TIDMESO TIDMEO.P TIDMEC.P TIDMEL.P
RNS Number : 5251F
EPE Special Opportunities Limited
22 March 2022
EPE Special Opportunities Limited
("ESO" or the "Company")
Annual Reports and Accounts for the year ended 31 January
2022
The Board of EPE Special Opportunities is pleased to announce
the Company's Annual Report and Accounts for the year ended 31
January 2022.
Summary
-- The Company's performance in the year ended 31 January 2022
was led by robust trading within the portfolio, despite the
continuing impact of the COVID-19 pandemic. The Company completed
two new investments in the period, EPIC Acquisition Corp in
December 2021 and The Rayware Group in July 2021. The Board and
Investment Advisor continue to carefully monitor the UK economic
outlook. The Board and Investment Advisor note the regrettable
development of the Ukrainian conflict and would like to extend
their thoughts to all those affected. The Board can confirm that
the Company and its portfolio do not have any material exposures to
Russia. As a result of the conflict, a heightened period of
geopolitical risk and economic disruption is expected. The Board
and Investment Advisor will therefore seek to adopt a conservative
approach through the coming period.
-- The Net Asset Value ("NAV") per share of the Company as at 31
January 2022 was 455.66 pence per share, representing an increase
of 4.1 per cent. on the NAV per share of 437.63 pence as at 31
January 2021.
-- The share price of the Company as at 31 January 2022 was
309.00 pence, representing an increase of 14.0 per cent. on the
share price of 271.00 pence as at 31 January 2021.
-- Luceco plc ("Luceco") released its trading update for the
year ended 31 December 2021 in January 2022, announcing strong
revenue growth 36.0 per cent. ahead of the 2019 pre-COVID-19
comparator, operating profit of GBP39.0 million and net debt to
EBITDA of 0.7x. The business outperformed the market due to new
business wins, superior channel access and superior product
availability, despite global supply chain disruption. In October
2021, Luceco announced the acquisition of DW Windsor Group for
GBP16.9 million. Luceco delivered share price growth of 15.4 per
cent. for the year ended 31 January 2022. In June 2021, ESO sold
4.5 million shares in Luceco, returning GBP15.0 million in cash,
whilst retaining a 22.1 per cent. holding in the business.
-- The Rayware Group ("Rayware") performed well in the period
since acquisition in July 2021, achieving sales ahead of forecast
and the prior year, and maintaining strong profitability despite
headwinds from increased input and freight costs. The business made
a number of additions to the management team, appointing a new CFO,
as well as a US Sales VP to support the strategic focus on the US
market. Looking ahead, Rayware is well positioned for growth via
international expansion and the development of its digital
offering.
-- Whittard of Chelsea ("Whittard") continued to face a
difficult trading environment as a result of ongoing COVID-19
disruption throughout 2021. Whittard's retail stores remained
closed until April 2021 in line with government restrictions, while
fourth quarter trading was impacted by the resurgent Omicron
variant. The business benefitted from further government support
extended in the period as well as the agreement of bilateral deals
with the majority of the business' landlords. Whittard's e-commerce
platform continued to trade at an elevated level in the period,
partially mitigating the disruption to the retail channel. Whittard
has made encouraging progress in its international channels,
securing a new franchise partner in South Korea, as well as new
marketplace partners in the US and the EU.
-- David Phillips achieved sales growth in the period, supported
by the delivery of strong project pipelines. However, profitability
was adversely affected by exceptional global supply chain pressures
and raw material price increases. Whilst the narrowing
profitability represents a set-back, the sales growth achieved in
the year is validation of the market opportunity for the business
and provides the scale to achieve meaningful profitability once
margin pressure subsides.
-- Pharmacy2U continued to build on the increased scale achieved
as a result of the expansion of online pharmacy in the COVID-19
period, delivering further sales growth and improving
profitability. In addition, the business has supplemented its core
divisions with a new Services division, operating vaccination
centres and associated services.
-- In December 2021, the Company announced a EUR10 million
investment in EPIC Acquisition Corp ("EAC"), a special purpose
acquisition company co-sponsored by the Investment Advisor and TTB
Partners, a Hong Kong based investment and advisory firm. EAC was
admitted to Euronext Amsterdam on 6 December 2021, raising EUR150
million. EAC intends to leverage the experience of the Investment
Advisor and TTB Partners to identify, acquire and develop a
consumer company operating in the EEA or UK which has the potential
for significant growth in Asian markets. EAC has appointed a highly
experienced group of non-executive directors, who are leaders in
global consumer and investment businesses and will be able to
provide further access to and guidance on potential targets. EAC is
targeting companies with an enterprise value of between EUR500
million and EUR1 billion.
-- The Company had liquidity of GBP27.6 million as at 31 January
2022. In December 2021, the Company raised GBP20.0 million gross
proceeds from a placement of zero dividend preference shares
("ZDP") to provide additional capital for the Company's medium term
pipeline of potential investments. The ZDP is repayable in December
2026. The Company has GBP4.0 million of unsecured loan notes
repayable in July 2022 and no other third-party debt
outstanding.
-- In December 2021, the Company completed buybacks in the
market totalling 628,884 ordinary shares (or 1.8 per cent. of the
Company's issued ordinary share capital).
-- As at 31 January 2022, the Company's unquoted portfolio was
valued at a weighted average EBITDA to enterprise value multiple of
5.2x (excluding Pharmacy2U, which is valued on a sales multiple)
and the portfolio had a low level of third party leverage with net
debt at 0.8x EBITDA in aggregate.
Mr Clive Spears, Chairman, commented: "The performance of the
Company in the year ended 31 January 2022 was robust, despite the
challenging macroeconomic environment. The Company has made
pleasing progress in the development of the existing portfolio, the
successful completion of two new investments, and the raising of
additional capital to fund the future investment pipeline. The
Board would like to extend its thanks to the Investment Advisor for
its efforts in another challenging year. The Board will monitor the
development of the portfolio over the coming period and looks
forward to updating shareholders at the half year point."
The person responsible for releasing this information on behalf
of the Company is Amanda Robinson of Langham Hall Fund Management
(Jersey) Limited.
Enquiries
EPIC Investment Partners LLP +44 (0) 207 269 8865
Alex Leslie
Langham Hall Fund Management (Jersey) +44 (0) 15 3488 5200
Limited Amanda Robinson
Cardew Group Limited +44 (0) 207 930 0777
Richard Spiegelberg
Numis Securities Limited +44 (0) 207 260 1000
Nominated Advisor: Stuart Skinner
Corporate Broker: Charles Farquhar
Chairman's Statement
The Company's performance in the year ended 31 January 2022 was
led by robust trading within the portfolio, despite the continuing
impact of the COVID-19 pandemic. The Company completed two new
investments in the period, EPIC Acquisition Corp in December 2021
and The Rayware Group in July 2021. The Board and Investment
Advisor continue to carefully monitor the UK economic outlook. The
Board and Investment Advisor note the regrettable development of
the Ukrainian conflict and would like to extend their thoughts to
all those affected. The Board can confirm that the Company and its
portfolio do not have any material exposures to Russia. As a result
of the conflict, a heightened period of geopolitical risk and
economic disruption is expected. The Board and Investment Advisor
will therefore seek to adopt a conservative approach through the
coming period.
The Net Asset Value per share of the Company as at 31 January
2022 was 455.66 pence per share, representing an increase of 4.1
per cent. on the NAV per share of 437.63 pence as at 31 January
2021. The share price of the Company as at 31 January 2022 was
309.00 pence, representing an increase of 14.0 per cent. on the
share price of 271.00 pence as at 31 January 2021.
Luceco plc released its trading update for the year ended 31
December 2021 in January 2022, announcing strong revenue growth
36.0 per cent. ahead of the 2019 pre-COVID-19 comparator, operating
profit of GBP39.0 million and net debt to EBITDA of 0.7x. The
business outperformed the market due to new business wins, superior
channel access and superior product availability, despite global
supply chain disruption. In October 2021, Luceco announced the
acquisition of DW Windsor Group for GBP16.9 million. Luceco
delivered share price growth of 15.4 per cent. for the year ended
31 January 2022. In June 2021, ESO sold 4.5 million shares in
Luceco, returning GBP15.0 million in cash, whilst retaining a 22.1
per cent. holding in the business.
The Rayware Group performed well in the period since acquisition
in July 2021, achieving sales ahead of forecast and the prior year,
and maintaining strong profitability despite headwinds from
increased input and freight costs. The business made a number of
additions to the management team, appointing a new CFO, as well as
a US Sales VP to support the strategic focus on the US market.
Looking ahead, Rayware is well positioned for growth via
international expansion and the development of its digital
offering.
Whittard of Chelsea continued to face a difficult trading
environment as a result of ongoing COVID-19 disruption throughout
2021. Whittard's retail stores remained closed until April 2021 in
line with government restrictions, while fourth quarter trading was
impacted by the resurgent Omicron variant. The business benefitted
from further government support extended in the period as well as
the agreement of bilateral deals with the majority of the business'
landlords. Whittard's e-commerce platform continued to trade at an
elevated level in the period, partially mitigating the disruption
to the retail channel. Whittard has made encouraging progress in
its international channels, securing a new franchise partner in
South Korea, as well as new marketplace partners in the US and the
EU.
David Phillips achieved sales growth in the period, supported by
the delivery of strong project pipelines. However, profitability
was adversely affected by exceptional global supply chain pressures
and raw material price increases. Whilst the narrowing
profitability represents a set-back, the sales growth achieved in
the year is validation of the market opportunity for the business
and provides the scale to achieve meaningful profitability once
margin pressure subsides.
Pharmacy2U continued to build on the increased scale achieved as
a result of the expansion of online pharmacy in the COVID-19
period, delivering further sales growth and improving
profitability. In addition, the business has supplemented its core
divisions with a new Services division, operating vaccination
centres and associated services.
In December 2021, the Company announced a EUR10 million
investment in EPIC Acquisition Corp, a special purpose acquisition
company co-sponsored by the Investment Advisor and TTB Partners, a
Hong Kong based investment and advisory firm. EAC was admitted to
Euronext Amsterdam on 6 December 2021, raising EUR150 million. EAC
intends to leverage the experience of the Investment Advisor and
TTB Partners to identify, acquire and develop a consumer company
operating in the EEA or UK which has the potential for significant
growth in Asian markets. EAC has appointed a highly experienced
group of non-executive directors, who are leaders in global
consumer and investment businesses and will be able to provide
further access to and guidance on potential targets. EAC is
targeting companies with an enterprise value of between EUR500
million and EUR1 billion.
The Company had liquidity of GBP27.6 million as at 31 January
2022. In December 2021, the Company raised GBP20.0 million gross
proceeds from a placement of zero dividend preference shares to
provide additional capital for the Company's medium term pipeline
of potential investments. The ZDP is repayable in December 2026.
The Company has GBP4.0 million of unsecured loan notes repayable in
July 2022 and no other third-party debt outstanding.
In December 2021, the Company completed buybacks in the market
totalling 628,884 ordinary shares (or 1.8 per cent. of the
Company's issued ordinary share capital).
I would like to extend thanks to the Investment Advisor for its
efforts in another challenging year. The Board will monitor the
development of the portfolio over the coming period and looks
forward to updating shareholders at the half year point.
C live Spears
C h airman
2 1 March 20 22
Investment Advisor's Report
The Company reported a number of positive developments in the
year ended 31 January 2022. The Investment Advisor was pleased to
announce two new investments in the period, including the recent
investment in EPIC Acquisition Corp, completed in December 2021.
The Company raised GBP20.0 million additional capital via a ZDP
placing in December 2021, allowing the Company to maintain
significant cash balances whilst taking advantage of the medium
term pipeline of opportunities. The Investment Advisor and the
Board note the uncertain macro environment, and the expectation of
headwinds in the coming period from the impact of the Ukrainian
conflict, inflation and global supply chain disruption. The
Investment Advisor and the Board will carefully monitor further
developments and will seek to maintain a measured approach through
the period.
The Company
The Net Asset Value per share of the Company as at 31 January
2022 was 455.66 pence per share, representing an increase of 4.1
per cent. on the NAV per share of 437.63 pence as at 31 January
2021. The share price of the Company as at 31 January 2022 was
309.00 pence, representing an increase of 14.0 per cent. on the
share price of 271.00 pence as at 31 January 2021.
The Company maintains strong liquidity and prudent levels of
third-party leverage. The Company has cash balances of GBP 27. 6
million(1) as at 31 January 2022, which are available to support
the existing portfolio, meet committed obligations and deploy into
attractive investment opportunities. Net debt in the underlying
portfolio stands at 0.8 x EBITDA in aggregate. In June 2021, the
Company partially sold down its stake in Luceco plc, returning
GBP15.0 million cash to ESO. In December 2021, the Company raised
GBP20.0 million from a ZDP placing, allowing the Company to
maintain significant cash balances whilst continuing to invest in
accordance with the Company's investing policy.
The Portfolio
The Company's unquoted portfolio is valued at a weighted average
enterprise value to EBITDA multiple of 5. 2x for mature assets
(excluding assets investing for growth). The valuation has been
derived by reference to relevant quoted comparables, after the
application of an appropriate discount to adjust for the
portfolio's scale and unquoted nature (i.e. an illiquidity
discount). Given the use of quoted comparables and actual financial
results generally, the valuation reflects the fair value of assets
as at the balance sheet date. The Investment Advisor notes that the
fair market value of the portfolio remains exposed to a volatile
macro environment and consequent equity market valuations.
Luceco delivered share price growth of 15.4 per cent. in the
year ended 31 January 2022. Luceco released its trading update for
the year ended 31 December 2021 in January 2022, reporting sales of
GBP228 million, with market share gains and strong growth across
all sales channels generating an increase of 36.0 per cent vs. a
2019 pre-COVID-19 comparator. The business reported an operating
profit of GBP39.0 million and margin of 17.0%, with input cost
inflation successfully mitigated by selling price increases. The
business reported a reduction in net debt to 0.7x adjusted last
twelve months EBITDA, providing capacity for future growth
investment. In October 2021, Luceco announced the acquisition of DW
Windsor Group for GBP16.9 million. In June 2021, ESO sold 4.5
million shares in Luceco, returning GBP15.0 million in cash, whilst
retaining a 22.1 per cent. holding in the business.
The Rayware Group has performed well since its acquisition by
the Company in July 2021, maintaining trading momentum and
profitability throughout the period. The Investment Advisor would
like to welcome the new appointments to the business' management
team, including the new CFO and US Sales VP. The business is
focused on developing international opportunities, with a strategic
focus on the US, as well as developing its digital channel
strategy.
Whittard of Chelsea continued to face material disruption as a
result of COVID-19. The retail estate was impacted by periods of
closure and depressed footfall as a result of reduced tourist
volumes and social distancing measures. Whittard's e-commerce
channels maintained the increased scale attained in the prior
period, partially mitigating this impact. Whittard continued to
make progress in developing its international footprint, securing a
new franchise partner in South Korea, with the first store in the
territory opened in December 2021, and securing new marketplace
partners in the US and the EU.
David Phillips has delivered substantial sales growth in the
period, primarily driven by the residential projects and fitted
business lines. The business has, however, had to contend with a
complex operating environment, including high input costs, limited
operational capacity and structural working capital cycle shifts.
Management have taken a number of actions to mitigate these
headwinds including pricing adjustments, supplier term negotiations
and stock-sell through management. Looking ahead, the Investment
Advisor remains focused on developing the Company's marketing
function and the realisation of operational efficiencies to create
a scalable logistics platform.
Pharmacy2U continued to deliver sales growth and improving
profitability in the period. In addition, the business has
developed a new Services division, operating vaccination centres
and associated services.
In December 2021, the Company completed a EUR10 million
investment in EPIC Acquisition Corp ("EAC"), a special purpose
acquisition company, and EAC's sponsor, EAC Sponsor Limited (the
"Sponsor"). EAC successfully raised a total of EUR150m at IPO and
is listed on Euronext Amsterdam. The Sponsor is jointly led by the
Investment Advisor and TTB Partners, a Hong Kong-based investment
and advisory business which has a strong track record of helping
global brands access and develop in Asian markets. EAC is seeking
to acquire a European consumer company with significant potential
for growth in Asian markets. The long term objective of EAC is to
build a business at the forefront of consumer innovation,
recognised in both its home markets and in Asia.
The Investment Advisor continues to monitor the Company's credit
fund investments. European Capital Private Debt Fund has completed
the deployment of the Company's committed capital in the fund and
is distributing capital to the Company. Both Atlantic Credit
Opportunities Fund and Prelude achieved strong performance in the
period, ahead of the high yield market and hedge fund peers,
delivering a 30.2 per cent. return and 18.0 per cent. return
respectively in the year ended 31 December 2021.
The Investment Advisor would like to extend its gratitude to the
management and employees of the portfolio for their continuing hard
work and welcomes its new partnership with TTB Partners. The
Investment Advisor would like to thank the Board and the Company's
shareholders for their continued support.
EPIC Investment Partners LLP
Investment Advisor to the Company
21 March 2022
[1] Company liquidity is stated inclusive of cash held by
associates in which the Company is the sole investor.
Biographies of the Directors
Clive Spears (Non- executive David Pirouet (Non - executive
Chairman) Director)
Clive Spears retired from the David Pirouet joined PricewaterhouseCoopers
Royal Bank of Scotland International Channel Islands LLP in 1980, retiring
Limited in December 2003 as Deputy in 2009 after being an Audit and
Director of Jersey after 32 years Assurance Partner for over 20
of service. His main activities years. During his 29 years at
prior to retirement included the firm Mr Pirouet specialised
Product Development, Corporate in the financial services sector,
Finance, Trust and Offshore Company in particular in the alternative
Services and he was Head of Joint investment management area and
Venture Fund Administration with also led the business's Hedge
Rawlinson & Hunter. Mr Spears Fund and business recovery practices
is an Associate of the Chartered for over four years. Mr Pirouet
Institute for Securities & Investment. currently holds a number of non-executive
He has accumulated a well spread positions across private equity,
portfolio of directorships centring infrastructure and corporate debt.
on private equity, infrastructure Mr Pirouet's was previously non-executive
and corporate debt. His current Director and Chair of the Audit
appointments include Chairman and Risk committee for GCP Infrastructure
of Nordic Capital Limited and Investments (FTSE 250 listed company)
directorships of a series of until he retired in February 2021.
ICG plc sponsored funds and funds He is a resident of Jersey.
managed by Kreos Fund Management.
He is a resident of Jersey.
--------------------------------------------
Heather Bestwick (Non - executive Nicholas Wilson (Non - executive
Director) Director)
--------------------------------------------
Heather Bestwick has been a financial Nicholas Wilson has over 40 years
services professional for over of experience in hedge funds,
25 years, onshore in the City derivatives and global asset management.
of London and offshore in the He has run offshore branch operations
Cayman Islands and Jersey. She for Mees Pierson Derivatives Limited,
qualified as an English solicitor, ADM Investor Services International
specialising in ship finance, Limited and several other London
with City firm Norton Rose, and based financial services companies.
worked in their London and Greek He is a resident of Isle of Man.
offices for 8 years. Ms Bestwick
subsequently practised and became
a partner with global offshore
law firm Walkers in the Cayman
Islands, and Managing Partner
of the Jersey office. Ms Bestwick
sits on the boards of the Deutsche
Bank company which managed the
dbX fund platform and Rathbone
Investment Management International
Limited. She is a resident of
Jersey.
--------------------------------------------
Michael Gray ( Non - executive
Director)
Michael Gray was at The Royal
Bank of Scotland for over 30
years, latterly as Managing Director
(Corporate) of RBS International
before retiring in 2015. During
his 32 years at the firm Michael
covered a broad spectrum of financial
services including corporate
and commercial banking, funds,
trusts and real estate. Mr Gray
currently holds a number of non-executive
positions across private equity,
infrastructure and fund management.
Michael's appointments currently
include non-executive directorships
of Triton Investment Management
(a Swedish private equity group),
GCP Infrastructure Investments
(a FTSE 250 listed company),
J-Star Jersey Company Limited
(a Japanese private equity group),
Foresight 4 VCT plc (a listed
venture capital fund), Jersey
Finance Limited (a Jersey finance
not-for-profit promotional company),
JTC plc (a FTSE 250 listed trust
and corporate services company)
and TEAM plc (a listed wealth
management company). He is a
resident of Jersey.
Biographies of the Investment Advisor
Giles Brand Hiren Patel
Giles Brand is a Managing Partner Hiren Patel is a Managing Partner
and the founder of EPIC. He is of EPIC. He has worked in the
currently Non-executive Chairman investment management industry
of Whittard of Chelsea and Luceco for the past twenty years. Before
plc. Before joining EPIC, Giles joining EPIC, Hiren was Finance
was a founding Director of EPIC Director of EPIC Investment Partners.
Investment Partners, a fund management Hiren was employed at Groupama
business which at sale had US Asset Management where he was
$5bn under management. Prior the Group Financial Controller.
to this, Giles worked in Mergers
and Acquisitions at Baring Brothers
in Paris and London. Giles read
History at Bristol University.
------------------------------------------
Robert Fulford James Henderson
------------------------------------------
Robert Fulford is a Managing James Henderson is a Managing
Director at EPIC. He previously Director at EPIC. He previously
worked at Barclaycard Consumer worked in the Investment Banking
Europe before joining EPIC. Whilst division of Deutsche Bank before
at Barclaycard, Robert was the joining EPIC. Whilst at Deutsche
Senior Manager for Strategic Bank he worked on a number of
Insight and was responsible for M&A transactions and IPOs in the
identifying, analysing and responding energy, property, retail and gaming
to competitive forces. Prior sectors, as well as providing
to Barclaycard, Robert spent corporate broking advice to mandated
four years as a strategy consultant clients. At EPIC, James manages
at Oliver Wyman Financial Services, the investment in Pharmacy2U and
where he worked with a range EPIC Acquisition Corp. James read
of major retail banking and institutional Modern History at Oxford University
clients in the UK, mainland Europe, and Medicine at Nottingham University.
Middle East and Africa. At EPIC,
Robert manages the investments
in Whittard of Chelsea, Rayware
and David Phillips. Robert read
Engineering at Cambridge University.
------------------------------------------
Alex Leslie Ian Williams
------------------------------------------
Alex Leslie is a Managing Director Ian Williams is a Managing Director
at EPIC. He previously worked at EPIC. He was previously a Partner
in Healthcare Investment Banking at Lyceum Capital Partners LLP,
at Piper Jaffray before joining responsible for deal origination
EPIC. Whilst at Piper Jaffray and engagement, with a primary focus
he worked on a number of M&A on the business services and software
transactions and equity fundraisings sectors, as well as financial services,
within the Biotechnology, Specialty education and health sectors. Prior
Pharmaceutical and Medical Technology to Lyceum, Ian was a Director at
sectors. At EPIC, Alex manages Arbuthnot Securities, involved in
the investment in Luceco plc, IPO's, secondary fund raisings and
Rayware, Prelude, Atlantic Credit M&A, focusing on the support services,
Opportunities Fund and European healthcare, transport & IT sectors.
Capital Private Debt Fund. He Ian started his career at Hambros
previously managed the Company's Bank in the M&A team. Ian read Politics
investments in Process Components. and Economics at the University
Alex read Human Biological and of Bristol.
Social Sciences at the University
of Oxford and obtained an MPhil
in Management from the Judge
Business School at the University
of Cambridge.
------------------------------------------
Risk and Audit Committee Report
The Risk and Audit Committee is chaired by David Pirouet and
comprises all other Directors. Mr Pirouet was appointed as Chairman
of the Committee on 28 June 2019.
The Risk and Audit Committee's main duties are:
-- To review and monitor the integrity of the interim and annual
financial statements, interim statements, announcements and matters
relating to accounting policy, laws and regulations of the
Company;
-- To evaluate the risks to the quality and effectiveness of the financial reporting process;
-- To review the effectiveness and robustness of the internal
control systems and the risk management policies and procedures of
the Company;
-- To review the valuation of portfolio investments;
-- To review corporate governance compliance, including the
Company's compliance with the QCA Corporate Governance Code;
-- To review the nature and scope of the work to be performed by
the Auditors, and their independence and objectivity; and
-- To make recommendations to the Board as to the appointment
and remuneration of the external auditors.
The Risk and Audit Committee has a calendar which sets out its
work programme for the year to ensure it covers all areas within
its remit appropriately. It met four times during the period under
review to carry out its responsibilities and senior representatives
of the Investment Advisor attended the meetings as required by the
Risk and Audit Committee. In between meetings, the Risk and Audit
Committee chairman maintains ongoing dialogue with the Investment
Advisor and the lead audit partner via regular calls (which will be
replaced by physical meeting once travel restrictions permit).
During the past year the Risk and Audit Committee carried out an
ongoing review of its own effectiveness. These concluded that the
Risk and Audit Committee is satisfactorily fulfilling its terms of
reference and is operating effectively. In addition, the Committee
undertook a review of the Company's corporate governance and
compliance with the QCA Corporate Governance Code.
Significant accounting matters
The primary risk considered by the Risk and Audit Committee
during the period under review in relation to the financial
statements of the Company is the valuation of unquoted
investments.
The Company's accounting policy for valuing investments is set
out in notes 3i and 12.The Risk and Audit Committee examined and
challenged the valuations prepared by the Investment Advisor,
taking into account the latest available information on the
Company's investments and the Investment Advisor's knowledge of the
underlying portfolio companies through their ongoing monitoring.
The Risk and Audit Committee satisfied itself that the valuation of
investments had been carried out consistently with prior accounting
periods, or that any change in valuation basis was appropriate, and
was conducted in accordance with published industry guidelines.
The Auditors explained the results of their review of the
procedures undertaken by the Investment Advisor in preparation of
valuation recommendations for the Risk and Audit Committee. On the
basis of their audit work, no material adjustments were identified
by the Auditor.
External audit
The Risk and Audit Committee reviewed the audit plan and fees
presented by the auditors, KPMG Audit LLC ("KPMG"), and considered
their report on the financial statements. The fee for the audit of
the annual report and financial statements of the Company (and
associates) for the year ended 31 January 2022 is GBP68,095 (2021:
GBP55,840).
The Risk and Audit Committee reviews the scope and nature of all
proposed non-audit services before engagement, with a view to
ensuring that none of these services have the potential to impair
or appear to impair the independence of their audit role. The Risk
and Audit Committee receives an annual assurance from the auditors
that their independence is not compromised by the provision of such
services, if applicable. During the period under review, the
auditors provided non-audit services to the Company in relation to
taxation, the Interim Review and Reporting Accountant work
representing total fees of GBP75,825 (2021: GBP7,800).
KPMG were appointed as auditors to the Company for the audit of
the year ended 31 January 2005. The Risk and Audit Committee
regularly considers the need to put the audit out to tender, the
auditors' fees and independence, alongside matters raised during
each audit.
The audit was put out to tender by the Committee in September
2021, and at the conclusion of the process it was resolved that
PricewaterhouseCoopers CI LLP be appointed as the Company's auditor
for the next financial year.
The current year is the seventh year in which the audit has been
undertaken by the current engagement partner at KPMG Audit LLC. The
extension of the engagement beyond the typical five-year limit was
agreed by the KPMG Ethics and Independence partner following the
deferral of the audit tender process as a result of COVID-19.
The Board will review the performance and services offered by
Langham Hall, as fund administrator and EPIC Administration as fund
sub-administrator on an ongoing basis. EPIC Administration
completed its triennial agreed upon procedures review during the
previous financial year.
Risk management and internal control
The Company does not have an internal audit function. The Risk
and Audit Committee believes this is appropriate as all of the
Company's operational functions are delegated to third party
service providers who have their own internal control and risk
monitoring arrangements. A report on these arrangements is prepared
by each third party service provider and submitted to the Risk and
Audit Committee which it reviews on behalf of the Board to support
the Directors' responsibility for overall internal control. The
Company does not have a whistleblowing policy and procedure in
place. The Company delegates this function to the Investment
Advisor who is regulated by the FCA and has such policies in place.
The Risk and Audit Committee has been informed by the Investment
Advisor that these policies meet the industry standards and no
whistleblowing took place during the year.
David Pirouet
Chairman of the Risk and Audit Committee
21 March 2022
Corporate Governance
The Board of EPE Special Opportunities is pleased to update
shareholders of the Company's compliance with the 2018 Quoted
Companies Alliance Corporate Governance Code (the "QCA Code").
The Company is committed to the highest standards of corporate
governance, ethical practices and regulatory compliance. The Board
believe that these standards are vital to generate long-term,
sustainable value for the Company's shareholders. In particular the
Board is concerned that the Company is governed in a manner to
allow ef cient and effective decision making, with robust risk
management procedures.
As an investment vehicle, the Company is reliant upon its
service providers for many of its operations. The Board maintains
ongoing and rigorous review of these providers. Speci cally the
Board reviews the governance and compliance of these entities to
ensure they meet the high standards of the Company.
The Board is dedicated to upholding these high standards and
will look to strengthen the Company's governance on an ongoing
basis.
The Company's compliance with the QCA Code is available on the
Company's website (www.epespecialopportunities.com). The Company
will provide annual updates on changes to compliance with the QCA
Code.
Clive Spears
Chairman
21 March 2022
Report of the Directors
Principal activity
The Company was incorporated in the Isle of Man as a company
limited by shares under the Laws with registered number 108834C on
25 July 2003. On 23 July 2012, the Company re-registered under the
Isle of Man Companies Act 2006, with registration number 008597V.
On 11 September 2018, the Company re-registered under the Bermuda
Companies Act 1981, with registration number 53954. The Company's
ordinary shares are quoted on AIM, a market operated by the London
Stock Exchange, and the Growth Market of the Aquis Stock Exchange
(formerly the NEX Exchange).
The principal activity of the Company and its associates is to
arrange income yielding financing for growth, buyout and special
situations and holding the investments with a view to exiting in
due course at a profit.
Incorporation
The Company was incorporated on 25 July 2003 and on 11 September
2018, registered under the Bermuda Companies Act 1981. The
Company's registered office is:
Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.
Place of business
During the year, the Company solely operated out of and was
controlled from:
Liberation House, Castle Street, St Helier, Jersey JE1 2LH
Results of the financial year
Results for the year are set out in the Statements of
Comprehensive Income and in the Statement of Changes in Equity.
Dividends
The Board does not recommend a dividend in relation to the
current year (2021: nil) (see note 10 for further details).
Corporate governance principles
The Directors, place a high degree of importance on ensuring
that the Company maintains high standards of Corporate Governance
and have therefore adopted the Quoted Companies Alliance 2018
Corporate Governance Code (the "QCA Code").
The Board holds at least four meetings annually and has
established Audit and Risk and Investment committees. The Board
does not intend to establish remuneration and nomination committees
given the current composition of the Board and the nature of the
Company's operations. The Board reviews annually the remuneration
of the Directors and agrees on the level of Directors' fees.
Composition of the Board
The Board currently comprises five non-executive directors, all
of whom are independent. Clive Spears is Chairman of the Board,
David Pirouet is Chairman of the Audit and Risk Committee and
Heather Bestwick is Chair of the Investment Committee.
Robert Quayle stepped down from the Board at the 2021 Annual
General Meeting.
Michael Gray was appointed to the Board in September 2021.
Audit and Risk Committee
The Audit and Risk Committee comprises David Pirouet (Chairman
of the Committee) and all the other Directors. The Audit and Risk
Committee provides a forum through which the Company's external
auditors report to the Board.
The Audit and Risk Committee meets twice a year, at a minimum,
and is responsible for considering the appointment and fee of the
external auditors and for agreeing the scope of the audit and
reviewing its findings. It is responsible for monitoring compliance
with accounting and legal requirements, ensuring that an effective
system of internal controls is maintained and for reviewing the
annual and interim financial statements of the Company before their
submission for approval by the Board. The Audit and Risk Committee
has adopted and complied with the extended terms of reference
implemented on the Company's readmission to AIM in August 2010, as
reviewed by the Board from time to time.
The Board is satisfied that the Audit and Risk Committee
contains members with sufficient recent and relevant financial
experience.
Investment Committee
The Board established an Investment Committee, which comprises
Heather Bestwick (Chair of the Committee) and all the other
Directors. The purpose of this committee is to review the portfolio
of the Company, new investment opportunities and evaluate the
performance of the Investment Advisor.
The Board is satisfied that the Investment Committee contains
members with sufficient recent and relevant experience.
Significant holdings
Significant shareholdings are analysed in schedule of
shareholders holding over 3% of issued shared. The Directors are
not aware of any other holdings greater than 3 per cent. of issued
shares.
Directors
The Directors of the Company holding office during the financial
year and to date are:
Mr. C.L. Spears (Chairman)
Mr. R.B.M. Quayle (resigned in June 2021)
Mr. N.V. Wilson
Ms. H. Bestwick
Mr. D.R. Pirouet
Mr. M.M Gray (appointed in September 2021)
Staff
At 31 January 2022 the Company employed no staff (2021:
none).
Auditors
The current year is the seventh year in which the audit has been
undertaken by the current engagement partner at KPMG Audit LLC. The
extension of the engagement beyond the typical five-year limit was
agreed by the KPMG Ethics and Independence partner following the
deferral of the audit tender process as a result of COVID-19. The
tender process has now been completed, and it was concluded that
PricewaterhouseCoopers CI LLP will succeed KPMG Audit LLC as the
Company's Auditors in the current financial year.
On behalf of the Board
Heather Bestwick
Director
21 March 2022
Statement of Directors' Responsibilities in respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
The Directors are required to prepare financial statements for
each financial year. As required by the AIM Rules of the London
Stock Exchange they are required to prepare the financial statement
in accordance with International Financial Reporting Standards
("IFRS") and applicable legal and regulatory requirements of
Bermuda 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 Company and of its profit or loss for that
period. In preparing the Company's financial statements, the
Directors are required to:
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with IFRS;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with the Bermuda Companies Act.
They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Bermuda governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Independent Auditor's Report to the Members of EPE Special
Opportunities Limited
1 Our opinion is unmodified
We have audited the financial statements of EPE Special
Opportunities Limited (the "Company"), which comprise the statement
of assets and liabilities as at 31 January 2022, the statements of
comprehensive income, changes in equity and cash flows for the year
then ended, and notes, comprising significant accounting policies
and other explanatory information.
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 January 2022 and of the Company's profit for the
year then ended; and
-- have been properly prepared in accordance with International Financial Reporting Standards.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Company in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
2 Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In arriving at our
audit opinion above, the key audit matter was as follows (unchanged
from 2021):
The risk Our response
Valuation of unquoted Subjective valuation: Our procedures included:
investments: Control design:
GBP47.9m (2021: GBP28.4m). 34.1% of the Company's Documenting and assessing
underlying investment the design and implementation
Refer to Significant portfolio (by value) of the investment valuation
accounting matters is held in investments processes and controls;
identified by the Audit and loans where no quoted
and Risk Committee, market price is available. Methodology choice:
note 2d (estimates In the context of valuation
and judgements, including Unquoted investments principles of IFRS 13
impact of Covid 19), are measured at fair we challenged the appropriateness
note 3 (accounting value, which is established of the valuation basis
policies), note 11 in accordance with the selected;
(investments at fair valuation principles
value through profit of International Financial Our valuations experience:
or loss) and note 12 Reporting Standard 13 Challenging the investment
(fair value of financial ("IFRS 13") by using advisor on key assumptions
instruments). measurements of value affecting investee company
such as prices of recent valuations, such as discount
orderly transactions, factors and earnings
trading comparable multiples and sales multiples.
and net assets. We compared key underlying
financial data inputs
The effect of these to external sources and
matters is that, as investee company management
part of our risk assessment, information as applicable.
we determined that the We challenged the assumptions
valuation of unquoted around sustainability
investments has a high of earnings based on
degree of estimation the plans of the investee
uncertainty, with a companies and whether
potential range of reasonable these are achievable.
outcomes greater than Our work included consideration
our materiality for of events which occurred
the financial statements subsequent to the year
as a whole, and possibly end up until the date
many times that amount. of this audit report;
The impact of COVID-19 Use of KPMG specialists
on the economy has increased We involved KPMG specialists
this uncertainty. to examine the methodology
adopted for the valuations
and challenge the assumptions
and key judgements in
the valuations;
Assessing transparency:
Consideration of the
appropriateness, in accordance
with relevant accounting
standards, of the disclosures
in respect of unquoted
investments and the effect
of changing one or more
inputs to reasonably
possible alternative
valuation assumptions.
------------------------------- ------------------------------------
3 Our application of materiality and an overview of the scope of
our audit
Materiality for the financial statements as a whole was set at
GBP1.45m (2021: GBP1.2m), determined with reference to a benchmark
of total assets of GBP168.2m (2021: GBP145.3m), of which it
represents approximately 0.86% (2021: 0.83%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance
materiality for the Company was set at 75% (2021: 75%) of
materiality for the financial statements as a whole, which equates
to GBP1.09m (2021: GBP0.9m). We applied this percentage in our
determination of performance materiality because we did not
identify any factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding GBP0.07m (2021: GBP0.06m), in
addition to other identified misstatements that warranted reporting
on qualitative grounds.
Our audit of the Company was undertaken to the materiality level
specified above, which has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
4 Going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease its operations, and as they have concluded that the
Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements (the "going concern period").
In our evaluation of the directors' conclusions, we considered
the inherent risks to the Company's business model and analysed how
those risks might affect the Company's financial resources or
ability to continue operations over the going concern period. The
risk that we considered most likely to affect the Company's
financial resources or ability to continue operations over this
period was the availability of capital to meet operating costs and
other financial commitments.
We considered whether this risk could plausibly affect the
liquidity in the going concern period by comparing severe, but
plausible downside scenarios that could arise from this risk
against the level of available financial resources indicated by the
Company's financial forecasts.
We considered whether the going concern disclosure in note 2(f)
to the financial statements gives a full and accurate description
of the directors' assessment of going concern.
Our conclusions based on this work:
-- we consider that the directors' use of the going concern
basis of accounting in the preparation of the financial statements
is appropriate;
-- we have not identified, and concur with the directors'
assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may cast
significant doubt on the Company's ability to continue as a going
concern for the going concern period; and
-- we found the going concern disclosure in the notes to the
financial statements to be acceptable.
However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the above conclusions are not a guarantee that the
Company will continue in operation.
5 Fraud and breaches of laws and regulations - ability to
detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud ("fraud
risks") we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
-- enquiring of management as to the Company's policies and
procedures to prevent and detect fraud as well as enquiring whether
management have knowledge of any actual, suspected or alleged
fraud;
-- reading minutes of meetings of those charged with governance; and
-- using analytical procedures to identify any unusual or unexpected relationships.
As required by auditing standards, we perform procedures to
address the risk of management override of controls, in particular
the risk that management may be in a position to make inappropriate
accounting entries. On this audit we do not believe there is a
fraud risk related to revenue recognition because the Company's
revenue streams are simple in nature with respect to accounting
policy choice, and are easily verifiable to external data sources
or agreements with little or no requirement for estimation from
management. We did not identify any additional fraud risks.
We performed procedures including
-- Identifying journal entries and other adjustments to test
based on risk criteria and comparing the identified entries to
supporting documentation; and
-- incorporating an element of unpredictability in our audit procedures.
Identifying and responding to risks of material misstatement due
to non-compliance with laws and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our sector experience and through discussion with
management (as required by auditing standards), and from inspection
of the Company's regulatory and legal correspondence, if any, and
discussed with management the policies and procedures regarding
compliance with laws and regulations. As the Company is regulated,
our assessment of risks involved gaining an understanding of the
control environment including the entity's procedures for complying
with regulatory requirements.
The Company is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation and taxation legislation and we assessed the extent of
compliance with these laws and regulations as part of our
procedures on the related financial statement items.
The Company is subject to other laws and regulations where the
consequences of non-compliance could have a material effect on
amounts or disclosures in the financial statements, for instance
through the imposition of fines or litigation or impacts on the
Company's ability to operate. We identified financial services
regulation as being the area most likely to have such an effect,
recognising the regulated nature of the Company's activities and
its legal form. Auditing standards limit the required audit
procedures to identify non-compliance with these laws and
regulations to enquiry of management and inspection of regulatory
and legal correspondence, if any. Therefore if a breach of
operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the
inherently limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remains a higher risk of
non-detection of fraud, as this may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
6 Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report but does not include the financial statements and our
auditor's report thereon. Our opinion on the financial statements
does not cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
7 Respective responsibilities
Directors' responsibilities
As explained more fully in Directors' statement, the directors
are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; 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; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
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 our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not 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 aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities .
8 The purpose of this report and restrictions on its use by
persons other than the Company's members, as a body
This report is made solely to the Company's members, as a body,
in accordance with the terms of engagement as detailed in our
letter dated 6 July 2021. Our audit work has been undertaken so
that we might state to the Company's members those matters we are
required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company and the
Company's members, as a body, for our audit work, for this report,
or for the opinions we have formed.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man IM1 1LA
21 March 2022
Statement of Comprehensive Income
For the year ended 31 January 2022
31 January 31 January
2022 2021
Revenue Capital Total Total
Note GBP GBP GBP GBP
------------------------------ -------------- ------------- ------------ ------------
Income
4 Interest income 514 - 514 4,089
Net fair value movement on
11 investments - 10,280,363 10,280,363 42,012,143
Total income 514 10,280,363 10,280,877 42,016,232
------------------------------ -------------- ------------- ------------ ------------
Expenses
5 Investment advisor's fees (2,054,555) - (2,054,555) (1,937,207)
6 Directors' fees (149,000) - (149,000) (154,000)
7 Share based payment expense (822,166) - (822,166) (682,525)
8 Other expenses (1,052,268) - (1,052,268) (669,769)
Total expense (4,077,989) - (4,077,989) (3,443,501)
------------------------------ -------------- ------------- ------------ ------------
Profit before finance costs
and tax (4,077,475) 10,280,363 6,202,888 38,572,731
------------------------------ -------------- ------------- ------------ ------------
Finance charges
Interest on unsecured loan
15 note instruments (319,685) - (319,685) (319,685)
Zero dividend preference
15 shares final
capital entitlement accrual (156,983) - (156,983) -
Profit for the year before
taxation (4,554,143) 10,280,363 5,726,220 38,253,046
9 Taxation - - - -
------------------------------ -------------- ------------- ------------ ------------
Profit for the year (4,554,143) 10,280,363 5,726,220 38,253,046
------------------------------ -------------- ------------- ------------ ------------
Other comprehensive income - - - -
------------------------------ -------------- ------------- ------------ ------------
Total comprehensive income (4,554,143) 10,280,363 5,726,220 38,253,046
------------------------------ -------------- ------------- ------------ ------------
Basic earnings per ordinary
17 share (pence) (14.20) 32.06 17.86 116.69
------------------------------ -------------- ------------- ------------ ------------
Diluted earnings per ordinary
17 share (pence) (14.20) 32.06 17.86 116.69
------------------------------ -------------- ------------- ------------ ------------
The total column of this statement represents the Company's
Statement of Comprehensive Income, prepared in accordance with
IFRS. The supplementary revenue and capital return columns are
prepared in accordance with the Board of Directors' agreed
principles, which are that the net gain/loss on investments is
allocated to the capital column and all other income and expenses
are allocated to the revenue column. All items derive from
continuing activities.
Statement of Assets and Liabilities
At 31 January 2022
31 January
31 January 2022 2021
Note GBP GBP
-------------------------------- ---------------------------- -----------------------------
Non-current assets
Investments at fair value
11 through profit or loss 140,525,060 117,256,810
140,525,060 117,256,810
-------------------------------- ---------------------------- -----------------------------
Current assets
13 Cash and cash equivalents 27,545,042 27,854,701
Trade and other receivables
and prepayments 95,147 197,564
-------------------------------- ---------------------------- -----------------------------
27,640,189 28,052,265
-------------------------------- ---------------------------- -----------------------------
Current liabilities
14 Trade and other payables (982,655) (659,645)
15 Unsecured loan note instruments (3,977,427) -
--------------------------------
(4,960,082) (659,645)
-------------------------------- ---------------------------- -----------------------------
Net current assets 22,680,107 27,392,620
-------------------------------- ---------------------------- -----------------------------
Non-current liabilities
15 Unsecured loan note instruments - (3,956,822)
Zero dividend preference
15 shares (19,580,190) -
(19,580,190) (3,956,822)
-------------------------------- ---------------------------- -----------------------------
Net assets 143,624,977 140,692,608
-------------------------------- ---------------------------- -----------------------------
Equity
16 Share capital 1,730,828 1,730,828
Share premium 13,619,627 13,619,627
Capital reserve 136,577,940 126,297,577
Revenue reserve (8,303,418) (955,424)
Total equity 143,624,977 140,692,608
-------------------------------- ---------------------------- -----------------------------
Net asset value per share
18 (pence) 455.66 437.63
-------------------------------- ---------------------------- -----------------------------
The financial statements were approved by the Board of Directors
on 21 March 2022 and signed on its behalf by:
Clive Spears David Pirouet
Director Director
Statement of Changes in Equity
For the year ended 31 January 2022
Year ended 31 January 2022
Share Share Capital Revenue
capital premium reserve reserve Total
Note GBP GBP GBP GBP GBP
---------------------- ---------- ----------- --------------- ------------ ------------
Balance at 1 February
2021 1,730,828 13,619,627 126,297,577 (955,424) 140,692,608
Total comprehensive
income/(loss) for
the year - - 10,280,363 (4,554,143) 5,726,220
---------------------- ---------- ----------- --------------- ------------ ------------
Contributions by
and distributions
to owners
Share-based payment
7 charge - - - 822,166 822,166
Share ownership
scheme participation - - - 625 625
16 Purchase of shares - - - (2,117,866) (2,117,866)
Share acquisition
16 for JSOP scheme - - - (1,498,776) (1,498,776)
Total transactions
with owners - - - (2,793,851) (2,793,851)
---------------------- ---------- ----------- --------------- ------------ ------------
Balance at 31 January
2022 1,730,828 13,619,627 136,577,940 (8,303,418) 143,624,977
---------------------- ---------- ----------- --------------- ------------ ------------
Year ended 31 January 2021
Share Share Capital Revenue
capital premium reserve reserve Total
Note GBP GBP GBP GBP GBP
---------------------- ---------- ----------- ------------ ------------ ------------
Balance at 1 February
2020 1,726,953 13,489,826 84,285,434 4,755,783 104,257,996
Total comprehensive
income/(loss) for
the year - - 42,012,143 (3,759,097) 38,253,046
---------------------- ---------- ----------- ------------ ------------ ------------
Contributions by
and distributions
to owners
Share-based payment
7 charge - - - 682,525 682,525
Share ownership
scheme participation - - - 3,943 3,943
Provision for future
settlement - - - 216,323 216,323
16 Purchase of shares - - - (2,068,761) (2,068,761)
Share acquisition
16 for JSOP scheme - - - (786,140) (786,140)
16 Issue of new shares 3,875 129,801 - - 133,676
---------------------- ---------- ----------- ------------ ------------ ------------
Total transactions
with owners 3,875 129,801 - (1,952,110) (1,818,434)
---------------------- ---------- ----------- ------------ ------------ ------------
Balance at 31 January
2021 1,730,828 13,619,627 126,297,577 (955,424) 140,692,608
---------------------- ---------- ----------- ------------ ------------ ------------
Statement of Cash Flows
For the year ended 31 January 2022
31 January 31 January
2022 2021
Note GBP GBP
-------------------------------------- --------------------- ------------------------
Operating activities
Interest income received 514 4,089
Expenses paid (3,231,866) (2,896,656)
19 Net cash used in operating activities (3,231,352) (2,892,567)
-------------------------------------- --------------------- ------------------------
Investing activities
11 Purchase of investments (31,253,480) (5,320,330)
11 Proceeds from investments 18,364,193 13,612,853
Net cash (used in)/generated
from investing activities (12,889,287) 8,292,523
-------------------------------------- --------------------- ------------------------
Financing activities
Unsecured loan note interest
paid (299,080) (299,080)
Purchase of shares (3,616,642) (2,854,901)
Share ownership scheme participation 625 3,943
Issue of zero dividend preference 20,000,000 -
shares
Issue costs for zero dividend (273,923) -
preference shares
Net cash generated from/(used
in) financing activities 15,810,980 (3,150,038)
-------------------------------------- --------------------- ------------------------
(Decrease)/ increase in cash
and cash equivalents (309,659) 2,249,918
Cash and cash equivalents at
start of year 27,854,701 25,604,783
-------------------------------------- --------------------- ------------------------
Cash and cash equivalents at
13 end of year 27,545,042 27,854,701
-------------------------------------- --------------------- ------------------------
Notes to the Financial Statements
For the year ended 31 January 2022
1 Operations
The Company was incorporated with limited liability in the Isle
of Man on 25 July 2003. The Company then re-registered under the
Isle of Man Companies Act 2006, with registration number 008597V.
On 11 September 2018, the Company re-registered under the Bermuda
Companies Act 1981, with registration number 53954. The Company
moved its operations to Jersey with immediate effect on 17 May 2017
and has subsequently operated from Jersey only.
The Company's ordinary shares are quoted on AIM, a market
operated by the London Stock Exchange, and the Growth Market of the
Aquis Stock Exchange (formerly the NEX Exchange).
The Company's portfolio investments are held in three associates
(ESO Investments 1 Limited, ESO Investments 2 Limited and ESO
Alternative Investments LP).
As the Company is an investment entity per IFRS 10, interests in
associates are measured at fair value.
The principal activity of the Company and its associates is to
arrange income yielding financing for growth, buyout and special
situations and holding the investments and its associates with a
view to exiting in due course at a profit.
The financial statements comprise the results of the Company and
its associates (see notes 3(a)).
The Company has no employees.
2 Basis of prepa ration
a. Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and applicable
legal and regulatory requirements of Bermuda law. They were
previously prepared in accordance with IFRS as adopted by the EU.
This change has had no impact on the financial statements. The
following accounting policies have been adopted and applied
consistently.
b. Basis of measurement
The financial statements have been prepared on the historical
cost convention except for financial instruments at fair value
through profit or loss which are measured at fair value.
c. Functional and presentation currency
These financial statements are presented in Sterling, which is
the Company's functional currency. All financial information
presented in Sterling has been rounded to the nearest pound.
'Functional currency' is the currency of the primary economic
environment in which the Company operates. The expenses (including
investment advisory and administration fees) are denominated and
paid in sterling. Accordingly, management has determined that the
functional currency of the Company is sterling.
d. Use of estimates and judgements
The preparation of financial statements in conformity with IFRS
requires the Directors and the Investment Advisor to make
judgements, estimates and assumptions that affect the application
of policies and the reported amounts of assets and liabilities,
income and expense. The estimates and associated assumptions are
based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of
which form the basis of making the judgements about carrying values
of assets and liabilities that are not readily apparent from other
sources. The Directors have, to the best of their ability, provided
as true and fair a view as is possible. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
Judgements made by Directors and the Investment Advisor in the
application of IFRS that have a significant effect on the financial
statements and estimates with a significant risk of material
adjustments in the next year relate to the determination of fair
value of financial instruments with significant unobservable inputs
(see note 12).
COVID-19 Impact:
The COVID-19 pandemic has had a significant impact on the
valuation multiples, derived from quoted comparables, used in the
preparation of the fair market valuation of the Company's unquoted
investments. These quoted comparables are subject to both market
volatility and uncertainty due to the impact of the pandemic and
their trading outlook. The performance and financial position
forecasted for the Company's portfolio is subject to the wider
market uncertainty caused by the COVID-19 pandemic. These inputs
have been used in the preparation of the fair market valuation of
the Company's unquoted investments.
e. Unconsolidated structured entities
The Company invests in portfolio investments via three entities,
which the Directors consider to be associates. See note 3(a) for an
explanation of why these entities are not controlled by the Company
but the Company has significant influence. The purpose of these
entities is to hold investments. These entities meet the definition
of unconsolidated structured entities under IFRS 12. There are
letters of support in place between the Company and ESO Investments
1 Limited and ESO Investments 2 Limited for the payment of
expenses.
The total net assets of these three entities, inclusive of loans
advanced by the Company, is GBP87,590,772 and the amount recognised
in the Company's financial statements (as investments at fair
value) is GBP140,525,060.
In respect of ESO Alternative Investments LP, the Company has
100% beneficial ownership of the entity and holds no voting
rights.
In respect of ESO Investments 1 Limited, the Company has 80%
beneficial ownership of the entity and holds no voting rights.
In respect of ESO Investments 2 Limited, the Company has 80%
beneficial ownership of the entity and holds no voting rights.
There are no restrictions on the ability of the associates to
transfer funds to the Company in the form of cash dividends or loan
repayments.
f. Going concern
The Company's management has assessed the Company's ability to
continue as a going concern and is satisfied that the Company has
the resources to continue in business for the foreseeable future.
Furthermore, the management is not aware of any material
uncertainties that may cast significant doubt upon the Company's
ability to continue as a going concern. Therefore, the financial
statements continue to be prepared on the going concern basis.
3 Significant accounting policies
a. Basis of treatment of associates
Associates
Associates are those enterprises over which the reporting entity
has significant influence, and which are neither subsidiaries nor
an interest in a joint venture. Significant influence is exerted
when the reporting entity has the power to participate in the
financial and operating policy decision of the investee, but it is
not in control or joint control of those policies.
The Company's portfolio investments are held via three entities
in which the Company is the sole investor: ESO Investments 1
Limited, ESO Investments 2 Limited and ESO Alternative Investments
LP (together the "Associates"). The primary activity of the
Associates is to make, hold and realise investments with a view to
profit. Any new investment made by the Company via the Associates
is at the sole discretion of the Company. The Associates do not
have any source of capital other than the Company and rely upon the
Company for any investment funding. Investment funding advanced to
the associates from the Company is contingent on it being used for
the same investment. The Associates are required to distribute any
proceeds from each investment to the Company upon receipt. This
indicates that the Company has significant influence over the
primary activity of the Associates.
The Associates, via their general partner or their Board, have
discretion over the management of their existing portfolio and on
the realisation of those investments. The respective Boards,
general partner and appointed investment managers of the Associates
are independent of the Company and accordingly the Company does not
control the investment activities of the Associates. This indicates
that the Company does not have overall control over the primary
activity of the Associates.
As the Company is the sole investor in the Associates, they do
not meet the definition of a joint venture. The Company does not
have control over the activities of the Associates and therefore
the Directors consider that they do not meet the definition of
subsidiaries. The Company has significant influence over the
activities of the Associates and therefore the Directors consider
that, for the reasons detailed above, they meet the definition of
associates. The Company has taken advantage of the exemption from
applying IAS 28 for investment entities and therefore the interests
in these associates are accounted for at fair value through profit
and loss rather than being equity accounted.
b. Segmental reporting
The Directors are of the opinion that the Company is engaged in
a single segment of business and geographic area being arranging
financing for growth, buyout and special situations in the United
Kingdom. Information presented to the Board of Directors for the
purpose of decision making is based on this single segment.
c. Income
Interest income is recognised as it accrues in profit or loss,
using the effective interest method. Dividend income is accounted
for when the right to receive such income is established.
d. Expenses
All expenses are accounted for on an accrual basis.
e. Cash and cash equivalents
Cash and cash equivalents comprise of current cash deposits with
banks only.
f. Finance charges
Other finance charges are recognised as an expense.
g. Trade and other payables
Trade and other payables are stated at amortised cost in
accordance with IFRS 9.
h. Unsecured loan note instruments
Unsecured loan note instruments are stated at amortised cost in
accordance with IFRS 9.
i. Financial assets and financial liabilities
i. Classification
Financial assets
When the Company first recognises a financial asset, it
classifies it based on the business model for managing the asset
and the asset's contractual cash flow characteristics, as
follows:
-- Amortised cost: a financial asset is measured at amortised
cost if both of the following conditions are met:
- the asset is held within a business model whose objective is
to hold assets in order to collect contractual cash flows; and
- the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
-- Fair value through other comprehensive income: financial
assets are classified and measured at fair value through other
comprehensive income if they are held in a business model whose
objective is achieved by both collecting contractual cash flows and
selling financial assets.
-- Fair value through profit or loss: any financial assets that
are not held in one of the two business models mentioned are
measured at fair value through profit or loss.
When, and only when, the Company changes its business model for
managing financial assets it must reclassify all affected financial
assets.
Financial liabilities
All financial liabilities are measured at amortised cost, except
for financial liabilities at fair value through profit or loss.
Such liabilities include derivatives (other than derivatives that
are financial guarantee contracts or are designated and effective
hedging instruments), other liabilities held for trading, and
liabilities that an entity designates to be measured at fair value
through profit or loss.
ii. Recognition
The Company recognises financial assets and financial
liabilities on the date it becomes a party to the contractual
provisions of the instrument.
iii. Measurement
Equity and debt investments, including those held by associates,
are stated at fair value. Loans and Receivables are stated at
amortised cost less any impairment losses.
The Investment Advisor determines asset values using the
valuation principles of IFRS 13.
'Fair value' is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the
principal or, in its absence, the most advantages market to which
the Company has access at that date. The fair value of a liability
reflects its non-performance risk.
When available, the Company measures the fair value of an
instrument using the quoted price in an active market for that
instrument. A market is regarded as 'active' if transactions for
the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis. The
Company measures instruments quoted in an active market at
mid-price.
If there is no quoted price in an active market, then the
Company uses valuation techniques that maximise the use of relevant
observable inputs and minimise the use of unobservable inputs. The
chosen valuation technique incorporates all of the factors that
market participants would take into account in pricing a
transaction.
The Company recognises transfers between levels of the fair
value hierarchy as at the end of the reporting period during which
the change has occurred.
The amortised cost of a financial asset or financial liability
is the amount at which the financial asset or financial liability
is measured at initial recognition, minus principal repayments,
plus or minus the cumulative amortisation using the effective
interest method of any difference between the initial amount
recognised and the maturity amount, minus any reduction for
impairment. Financial assets that are not carried at fair value
though profit and loss are subject to an impairment test. For loans
to portfolio companies the impairment test is undertaken as part of
the assessment of the fair value of the enterprise value of the
related business, as described above. If expected life cannot be
determined reliably, then the contractual life is used.
iv. Impairment
12-month expected credit losses
12-month expected credit losses are calculated by multiplying
the probability of a default occurring in the next 12 months with
the total (lifetime) expected credit losses that would result from
that default, regardless of when those losses occur. Therefore,
12-month expected credit losses represent a financial asset's
lifetime expected credit losses that are expected to arise from
default events that are possible within the 12 month period
following origination of an asset, or from each reporting date for
those assets in initial recognition stage.
Lifetime expected credit losses
Lifetime expected credit losses are the present value of
expected credit losses that arise if a borrower defaults on its
obligation at any point throughout the term of a lender's financial
asset (that is, all possible default events during the term of the
financial asset are included in the analysis). Lifetime expected
credit losses are calculated based on a weighted average of
expected credit losses, with the weightings being based on the
respective probabilities of default.
v. Derecognition
The Company derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire or it
transfers the financial asset and the transfer qualifies for
derecognition in accordance with IFRS 9.
The Company uses the weighted average method to determine
realised gains and losses on derecognition. A financial liability
is derecognised when the obligation specified in the contract is
discharged, cancelled or expired.
j. Share capital
Ordinary share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares and share
options are recognised as a deduction from equity, net of any tax
effects.
Repurchase of share capital (treasury shares)
When share capital recognised as equity is repurchased, the
amount of the consideration paid, which includes directly
attributable costs, net of any tax effects, is recognised as a
deduction from equity. Repurchased shares are classified as
treasury shares and are presented as a deduction from total equity.
When treasury shares are sold or reissued subsequently, the amount
received is recognised as an increase in equity, and the resulting
surplus or deficit on the transaction is transferred to/from
revenue reserves.
Capital Reserve and Revenue Reserve
The capital reserve comprises net gains and losses on
investments. The revenue reserve comprises other income and
expenses plus other items recorded directly in equity (excluding
items recorded as share capital/share premium).
k. Joint share ownership plan ("JSOP") and share-based payments
Directors of the Company and certain employees of the Investment
Advisor (together "Participants") receive remuneration in the form
of equity-settled share-based payment transactions, through a JSOP
Scheme.
Equity-settled share-based payments are measured at fair value
at the date of grant. The fair value is determined based on the
share price of the equity instrument at the grant date. The fair
value determined at the grant date of the equity-settled
share-based payment is expensed on a straight-line basis over the
vesting period, based on the Company's estimate of the number of
shares that will eventually vest. The instruments are subject to a
three-year service vesting condition from the grant date, and their
fair value is recognised as a share-based expense with a
corresponding increase in revenue reserves within equity over the
vesting period. Contributions received from employees as part of
the JSOP arrangement are recognised directly in equity in the line
share ownership scheme participation.
The assets (other than investments in the Company's shares),
liabilities, income and expenses of the trust established to
operate the JSOP scheme (the "Trust") are recognised by the Company
as the Trust is considered to be an agent of the Company. The
Trust's investment in the Company's shares is deducted from
shareholders' funds in the Statement of Asset and Liabilities as if
they were treasury shares (see note 7).
l. Zero dividend preference shares
Under IAS 32 - Financial Instruments: Presentation, the ZDP
Shares are classified as financial liabilities and are held at
amortised cost. Appropriation for the period in respect of ZDP
Shares is included in the Statement of Comprehensive Income as a
finance cost and is calculated using the effective interest rate
method ("EIR"). The costs of issue of the ZDP Shares are being
amortised over the period until the ZDP Shares are due for
redemption.
m. Future changes in accounting policies
Several new standards are effective for annual periods beginning
after 1 January 2021 and earlier application is permitted; however,
the Company has not adopted early the new or amended standards in
preparing these financial statements.
The Directors do not expect the adoption of the standards and
interpretations to have a material impact on the Company's
financial statements in the period of initial application.
4 Interest income
2022 2021
Company Company
GBP GBP
--------------- -------- --------
Cash balances 514 4,089
---------------- -------- --------
Total 514 4,089
---------------- -------- --------
5 Investment advisory, administration and performance fees
Investment advisory fees
The investment advisory fee payable to EPIC Investment Partners
LLP ("EPIC") is assessed and payable at the end of each fiscal
quarter and is calculated as 2 per cent. of the Company's NAV where
the Company's NAV is less than GBP100 million; otherwise the
investment advisory fee is calculated as the greater of GBP2.0
million or the sum of 2 per cent. of the Company's NAV comprising
Level 3 portfolio assets (i.e. unquoted assets), 1 per cent. of the
Company's NAV comprising Level 1 assets (i.e. quoted assets), no
fees on assets which are managed or advised by a third-party
manager, 0.5 per cent. of the Company's net cash (if greater than
nil), and 2 per cent. of the Company's net cash (if less than nil)
(i.e. reducing fees for net debt positions).
The charge for the current year was GBP2,054,555 (2021:
GBP1,937,207). The amount outstanding as at 31 January 2022 was
GBP500,000 (2021: GBP500,000) (see note 14).
Administration fees
EPIC Administration Limited provides accounting and financial
administration services to the Company. The fee payable to EPIC
Administration Limited is assessed and payable at the end of each
fiscal quarter and is calculated as 0.15 per cent. of the Company's
NAV where the Company's NAV is less than GBP100 million (subject to
a minimum fee of GBP35,000); otherwise the advisory fee shall be
calculated as 0.15 per cent. of GBP100 million plus a fee of 0.1
per cent. of the excess of the Company's NAV above GBP100
million.
The charge for the current year was GBP212,431 (year ended 31
January 2021: GBP163,212).
Other administration fees during the year were GBP72,196 (2021:
GBP66,234).
Performance fees paid by associates
The associates are stated at fair value. Performance fees are
paid to the Investment Advisor based on the performance of the
associates and deducted in calculating the fair value of
associates.
Performance fee in ESO Investments 1 Limited
The distribution policy of ESO Investments 1 Limited includes an
allocation of profits to the Investment Advisor such that, for each
investment where a returns hurdle of 8 per cent. per annum has been
achieved, the Investment Advisor is entitled to receive 20 per
cent. of the increase above the base value of investment. As at 31
January 2022, GBPnil has been accrued in the profit share account
of the Investment Advisor in the records of ESO Investments 1
Limited (2021: GBP767,311 accrued).
Performance fee in ESO Investments 2 Limited
The distribution policy of ESO Investments 2 Limited includes an
allocation of profit to the Investment Advisor such that, for each
investment where a returns hurdle of 8 per cent. per annum has been
achieved, the Investment Advisor is entitled to receive 20 per
cent. of the increase above the base value of investment. As at 31
January 2022, GBP20,027,085 has been accrued in the profit share
account of the Investment Advisor in the records of ESO Investments
2 Limited (2021: GBP16,125,708 accrued).
Joint share ownership plan ("JSOP") and share-based payments
Directors of the Company and certain employees of the Investment
Advisor (together "Participants") receive remuneration in the form
of equity-settled share-based payment transactions, through a JSOP
Scheme (see note 7).
6 Directors' fees
2022 2022 2021 2021
Share-based Share-based
Company payment Company payment
GBP GBP GBP GBP
------------------------ -------- ------------ -------- ------------
C.L. Spears (Chairman) 32,000 13,445 32,000 11,222
R.B.M. Quayle 15,000 4,754 30,000 10,440
N.V. Wilson 30,000 13,132 30,000 10,928
H. Bestwick 30,000 13,445 30,000 11,222
D.R. Pirouet 32,000 6,648 32,000 4,776
M.M. Gray 10,000 1,197 - -
------------------------- -------- ------------ -------- ------------
Total 149,000 52,621 154,000 48,588
------------------------- -------- ------------ -------- ------------
In addition to above, during the year, C.L. Spears and H.
Bestwick received GBP3,750 each and M.M. Gray received GBP1,250 as
Directors' fees for their respective directorships in ESO
Investments 1 Limited and ESO Investments 2 Limited. The
share-based payment expense is calculated as set out in note 7.
7 Share-based payment expense
The cost of equity-settled transactions to Participants in the
JSOP Scheme are measured at fair value at the grant date. The fair
value is determined based on the share price of the equity
instrument at the grant date.
The Trust was created to award shares to Participants as part of
the JSOP. Participants are awarded a certain number of shares
("Matching Shares") which are subject to a three-year service
vesting condition from the grant date. In order to receive their
Matching Share allocation Participants are required to purchase
shares in the Company on the open market ("Bought Shares"). The
Participant will then be entitled to acquire a joint ownership
interest in the Matching Shares for the payment of a nominal
amount, on the basis of one joint ownership interest in one
Matching Share for every Bought Share they acquire in the relevant
award period.
The Trust holds the Matching Shares jointly with the Participant
until the award vests. These shares carry the same rights
as the rest of the ordinary shares.
The Trust held 1,871,753 (2021: 1,419,004) matching shares at
the year-end which have traditionally not voted (see note 16).
3,755 shares vested to Participants in the year ended 31 January
2022 (2021: Nil). 185,779 shares were awarded to Participants in
the year ended 31 January 2022 (2021: 271,995).
The share-based payment expense in the Statement of
Comprehensive Income has been calculated on the basis of the fair
value of the equity instruments at the grant date and the estimated
number of equity instruments to be issued after the vesting period,
less the amount paid for the joint ownership interest in the
Matching Shares.
The total share-based payment expense in the year ended 31
January 2022 was GBP822,166 (2021: GBP682,525) of which GBP670,865
related to expenses incurred in the year ended 31 January 2022 and
GBP151,301 related to expenses incurred in the year ended 31
January 2020. Of the total share-based payment expense in the year
ended 31 January 2022, GBP52,621 related to the Directors (2021:
GBP48,588) and the balance related to members, employees and
consultants of the Investment Advisor.
8 Other expenses
The breakdown of other expenses presented in the statement of
comprehensive income is as follows:
31 January 31 January
2022 2021
Total Total
GBP GBP
------------------------------------ ------------ -----------
Administration fees (284,627) (229,446)
Directors' and officers' insurance (24,453) (22,356)
Professional fees (480,554) (212,697)
Board meeting and travel expenses (588) (1,981)
Auditors' remuneration (68,095) (55,840)
Interim review remuneration (8,325) (8,160)
Bank charges (3,261) (659)
Irrecoverable VAT (360) (675)
Foreign exchange movement (52,948) (20,033)
Nominated advisor and broker fees (61,962) (60,710)
Listing fees (48,446) (44,134)
Sundry expenses (18,649) (13,078)
Other expenses (1,052,268) (669,769)
------------------------------------- ------------ -----------
9 Taxation
The Company is a tax resident of Jersey and is subject to 0 per
cent. corporation tax (2021: 0 per cent.).
ESO Alternative Investments LP is transparent for tax
purposes.
ESO Investments 1 Limited and ESO Investments 2 Limited are tax
resident in Jersey and are subject to 0 per cent. corporation
tax.
10 Dividends paid and proposed
No dividends were paid or proposed for the year ended 31 January
2022 (2021: GBPnil).
11 Investments at fair value through profit or loss
31 January
31 January 2022 2021
GBP GBP
Investments at fair value through
profit and loss* 140,525,060 117,256,810
140,525,060 117,256,810
----------------------------------- ----------------------- -----------------------
Investments
31 January 2022 31 January 2021
GBP GBP
Investments at 1 February 117,256,810 83,382,923
Purchase of investments 31,253,480 5,320,330
Proceeds from investments (18,364,193) (13,612,853)
Distributions (non-cash distribution
in prior year) - (66,664)
Net fair value movements 10,280,363 42,012,143
Loan to associates - 220,931
Reclassification of debtor balance
to investee 98,600 -
Investments at 31 January 140,525,060 117,256,810
--------------------------------------- ------------------------- ---------------------------
*Comprises associates stated at fair value in accordance with
accounting policy set out in note 3(a) ( ESO Investments 1 Limited,
ESO Investments 2 Limited and ESO Alternative Investments LP).
12 Fair value of financial instruments
The Company determines the fair value of financial instruments
with reference to IPEV guidelines and the valuation principles of
IFRS 13 (Fair Value Measurement). The Company measures fair value
using the IFRS 13 fair value hierarchy, which reflects the
significance and certainty of the inputs used in deriving the fair
value of an asset:
-- Level 1: Inputs that are quoted market prices (unadjusted) in
active markets for identical instruments;
-- Level 2: Inputs other than quoted prices included within
Level 1 that are observable either directly (i.e. as prices) or
indirectly (i.e. derived from prices). This category includes
instruments valued using quoted market prices in active markets for
similar instruments, quoted prices for identical or similar
instruments in markets that are considered less than active or
other valuation techniques in which all significant inputs are
directly or indirectly observable from market data;
-- Level 3: Inputs that are unobservable. This category includes
all instruments for which the valuation technique includes inputs
not based on observable data and the unobservable inputs have a
significant effect on the instrument's valuation. This category
includes instruments that are valued based on quoted prices for
similar instruments but for which significant unobservable
adjustments or assumptions are required to reflect differences
between the instruments.
Valuation framework
The Company employs the valuation framework detailed below with
respect to the measurement of fair values. A valuation of the
Company's investments is prepared by the Investment Advisor with
reference to IPEV guidelines and the valuation principles of IFRS
13 (Fair Value Measurement). The Investment Advisor recommends
these valuations to the Board of Directors. The Board of Directors
considers the valuations recommended by the Investment Advisor,
determines any amendments required and thereafter adopts the fair
values presented in the Company's financial statements.
Quoted investments
Quoted investments traded in an active market are classified as
Level 1 in the IFRS 13 fair value hierarchy. The Company's
investment in Luceco plc is considered as a Level 1 asset. For
Level 1 assets, the Company calculates the holding value from the
latest market price (without adjustment).
Quoted investments traded in markets that are considered less
than active are classified as Level 2 in the IFRS 13 fair value
hierarchy. The Company's investment in EPIC Acquisition Corp is
considered as a Level 2 asset. For Level 2 assets, the Company
calculates the holding value from the latest available market
prices (without adjustment).
Unquoted private equity investments and third-party fund
investments
Private equity investments and fund investments are classified
as Level 3 in the IFRS 13 fair value hierarchy. The Company's
investments in Whittard, David Phillips, Rayware, Pharmacy2U,
European Capital Private Debt Fund LP, EPE Junior Aggregator LP,
Atlantic Credit Opportunities Fund Limited and EAC Sponsor Limited
are considered to be Level 3 assets. Various valuation techniques
may be applied in determining the fair value of investments held as
Level 3 in the fair value hierarchy;
-- For recently acquired assets, the Company considers the
investment cost an applicable fair value for the asset;
-- For underperforming assets, the Company considers the net
asset or recovery valuation more applicable, in particular where
the business' performance be contingent on shareholder financial
support;
-- For performing assets, the Company considers the market
approach to be the most appropriate with a specific focus on
trading comparables, applied on a forward basis. The Company will
also consider transaction comparables, applied on a historic
basis;
-- For assets managed and valued by third party managers, the
Company reviews the valuation methodology of the third party
manager. If deemed appropriate and consistent with the Company's
reporting standards, the Company will use the valuation prepared by
the third-party manager.
The Investment Advisor believe that it is appropriate to apply
an illiquidity discount to the multiples of comparable companies
when using them to calculate valuations for small, private
companies. This discount adjusts for the difference in size between
generally larger comparable companies and the smaller assets being
valued. The illiquidity discount also incorporates the premium the
market gives to comparable companies for being freely traded or
listed securities. The Investment Advisor has determined between 15
per cent. and 25 per cent. to be an appropriate illiquidity
discount with reference to market data and transaction multiples
seen in the market in which the Investment Advisor operates.
Where portfolio investments are held through
subsidiary/associate holding companies, the net assets of the
holding company are added to the value of the portfolio investment
being assessed to derive the fair value of the holding company held
by the Company.
Fair value hierarchy - Financial instruments measured at fair
value
The table below analyses the underlying investments held by the
associates measured at fair value at the reporting date by the
level in the fair value hierarchy into which the fair value
measurement is categorised. Debt securities are also included, as
these are also stated at fair value with the Board assessing the
fair value of the total investment, which includes debt and equity.
The amounts are based on the values recognised in the statement of
financial position of the associates.
Level 1 Level 2 Level 3 Total
31 January 2022 GBP GBP GBP GBP
------------------------------ ----------- ---------- --------------- -------------------
Financial assets at
fair value through
profit or loss
Unquoted private equity
investments (including
debt) - - 41,897,143 41,897,143
Unquoted fund investments - - 5,989,711 5,989,711
Quoted investments 87,206,277 5,166,896 - 92,373,173
Investments at fair
value through profit
or loss 87,206,277 5,166,896 47,886,854 140,260,027
------------------------------- ----------- ---------- --------------- -------------------
Other assets and liabilities
(held at cost) - - - 265,033
Total 87,206,277 5,166,896 47,886,854 140,525,060
------------------------------- ----------- ---------- --------------- -------------------
Level 1 Level 2 Level 3 Total
31 January 2021 GBP GBP GBP GBP
------------------------------ ----------- ---------- --------------- -------------------
Financial assets at
fair value through
profit or loss
Unquoted private equity
investments (including
debt) - - 23,156,643 23,156,643
Unquoted fund investments - - 5,265,686 5,265,686
Quoted investments 88,737,691 - - 88,737,691
Investments at fair
value through profit
or loss 88,737,691 - 28,422,329 117,160,020
------------------------------- ----------- ---------- --------------- -------------------
Other assets and liabilities
(held at cost) - - - 96,790
Total 88,737,691 - 28,422,329 117,256,810
------------------------------- ----------- ---------- --------------- -------------------
The following table, detailing the value of portfolio
investments only, shows a reconciliation of the opening balances to
the closing balances for fair value measurements in level 3 of the
fair value hierarchy for the underlying investments held by the
associates.
31 January 31 January
2022 2021
Unquoted investments (including debt) GBP GBP
------------------------------------------ ------------------- ------------
Balance as at 1 February 28,422,329 25,405,230
Additional investments 25,786,074 5,339,953
Capital distributions from investments (330,247) (223,018)
Change in fair value through
profit & loss (5,991,302) (2,099,836)
Balance as at 31 January 47,886,854 28,422,329
------------------------------------------ ------------------- ------------
Significant unobservable inputs used in measuring fair value
The table below sets out information about significant
unobservable inputs used at 31 January 2022 in measuring financial
instruments categorised as Level 3 in the fair value hierarchy.
Description Fair value Significant unobservable
at inputs
31 January
2022
------------------------------------ -------------------------
GBP
------------------------------------ -------------------- -------------------------
Unquoted private equity investments 41,897,143 Sales/EBITDA multiple
(including debt) or cost of recent
investment
Unquoted fund investments 5,989,711 Reported net asset
value
------------------------------------ -------------------- -------------------------
Significant unobservable inputs are developed as follows:
-- Trading comparable multiple: valuation multiples used by
other market participants when pricing comparable assets. Relevant
comparable assets are selected from public companies determined to
be proximate to the Company's investment based on similarity of
sector, size, geography or other relevant factors. The valuation
multiple for a comparable company is determined by calculating the
enterprise value of the company implied by its market price as at
the reporting date and dividing by the relevant financial metric
(sales or EBITDA).
-- Reported net asset value: for assets managed and valued by a
third party, the manager provides the Company with periodic
valuations of the Company's investment. The Company reviews the
valuation methodology of the third-party manager. If deemed
appropriate and consistent with the Company's reporting standards,
the Board will adopt the valuation prepared by the third-party
manager. Adjustments are made to third party valuations where
considered necessary to arrive at the Director's estimate of fair
value.
-- Investment cost: for recently acquired assets (typically
completed in the last twelve months), the Investment Advisor
considers the investment cost an applicable fair value for the
asset.
Although management believes that its estimates of fair value
are appropriate, the use of different methodologies or assumptions
could lead to different measurements of fair value. For fair value
measurements of Level 3 assets, changing one or more of the
assumptions used to reasonably possible alternative assumptions
would have the following effects on the Level 3 investment
valuations:
-- For the Company's investment in mature Level 3 assets, the
valuations used in the preparation of the financial statements
imply an average EV to EBITDA multiple of 5.2x (weighted by each
asset's total valuation) (2021: 5.8x). The key unobservable inputs
into the preparation of the valuation of mature Level 3 assets was
the EV to EBITDA multiple applied to the asset's financial
forecasts. If these inputs had been taken to be 25 per cent.
higher, the value of the Level 3 assets and profit for the year
would have been GBP10,654,945 higher. If these inputs had been
taken to be 25 per cent. lower, the value of the Level 3 assets and
profit for the year would have been GBP14,691,060 lower. A
corresponding increase or decrease in the asset's financial
forecasts would have a similar impact on the Company's assets and
profit.
-- For the Company's investment in growth Level 3 assets, the
valuations used in the preparation of the financial statements
imply an average EV to sales multiple of 1.2x (weighted by each
asset's total valuation) (2021: 1.6x). The key unobservable inputs
into the preparation of the valuation of growth Level 3 assets were
the EV to sales multiple applied to the asset's financial
forecasts. If these inputs had been taken to be 25 per cent.
higher, the value of the Level 3 assets and profit for the year
would have been GBP762,779 higher. If these inputs had been taken
to be 25 per cent. lower, the value of the Level 3 assets and
profit for the year would have been GBP762,779 lower. A
corresponding increase or decrease in the asset's financial
forecasts would have a similar impact on the Company's assets and
profit.
Classification of financial assets and liabilities
The table below sets out the classifications of the carrying
amounts of the Company's financial assets and liabilities into
categories of financial instruments.
31 January 2022
At amortised
At fair value cost Total
Financial assets GBP GBP GBP
---------------------------------- -------------------------- ----------------------- -----------------------
Investments at fair value
through profit or loss 140,525,060 - 140,525,060
Cash and cash equivalents - 27,545,042 27,545,042
Trade and other receivables - - -
140,525,060 27,545,042 168,070,102
========================== ======================= =======================
Financial liabilities
---------------------------------- -------------------------- ----------------------- -----------------------
Trade and other payables - 982,655 982,655
Unsecured loan note instruments* - 3,977,427 3,977,427
Zero dividend preference
shares - 19,580,190 19,580,190
- 24,540,272 24,540,272
========================== ======================= =======================
31 January 2021
At amortised
At fair value cost Total
Financial assets GBP GBP GBP
---------------------------------- -------------------------- ----------------------- -----------------------
Investments at fair value
through profit or loss 117,256,810 - 117,256,810
Cash and cash equivalents - 27,854,701 27,854,701
Trade and other receivables - 98,200 98,200
117,256,810 27,952,901 145,209,711
========================== ======================= =======================
Financial liabilities
---------------------------------- -------------------------- ----------------------- -----------------------
Trade and other payables - 659,645 659,645
Unsecured loan note instruments* - 3,956,822 3,956,822
- 4,616,467 4,616,467
========================== ======================= =======================
*The directors consider that the fair value of the unsecured
loan note instruments and zero dividend preference shares is equal
to carrying value.
13 Cash and cash equivalents
2022 2021
GBP GBP
--------------------------- --------------------- -----------
Current and call accounts 27,545,042 27,854,701
--------------------------- --------------------- -----------
27,545,042 27,854,701
--------------------------- --------------------- -----------
The current and call accounts have been classified as cash and
cash equivalents in the Statement of Cash Flows.
14 Trade and other payables
2022 2021
GBP GBP
--------------------------------- -------- --------
Trade payables 13,657 688
Accrued administration fee 48,406 47,677
Accrued audit fee 54,078 43,466
Accrued professional fee 65,811 53,131
Accrued investment advisor fees 500,000 500,000
Accrued Directors' fees 12,833 12,833
Provision for ZDP issue costs 285,870 -
Other payables 2,000 1,850
Total 982,655 659,645
---------------------------------- -------- --------
15 Non-current liabilities
Unsecured Loan Notes ("ULN")
The Company has issued ULN's which pay interest at 7.5 per cent.
per annum and are redeemable on 23 July 2022 (subject to voluntary
early redemption by the Company). At 31 January 2022, GBP3,987,729
(2021: GBP3,987,729) of ULNs in principal amount were outstanding.
Issue costs totalling GBP144,236 have been offset against the value
of the loan note instrument and are being amortised over the life
of the instrument. The total issue costs expensed in the year ended
31 January 2022 was GBP20,605 (2021: GBP20,605). The carrying value
of the ULNs in issue at the year-end was GBP3,977,427 (2021:
GBP3,956,822). The total interest expense for the ULNs for the year
is GBP319,685 (2021: GBP319,685). This includes the amortisation of
the issue costs.
Zero Dividend Preference Shares ("ZDP Shares")
On 17 December 2021 the Company issued 20,000,000 ZDP Shares at
a price of GBP1 per share, raising GBP20,000,000. The ZDP Shares
will not pay dividends but have a final capital entitlement at
maturity on 16 December 2026 of 129.14 pence. It should be noted
that the predetermined capital entitlement of a ZDP Share is not
guaranteed and is dependent upon the Company's gross assets being
sufficient on 16 December 2026 to meet the final capital
entitlement.
Issue costs totalling GBP573,796 have been offset against the
value of the ZDP Shares and are being amortised over the life of
the instrument. The total issue costs expensed in the year ended 31
January 2022 was GBP14,538 (2021: GBPnil). The carrying value of
the ZDP Shares in issue at the year-end was GBP19,580,190 (2021:
GBPnil). The total finance charge for the ZDP Shares for the year
is GBP156,983 (2021: GBPnil). This includes the ZDP Share final
capital entitlement accrual and the amortisation of the issue
costs.
16 Share capital
2022 2022 2021 2021
Number GBP Number GBP
------------------------------- ------------ ---------- ------------ ----------
Authorised share capital
Ordinary shares of 5p each 45,000,000 2,250,000 45,000,000 2,250,000
-------------------------------- ------------ ---------- ------------ ----------
Called up, allotted and fully
paid
Ordinary shares of 5p each 34,616,554 1,730,828 34,616,554 1,730,828
Ordinary shares of 5p each
held in treasury (3,096,575) - (2,467,731) -
-------------------------------- ------------ ---------- ------------ ----------
31,519,979 1,730,828 32,148,823 1,730,828
------------------------------- ------------ ---------- ------------ ----------
No shares were issued during the year ended 31 January 2022.
During the year ended 31 January 2021, 77,493 ordinary shares of 5
pence each were issued at a price of 172.50 pence each. Therefore,
in the prior year the share capital of the Company increased by
GBP3,875 and the share premium increased by GBP129,801.
During the year ended 31 January 2022, the Company repurchased
628,844 shares (2021: 799,480 shares) with a total value of
GBP2,117,866 (2021: GBP2,068,761). These shares are held as
treasury shares.
During the year ended 31 January 2022, the Trust purchased
456,524 shares (2021: 462,435 shares) with a total value of
GBP1,498,776 (2021: GBP786,140). 3,755 shares vested to
Participants in the year ended 31 January 2022 (2021: nil). At the
year-end 1,871,753 shares were held by the Trust (2021: 1,419,004)
(see note 7).
17 Basic and diluted profit per share (pence)
Basic profit per share is calculated by dividing the profit of
the Company for the year attributable to the ordinary shareholders
of GBP5,726,220 (2021: GBP38,253,046) divided by the weighted
average number of shares outstanding during the year of 32,065,616
after excluding treasury shares (2021: 32,782,089 shares).
Diluted profit per share is calculated by dividing the profit of
the Company for the year attributable to ordinary shareholders of
GBP5,726,220 (2021: GBP38,253,046) divided by the weighted average
number of ordinary shares outstanding during the year, as adjusted
for the effects of all dilutive potential ordinary shares, of
32,065,616 after excluding treasury shares (2021: 32,782,089
shares).
18 NAV per share (pence)
The Company's NAV per share of 455.66 pence (2021: 437.63 pence)
is based on the net assets of the Company at the year-end of
GBP143,624,977 (2021: GBP140,692,608) divided by the shares in
issue at the end of the year of 31,519,979 after excluding treasury
shares (2021: 32,148,823).
The Company's diluted NAV per share of 455.66 pence is based on
the net assets of the Company at the year-end of GBP143,624,977
(2021: GBP140,692,608) divided by the shares in issue at the end of
the year, as adjusted for the effects of dilutive potential
ordinary shares of 31,519,979 after excluding treasury shares
(2021: 32,148,823).
19 Net cash used in operating activities
Reconciliation of profit before finance cost and tax to net cash
used in operating activities:
2022 2021
Company Company
GBP GBP
-------------------------------------------- ------------ ------------
Loss before finance cost and tax (Revenue) (4,077,475) (3,439,412)
Adjustments:
Share-based payment expense 822,166 682,525
Movement in loans from associates - (154,268)
------------ ------------
(3,255,309) (2,911,155)
Non-cash items
Movement in trade and other receivables 3,817 37,647
Movement in trade and other payables 20,140 (19,059)
Net cash used in operating activities (3,231,352) (2,892,567)
-------------------------------------------- ------------ ------------
20 Financial instruments
The Company's financial instruments comprise:
-- Investments in listed and unlisted companies held by
associates, comprising equity and loans
-- Cash and cash equivalents, loans and convertible loan note instruments; and
-- Accrued interest and trade and other receivables, accrued expenses and sundry creditors.
Financial risk management objectives and policies
The main risks arising from the Company's financial instruments
are liquidity risk, credit risk, market price risk and interest
rate risk. None of those risks are hedged. These risks arise
through directly held financial instruments and through the
indirect exposures created by the underlying financial instruments
in the associates. These risks are managed by the Directors in
conjunction with the Investment Advisor. The Investment Advisor is
responsible for day to day management of financial instruments in
the associates.
Capital management
The Company's capital comprises share capital, share premium and
reserves and is not subject to externally imposed capital
requirements.
Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The Company's liquid assets comprise cash and cash
equivalents and trade and other receivables, which are readily
realisable.
Residual contractual maturities of financial liabilities
Less
than 1 - 3 3 months 1 - 5 Over 5 No stated
1 Month Months to 1 year years years maturity
31 January 2022 GBP GBP GBP GBP GBP GBP
----------------------- --------- -------- ----------- ----------- ------- ----------
Financial liabilities
Trade and other
payables 982,655 - - - - -
Loan note instruments - - 3,977,427 - - -
Zero dividend
preference shares - - - 19,580,190 - -
-----------------------
Total 982,655 - 3,977,427 19,580,190 - -
------------------------- --------- -------- ----------- ----------- ------- ----------
Less
than 1 - 3 3 months 1 - 5 Over 5 No stated
1 Month Months to 1 year years years maturity
31 January 2021 GBP GBP GBP GBP GBP GBP
----------------------- --------- -------- ----------- ----------- ------- ----------
Financial liabilities
Trade and other
payables 659,645 - - - - -
Loan note instruments - - - 4,436,341 - -
----------------------- ---------
Total 659,645 - - 4,436,341 - -
------------------------- --------- -------- ----------- ----------- ------- ----------
Credit risk
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to meet a commitment that it has entered into
with the Company.
The Company, through its interests in associates, has advanced
loans to a number of private companies which exposes the Company to
significant credit risk. The loans are advanced to unquoted private
companies, which have no credit risk rating. They are entered into
as part of the investment strategy of the Company and its
associates, and credit risk is managed by taking security where
available (typically a floating charge) and the Investment Advisor
taking an active role in the management of the borrowing
companies.
Although the Investment Advisor looks to set realistic repayment
schedules, it does not necessarily view a portfolio company not
repaying on time and in full as 'underperforming' and seeks to
monitor each portfolio company on a case-by-case basis. However, in
all cases the Investment Advisor reserves the right to exercise
step in rights. In addition to the repayment of loans advanced, the
Company and associates will often arrange additional preference
share structures and take significant equity stakes so as to create
shareholder value. It is the performance of the combination of all
securities including third party debt that determines the Company's
view of each investment.
At the reporting date, the Company's financial assets exposed to
credit risk amounted to the following (excluding exposure in the
underlying associates):
2022 2021
GBP GBP
----------------------------- ----------- -----------
Cash and cash equivalents 27,545,042 27,854,701
Trade and other receivables - 98,200
Total 27,545,042 27,952,901
------------------------------ ----------- -----------
Cash balances are placed with HSBC Bank plc, Barclays Bank plc,
both of which have the credit rating of A1 Negative (Moody's) and
Santander International which has the credit rating of A2
(Moody's).
Market price risk
Market price risk is the risk that the value of a financial
instrument will fluctuate as a result of changes in market prices
(other than those arising from interest rate risk or currency
risk). The Company is exposed to a market price risk via its equity
investments held through its interests in associates, which are
stated at fair value.
Market price risk sensitivity
The Company is exposed to market price risk with regard to its
investment in the associates, which own equity interests in a
number of quoted and unquoted companies which are stated at fair
value. Luceco plc was quoted on the Main Market of the London Stock
Exchange at 31 January 2022. EPIC Acquisition Corp's shares was
quoted on the Euronext Amsterdam Stock Exchange at 31 January
2022.
If Luceco plc's share price had been 5.0 per cent. higher than
actual close of market on 31 January 2022, EPE Special
Opportunities Limited's NAV / share would have been 2.97 per cent.
higher than reported. If Luceco's share price had been 5.0 per
cent. lower than actual close of market on 31 January 2022, EPE
Special Opportunities Limited's NAV / share would have been 2.97
per cent. lower than reported. These movements would have had a
corresponding effect on the profit for the year
If EPIC Acquisition Corp's share price had been 5.0 per cent.
higher than actual close of market on 31 January 2022, EPE Special
Opportunities Limited's NAV / share would have been 0.18 per cent.
higher than reported. If EPIC Acquisition Corp's share price had
been 5.0 per cent. lower than actual close of market on 31 January
2022, EPE Special Opportunities Limited's NAV / share would have
been 0.18 per cent. lower than reported. These movements would have
had a corresponding effect on the profit for the year.
Interest rate risk
The Company is exposed to interest rate risk through its
investment in the associates and on its cash balances. The
associates provide loans to portfolio companies. Most of the loans
are at fixed rates. Cash balances earn interest at variable rates.
The unsecured loan note instruments carry fixed interest rates.
The table below summarises the Company's exposure to interest
rate risks. It includes the Company's financial assets and
liabilities at the earlier of contractual re-pricing or maturity
date, measured by the carrying values of assets and
liabilities:
Less than 1 month 1 - 5 Over Non- interest
31 January 2022 1 month - 1 year years 5 years bearing Total
Assets GBP GBP GBP GBP GBP GBP
--------------------------- ----------- ------------ ------- --------- -------------- ------------
Receivables and
cash
Trade and other
receivables - - - - - -
Cash and cash equivalents 27,545,042 - - - - 27,545,042
---------------------------- ----------- ------------ -------
Total financial
assets 27,545,042 - - - - 27,545,042
---------------------------- ----------- ------------ ------- --------- -------------- ------------
Liabilities
Financial liabilities
measured at amortised
cost
Trade and other
payables - - - - (982,655) (982,655)
Unsecured loan note
instruments - (3,977,427) - - - (3,977,427)
Total financial
liabilities (3,977,427) - - (982,655) (4,960,082)
---------------------------- ----------- ------------ ------- --------- -------------- ------------
Less than 1 month 1 - 5 Over Non- interest
31 January 2021 1 month - 1 year years 5 years bearing Total
Assets GBP GBP GBP GBP GBP GBP
----------------------------- ----------- ---------- ------------ --------- -------------- ------------
Receivables and cash
Trade and other receivables - - - - 98,200 98,200
Cash and cash equivalents 27,854,701 - - - - 27,854,701
----------------------------- ----------- ---------- ------------
Total financial assets 27,854,701 - - - 98,200 27,952,901
----------------------------- ----------- ---------- ------------ --------- -------------- ------------
Liabilities
Financial liabilities
measured at amortised
cost
Trade and other payables - - - - (659,645) (659,645)
Unsecured loan note
instruments - - (3,956,822) - - (3,956,822)
Total financial liabilities - - (3,956,822) - (659,645) (4,616,467)
----------------------------- ----------- ---------- ------------ --------- -------------- ------------
Interest rate sensitivity
The Company is exposed to market interest rate risk only via its
cash balances. A sensitivity analysis has not been provided as it
is not considered significant to Company performance.
Currency risk
The Company's has no significant exposure to foreign currency
risk.
Exposure to other market price risk
The investment advisor monitors the concentration of risk for
equity and debt securities based on counterparties and industries
(and geographical location). The Company's equity and debt
investments are concentrated in the following industries.
2022 2021
% %
--------------------------------------------- ---------------------- ------
Consumer and Retail 26.1 13.3
Engineering, Manufacturing and Distribution 52.0 61.2
Healthcare 1.9 2.7
Credit Funds 3.6 3.6
Bank Deposits 16.4 19.2
--------------------------------------------- ---------------------- ------
100.0 100.0
--------------------------------------------- ---------------------- ------
The Company notes that there was a concentration on the
Engineering, Manufacturing and Distribution sector, representing
52.0 per cent. of investments for the year ended 31 January 2022
(31 January 2021: 61.2 per cent.). The Company monitors carefully
the sector concentration risk across the portfolio.
Operational risk
'Operational risk' is the risk of direct or indirect loss
arising from a wide variety of causes associated with the
processes, technology and infrastructure supporting the Company's
activities (both at the Company and at its service providers) and
from external factors (other than credit, market and liquidity
risks) such as those arising from legal and regulatory requirements
and generally accepted standards of investment management
behaviour.
The Company's objective is to manage operational risk so as to
balance the limitation of financial losses and damage to its
reputation with achieving its investment objective of generating
returns to investors.
The primary responsibility for the development and
implementation of controls over operational risk rests with the
Board of Directors. This responsibility is supported by the
development of overall standards for the management of operational
risk, which encompasses the controls and processes at the service
providers and the establishment of service levels with the service
providers, in the following areas:
-- documentation of controls and procedures;
-- requirements for:
- appropriate segregation of duties between various functions, roles and responsibilities;
- reconciliation and monitoring of transactions; and
- periodic assessment of operational risk faced;
-- the adequacy of controls and procedures to address the risks identified;
-- compliance with regulatory and other legal requirements;
-- development of contingency plans;
-- training and professional development;
-- ethical and business standards; and
-- risk mitigation, including insurance if this is effective.
The Company's key service providers include the following:
-- Administrator: Langham Hall Fund Management (Jersey) Limited
-- Investment Advisor: EPIC Investment Partners LLP
-- Financial Administrator: EPIC Administration Limited
-- Nominated Advisor and Broker: Numis Securities Limited
The Directors' assessment of the adequacy of the controls and
processes in place at the service providers with respect to
operational risk is carried out via regular discussions with the
service providers as well as site visits to their offices. The
Company also undertakes periodic third-party reviews of service
providers' activities.
21 Directors' interests
Five of the Directors have interests in the shares of the
Company as at 31 January 2022 (2021: five). Nicholas Wilson holds
131,265 ordinary shares (2021: 131,265). Clive Spears holds 136,314
ordinary shares (2021: 133,270). Heather Bestwick holds 22,307
ordinary shares (2021: 19,263). David Pirouet holds 14,073 ordinary
shares (2021: 11,162). Michael Gray holds 2,378 ordinary shares
(2021: nil)
22 Related parties
Directors' fees expense during the year amounted to GBP149,000
(year ended 31 January 2021: GBP154,000) of which GBP12,833 is
accrued as at 31 January 2022 (2021: GBP12,833)
Certain Directors of the Company and other participants are
incentivised in the form of equity settled share-based payment
transactions, through a Joint Share Ownership Plan (see note
7).
Details of remuneration payable to key service providers are
included in note 5 to the financial statements.
In August 2020, the Investment Advisor acquired a controlling
interest in Atlantic Capital Management Limited ("ACML"). ACML is
the manager of Atlantic Credit Opportunities Fund and the
sub-advisor to the segregated account of Prelude Structured
Alternatives Master Fund LP. On 1 September 2020, the Company
completed a GBP1.9 million investment into Atlantic Credit
Opportunities Fund. On 12 November 2020, the Company completed a
further $2.5 million investment in a segregated account of Prelude
Structured Alternatives Master Fund LP. The Company will not pay
any management or performance fees to ACML in relation to these two
investments.
In December 2021, ESO Alternative Investments LP invested EUR10
million into EPIC Acquisition Corp ("EAC"), a newly incorporated
special purpose acquisition company ("SPAC") and EAC's sponsor, EAC
Sponsor Limited (the "Sponsor"). The Sponsor is jointly led by the
Investment Advisor and TT Bond Partners (an independent party).
23 Subsequent events
Following the year end, the Directors in aggregate sold 88,653
ordinary shares in the Company at a price of 305.00 pence per
ordinary share on 9 February 2022.
Following the year end, the Trust acquired 40,239 ordinary
shares in the Company at a price of 305.00 pence per ordinary share
on 9 February 2022.
Schedule of shareholders holding over 3% of issued shares
As at 31 January 2022
Percentage
holding
--------------------------------------------------- ----------------------------
Giles Brand 32.8%
HSBC Global Custody Nominee UK Limited 7.5%
Corporation of Lloyds 7.4%
Boston Trust Company Limited (Trustee to the ESO
JSOP Scheme) 5.9%
Premier Miton Investors 5.2%
Lombard Odier Darier Hentsch 3.3%
Total over 3% holding 62.1%
--------------------------------------------------- ----------------------------
Company Information
Directors Administrator and Company Address
C.L. Spears (Chairman) Langham Hall Fund Management
(Jersey) Limited
H. Bestwick Liberation House
D. Pirouet Castle Street, St Helier
R.B.M. Quayle (resigned in June Jersey JE1 2LH
2021)
N.V. Wilson
M.M. Gray (appointed in September
2021)
Investment Advisor Financial Administrator
EPIC Investment Partners LLP EPIC Administration Limited
Audrey House Audrey House
16-20 Ely Place 16-20 Ely Place
London EC1N 6SN London EC1N 6SN
Auditors and Reporting Accountants Nominated Advisor and Broker
KPMG Audit LLC Numis Securities Limited
Heritage Court 10 Paternoster Square
41 Athol Street London EC4M 7LT
Douglas
Isle of Man IM1 1LA
Bankers Registered Agent (Bermuda)
Barclays Bank plc Conyers Dill & Pearman
1 Churchill Place Clarendon House, 2 Church Street
Canary Wharf Hamilton HM 11
London E14 5HP Bermuda
HSBC Bank plc Registrar and CREST Providers
1st Floor Computershare Investor Services
(Jersey) Limited
60 Queen Victoria Street Queensway House
London EC4N 4TR Hilgrove Street
St. Helier JE1 1ES
Santander International Investor Relations
PO Box 545 Richard Spiegelberg
19-21 Commercial Street Cardew Company
St Helier, Jersey, JE4 8XG 5 Chancery Lane
London EC4A 1BL
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END
FR SEDEEFEESEDD
(END) Dow Jones Newswires
March 22, 2022 03:00 ET (07:00 GMT)
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