareholders and the Executive Directors frequently engage
constructively with current and potential shareholders. All
shareholders have the opportunity, and are encouraged, to attend
and vote at the annual general meeting of the Company during which
the Board will be available to discuss issues affecting the
Company. The Board stays informed of shareholders' views via
regular meetings and other communications with shareholders.
Annual General Meeting
The next AGM of the Company will be held at Travers Smith LLP,
10 Snow Hill, London EC1A 2AL at 11 a.m. on 12 December 2019. The
AGM is an opportunity for shareholders to vote on certain aspects
of the Company's business including Recapitalisation, continuation
and broadening of its investment strategy. The Directors will also
be available to answer any shareholder questions prior to and after
the meeting. The Financial Statements and related papers are to be
available on the Company's website at www.wilmcoteplc.com.
WILMCOTE HOLDINGS PLC
GOVERNANCE AUDIT AND RISK REPORT
Audit and Risk
I present the Audit and Risk Committee Report for the year ended
30 June 2019. The Audit and Risk Committee was established on 1
October 2018 and throughout this period I have chaired the
committee, with James Corsellis and John McAdam serving as members.
John McAdam stepped down as a Non-Executive Director and committee
member on 21 October 2019. The roles and responsibilities of the
Audit and Risk Committee are set out in its terms of reference,
which are available on the Company's website and from the Company
Secretary. The Audit and Risk Committee are responsible for
the:
-- review and challenge of the risk identification and risk
management process across the business including the risks in
connection with a potential acquisition;
-- management of relations with the external auditor to ensure
that the annual audit is effective, objective, independent and of
high quality;
-- oversight of the relationship with the external auditor to
ensure it remains appropriate and, that the service is
appropriately priced; and
-- review of the Company's draft corporate reporting, including
the annual report and accounts.
The Audit and Risk Committee has met twice in the period from
establishment to 30 June 2019. The key matters we have discussed
during this period were the:
-- inaugural meeting including consideration of the committee's terms of reference;
-- review of risk identification and risk management processes,
including review of the Company's risk register;
-- review the Company's policies and procedures including review
of the updated Financial Position and Prospects Procedures
Memorandum, Market Abuse Regulations policy, share dealing code,
tax evasion risk assessment and whistleblowing policy; and
-- external audit of the Company's accounts for the period from incorporation to 30 June 2018.
In addition to the above the Audit and Risk Committee
recommended the re-appointment of PwC as the Company's external
auditor. Auditor independence, reputation, experience and fee quote
among other factors were considered by the Board in determining the
external auditor appointment. PwC has been engaged by the Company
to provide other services in the period, including the reporting
accountant role on both the proposed acquisition of the Arclin
business and, in the prior period, the potential acquisition of
Arysta LifeScience. The reporting accountant role is aligned with
that of the Company's auditor and is not considered by the Board to
impinge on the independence of the external auditor. PwC has also
confirmed that it believes that it has remained independent. The
total amount recognised for non-audit services during the year was
GBP2,420,000 (period ended 30 June 2018: GBP1,374,000) which
relates to the proposed acquisition of the Arclin business (2018:
GBP50,000 related to the Company's IPO and GBP1,324,000 related to
the proposed acquisition of Arysta LifeScience).
In respect of the Financial Statements the Audit and Risk
Committee evaluated the prior year audit process and the external
auditor. In addition we reviewed the Annual Report and Audited
Financial Statements and Interim Financial Statements including the
going concern assumption, and considered whether the Financial
Statements are fair, balanced and understandable. As part of the
review, the Board received a report from the external auditor on
its audit.
Mark Brangstrup
Watts
Committee Chairman
25 November 2019
WILMCOTE HOLDINGS PLC
GOVERNANCE NOMINATION AND REMUNERATION REPORT
Nomination and Remuneration Committee Chairman's Statement
I present the Nomination and Remuneration Report for the year
ended 30 June 2019. The Report is set out in two sections; the
'Nomination and Remuneration Report' summarises the committee's
work during the year and the 'Annual Report on Remuneration'
details the Company's application of its remuneration philosophy,
setting out the amounts earned by the Directors during the current
year and looking ahead to next year.
The Nomination and Remuneration Committee was established on 1
October 2018 and throughout this period I have chaired the
committee with James Corsellis and John McAdam serving as members.
John McAdam stepped down as a Non-Executive Director and committee
member on 21 October 2019. The roles and responsibilities of the
Nomination and Remuneration Committee are set out in its terms of
reference, which are available on the Company's website and from
the Company Secretary. The Nomination and Remuneration Committee
are responsible for making recommendations to the Board for the
matters set out in its terms of reference, whilst the
responsibility for establishing the Company's overall approach to
remuneration lies with the Board.
Since establishment, the Nomination and Remuneration Committee
has met three times in the period from inception to 30 June 2019.
The key matters we have discussed during this period were:
-- the inaugural meeting of the committee which included a review of the following:
o the committee's terms of reference;
o size and composition of the Board, including diversity;
o succession planning; and
o the Company's overall approach to remuneration as set out in
the 2018 Remuneration Report.
-- the recruitment of a high-quality candidate to fill the role
of CFO and support the business in achieving the Company's stated
strategy; and
-- the appointment and remuneration package for Kevin Dangerfield.
On 29 April 2019, the Company appointed Kevin Dangerfield as CFO
to the Company effective 1 July 2019. Kevin was appointed whilst
the Company was pursing the potential acquisition of Arclin and
provided additional skills and experience to support the Company
during this time. Following the cessation of discussions in respect
of the acquisition it was mutually agreed between the Company and
Kevin that he step down from his position.
Kevin's remuneration package is set out in the second part of
this report; in determining this we performed a benchmarking
exercise using KPMG's Director Remuneration Report for FTSE 250
businesses. It was expected that on completion of the proposed
Platform Acquisition the business would be of a size comparable to
a FTSE 250 business and as such it was fundamental that the
business have the personnel of this calibre in place to lead the
proposed enlarged group in delivering its strategy.
As detailed on page 42 of these Financial Statements, Kevin was
awarded executive incentive shares. These shares are a fundamental
part of the Company's remuneration philosophy and align the
director's interests to those of our shareholders. Following his
departure the incentive shares were subsequently transferred to the
Company.
Looking Forward
Given the current nature and activities of the Company there are
no significant proposed changes to the executive director
remuneration packages for the year ahead. However, to the extent
that the nature and size of the business changes in the coming
months, the Board composition will be revisited and appointments
reflective of the roles undertaken.
Mark Brangstrup Watts
Committee Chairman
25 November 2019
Directors' Remuneration Report
The information included in this report is not subject to audit
unless specifically indicated.
The remuneration philosophy of the Company is that executive
remuneration should be simple, clear and transparent and support
the delivery of the business strategy by attracting the highest
calibre personnel. This philosophy is reflected in our remuneration
structure.
The Board feels very strongly that the Directors' remuneration
should be linked to the creation and delivery of attractive returns
to shareholders. Although the Board feels it is important to
remunerate senior executives through their basic pay and benefits
at market levels commensurate with their peers, the participation
share scheme has been designed to provide ongoing remuneration in
alignment with shareholders' interests. The participation share
scheme has been in place since before the Company's IPO.
Participation Share Scheme
The Directors believe that the success of the Company will
depend to a high degree on the future performance of its management
team. The Company established incentive arrangements which will
only reward the participants if shareholder value is created,
thereby aligning the interests of management directly with those of
shareholders (the "Participation Share Scheme").
The Company has in place an executive incentive scheme (the
"Management LTIP") through which Adrian Whitfield and Kevin
Dangerfield were to be rewarded for increases in shareholder value,
subject to certain conditions including a preferred return for
Shareholders being satisfied.
Under the Management LTIP, participants have subscribed for A1
Shares in WHJ Limited ("WHJL") which they can give notice to redeem
between the third and fifth anniversaries of the Platform
Acquisition (or earlier if there is an exit event). Subject to
delivering a compound annual growth rate on Shareholders' invested
capital in the Company (taking dividends and any prior return of
capital into account) equal to or greater than 10 per cent. per
annum (the "Shareholder Preferred Return"), the A1 Shares may be
redeemed for an aggregate value equivalent to 10 per cent. of the
excess of the market value of the Company (adjusted for any
dividends or capital returns) over and above its aggregate paid up
share capital (the "Shareholder Value Growth").
Upon receipt of a notice to redeem to WHJL, the Company and the
holders of A1 Shares will have the right to elect that the A1
Shares that would otherwise have been redeemed are instead
exchanged for Ordinary Shares. If Ordinary Shares are issued to
satisfy the redemption of A1 Shares, Shareholders will experience
dilution at the time of any redemption by reference to a fixed
proportion of the Shareholder Value Growth they will have benefited
from. If neither the Company nor the holders of A1 Shares exercise
such right, the holders of A1 Shares will receive cash, which would
instead reduce the Company's cash resources on an equivalent
basis.
In addition, Marwyn Long Term Incentive LP ("MLTI"), in which
James Corsellis and Mark Brangstrup Watts are beneficially
interested, has subscribed for A2 Shares in WHJL (the "Marwyn
Performance Shares"). The Marwyn Performance Shares are intended to
reward Marwyn for its central role in the formation of the Company,
completion of the Platform Acquisition and ongoing involvement in
the development and execution of the Company's strategy to deliver
value to all Shareholders, taking into account Mawyn's track record
of shareholder value creation. In the event that the Shareholder
Preferred Return on all equity invested has been satisfied between
the third and fifth anniversary of the Platform Acquisition (or
earlier if there is an exit event), MLTI will be entitled to redeem
the Marwyn Performance Shares for five per cent. of the Shareholder
Value Growth at the time of giving such notice for cash or Ordinary
Shares on the same basis as the A1 Shares. If Ordinary Shares are
issued to satisfy the redemption of the Marwyn Performance Shares,
Shareholders will experience dilution at the time of any redemption
by reference to a fixed proportion of the Shareholder Value
Growth they will have benefited from. If they are redeemed in
cash, the redemption would instead reduce the Company's cash
resources on an equivalent basis.
The Management LTIP and Marwyn Performance Shares have been
designed to align the Company's shareholders' interests and the
shareholders' expected typical ownership period. The Board strongly
believes that this clear and transparent incentive framework is
aligned with the Company's strategy for growth and provides a
strong platform for the future success of the Company. The
Participation Share Scheme has been designed to ensure that it
is:
Clear Performance of management will only be rewarded where the Company's strategy has been
effectively
implemented and long-term Shareholder value has been created. Creating value for
Shareholders
will create value for participants in the scheme.
Simple Management will be entitled to 10 per cent. of the growth in Shareholder value,
subject to
a preferred return of 10 per cent. per annum growth on all equity invested having
been achieved.
All returns to Shareholders and further equity raises are included in the calculation
of growth
in value to ensure all management actions during the life of the scheme are taken
into account.
With the information required to calculate the value of the scheme being publicly
available,
its value can be easily understood by all stakeholders.
======================================================================================
Proportional The greater the Shareholder value created over a period of three to five years from
the date
of the Platform Acquisition, the greater the potential reward for management under
the scheme.
This correlation drives management to deliver performance sustainable over the long
term.
======================================================================================
Aligned with Shareholders Management are not entitled to any rewards under the Management LTIP unless the
Shareholder
Preferred Return has been achieved. In addition, management are only rewarded under
the scheme
if the Shareholder Preferred Return is satisfied after the third anniversary of the
acquisition
(unless there has been an exit event) and prior to the fifth anniversary.
Management's focus on developing the Company in line with its stated strategy and
delivering
long-term sustainable performance is wholly aligned with the interests of
Shareholders.
The basis of the calculation of growth in value considers all amounts invested by and
returned
to Shareholders during the life of the scheme, thereby reflecting the ongoing
commitments
made by, and returns generated for, Shareholders over that period.
======================================================================================
Aligned with Company Strategy The scheme value will be created over the period following the Platform Acquisition
as the
Company implements its strategy. This is mirrored in the vesting period with awards
only being
capable of exercise if the Shareholder Preferred Return is satisfied after the third
anniversary
of the Platform Acquisition (unless there has been an exit event) and prior to the
fifth anniversary.
It is expected that awards under the scheme will be satisfied by the issue of new
Ordinary
Shares to participants rather than by cash payment, with those new Ordinary Shares
(net of
such new Ordinary Shares as need to be sold to settle tax liabilities associated with
the
award) being subject to a 12-month lock-up. This will further incentivise management
to deliver
outperformance following the exercise of their awards, and for an aggregate period of
up to
six years following the Platform Acquisition.
Leaver conditions apply to the scheme such that any participant who ceases to be an
employee
of the Company and thereby delivering value to Shareholders prior to the third
anniversary
of the Platform Acquisition will (depending on the reason for such person ceasing to
be an
employee) forfeit some or all of their entitlement under the scheme.
======================================================================================
In October 2019, Adrian Whitfield and Kevin Dangerfield stepped
down from their position as directors of the Company and it was
agreed that their A1 Shares be transferred to the Company and will
be subsequently cancelled. As at the date of this report there are
no members of the Management LTIP.
More detail on the Management LTIP and Marwyn Performance Shares
is included in note 17 of these Financial Statements.
It is anticipated that the exercise of the Management LTIP or
Marwyn Performance Shares will result in management receiving
Ordinary Shares in the Company. Those shareholdings could be
substantial and should further align management and
shareholders.
Directors' Basic and Performance Related Pay:
The below table sets out the remuneration of each Director
during the year and prior period:
For the 12 month Adrian Whitfield Mark Brangstrup James Corsellis John McAdam*
period ended 30 GBP'000 Watts
June 2019 GBP'000 GBP'000 GBP'000
Salary 300 7 7 38
================= ================ ================ =============
Guaranteed bonus 100 - - -
================= ================ ================ =============
Taxable benefits 4 - - -
404 7 7 38
================= ================ ================ =============
*John McAdam was appointed on 1 October 2018.
For the 15 month period Adrian Whitfield Mark Brangstrup James Corsellis
from incorporation GBP'000 Watts GBP'000
to 30 June 2018 GBP'000
Salary 385 9 9
================= ================ ================
Guaranteed bonus 128 - -
================= ================ ================
Taxable benefits 8 - -
================= ================ ================
521 9 9
================= ================ ================
Taxable benefits include private medical and dental insurance
and travel insurance. None of the Directors received a pension in
the year or prior period. There was no change in the remuneration
package for the CEO in the two years presented.
John McAdam was appointed as Director effective 1 October 2018
and subsequently stepped down from this position on 21 October
2019. His annual salary for this period was GBP50,000 which is
considered to be market rate for an independent non-executive
director of a business of this nature.
On 29 April 2019, the Company entered into a service contract
with Kevin Dangerfield, pursuant to which he commenced his
employment by the Company as CFO and as an Executive Director on 1
July 2019 and as such Kevin did not receive any remuneration in the
financial year. Kevin's remuneration package included an annual
salary of GBP350,000 per annum, along with an annual discretionary
bonus as decided by the Nomination and Remuneration Committee.
Kevin was also entitled to a payment of 20 per cent of salary in
lieu of contributions to the Company's pension scheme and an annual
car allowance of GBP11,000.
Director Service Contract Provisions
New director and senior management service contracts are
prepared alongside the Company's legal counsel, and new
practices/guidance are considered at the point these are
drafted.
The employment contracts set out clearly the notice period,
termination clauses and claw black clauses for each of the
Directors. In all instances directors are required to step down
from their position should this be voted for by the
shareholders.
Shareholder Vote
At the 2018 AGM, 100 per cent of the shareholders who voted did
so in favour of the remuneration report as set out in the Company's
Annual Report and in favour of the re-election of Adrian Whitfield
and appointment of John McAdam.
Performance Evaluation
A performance evaluation will be undertaken by way of a board
effectiveness review. As set out on page 12 of these Financial
Statements the board effectiveness review will take place once
additional board members are appointed.
Comparison Against Market Performance
The Company does not yet own an operating business, and as such
an illustration of the Company's share price as a comparison to the
market is not presented within this report. No performance related
bonuses have been paid within the year or prior period.
Risks
The Board are mindful of the potential risks associated with its
remuneration policy. The Board aims to provide a structure that
encourages an acceptable level of risk-taking (by benchmarking
against shareholder returns) and an optimal remuneration mix. The
Board has considered the risk involved in the Participation Share
Scheme and is satisfied that the Company's governance procedures
mitigate these risks appropriately.
The Board seeks to ensure that its approach to remuneration
drives behaviour aligned to the long-term interests of the Company
and its shareholders.
Looking Ahead
The Directors are currently pursuing the Recapitalisation, and
following shareholder approval will pursue the Platform
Acquisition. As the nature of the business evolves the Directors
will reconsider the Board and committee composition.
Once the Company has made its first Platform Acquisition, the
objectives of the enlarged Group will be established; at this point
the Directors' service contracts will be revisited and as part of
this process the Nomination and Remuneration Committee will
consider the most appropriate key performance indicators, for the
Directors.
On behalf of the Board
James Corsellis
Chairman
25 November
2019
Independent auditors' report to the members of Wilmcote Holdings
plc
Report on the audit of the financial statements
Opinion
In our opinion, Wilmcote Holdings plc's group financial
statements (the "financial statements"):
-- give a true and fair view of the state of the group's affairs
as at 30 June 2019 and of its loss and cash flows for the year then
ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union; and
-- have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
We have audited the financial statements, included within the
Annual Report and Audited Financial Statements (the "Annual
Report"), which comprise: the consolidated statement of financial
position as at 30 June 2019; the consolidated statement of
comprehensive income, the consolidated statement of cash flows, and
the consolidated statement of changes in equity for the year then
ended; and the notes to the financial statements, which include a
description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities under ISAs (UK) are further described in the
Auditors' 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 remained independent of the group in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC's Ethical
Standard, as applicable to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements.
Our audit approach
Overview
* Overall group materiality: GBP78,000 (2018:
GBP200,000), based on 1% of total assets.
========================================================================================
* The Group comprises the parent entity and five wholly
owned subsidiaries. We
performed a full scope audit of the parent entity, Wilmcote Holdings plc,
and its
subsidiary, WHJ Limited, in addition to the Group consolidation. Taken
together
these accounted for 100% of Group's total assets and 100% of the Group's
consolidated comprehensive
loss.
========================================================================================
* Going concern.
==========================================================================================
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 looked at 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 evaluating whether there was evidence
of bias by the directors that represented a risk of material
misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors'
professional judgement, were of most significance in the 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. This is not a complete list of all risks identified
by our audit.
Key audit matter How our audit addressed the key audit matter
---------------------------------------------------------- ==========================================================
Going concern We obtained management's cash flow forecasts for the
Management performed an assessment of the Group's ability Group for the period to 31 December 2020,
to continue as a going concern for which supports their continued use of the going concern
a period of at least 12 months from the date of approval basis of accounting. We tested the
of the financial statements. They integrity of the forecasts, including mathematical
prepared detailed monthly projected cash flow forecasts accuracy.
based on forecast costs and overheads The forecasts include a number of key assumptions. We
to maintain the Group in existence as a listed entity in held extensive discussions with management
the period of assessment. In making and examined these key assumptions, such as the level of
their assessment management considered the timing of future operating costs required to
settlement of existing liabilities including maintain the Group with no other activity.
the costs associated with the termination of contracts We examined the nature of costs that management has
with key management and the settlement assumed it can defer, if needed, and reviewed
of aborted acquisition costs. correspondence with the key service providers to
determine whether it was reasonable for management
The forecasts assume existing contractual obligations and to assume this could be undertaken.
other expected administrative overheads We have reviewed the terms of the proposed open offer of
but do not assume any incremental diligence activity for a the company's ordinary share capital
further platform acquisition. The and an irrevocable undertaking from its majority
forecasts show that if no further action is taken the shareholder to fully participate in the offer
Group could run out of cash during 2020, to assess whether it is reasonable for management to rely
however, it could manage this position by deferring some on this undertaking in their going
costs but would end 2020 with a minimal concern assessment.
cash balance that would not allow it to fund its strategy. Whilst management has not included costs for incremental
diligence activity for the pursuit
Management has then reflected separately the assumed net of a new acquisition and for a new management team we
proceeds of the proposed open offer concluded that it is reasonable for
of ordinary shares as described in note 2b) taking into them to assume that these costs would be managed so that
account an irrevocable undertaking they remain within the constraints
to the directors from its majority shareholder, who owns of the cash available to the Group and that new financing
60% of the Group's issued share capital, would be sought, if needed, to finalise
to participate fully in the offer. a platform acquisition.
Having regard to the existing and future working capital We examined the disclosure provided in Note 2b) of the
position of the Group, the directors Consolidated Financial Statements and
of the Group reviewed the cash flow forecasts prepared by found that it is sufficient to inform members about the
management, evaluated the impact directors' going concern assessment.
on the Group and concluded that the going concern basis of Our conclusions relating to going concern are included
accounting for the preparation later in this report.
of the Consolidated Financial Statements continues to be
appropriate albeit, in the absence
of additional proceeds from the proposed open offer,
relies on the deferral of certain amounts
payable to key service providers.
Refer to Going Concern (Note 2b) of the Consolidated
Financial Statements).
========================================================== ==========================================================
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
group, the accounting processes and controls, and the industry in
which it operates.
The Group comprises Wilmcote Holdings plc and its five
subsidiaries. A reporting package for each component is
submitted and consolidated by Wilmcote Holdings plc's finance
function, including its expenditure and financial position as
prepared under Group accounting policies which are in compliance
with IFRSs. We audited two components centrally
(Wilmcote Holdings plc and WHJ Limited), supplemented by
auditing the Group consolidation.
Taken together, our audit work achieved coverage of 100% of
consolidated expenditure, 100% of the total assets and 100%
of consolidated loss after tax. This is due to the fact that the
components not subject to a full scope audit had no revenues or
expenditure in the period and all assets on the balance sheets
of those entities eliminate on consolidation.
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 group materiality GBP78,000 (2018: GBP200,000).
=============================== =====================================================================================
How we determined it 1% of total assets.
=============================== =====================================================================================
Rationale for benchmark applied We believe that total assets provides us with a consistent year on year basis for
determining
materiality. Given the current stage in the Group's lifecycle with no platform
acquisition
to date. We believe that it is not appropriate to use a profit measure at this time.
Total
assets is a generally accepted auditing benchmark given the nature of the Group's
operations.
=============================== =====================================================================================
For each component in the scope of our group audit, we allocated
a materiality that is less than our overall group materiality. The
range of materiality allocated across components was between
GBP60,000 and GBP77,500.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above GBP7,800 (2018:
GBP20,000) as well as misstatements below that amount that, in our
view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation Outcome
We are required to report if we have anything material to We have nothing material to add or to draw attention to.
add or draw attention to in respect However, because not all future events or conditions can
of the directors' statement in the financial statements be predicted, this statement is not
about whether the directors considered a guarantee as to the group's ability to continue as a
it appropriate to adopt the going concern basis of going concern. For example, the terms
accounting in preparing the financial statements on which the United Kingdom may withdraw from the
and the directors' identification of any material European Union are not clear, and it is
uncertainties to the group's ability to difficult to evaluate all of the potential implications
continue as a going concern over a period of at least on the group's trade, customers, suppliers
twelve months from the date of approval and the wider economy.
of the financial statements.
========================================================== ==========================================================
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our auditors'
report thereon. The directors are responsible for the other
information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or any form of assurance 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 we
identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial
statements or a material misstatement of the other information. 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 set out on page 7, the directors are responsible
for the preparation of the financial statements in accordance with
the applicable framework and for being satisfied that they give a
true and fair view. The directors are also 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.
In preparing the financial statements, the directors are
responsible for assessing the group'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 group or to cease
operations, or have no realistic alternative but to do so.
Auditors' 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
auditors' report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditors' report.
Use of this report
This report, including the opinions, has been prepared for and
only for the company's members as a body in accordance with Article
113A of the Companies (Jersey) Law 1991 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.
Other required reporting
Companies (Jersey) Law 1991 exception reporting
Under the Companies (Jersey) Law 1991 we are required to report
to you if, in our opinion we have not received all the information
and explanations we require for our audit. We have no exceptions to
report arising from this responsibility.
Jonathan Lambert
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants
London
25 November 2019
WILMCOTE HOLDINGS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Period ended
30 June 30 June
2019 2018
Note GBP'000 GBP'000
Administrative expenses 7 (10,299) (13,277)
Operating loss (10,299) (13,277)
Finance income 5 46 81
Loss before income taxes (10,253) (13,196)
Income tax 8 - -
========== ============
Loss for the year / period attributable
to owners of the parent (10,253) (13,196)
Total other comprehensive income - -
Total comprehensive loss for the year
/ period attributable to owners of the
parent (10,253) (13,196)
========== ============
Loss per ordinary share GBP GBP
Basic and diluted 9 (0.492) (0.790)
The Group's activities derive from continuing operations.
The notes on pages 32 to 46 form an integral part of these
Consolidated Financial Statements.
WILMCOTE HOLDINGS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
30 June 30 June
2019 2018
Note GBP'000 GBP'000
Assets
Non-current assets
Property, plant & equipment 2 3
-------- --------
Total non-current assets 2 3
Current assets
Other receivables 11 285 367
Cash and cash equivalents 12 7,525 19,473
-------- --------
Total current assets 7,810 19,840
Total assets 7,812 19,843
======== ========
Equity and liabilities
Equity
Stated capital 14 24,370 24,370
Share-based payment reserve 15 288 285
Accumulated losses (23,362) (13,196)
-------- --------
Total equity attributable to equity holders
of the parent 1,296 11,459
Current liabilities
Trade and other payables 13 6,516 8,384
-------- --------
Total liabilities 6,516 8,384
Total equity and liabilities 7,812 19,843
======== ========
The notes on pages 32 to 46 form an integral part of these
Consolidated Financial Statements.
The Consolidated Financial Statements were approved by the Board
of Directors on 25 November 2019 and were signed on its behalf
by:
James Corsellis Mark Brangstrup Watts
Chairman Executive Director
WILMCOTE HOLDINGS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share based
Stated payment Accumulated Total
Note capital reserve losses equity
-------------- ----------------- ----------------- ---------
GBP'000 GBP'000 GBP'000 GBP'000
At incorporation 17 March - - - -
2017
14,
Issue of shares 17 25,000 36 - 25,036
Share issue costs 14 (630) - - (630)
Loss and total comprehensive
loss for the period - - (13,196) (13,196)
Share-based payment
expense 17 - 249 - 249
-------------- ----------------- ----------------- ---------
Balance as at 30 June
2018 24,370 285 (13,196) 11,459
============== ================= ================= =========
Share based
Stated payment Accumulated Total
Note capital reserve losses equity
---------- -------------- ------------ ---------
GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1
July 2018 24,370 285 (13,196) 11,459
Loss and total comprehensive
loss for the year - - (10,253) (10,253)
Share-based payment
expense 17 - 90 - 90
Cancellation of
shares 17 - (87) 87 -
---------- -------------- ------------ ---------
Balance as at 30 June
2019 24,370 288 (23,362) 1,296
========== ============== ============ =========
The notes on pages 32 to 46 form an integral part of these
Consolidated Financial Statements
WILMCOTE HOLDINGS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year For the
ended period
30 June ended
30 June
2019 2018
Note GBP'000 GBP'000
Operating activities
Loss for the year / period (10,253) (13,196)
Adjustments to reconcile total operating
loss to net cash flows:
Deduct finance income (46) (81)
Add back depreciation expense 1 2
Add back share based payment expense 17 90 249
Working capital adjustments:
Decrease/(increase) in receivables 80 (367)
(Decrease)/increase in trade and other
payables (1,847) 8,272
Interest received 46 81
Net cash flows used in operating activities (11,929) (5,040)
------------ --------
Investing activities
Purchase of property, plant & equipment - (5)
------------ --------
Net cash flows used in investing activities - (5)
------------ --------
Financing activities
Proceeds from issue of ordinary shares 14 - 25,000
Proceeds from issue of WHJ Limited
A1 and A2 shares - 148
Payment on cancellation of WHJ Limited
A1 shares (19) -
Costs directly attributable to equity
raise 14 - (630)
------------ --------
Net cash flows (used in) / generated
from financing activities (19) 24,518
------------ --------
Net (decrease)/increase in cash and
cash equivalents (11,948) 19,473
Cash and cash equivalents at the beginning
of the year / period 19,473 -
------------ --------
Cash and cash equivalents at the end
of the year / period 12 7,525 19,473
============ ========
The notes on pages 32 to 46 form an integral part of these
Consolidated Financial Statements.
WILMCOTE HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Wilmcote Holdings plc ("Wilmcote", or the "Company"), an
"investing company" for the purposes of the AIM Rules for Companies
("AIM Rules"), is incorporated in Jersey (company number 123424)
and domiciled in the United Kingdom. It is a public limited company
with its registered office at One Waverley Place, Union Street, St
Helier, Jersey, JE1 1AX and is registered as a UK establishment
(BR019423) with its address at 11 Buckingham Street, London, WC2N
6DF. The Company is the parent (directly and indirectly) of a
number of subsidiaries (together with the Company, collectively the
"Group"), as detailed in note 10. The activity of the Company is
the acquisition and subsequent development of assets engaged in the
downstream and speciality chemicals sector.
2. ACCOUNTING POLICIES
(a) Basis of preparation
The Consolidated Financial Statements represent the year ended
30 June 2019, with the comparative period from incorporation on 17
March 2017 to 30 June 2018 and therefore the results are not
directly comparable due to the different time periods which they
represent.
The Consolidated Financial Statements are prepared in accordance
with International Financial Reporting Standards and IFRS
Interpretations Committee interpretations as adopted by the
European Union (collectively, "IFRS") and are presented in British
pounds sterling, which is the presentational currency of the Group
and the functional currency and presentational currency of the
Company. All values are rounded to the nearest thousand (GBP000)
except where otherwise indicated. The Consolidated Financial
Statements have been prepared under the historical cost
convention.
The principal accounting policies adopted in the preparation of
the Consolidated Financial Statements are set out below. The
policies have been consistently applied throughout the periods
presented.
(b) Going concern
The Consolidated Financial Statements have been prepared on a
going concern basis, which assumes that the Group will continue to
be able to meet its liabilities as they fall due for the
foreseeable future. The Directors closely monitor and manage
available cash resources to ensure that the Company can meet its
liabilities as they fall due, but the current cash position of the
Company is not sufficient to enable active pursuit of a Platform
Acquisition. Consequently, As announced on 25 November 2019, the
Company is undertaking an open offer of Ordinary Shares to raise a
further GBP6.5 million of capital. The manager of the Company's
largest shareholder has committed to subscribe for its pro-rata
entitlement, being 60.44 per cent of Ordinary Shares to be issued
under the open offer and to vote in favour of the resolutions
proposed at the Company's Annual General Meeting on 12 December
2019. The Directors are confident that the Group will, following
completion of the Recapitalisation, have significant and sufficient
cash reserves to pursue its investment strategy and have concluded
that it remains appropriate to use the going concern basis of
accounting for the Consolidated Financial Statements.
The capital generated from the open offer will enable the
Company to consider and appoint, if appropriate, an experienced
management team and continue to pursue a Platform Acquisition.
Further capital may be required to fund the Platform Acquisition
and, dependent on the size of the proposed transaction, to fund
transaction-related expenses.
(c) New standards and amendments to International Financial Reporting Standards
Standards, amendments and interpretation effective and adopted
by the Group:
The accounting policies adopted in the presentation of these
Consolidated Financial Statements reflect the adoption of a number
of new standards, amendments and interpretations effective for
periods beginning on or after 1 January 2018, including (but not
limited to) IFRS 9 Financial Instruments and IFRS 15 Revenue from
Contracts with Customers. None of these new standards, amendments
or interpretations have had a material impact on the Group.
Standards, amendments and interpretations issued but not yet
effective:
The following standards are issued but not yet effective. The
Group intends to adopt these standards, if applicable, when they
become effective. It is not currently expected that these standards
will have a material impact on the Group.
Standard Effective date
IFRS 16 Leases 1 January 2019
IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019
Amendments to IFRS 9: Prepayment Features with 1 January 2019
Negative Compensation
Amendments to IAS 28: Long-term Interests in 1 January 2019
Associates and Joint Ventures
Annual improvement to IFRS Standards 2015-2017 1 January 2019
Cycle
Amendments to IAS 19: Plan Amendment, Curtailment 1 January 2019*
or Settlement
Amendments to IFRS 3: Business Combinations 1 January 2019*
Amendments to IAS 1 & *8: Definition of Material 1 January 2020*
IFRS 17 Insurance Contracts 1 January 2021*
* Subject to EU endorsement
(d) Basis of consolidation
Subsidiaries are entities controlled by the Company. Control
exists when the Company is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. The
financial information of subsidiaries is fully consolidated from
the date that control commences until the date that control
ceases.
Intragroup balances, and any gains and losses or income and
expenses arising from intragroup transactions, are eliminated in
preparing the consolidated financial information.
(e) Property, plant & equipment
Property, plant & equipment is measured initially at
acquisition cost and subsequently carried net of any accumulated
depreciation and any impairment losses.
Property, plant & equipment is depreciated systematically on
the basis of the estimated useful life of the items, and the cost
of the assets is distributed on a straight-line basis over the
estimated useful lives, which have been assessed to be:
Useful life
Office Equipment 3 years
Items of property, plant and equipment are de-recognised when
they are sold or when no future economic benefit is expected to be
obtained from their continuing use. The gain or loss arising on the
disposal or de-recognition of an item of property, plant and
equipment is determined as the difference between the proceeds from
the sale and the carrying amount of the asset and is recognised in
the Consolidated Statement of Comprehensive Income.
(f) Other receivables
Other receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less impairment.
(g) Cash and cash equivalents
Cash and cash equivalents comprise cash balances at banks.
(h) Stated capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are recognised in
stated capital as a deduction from the proceeds.
(i) Trade and other payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less. If not, they are
presented as non-current liabilities. Trade and other payables are
recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method.
(j) Corporation tax
Corporation tax for the period presented comprises current and
deferred tax.
Current tax is the expected tax payable on the taxable income
for the period. Taxable profit differs from profit reported in the
consolidated statement of comprehensive income because some items
of income and expense are taxable or deductible in different years,
or may never be taxable or deductible. Current tax is the expected
tax payable on the taxable income for the period. The Group's
current tax is calculated using tax rates enacted or substantially
enacted at the balance sheet date, and any adjustment to taxes
payable in respect of previous periods.
Deferred tax is the tax expected to be payable or recoverable in
the future arising from temporary differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit. Deferred tax is accounted for using the balance sheet
liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
(k) Pension benefits
The Group pays contributions to externally-administered pension
plans on behalf of employees. The Group has no further payment
obligations once the contributions have been paid. The
contributions are recognised as an expense using the accruals
basis.
(l) Loss per ordinary share
The Group presents basic earnings per ordinary share ("EPS")
data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is calculated by
adjusting the weighted average number of ordinary shares
outstanding to assume conversion of all dilutive potential ordinary
shares.
(m) Share based payments
The A1 Shares in WHJ Limited ("WHJL") (the "A1 Shares" or the
"Participation Shares") and the A2 Shares in WHJL (the "A2 Shares")
represent equity-settled share-based payment arrangements under
which the Group receives services as a consideration for the
additional rights attached to these equity shares, over and above
their nominal price.
Equity-settled share-based payments to certain of the Directors
and others providing similar services are measured at the fair
value of the equity instruments at the grant date. The fair value
is expensed, with a corresponding increase in equity, on a
straight-line basis from the grant date to the expected exercise
date. Where the equity instruments granted are considered to vest
immediately, the services are deemed to have been received in full,
with a corresponding expense and increase in equity recognised at
grant date.
The dilutive effect of outstanding share-based payments is
reflected as share dilution in the computation of diluted EPS.
3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group's Consolidated Financial Statements
under IFRS requires the Directors to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities. Estimates and
judgements are continually evaluated and are based on historical
experience and other factors including expectations of future
events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates. The use of the
going concern basis of accounting is explained in note 2b.
Significant estimates
There are significant estimates and assumptions used in the
valuation of the Participation Shares. Management has considered at
the grant date, the probability of a successful first acquisition
by the Group and the potential range of value for the Participation
Shares, based on the circumstances on the grant date. The fair
value of the Participation Shares and related share-based payment
expense was calculated using a Monte Carlo valuation model. A
summary of the terms is set out in note 17.
Significant judgements
For the year ended 30 June 2019 and at the year end, the
Directors do not consider that they have made any significant
judgements which would materially affect the balances and results
reported in these Consolidated Financial Statements.
4. SEGMENT INFORMATION
The Board of Directors is the Group's chief operating
decision-maker. As the Group has not yet acquired an operating
business, the Board of Directors considers the Group as a whole for
the purposes of assessing performance and allocating resources, and
therefore the Group has one reportable operating segment.
5. FINANCE INCOME
For the year For the period
ended 30 June ended 30 June
2019 2018
GBP'000 GBP'000
Interest on bank deposits 46 81
-------------- --------------
46 81
-------------- --------------
6. EMPLOYEES AND DIRECTORS
(a) Employment costs for the Group during the year:
For the year For the period
ended 30 June ended 30 June
2019 2018
GBP'000 GBP'000
Wages and salaries 715 781
Pension contributions 2 1
Social security costs 93 102
Short term employment benefits 11 16
Other employment related expenses 320 118
-------------- --------------
Total employment costs expense 1,141 1,018
============== ==============
(b) Key management compensation
The Board considers the Directors of the Company, along with
certain senior employees, to be the key management personnel of the
Group. Details of the amounts paid to key management personnel are
detailed in the Nomination and Remuneration Report on pages 17 -
23.
(c) Employed persons
The average monthly number of persons employed by the Group
(including Directors) during the year was as follows:
For the year For the period
ended 30 June ended 30 June
2019 2018
GBP'000 GBP'000
Administrative 1 1
Key management 1 1
Directors 4 3
6 5
============== ==============
7. ADMINISTRATIVE EXPENSES
For the year For the period
ended 30 June ended 30 June
2019 2018
GBP'000 GBP'000
Group expenses by nature
Employment costs 1,141 1,018
Non-recurring project, professional
and diligence costs 7,481 10,281
Travel and entertaining 61 208
Office costs 77 118
Professional support 1,425 1,377
Share-based payment expenses 90 249
Other expenses 24 26
10,299 13,277
============== ==============
Non-recurring project costs are those incurred on projects that
are considered to be one-off or non-recurring in nature. These
projects are usually related to potential acquisitions where
incremental and identifiable external costs are incurred by the
Group in order to make or evaluate the potential transaction, even
if it is not consummated.
8. INCOME TAX
For the year For the period
ended to 30 June ended 30 June
2019 2018
GBP'000 GBP'000
Analysis of tax in year / period
Current tax on loss for the year / - -
period
----------------- --------------
Total current tax - -
================= ==============
Reconciliation of effective rate and tax charge:
For the year For the period
ended to 30 June ended 30 June
2019 2018
GBP'000 GBP'000
Loss on ordinary activities before
tax (10,253) (13,196)
----------------- --------------
Loss on ordinary activities multiplied
by the rate or corporation tax in the
UK of 19 per cent (2018: 19 per cent). (1,948) (2,507)
Effects of:
Losses carried forward for which no
deferred tax recognised 1,948 2,507
Total taxation charge - -
================= ==============
The Group is tax resident in the UK. As at 30 June 2019,
cumulative tax losses available to carry forward against future
trading profits were GBP23,362,000 (2018: GBP13,196,000) subject to
agreement with HM Revenue & Customs. Prior to a Platform
Acquisition, there is no certainty as to future profits and no
deferred tax asset is recognised in relation to these carried
forward losses. Under UK Law, there is no expiry for the use of tax
losses.
9. LOSS PER ORDINARY SHARE
Basic EPS is calculated by dividing the profit attributable to
equity holders of the company by the weighted average number of
ordinary shares in issue during the period. Diluted EPS is
calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive potential
ordinary shares. The weighted average number of shares has not been
adjusted in calculating diluted EPS as there are no instruments
which have a current dilutive effect.
Refer to note 17 for instruments that could potentially dilute
basic EPS in the future.
For the year For the period
ended to 30 June ended 30 June
2019 2018
Loss attributable to owners of the
parent (GBP'000) (10,253) (13,196)
Weighted average number of ordinary
shares in issue 20,833,336 16,702,055
Weighted average number of ordinary
shares for diluted EPS 20,833,336 16,702,055
Basic and diluted loss per ordinary
share (GBP) (0.492) (0.790)
10. SUBSIDIARIES
Subsidiary undertakings of the Group
The Company owns, directly or indirectly, the whole of the
issued and fully paid ordinary share capital of its subsidiary
undertakings.
The subsidiary undertakings of the Company and Group as at 30
June 2019 are presented below:
Proportion
of ordinary Proportion
shares held of ordinary
Nature of Country directly by shares held
Subsidiary business of incorporation parent by the Group
------------------- ----------------- ------------------- ------------- --------------
Incentive
WHJ Limited vehicle Jersey 100% 100%
WCH Group Limited Dormant company England 100% 100%
Wilmcote Group
Limited Dormant company England 0% 100%
Arrow US Holdings
Inc Dormant company United States 0% 100%
Arrow Canadian
Holdings Limited Dormant company Canada 0% 100%
There are no restrictions on the Company's ability to access or
use the assets and settle the liabilities of the Company's
subsidiaries.
The registered office of WHJ Limited is One Waverley Place,
Union Street, St Helier, Jersey, JE1 1AX. The registered office of
Wilmcote Group Limited and WCH Group Limited is 11 Buckingham
Street, London, WC2N 6DF. The registered address for Arrow US
Holdings Limited is 1209 Orange Street, Wilmington, New Castle,
Delaware, 19801. The registered address for Arrow Canadian Holdings
Limited is 1055 West Hastings Street, Suite 1700, Vancouver, BC,
V6E 2E9.
11. OTHER RECEIVABLES
As at As at
30 June 30 June
2019 2018
GBP'000 GBP'000
Amounts receivable within one year:
Prepayments 45 33
Other receivables 55 59
VAT receivable 185 275
-------- --------
285 367
======== ========
Other receivables are all current.
There is no material difference between the book value and the
fair value of the receivables. Receivables are considered to be
past due once they have passed their contracted due date.
12. CASH AND CASH EQUIVALENTS
As at As at
30 June 30 June
2019 2018
GBP'000 GBP'000
Cash and cash equivalents
Cash at bank 7,525 19,473
-------- --------
7,525 19,473
======== ========
Credit risk is managed on a group basis. Credit risk arises from
cash and cash equivalents and deposits with banks and financial
institutions. For banks and financial institutions, only
independently rated parties with a minimum short-term credit rating
of P-1, as issued by Moody's, are accepted. The utilisation of
credit limits is regularly monitored.
13. TRADE AND OTHER PAYABLES
As at As at
30 June 30 June
2019 2018
GBP'000 GBP'000
Amounts falling due within one year:
Trade payables 1,113 1,059
Accruals 5,312 7,213
A1 share liability 91 112
-------- --------
6,516 8,384
======== ========
There is no material difference between the book value and the
fair value of the trade and other payables.
14. STATED CAPITAL
As at As at
30 June 30 June
2019 2018
GBP'000 GBP'000
Authorised
Unlimited ordinary shares of no par
value
Issued and fully paid
20,833,336 ordinary shares of no par
value 24,370 24,370
-------- --------
24,370 24,370
======== ========
On incorporation, 2 ordinary shares of no par value were issued
at GBP1.20 per share for aggregate consideration of GBP2.40. On 21
March 2017, a further 8,333,334 ordinary shares of no par value
were issued at GBP1.20 for an aggregate consideration of
GBP10,000,001. Following the Company's admission to AIM on 17
August 2017, a further 12,500,000 ordinary shares of no par value
were issued at GBP1.20 for an aggregate consideration of
GBP15,000,000. GBP630,427 of costs directly attributable to the
August 2017 share issue have been taken against stated capital.
The holders of ordinary shares are entitled to receive dividends
as declared and are entitled to one vote per ordinary share at
meetings of the Company.
15. RESERVES
The following describes the nature and purpose of each reserve
within shareholders' equity:
Accumulated losses
Cumulative losses recognised in the Consolidated Statement of
Comprehensive Income.
Share based payment reserve
The share based payment reserve is the cumulative amount
recognised in relation to the equity-settled share based payment
scheme as further described in note 17.
16. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
The Group has the following categories of financial instruments
as at 30 June 2019:
As at As at
30 June 30 June
2019 2018
GBP'000 GBP'000
Financial assets measured at amortised
cost
Cash and cash equivalents 7,525 19,473
Other receivables 55 59
-------- --------
7,580 19,532
======== ========
Financial liabilities measured at amortised
cost
Trade and other payables 6,516 8,384
-------- --------
6,516 8,384
======== ========
All financial instruments are classified as current assets and
current liabilities. There are no non-current financial instruments
as at 30 June 2019.
The fair value and book value of the financial assets and
liabilities are materially equivalent.
The Group has exposure to the following risks from its use of
financial instruments:
-- Market risk;
-- Liquidity risk; and
-- Credit risk
This note presents information about the Group's exposure to
each of the above risks and the Group's objectives, policies and
processes for measuring and managing these risks.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, to set appropriate risk
limits and controls and to monitor risks and adherence limits. Risk
management policies and systems are reviewed regularly to reflect
changes in market conditions and the Group's activities.
Treasury activities are managed on a Group basis under policies
and procedures approved and monitored by the Board. These are
designed to reduce the financial risks faced by the Group which
primarily relate to movements in interest rates.
Market risk
The Group's activities primarily expose it to the risk of
changes in interest rates due to the significant cash balance
historically held (and expected to be held post Recapitalisation);
however any change in interest rates will not have a material
effect on the Group. The Group's operations are predominately in
GBP, its functional currency and accordingly minimal translation
exposures arise in receivables or payables.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group's
approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the
Group's reputation. Due to the limited cash resources currently,
the Company is seeking to raise additional capital through the
Recapitalisation.
The Group currently meets all liabilities from cash reserves.
The Group's liability for operating expenses is monitored on an
ongoing basis to ensure cash resources are adequate to meet
liabilities as they fall due.
Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation. The main credit risk relates to the cash
held with financial institutions. The Company manages its exposure
to credit risk associated with its cash deposits by selecting
counterparties with a high credit rating with which to carry out
these transactions. The counterparty for these transactions is
Barclays Bank plc, which holds a short-term credit rating of P-1,
as issued by Moody's. The Group's maximum exposure to credit risk
is the carrying value of the cash on the Consolidated Statement of
Financial Position.
Capital management
The Board's policy is to maintain a strong capital base so as to
maintain creditor and market confidence and to sustain future
development of the business. Capital includes stated capital and
all other equity reserves attributable to the equity holders of the
Company and totals GBP1.3 million as at 30 June 2019 (GBP11.5
million as at 30 June 2018). There were no changes in the Group's
approach to capital management during the year.
17. SHARE-BASED PAYMENTS
Management Long Term Incentive Arrangements
Implementation of the Group share scheme - Participation
Shares
Arrangements have been put in place to create incentives for
those who are expected to make key contributions to the success of
the Group. Success depends upon the sourcing of attractive
investment opportunities, effective execution of transactions, and
the subsequent integration and optimisation of target businesses.
Accordingly, an incentive scheme has been created to reward key
executive contributors for the creation of value, once all
investors have received a preferential level of return. In order to
make these arrangements most efficient, they are based around a
subscription for shares in WHJL by the key contributors through the
"Participation Shares". As at 30 June 2019, Participation Shares
were held by Adrian Whitfield and Kevin Dangerfield.
On being offered, the Company will purchase the Participation
Shares either for cash or for the issue of new ordinary shares at
its discretion, with the expectation being that new shares will be
issued. The valuation of the Participation Shares is discussed
below. The Participation Shares may only be sold on this basis if
both the growth and at least one of the vesting conditions have
been satisfied. If the growth condition has not been satisfied on
or before the fifth anniversary of a Platform Acquisition (or such
later date as WHJL and the holders of 90 per cent. of the ordinary
shares, A1 Shares and A2 Shares in WHJL agree) the Participation
Shares must be sold to the Company or, at its election, redeemed by
WHJL and in both cases at a price per Participation Share equal to
its subscription price unless and to the extent that the Nomination
& Remuneration Committee determines otherwise.
Participation Shares
In 2017, 500 A1 Shares were issued to Adrian Whitfield and 100
A1 Shares were issued to the Corporate Development Director, which
have been accounted for in accordance with IFRS 2 Share-based
Payment as equity-settled share-based payment awards.
On 21 August 2018, the 600 A1 Shares issued to Adrian Whitfield
and the Corporate Development Director were bought back by the
Group and subsequently cancelled. On 4 September 2018, 500 new A1
Shares were issued to Adrian Whitfield and 100 new A1 Shares were
issued to the Corporate Development Director, which have been
treated as replacement awards under IFRS 2.
In March 2018, 100 A1 Shares were issued to a potential Chief
Financial Officer ("CFO"), contingent on him commencing employment
as CFO. As he was not appointed, these shares were subsequently
cancelled in August 2018 and no expense was recognised in any
period in respect of the A1 Shares.
In April 2019, 100 A1 Shares were issued to Kevin Dangerfield,
who became CFO effective 1 July 2019. The 100 A1 Shares issued to
the Corporate Development Director were cancelled following his
resignation from the Company in accordance with the leaver
provisions discussed below.
Grant date
The date at which the entity and another party agree to a
share-based payment arrangement, for accounting purposes, is the
grant date. As the issue of Participation Shares in August 2018 was
treated as replacement awards for the A1 Shares issued previously,
under IFRS2, the grant date for the replacement shares is the same
as the equivalent cancelled shares. The grant date for each of the
Participation Shares in issue as at 30 June 2019 is:
Participant Grant date
Adrian Whitfield 21 March 2017
Kevin Dangerfield 29 April 2019
Growth Condition
The growth condition requires the compound annual growth of the
Company's equity value to be at least 10 per cent. per annum. The
growth condition takes into account new shares issued, dividends
and capital returned to shareholders.
Service Conditions and Leaver Provisions
There are leaver provisions in relation to the Participation
Shares which are set out in the subscription agreements entered
into between the holders of the A1 Shares and WHJL.
If the holder leaves in circumstances in which he or she is
deemed to be a "Good Leaver" (being any reason other than a bad
leaver circumstance), then depending on circumstances, generally he
or she may be required to sell his or her A1 Shares to WHJL at the
subscription price, a specified price or the market value, or may
retain his or her A1 Shares, or a combination of these provisions.
Generally, a holder will be entitled to retain the full number of
A1 Shares (subject to the vesting provisions set out below) if he
or she is still an employee on the third anniversary of the
Platform Acquisition. Any holder deemed to be a "Bad Leaver" (such
as termination of employment for gross misconduct, fraud or
criminal acts) will be required to sell his A1 Shares back to WHJL
for a total consideration of GBP1.
If Adrian Whitfield ceases to be involved with the Company
before the second anniversary of the Platform Acquisition because
he has resigned, then all of his A1 Shares will be forfeited. If
Kevin Dangerfield ceases to be involved with the Company either (i)
at any time before the date falling six months after the Platform
Acquisition for any reason or (ii) before the second anniversary of
the Platform Acquisition because he has resigned, then all of his
A1 Shares will be forfeited. Any A1 Shares so forfeited will be
sold back to WHJL in accordance with the leaver provisions.
As there are conditions whereby the holders of A1 Shares can
sell their shares to WHJL for the price they paid, the amounts
received from on the issue of A1 Shares is recognised as a
liability in the Consolidated Financial Statements.
Vesting Conditions and Vesting Period
The A1 Shares are subject to certain vesting conditions, at
least one of which must be (and continue to be) satisfied in order
for a holder of Participation Shares to exercise their redemption
rights, such right beginning on the third anniversary and ending on
the fifth anniversary of the date of the Platform Acquisition or
such later date as is agreed between the Company and the holders of
at least 90 per cent. of the ordinary shares in WHJL, A1 Shares and
A2 Shares.
The vesting conditions are as follows:
(i) it is later than the third anniversary of the Platform Acquisition;
(ii) a sale of all or a material part of the business of WHJL;
(iii) a sale of all of the issued ordinary shares of WHJL or a merger of WHJL;
(iv) a winding up of WHJL; or
(v) a sale, merger or change of control of the Company.
If any of the vesting conditions described at paragraphs (ii) to
(v) above are satisfied before the third anniversary of the
Platform Acquisition, the A1 Shares will be treated as having
vested in full.
Value
Subject to the provisions detailed above, the Participation
Shares can be sold to, or redeemed by, the Company for an aggregate
value equivalent to 10 per cent. of the excess in the market value
of the Company over and above its aggregate paid up share capital,
allowing for any dividends and other capital movements.
Holding of Participation Shares
As at 30 June 2019, Participation Shares have been allocated and
issued as shown in the table below.
Number
of Participation Fair value
Nominal Issue Price Shares at grant
price Per A1 Share date
Adrian Whitfield GBP1 GBP72.32 500 GBP205,465
Kevin Dangerfield GBP1 GBP552.96 100 GBP316,800
600 GBP522,265
================== =============
No Participation Shares were exercisable at 30 June 2019.
Valuation of Participation Shares
The fair value of the Participation Shares granted under the
scheme has been calculated using a Monte Carlo model. The fair
value uses an ungeared volatility of 25 per cent. and is based on a
weighted average share price over the vesting period. An expected
term input of four years has been used, being the midpoint of the
period of time between the date on which an acquisition is expected
to take place and the start and end of the redemption period. The
Participation Shares are subject to a growth condition, which is a
market performance condition, and as such has been taken into
consideration in determining their fair value. The risk free rate
is taken from zero-coupon UK Government bonds with a redemption
period in line with the expected term. The model incorporates a
range of probabilities for the likelihood of an acquisition being
made of a given size.
Expense related to Participation Shares
GBP90,000 has been recognised in the Consolidated Statement of
Comprehensive Income in the year, including accelerating the
remaining expense on cancellation of the 100 A1 Shares issued to
the Corporate Development Director in relation to the Participation
Shares. Upon cancellation, the total expense relating to these A1
Shares was recycled from the Share Based Payment Reserve to the
Accumulated Losses reserve.
Marwyn Performance Shares
Marwyn Long Term Incentive LP ("MLTI"), in which James Corsellis
and Mark Brangstrup Watts are beneficially interested, has
subscribed for all of the A2 Shares in WHJL (the "Marwyn
Performance Shares"). The Marwyn Performance Shares, which were
issued prior to the initial public offering of the Company on AIM,
are intended to reward Marwyn for its key contribution in the
creation of shareholder value, taking into account Marwyn's track
record of shareholder value creation.
The Marwyn Performance Shares are subject to the same growth,
vesting and redemption conditions as the A1 Shares. In the event
that the relevant conditions (including the growth condition, being
a compound 10 per cent. annual growth on all equity invested over a
three to five-year period) are satisfied, MLTI is entitled to
redeem the Marwyn Performance Shares for an aggregate value
equivalent to five per cent. of the shareholder value growth.
Nominal Issue Price Number Fair value
price Per A2 Share of A2 Shares at grant
date
Marwyn Long Term Incentive GBP1 GBP72.32 500 GBP205,465
LP
Expense related to the Marwyn Performance Shares
As the Marwyn Performance Shares do not have any service
conditions, their fair value on grant date was recognised
immediately as an expense in the period ended 30 June 2018.
Consequently, there is no expense in relation to the Marwyn
Performance Shares in the current year.
18. RELATED PARTY TRANSACTIONS
The AIM Rules define a related party as any (i) director of the
Company or its subsidiary, (ii) a substantial shareholder, being
any shareholders holding at least 10 per cent. of a share class or
(iii) an associate of those parties identified in (i) or (ii).
James Corsellis and Mark Brangstrup Watts are the managing
partners of the Marwyn Group. Funds managed by Marwyn Asset
Management Limited of which James Corsellis and Mark Brangstrup
Watts are both non-executive directors and in which they are the
ultimate beneficial owners, hold 60.44 per cent. of the Company's
issued ordinary shares.
James Corsellis and Mark Brangstrup Watts have a beneficial
interest in the A2 Shares as described in note 17.
James Corsellis and Mark Brangstrup Watts are the managing
partners of Marwyn Capital LLP which provides corporate finance
advice and various office and finance support services to the
Company. During the year, Marwyn Capital LLP charged GBP780,000
(excluding VAT) (period from incorporation on 17 March 2017 to 30
June 2018: GBP934,000) in respect of services supplied, GBP14,000
(excluding VAT) (period ended 30 June 2018: GBP18,000) for James
Corsellis' and Mark Brangstrup Watts' directors' fees and GBP11,000
(period ended 30 June 2018: GBP9,000) in respect of expenses
incurred on behalf of the Group. Marwyn Capital LLP was owed an
amount of GBP73,000 at the balance sheet date (30 June 2018:
GBP71,000).
James Corsellis and Mark Brangstrup Watts are the ultimate
beneficial owners of Axio Capital Solutions Limited which provides
financial and accounting services, transactional support, company
secretarial, and administrative services to the Company. During the
year, Axio Capital Solutions Limited charged GBP390,000 (period
ended 30 June 2018: GBP301,000) in respect of services supplied and
GBP19,000 (period ended 30 June 2018: GBP25,000) in respect of
expenses incurred on behalf of the Group. Axio Capital Solutions
Limited was owed an amount of GBP27,000 at the balance sheet date
(30 June 2018: GBP24,000).
James Corsellis and Mark Brangstrup Watts are the ultimate
beneficial owners of Marwyn Partners Limited and Marwyn Investment
Management LLP which both incurred costs on behalf of the Group
which they recharged. During the year, Marwyn Partners Limited
charged GBP68,000 (period ended 30 June 2018: GBP86,000) in respect
of recharged costs, of which GBP17,000 was outstanding at 30 June
2019 (30 June 2018: GBP6,000) and Marwyn Investment Management LLP
charged GBP114,000 (period ended 2018: GBP272,000) in respect of
recharged costs, of which GBP19,000 was outstanding at 30 June 2019
(30 June 2018: GBP28,000).
Compensation of key management personnel of the Group is
included in the Nomination and Remuneration Report. Holdings of
Participation Shares are detailed in Note 17.
19. COMMITMENTS AND CONTINGENT LIABILITIES
There were no commitments or contingent liabilities outstanding
at 30 June 2019 which would require disclosure or adjustment in
these Consolidated Financial Statements.
20. INDEPENT AUDITORS' REMUNERATION
In the period ended 30 June 2019, the Group's independent
auditor, PricewaterhouseCoopers LLP, has charged GBP2,447,000
(2018: GBP1,374,000) for non-audit services to the Group. The audit
fees of the Group's auditor for the period ended 30 June 2019
amount to GBP27,000 (2018: GBP31,000).
21. POST BALANCE SHEET EVENTS
On 21 October 2019, the Company announced that that further to
the conclusion of negotiations with Arclin Inc., it was been
mutually agreed that Adrian Whitfield, Kevin Dangerfield and John
McAdam step down from the Board and leave the Company. The A1
Shares issued to Adrian and Kevin were subsequently transferred to
the Company.
In a circular dated 25 November 2019 the Directors have proposed
that the Company be recapitalised by a further GBP6.5 million to
fund future operating and transaction-related expenses to allow the
Company to continue to pursue acquisition opportunities.
WILMCOTE HOLDINGS PLC
RISKS
Risks applicable to investing in the Company
An investment in the ordinary shares involves a high degree of
risk. No assurance can be given that shareholders will realise a
profit or will avoid loss on their investment. The Board has
identified the following risks which it considers to be the most
significant for investors in the Company. The risks referred to
below do not purport to be exhaustive and are not set out in any
particular order of priority. If any of the following events
identified below occur, the Company's business, financial
condition, capital resources, results and/or future operations and
prospects could be materially adversely affected. In that case, the
market price of the ordinary shares could decline and investors may
lose part or all of their investment. Additional risks and
uncertainties not currently known to the Board or which the Board
currently deem not significant may also have an adverse effect on
the Company's business. In particular, the Company's performance
may be affected by changes in the market and/or economic conditions
and in legal, regulatory and tax requirements.
Risks rating to the Company's future business and potential
structure
-- Limited history
The Company has not, since incorporation, carried on any trading
activities beyond conducting diligence into potential acquisition
opportunities. Accordingly, as at the date of this document, the
Company has very limited meaningful historical financial data upon
which prospective investors may base an evaluation of the Company.
The value of any investment in the Company is, therefore, wholly
dependent upon the successful implementation of the Investment
Policy described in the Admission Document (and as it may be
amended from time to time). As such, the Company is subject to all
of the risks and uncertainties associated with any newly
established business enterprise including the risk that the Company
will not achieve its investment objectives and that the value of an
investment in the Company could decline and may result in the loss
of capital invested.
The past performance of companies, assets or funds managed by
the Directors, or persons affiliated with them, in other ventures
in a similar sector or otherwise, is not necessarily a guide to the
future business, results of operations, financial condition or
prospects of the Company. Investors will be relying on the ability
of the Company and the Directors to identify potential acquisition
targets, evaluate their merits, conduct diligence and
negotiations.
-- The Company's ability to complete an acquisition
Although the Company has historically identified a number of
potential investment opportunities, it does not currently have an
investment opportunity that is materially progressed and is not
currently in formal or exclusive discussions with any asset
vendors. The Company's future success is dependent upon its ability
to not only identify opportunities but also to execute successful
acquisitions and/or investments. There can be no assurance that the
Company will be able to conclude agreements with any target
business and/or shareholders in the future and failure to do so
could result in the loss of an investor's investment. In addition,
the Company may not be able to raise the additional funds required
to acquire any target business and fund its working capital
requirements in accordance with its Investment Policy.
Pursuant to the AIM Rules for Companies, as the Company has not
substantially implemented its investment policy within 18 months of
admission, the investment policy is subject to approval by
shareholders at the next annual general meeting of the Company on
12 December 2019 and annually at each annual general meeting
thereafter.
Should shareholders reject the investment policy and elect to
wind up the Company and return funds (after payment of the expenses
and liabilities of the Company) to Shareholders, there can be no
assurance as to the particular amount or value of the remaining
assets at such future time of any such distribution either as a
result of costs from an unsuccessful acquisition or from other
factors, including disputes or legal claims which the Company is
required to pay out, the cost of the liquidation event and
dissolution process, applicable tax liabilities or amounts due to
third party creditors. Upon distribution of assets on a liquidation
event, such costs and expenses will result in investors receiving
less than the initial subscription price and investors who acquired
Ordinary Shares after Admission potentially receiving less than
they invested.
-- The Company may face significant competition for acquisition opportunities
There may be significant competition in some or all of the
acquisition opportunities that the Company may explore. Such
competition may for example come from strategic buyers, sovereign
wealth funds, special purpose acquisition companies and public and
private investment funds, many of which are well established and
have extensive experience in identifying and completing
acquisitions. A number of these competitors may possess greater
technical, financial, human and other resources than the Company.
The Company cannot assure investors that it will be successful
against such competition. Such competition may cause the Company to
be unsuccessful in executing an acquisition or may result in a
successful acquisition being made at a significantly higher price
than would otherwise have been the case which could materially
adversely impact the business, financial condition, result of
operations and prospects of the Company.
-- Material facts or circumstances may not be revealed in the due diligence process
Prior to making or proposing any investment, the Company will
undertake due diligence on potential acquisition targets to a level
considered reasonable and appropriate by the Company on a case by
case basis. However, these efforts may not reveal all facts or
circumstances that would have a material adverse effect upon the
value of the investment. In undertaking due diligence, the Company
will need to utilise its own resources and may be required to rely
upon third parties to conduct certain aspects of the due diligence
process. Further, the Company may not have the ability to review
all documents relating to the target company and assets. Any due
diligence process involves subjective analysis and there can be no
assurance that due diligence will reveal all material issues
related to a potential investment. Any failure to reveal all
material facts or circumstances relating to a potential investment
may have a material adverse effect on the business, financial
condition, results of operations and prospects of the Company
-- The Company may not acquire total voting control of any target company or business
Although the Company intends to acquire total voting control of
any target company or business, it may also consider acquiring a
non-controlling interest constituting less than total voting
control or less than the entire equity interest of that target
company or business if such opportunity is considered attractive or
where the Company expects to acquire sufficient influence to
implement its strategy. In such circumstances, the remaining
ownership interest will be held by third parties and the Company's
decision-making authority may be limited. Such acquisitions may
also involve the risk that such third parties may become insolvent
or unable or unwilling to fund additional investments in the
target. Such third parties may also have interests which are
inconsistent or conflict with the Company's interests, or they may
obstruct the Company's strategy for the target or propose an
alternative strategy. Any third party's interests may be contrary
to the Company's interests. In addition, disputes among the Company
and any such third parties could result in litigation or
arbitration. Any of these events could impair the Company's
objectives and strategy, which could have a material adverse effect
on the continued development or growth of the acquired company or
business and therefore on the Company.
-- Need for additional funding and dilution
The net proceeds of the Open Offer will be insufficient to fund
in full suitable acquisitions and/or investments identified by the
Board. Accordingly, the Company intends to seek additional sources
of financing (equity and/or debt) to implement its strategy. There
can be no assurance that the Company will be able to raise those
funds, whether on acceptable terms or at all.
If further financing is obtained or the consideration for an
acquisition is provided by issuing equity securities or convertible
debt securities, Shareholders at the time of such future
fundraising or acquisition may be diluted and the new securities
may carry rights, privileges and preferences superior to the
Ordinary Shares.
The Company may seek debt financing to fund all or part of any
future acquisition. The incurrence by the Company of substantial
indebtedness in connection with an acquisition could result in:
(i) default and foreclosure on the Company's assets, if its cash
flow from operations was insufficient to pay its debt obligations
as they become due; or
(ii) an inability to obtain additional financing, if any
indebtedness incurred contains covenants restricting its ability to
incur additional indebtedness.
An inability to obtain debt financing may have a material
adverse effect on the business, financial condition, results of
operations and prospects of the Company. If such financing is
obtained the Company's ability to raise further finance and its
ability to operate its business may be subject to restrictions.
The occurrence of any or a combination of these, or other,
factors could decrease Shareholders' proportional ownership
interests in the Company or have a material adverse effect on its
financial condition and results of operations.
The companies or businesses in which the Company invests may
also have borrowings. Although such facilities may increase
investment returns, they also create greater potential for loss.
This includes the risk that the borrower will be unable to service
the interest repayments, or comply with other requirements,
rendering the debt repayable, and the risk that available capital
will be insufficient to meet required repayments. There is also the
risk that existing borrowings will not be able to be refinanced or
that the terms of such refinancing will not be as favourable as the
terms of existing borrowings. A number of factors (including
changes in interest rates, conditions in the banking market and
general economic conditions), all of which are beyond the Company's
control, may make it difficult for the Company to obtain new
financing on attractive terms or at all, which could have a
material adverse effect on the business, financial condition,
results of operations and prospects of the Company.
-- Success of investment policy not guaranteed
The Company's level of profit will be reliant upon the
performance of the assets acquired and the Investment Policy. The
success of the Investment Policy depends on the Directors' ability
to identify investments in accordance with the Company's investment
objectives and to interpret market data correctly. No assurance can
be given that the strategy to be used will be successful under all
or any market conditions or that the Company will be able to
generate positive returns for Shareholders. If the Investment
Policy is not successfully implemented, this could adversely impact
the business, development, financial condition, results of
operations and prospects of the Company.
-- Changes in Investment Policy may occur
The Company's Investment Policy may be modified and altered from
time to time with the approval of Shareholders, so it is possible
that the approaches adopted to achieve the Company's investment
objectives in the future may be different from those the Directors
currently expect to use and which are disclosed in this document.
Any such change could adversely impact the business, development,
financial condition, results of operations and prospects of the
Company.
-- Inability to refocus and improve the operating and financial
performance of an acquired business
The success of the Company's acquisitions may depend in part on
the Company's ability to implement the necessary technological,
strategic, operational and financial change programmes in order to
transform the acquired business and improve its financial
performance. Implementing change programmes within an acquired
business may require significant modifications, including changes
to hardware and other business assets, operating and financial
processes and technology, software, business systems, management
techniques and personnel, including senior management. There is no
certainty that the Company will be able to successfully implement
such change programmes within a reasonable timescale and cost, and
any inability to do so could have a material adverse impact on the
Company's performance and prospects.
-- Reliance on expertise of Directors
The Company will be highly dependent on the expertise and
continued service of the Directors. However, any one of the
Directors could give notice to terminate their employment
agreements at any time and their loss may have an adverse effect on
the Company's business.
In addition, there is a risk that the Company will not be able
to recruit executives of sufficient expertise or experience to
maximise any opportunities that present themselves, or that
recruiting and retaining those executives is more costly or takes
longer than expected. The failure to attract and retain those
individuals may adversely affect the Company's operations.
-- The Company could incur costs for transactions that may ultimately be unsuccessful
The Company has pursued a number of potential Platform
Acquisitions and as a result incurred substantial legal, financial
and advisory expenses. The Company's cash balance is now below that
required to execute a platform acquisition in accordance with its
investment strategy and hence is undertaking the Open Offer.
There is a risk that the Company may again incur substantial
legal, financial and advisory expenses arising from unsuccessful
transactions which may include public offer and transaction
documentation, legal, accounting and other due diligence which
could have a material adverse effect on the business, financial
condition, results of operations and prospects of the Company.
-- Potential dilution from the incentivisation of management and Marwyn
The Company has in place an incentivisation scheme through which
members of management that may be employed by the Company, certain
employees of the Company and Marwyn Long Term Incentive LP ("MLTI")
will be rewarded for increases in shareholder value, subject to
certain conditions and performance hurdles. For example, MLTI has
subscribed for A2 Shares as part of the incentivisation scheme. In
certain circumstances, the Company may purchase the A2 Shares
either for the issue of new Ordinary Shares or for cash. There is
discretion for the holders of A2 Shares to exchange each A2 Share
that would otherwise have been redeemed for Ordinary Shares or
cash.
If Ordinary Shares are to be issued in order to satisfy the
incentivisation scheme, the existing Shareholders may face
significant dilution. If the Company has sufficient cash resources
the incentivisation scheme may be settled with cash, thereby
reducing the Company's cash resources.
Risks relating to sectors in which the Company might invest
-- Industry specific risks
It is anticipated that the Company will invest in businesses in
varying sectors within the UK, Europe and North America. The
performance of sectors in which the Company may invest may be
cyclical in nature, with some correlation to gross domestic product
and, specifically, levels of demand within targeted end-markets. As
a result, the identified sector may be affected by changes in
general economic activity levels which are beyond the Company's
control but which may have a material adverse effect on the
Company's financial condition and prospects.
In addition, the political risks associated with operating
across a broad number of jurisdictions and markets could affect the
Company's ability to manage or retain interests in its business
activities and could have a material adverse effect on the
profitability of its business following a Platform Acquisition.
-- Competitive pressure risks
The markets in which the Company and its proposed acquisition
targets will operate are highly competitive with significant
competition from large international producers and smaller regional
competitors. The Group may lose market share to other producers or
to other products that can be substituted for the products of the
Group. Increased competition and unanticipated actions by
competitors or customers, which could arise as a result of, among
other things, unforeseen changes in the competitive landscape due
to the introduction of disruptive technologies, could lead to an
adverse effect on results and hinder the Company's growth
potential.
The Company intends that the Group will, where necessary, invest
in new facilities to allow it to maintain its key market positions.
Following a Platform Acquisition, the ability of the Group to
compete in the sectors in which it invests will be dependent on its
ability to develop technological innovations, to introduce new
products and to protect its intellectual property, trade secrets
and know-how. In addition, any failure by the Group to procure key
raw materials may lead to production interruptions and volatility
in the long term prices of such raw materials and energy prices
(including oil, natural gas and electricity) which may adversely
affect the profitability of the Group and its working capital
position.
-- Product price changes
Following completion of a Platform Acquisition, the purchase
price of any raw products used or products distributed by the
Company in its production processes could fluctuate, thereby
potentially affecting the Company's results of operations. There
could be significant increases in the cost of specific raw
materials leading to a diminution in margins if substitute products
need to be sourced from elsewhere. In addition, a period of
commodity price deflation may lead to reductions in the price and
value of the Company's products where sales prices are indexed or
if competitors reduced their selling prices. If this was to occur,
the Company's revenue and, as a result, its profits, could be
reduced and the value of inventory held in stock may not be fully
recoverable.
-- New entrants to the market
The Company will always be at risk that new entrants to the
market are able to procure, by way of acquisition or licence,
businesses which compete with the Company. Any new entrant in this
space could have a disruptive effect on the Company and its ability
to implement the Investment Strategy and deliver significant value
for Shareholders. If any new entrant was able to establish a
foothold in the market, this could have a corresponding negative
effect on the financial prospects of the Company.
-- Trading on AIM
The Ordinary Shares are admitted to trading on AIM. An
investment in shares quoted on AIM may be less liquid and may carry
a higher risk than an investment in shares quoted on the Official
List. The AIM Rules for Companies are less demanding than those
which apply to companies traded on the Premium Segment of the
Official List. Further, the FCA has not itself examined or approved
the contents of this document. A prospective investor should be
aware of the risks of investing in such shares and should make the
decision to invest only after careful consideration and, if
appropriate, consultation with an independent financial adviser
authorised under FSMA.
-- Value and liquidity of the Ordinary Shares
It may be difficult for an investor to realise his, her or its
investment. The shares of publicly traded companies can have
limited liquidity and their share prices can be highly
volatile.
The price at which the Ordinary Shares are traded and the price
at which investors may realise their investment are influenced by a
large number of factors, some specific to the Company and its
operations and others which may affect companies operating within a
particular sector or quoted companies generally. A relatively small
movement in the value of an investment or the amount of income
derived from it may result in a disproportionately large movement,
unfavourable as well as favourable, in the value of the Ordinary
Shares or the amount of income received in respect thereof.
Shareholders should be aware that the value of the Ordinary
Shares could go down as well as up, and investors may therefore not
recover their original investment. Furthermore, the market price of
the Ordinary Shares may not reflect the underlying value of the
Company's net assets.
The investment opportunity offered in this document may not be
suitable for all recipients of this document. Shareholders are
therefore strongly recommended to consult an independent financial
adviser authorised under FSMA who specialises in advising on
investments of this nature before making an investment
decision.
-- Investing Company status
The Company is currently considered to be an Investing Company
for the purposes of the AIM Rules. As a result, it may benefit from
certain partial carve-outs to the AIM Rules, such as those in
relation to the classification of Reverse Takeovers. Were the
Company to lose Investing Company status for any reason, such
carve-outs would cease to apply. It is anticipated that an
acquisition may constitute a Reverse Takeover.
-- The interests of significant Shareholders may conflict with those of other Shareholders
Approximately 80 per cent. of the Company's issued share capital
is held by two Shareholders. Such Shareholders are as a result able
to exercise sufficient control over the Company's corporate actions
so as not to require the approval of the Company's other
Shareholders. The interests of such significant Shareholders may
conflict with those of other holders of Ordinary Shares.
-- Dilution of Shareholders' interest as a result of additional equity fundraising
The Company intends to issue additional Ordinary Shares in
subsequent public offerings or private placements to fund
acquisitions or as consideration for acquisitions. As Jersey law
does not grant Shareholders the benefit of pre-emption rights in
relation to a further issue of Ordinary Shares, pre- emption rights
have been included in the Company's Articles. However, it is
possible that existing Shareholders may not always be offered the
right or opportunity to participate in such future share issues,
which may dilute the existing Shareholders' interests in the
Company. Furthermore, the issue of additional Ordinary Shares may
be on more favourable terms than the Open Offer.
The Group may need to raise additional funds in the future to
finance, amongst other things, working capital, expansion of the
business, new developments relating to existing operations or new
acquisitions. If additional funds are raised through the issuance
of new equity or equity-linked securities of the Company other than
on a pro rata basis to existing Shareholders, the percentage
ownership of the existing Shareholders may be reduced. Shareholders
may also experience subsequent dilution and/or such securities may
have preferred rights, options and pre-emption rights senior to the
Ordinary Shares.
-- The Company has a controlling Shareholder
Marwyn Asset Management Limited ("MAML"), the manager of the
Company's largest shareholder controls approximately 60 per cent.
of the issued Ordinary Shares of the Company. As a result, MAML is
able to exercise significant influence to pass or veto matters
requiring Shareholder approval, including future issues of Ordinary
Shares and the election of directors and to veto or seek to approve
fundamental changes of business. This concentration of ownership
may have the effect of delaying, deferring, deterring or preventing
a change in control, depriving Shareholders of the opportunity to
receive a premium for their Ordinary Shares as part of a sale of
the Company. The interests of MAML may not necessarily be aligned
with those of the other Shareholders. Accordingly, MAML could
influence the Company's business in a manner that may not be in the
interests of other Shareholders. For example, MAML can approve a
change of Investment Policy, can prevent special resolutions of the
Company being passed and can approve ordinary resolutions of the
Company without the assent of any other Shareholders. The
concentration of ownership could also affect the market price and
liquidity of the Ordinary Shares. If MAML seeks to influence the
Company's business in a manner that may not be in the interests of
other Shareholders, the Company's business, results of operations,
financial condition and prospects, and the trading price of the
Ordinary Shares could be adversely affected.
Risks relating to legislation and regulations
-- Legislative and regulatory risks
Any investment is subject to changes in regulation and
legislation. As the direction and impact of changes in regulations
can be unpredictable, there is a risk that regulatory developments
will not bring about positive changes and opportunities, or that
the costs associated with those changes and opportunities will be
significant. In particular, there is a risk that regulatory change
will bring about a significant downturn in the prospects of one or
more acquired businesses, rather than presenting a positive
opportunity.
-- Taxation
There can be no certainty that the current taxation regime in
England and Wales or overseas jurisdictions in which the Company
may operate in the future will remain in force or that the current
levels of corporation taxation will remain unchanged. Any change in
the tax status of the Company or to applicable tax legislation may
have a material adverse effect on the financial position of the
Company.
General risks
-- United Kingdom exit from the European Union
The United Kingdom served notice on 29 March 2017 to exit the
European Union pursuant to Article 50 of the Treaty of Lisbon
("Brexit"). The United Kingdom is currently expected to leave the
European Union no later than 31 January 2020.
Brexit could have significant impact on the Company. The extent
of the impact would depend in part on the nature of the
arrangements that are put in place between the UK and the EU
following Brexit and the extent to which the UK continues to apply
laws that are based on EU legislation. In addition, the
macroeconomic effect of Brexit on the Company's business is
unknown. As such, it is not possible to state the impact that
Brexit would have on the Company. It could also potentially make it
more difficult for the Company to operate its business in the EU as
a result of any increase in tariffs and/or more burdensome
regulations being imposed on UK companies. This could restrict the
Company's future prospects and adversely impact its financial
condition.
-- The general economic climate may be adverse for the Company
The Company may acquire or make investments in companies and
businesses that are susceptible to economic recessions or
downturns. During periods of adverse economic conditions, the
markets in which the Company operates may decline, thereby
potentially decreasing revenues and causing financial losses,
difficulties in obtaining access to, and fulfilling commitments in
respect of, financing, and increased funding costs. In addition,
during periods of adverse economic conditions, the Company may have
difficulty accessing financial markets, which could make it more
difficult or impossible for the Company to obtain funding for
additional investments and negatively affect the Company's net
asset value and operating results. Accordingly, adverse economic
conditions could adversely impact the business, development,
financial condition, results of operations and prospects of the
Company.
There is also a risk that new economic, legal, social and tax
policies may be introduced in certain countries under new national
and regional administrations, including the United States, which
could potentially have an adverse impact on the trading conditions
for the Company.
WILMCOTE HOLDINGS PLC
ADVISERS
Nominated Adviser and Broker Corporate Finance Adviser
Numis Securities Limited Marwyn Capital LLP
The London Stock Exchange Building 11 Buckingham Street
10 Paternoster Square London, WC2N 6DF
London, EC4M 7LT
Registrar Company Secretary and Administrator
Link Registrars (Jersey) Limited Axio Capital Solutions Limited
12 Castle Street One Waverley Place
St Helier, Jersey, JE2 3RT Union Street
St Helier, Jersey, JE1 1AX
Principal Bankers Solicitors to the Company
Barclays Bank plc (as to English law)
39/41 Broad Street Covington & Burling LLP
St Helier, Jersey, JE4 8PV 265 Strand
London, WC2R 1BH
Independent Auditors Solicitors to the Company
PricewaterhouseCoopers LLP (as to Jersey law)
1 Embankment Place Ogier
London, WC2N 6RH 44 Esplanade
St Helier, Jersey, JE4 9WG
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR USRRRKUAAUUA
(END) Dow Jones Newswires
November 25, 2019 02:00 ET (07:00 GMT)
Marwyn Acquisition (LSE:MACP)
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