TIDMESO TIDMEO.P TIDMEC.P TIDMEL.P

RNS Number : 9070K

EPE Special Opportunities Limited

07 September 2021

EPE Special Opportunities Limited

("ESO" or the "Company")

Interim Review and Unaudited Financial Statements for the six months ended 31 July 2021

The Board of EPE Special Opportunities is pleased to announce the Company's Interim Review and Unaudited Financial Statements for the six months ended 31 July 2021.

Summary

-- The Company achieved a strong performance in the six months ended 31 July 2021. Overall progress has been made across the portfolio against the backdrop of headwinds caused by the ongoing COVID-19 pandemic. The Board was pleased to announce the Company's investment in Hamsard 3634 Limited, trading as The Rayware Group ("Rayware") in July 2021. The Board and Investment Advisor continue to monitor the improving outlook for the UK economy as social restrictions are relaxed and the vaccination programme nears completion.

-- The Net Asset Value ("NAV") per share of the Company as at 31 July 2021 was 542.30 pence per share, representing an increase of 23.9 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 July 2021 was 393.00 pence, representing an increase of 45.0 per cent. on the share price of 271.00 pence as at 31 January 2021.

-- Luceco plc's share price performed strongly, achieving a 49.2 per cent. increase in the six months ended 31 July 2021, with the share price as at 31 July 2021 being 388.00 pence. The business announced strong trading for the six months ended 30 June 2021, achieving profit growth underpinned by market share gains through the COVID period and the defence of margins against inflationary pressures. The business announced full year guidance ahead of market expectations, forecasting sales of at least GBP220.0 million and operating profit of at least GBP39.0 million. In June 2021, ESO sold 4.5 million shares in Luceco plc, returning GBP15.0 million in cash, whilst retaining a 22.1 per cent. holding in the business.

-- Whittard of Chelsea ("Whittard") continued to face disruption to trading as a result of COVID-19. In line with government restrictions, Whittard's retail stores remained closed until April 2021. Subsequent to the reopening of stores, trading was impacted by reduced tourist volumes and social distancing measures. The business' profitability in the period benefitted from further government support and the agreement of bilateral deals with landlords. Whittard made pleasing progress internationally, securing a new franchise partner in South Korea and new marketplace partners in the US and EU.

-- David Phillips achieved sales growth and sustained profitability in the period, in the context of a difficult macro trading environment. The business has secured a healthy pipeline of large-scale projects in the build-to-rent and institutional developer markets. Looking to the medium term, the business is monitoring the impact of inflationary cost pressures and working capital requirements.

-- Pharmacy2U continued to execute its growth plan, benefiting from the shift to online pharmacy in the COVID-19 period. The business has achieved EBITDA profitability, aided by the operational leverage of increased scale.

-- In July 2021, the Company acquired a majority interest in Rayware, a wholesaler of six heritage British homeware brands, including the iconic Kilner and Mason Cash marques, as well as Viners, Typhoon, Ravenhead and Price & Kensington. The business develops and distributes a wide product range including jars, mixing bowls, cutlery, glassware and tableware. Rayware has achieved significant growth in the last twelve months, driven by strong relationships with its long-standing customer base, and more recently benefitting from structural trends including home cooking, sustainability and premiumisation. The Company intends to support Rayware to achieve its future growth ambitions by supporting international expansion and the development of a digitally-led channel strategy.

-- The Company has liquidity of GBP19.7 million(1) as at 31 July 2021. The Company has GBP3.9 million of outstanding unsecured loan notes repayable in July 2022 and has no other third-party debt outstanding. The Company is considering raising debt financing of up to GBP25.0 million to provide additional capital for its strong pipeline of potential investments. Such debt financing options include an interest-bearing loan (listed or unlisted), zero dividend preference shares or a term debt facility and would bear market rate financing costs. Other forms of debt finance may also be contemplated.

-- As at 31 July 2021, the Company's unquoted portfolio was valued at a weighted average EBITDA to enterprise value multiple of 6.4x (excluding Pharmacy2U, which is valued on a sales multiple) and had a low level of third party leverage with net debt at 0.6x EBITDA in aggregate.

-- The Board would like to welcome Michael Gray, who joined the Board on 2 September 2021 as a non-executive Director. Mr Gray was at The Royal Bank of Scotland for over 30 years, latterly as Managing Director (Corporate) of RBS International, before retiring in 2015. The Board are confident his experience in private equity and the wider financial services sector will be a valuable addition to the Board.

Mr Clive Spears, Chairman, commented: "The performance of the Company in the six months ended 31 July 2021 was strong despite the ongoing disruption caused by the COVID-19 pandemic. The Company has continued to make progress in the existing portfolio and has successfully completed a new investment in the period. The Board would like to express its gratitude to the Investment Advisor for navigating this turbulent period. The Board looks forward to updating shareholders on further progress made by the Company at the year end."

The person responsible for releasing this information on behalf of the Company is Amanda Robinson of Langham Hall Fund Management (Jersey) Limited.

(1) Company liquidity is stated inclusive of cash held by associates in which the Company is the sole investor.

Enquiries:

 
EPIC Investment Partners LLP                    +44 (0) 207 269 8865 
                                                 Alex Leslie 
Langham Hall Fund Management (Jersey) Limited   +44 (0) 153 488 5200 
                                                 Amanda Robinson 
Cardew Group Limited                            +44 (0) 207 930 0777 
                                                 Richard Spiegelberg 
Numis Securities Limited                        +44 (0) 207 260 1000 
Nominated Advisor:                              Stuart Skinner / Henry 
                                                 Slater 
Corporate Broker:                               Charles Farquhar 
 

Chairman's Statement

The Company achieved a strong performance in the six months ended 31 July 2021. Overall progress has been made across the portfolio against the backdrop of headwinds caused by the ongoing COVID-19 pandemic. The Board was pleased to announce the Company's investment in Hamsard 3634 Limited, trading as The Rayware Group ("Rayware") in July 2021. The Board and Investment Advisor continue to monitor the improving outlook for the UK economy as social restrictions are relaxed and the vaccination programme nears completion.

The Net Asset Value ("NAV") per share of the Company as at 31 July 2021 was 542.30 pence per share, representing an increase of 23.9 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 July 2021 was 393.00 pence, representing an increase of 45.0 per cent. on the share price of 271.00 pence as at 31 January 2021.

Luceco plc's share price performed strongly, achieving a 49.2 per cent. increase in the six months ended 31 July 2021, with the share price as at 31 July 2021 being 388.00 pence. The business announced strong trading for the six months ended 30 June 2021, achieving profit growth underpinned by market share gains through the COVID period and the defence of margins against inflationary pressures. The business announced full year guidance ahead of market expectations, forecasting sales of at least GBP220.0 million and operating profit of at least GBP39.0 million. In June 2021, ESO sold 4.5 million shares in Luceco plc, returning GBP15.0 million in cash, whilst retaining a 22.1 per cent. holding in the business.

Whittard of Chelsea ("Whittard") continued to face disruption to trading as a result of COVID-19. In line with government restrictions, Whittard's retail stores remained closed until April 2021. Subsequent to the reopening of stores, trading was impacted by reduced tourist volumes and social distancing measures . The business' profitability in the period benefitted from further government support and the agreement of bilateral deals with landlords. Whittard made pleasing progress internationally, securing a new franchise partner in South Korea and new marketplace partners in the US and EU.

David Phillips achieved sales growth and sustained profitability in the period, in the context of a difficult macro trading environment. The business secured a healthy pipeline of large-scale projects in the build-to-rent and institutional developer markets. Looking to the medium term, the business is monitoring the impact of inflationary cost pressures and working capital requirements.

Pharmacy2U continued to execute its growth plan, benefiting from the shift to online pharmacy in the COVID-19 period. The business has achieved EBITDA profitability, aided by the operational leverage of increased scale.

In July 2021, the Company acquired a majority interest in Rayware, a wholesaler of six heritage British homeware brands, including the iconic Kilner and Mason Cash marques, as well as Viners, Typhoon, Ravenhead and Price & Kensington. The business develops and distributes a wide product range including jars, mixing bowls, cutlery, glassware and tableware. Rayware has achieved significant growth, driven by strong relationships with its long-standing customer base, and more recently benefitting from structural trends including home cooking, sustainability and premiumisation. The Company intends to support Rayware to achieve its future growth ambitions by supporting international expansion and the development of a digitally-led channel strategy.

The Company has liquidity of GBP19.7 million(1) as at 31 July 2021. The Company has GBP3.9 million of outstanding unsecured loan notes repayable in July 2022 and has no other third-party debt outstanding. The Company is considering raising debt financing of up to GBP25.0 million to provide additional capital for its strong pipeline of potential investments. Such debt financing options include an interest-bearing loan (listed or unlisted), zero dividend preference shares or a term debt facility and would bear market rate financing costs. Other forms of debt finance may also be contemplated.

The Board would like to welcome Michael Gray, who joined the Board on 2 September 2021 as a non-executive Director. Mr Gray was at The Royal Bank of Scotland for over 30 years, latterly as Managing Director (Corporate) of RBS International, before retiring in 2015. The Board are confident his experience in private equity and the wider financial services sector will be a valuable addition to the Board.

I would like to express my gratitude to my fellow directors and the Investment Advisor for navigating this turbulent period. I look forward to updating shareholders on further progress made by the Company at the year end.

Clive Spears

Chairman

6 September 2021

(1) Company liquidity is stated inclusive of cash held by associates in which the Company is the sole investor.

   Investment   Advisor's Report 

The Company achieved pleasing momentum in the six months ended 31 July 2021, with the portfolio navigating the ongoing challenges of the COVID-19 pandemic. The Investment Advisor was pleased to announce the completion of the Company's investment in Rayware and looks forward to developing the attractive growth avenues available to the business. The Investment Advisor continues to review a healthy pipeline of investment opportunities in which to deploy further capital. The Investment Advisor and the Board will endeavour to build on the encouraging performance of the last six months and look forward to updating shareholders at the year end.

The Company

The Net Asset Value ("NAV") per share of the Company as at 31 July 2021 was 542.30 pence per share, representing an increase of 23.9 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 July 2021 was 393.00 pence, representing an increase of 45.0 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 GBP19.7 million [1] as at 31 July 2021, which are available to support the existing portfolio, meet committed obligations and to deploy into attractive investment opportunities. Net debt in the underlying portfolio stands at 0.6x EBITDA in aggregate. In June 2021, the Company partially sold down its stake in Luceco plc, returning GBP15.0 million cash to ESO to maintain liquidity and finance new acquisitions.

The Portfolio

The Company's unquoted portfolio is valued at a weighted average enterprise value to EBITDA multiple of 6.4x 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/actuals 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 valuations.

The share price of Luceco plc as at 31 July 2021 was 388.00 pence, representing an increase of 49.2 per cent. vs. 31 January 2021. On 16 July 2021, Luceco released a trading update for the six months ended 30 June 2021, announcing trading ahead of expectations, with sales of GBP108.0 million, a 51.0 per cent. increase vs. 2020 and 31.0 per cent. vs. 2019. In addition, the business achieved gross margin of 38.5 per cent. (a 0.1 per cent. increase vs. 2020) and operating profit of GBP19.0 million (a 115.9 per cent. increase vs. 2020), with profitability successfully defended against inflationary cost pressures. The business announced a full year forecast of at least GBP220.0 million sales and at least GBP39.0 million operating profit, ahead of market expectations. In June 2021, ESO sold down 11.2 per cent. of its investment in Luceco plc in the market, providing GBP15.0 million in funds for new investments.

Whittard of Chelsea ("Whittard") continued to experience challenging trading conditions as a result of the COVID-19 pandemic. Trading was impacted by the closure of the UK retail estate for much of the period, as well as social distancing restrictions subsequent to the reopening of stores. Whittard's online channel continued to perform well, maintaining the increased scale attained in the prior year. In the medium term, reduced tourist volumes are expected to continue to provide a headwind to trading performance. The business continued to make pleasing progress in developing its international presence, securing a new franchise partner in South Korea, and new marketplace partners in the US and EU.

David Phillips continued its positive trajectory in the period despite difficult trading conditions, with sales growth supported by resilience in the Company's high growth business lines, residential projects and fitted. Looking forward, the Investment Advisor and the management team are focused on ensuring successful execution through this high growth period, against a complex background of high input costs, tightness in operational capacity and structural working capital cycle shifts. The Investment Advisor is encouraged by the fact that the business realised considerable structural improvements through both the initial turnaround phase and through the COVID-19 crisis which should allow the Company to operate efficiently at this higher trading level.

Pharmacy2U continued to grow both sales and registered patients in the period, building on the significant gains made in the prior year. Pharmacy2U has achieved EBITDA profitability, benefitting from the business' significantly increased scale.

In July 2021, the Company acquired a majority interest in Rayware, a wholesaler of six heritage British homeware brands, including the iconic Kilner and Mason Cash marques, as well as Viners, Typhoon, Ravenhead and Price & Kensington. The business develops and distributes a wide product range including jars, mixing bowls, cutlery, glassware and tableware. The business has performed strongly over the recent period, growing sales and gaining market share by maintaining uninterrupted supply to customers through the period of COVID-19 disruption and benefitting from long term market drivers. Looking to the future, the business has a number of attractive growth avenues available, with the Investment Advisor seeking to support the development of an omni-channel strategy across domestic and international markets.

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 continues to distribute capital to the Company. Both Atlantic Credit Opportunities Fund and Prelude have achieved strong performance in the period, ahead of the high yield market and hedge fund peers, delivering an 18.4 per cent. return and 17.5 per cent. return respectively in the six months ended 30 June 2021.

The Investment Advisor would like to extend its gratitude to the management and employees of the portfolio for their continuing hard work and welcome the team at Rayware . 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

6 September 2021

(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 - Chairman                         David Pirouet - Chair of Audit 
                                                  & Risk Committee 
 Clive Spears retired from the Royal             David Pirouet joined PricewaterhouseCoopers 
  Bank of Scotland International Limited          Channel Islands LLP in 1980, retiring 
  in December 2003 as Deputy Director             in 2009 after being an Audit and 
  of Jersey after 32 years of service.            Assurance Partner for over 20 years. 
  His main activities prior to retirement         During his 29 years at the firm 
  included Product Development, Corporate         Mr Pirouet specialised in the financial 
  Finance, Trust and Offshore Company             services sector, in particular 
  Services and he was Head of Joint               in the alternative investment management 
  Venture Fund Administration with                area and also led the business's 
  Rawlinson & Hunter. Mr Spears is                Hedge Fund and business recovery 
  an Associate of the Chartered Institute         practices for over four years. 
  of Bankers and a Member of the Chartered        Mr Pirouet currently holds a number 
  Institute for Securities & Investment.          of non-executive positions across 
  He has accumulated a well spread                private equity, infrastructure 
  portfolio of directorships centring             and corporate debt. Mr Pirouet's 
  on private equity, infrastructure               was previously non-executive Director 
  and corporate debt. His current appointments    and Chair of the Audit and Risk 
  include Chairman of Nordic Capital              committee for GCP Infrastructure 
  Limited and directorships of a series           Investments (FTSE 250 listed company) 
  of ICG plc sponsored funds and funds            until he retired in February 2021. 
  managed by Kreos Fund Management. 
                                                -------------------------------------------- 
 Heather Bestwick                                Michael Gray 
                                                -------------------------------------------- 
 Heather Bestwick has been a financial           Michael Gray joined The Royal Bank 
  services professional for over 25               of Scotland in 1983, retiring in 
  years, onshore in the City of London            2015 after being Managing Director 
  and offshore in the Cayman Islands              (Corporate) of RBS International 
  and Jersey. She qualified as an English         for 10 years. During his 32 years 
  solicitor, specialising in ship finance,        at the firm Michael covered a broad 
  with City firm Norton Rose, and worked          spectrum of financial services 
  in their London and Greek offices               including corporate and commercial 
  for 8 years. Ms Bestwick subsequently           banking, funds, trusts and real 
  practised and became a partner with             estate. Mr Gray currently holds 
  global offshore law firm Walkers                a number of non-executive positions 
  in the Cayman Islands, and Managing             across private equity, infrastructure 
  Partner of the Jersey office. Ms                and fund management. Michael's 
  Bestwick sits on the boards of Deutsche         appointments currently include 
  International Corporate Services                non-executive directorships of 
  Limited and Rathbone Investment Management      Triton Investment Management (a 
  International Limited.                          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), 
                                                  JTC plc (a FTSE 250 listed trust 
                                                  and corporate services company) 
                                                  and TEAM plc (a listed wealth management 
                                                  company). 
                                                -------------------------------------------- 
 Nicholas Wilson 
 Nicholas Wilson has over 40 years 
  of experience in hedge funds, derivatives 
  and global asset management. He has 
  run offshore branch operations for 
  Mees Pierson Derivatives Limited, 
  ADM Investor Services International 
  Limited and several other London 
  based financial services companies. 
  He is Chairman of Gulf Investment 
  Fund plc, a premium listed company, 
  and, until recently, was chairman 
  of Alternative Investment Strategies 
  Limited. 
 

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. Hiren is responsible for 
  currently Non-executive Chairman               EPIC's Markets and Administration 
  of Whittard of Chelsea and Luceco              business lines, as well as the group's 
  plc. Before joining EPIC, Giles                financial, operational and compliance 
  was a founding Director of EPIC                functions. Hiren has worked in the 
  Investment Partners, a fund management         investment management industry for 
  business which at sale had US $5bn             the past twenty years. Before joining 
  under management. Prior to this,               EPIC, Hiren was Group Financial Controller 
  Giles worked in Mergers and Acquisitions       at Groupama Asset Management. 
  at Baring Brothers in Paris and 
  London. Giles read History at Bristol 
  University. 
                                               ------------------------------------------------ 
 Robert Fulford                                 James Henderson 
                                               ------------------------------------------------ 
 Robert Fulford is a Managing Director          James Henderson is a Managing Director 
  at EPIC. He previously worked at               at EPIC. He previously worked in 
  Barclaycard Consumer Europe before             the Investment Banking division of 
  joining EPIC. Whilst at Barclaycard,           Deutsche Bank before joining EPIC. 
  Robert was the Senior Manager for              Whilst at Deutsche Bank he worked 
  Strategic Insight and was responsible          on a number of M&A transactions and 
  for identifying, analysing and                 IPOs in the energy, property, retail 
  responding to competitive forces.              and gaming sectors, as well as providing 
  Prior to Barclaycard, Robert spent             corporate broking advice to mandated 
  four years as a strategy consultant            clients. At EPIC, James manages the 
  at Oliver Wyman Financial Services,            investment in Pharmacy2U. James read 
  where he worked with a range of                Modern History at Oxford University 
  major retail banking and institutional         and Medicine at Nottingham University. 
  clients in the UK, mainland Europe, 
  Middle East and Africa. At EPIC, 
  Robert manages the investments 
  in Whittard of Chelsea, David Phillips 
  and Rayware. 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 in                at EPIC. He was previously a Partner 
  Healthcare Investment Banking at                at Lyceum Capital Partners LLP, responsible 
  Piper Jaffray before joining EPIC.              for deal origination and engagement, 
  Whilst at Piper Jaffray he worked               with a primary focus on the business 
  on a number of M&A transactions                 services and software sectors, as well 
  and equity fundraisings within                  as financial services, education and 
  the Biotechnology, Specialty Pharmaceutical     health sectors. Prior to Lyceum, Ian 
  and Medical Technology sectors.                 was a Director at Arbuthnot Securities, 
  At EPIC, Alex manages the investment            involved in transactions including 
  in Luceco plc and Rayware. Alex                 IPOs, secondary fund raisings and M&A, 
  read Human Biological and Social                focusing on the support services, healthcare, 
  Sciences at the University of Oxford            transport & IT sectors. Ian read Politics 
  and obtained an MPhil in Management             and Economics at the University of 
  from the Judge Business School                  Bristol. 
  at the University of Cambridge. 
                                               ------------------------------------------------ 
 

Independent Review Report to EPE Special Opportunities Limited

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly report for the six months ended 31 July 2021 which comprises the Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 31 July 2021 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting and the AIM Rules.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Directors' responsibilities

The half-yearly report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards. The Directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this 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 for our review work, for this report, or for the conclusions we have reached.

KPMG Audit LLC

Chartered Accountants

Heritage Court

41 Athol Street

Douglas

Isle of Man IM1 1LA

6 September 2021

Statement of Comprehensive Income

For the six months ended 31 July 2021

 
                                                                                                                1 Feb                   1 Feb 
                                                                                                              2020 to                 2020 to 
                                                                                                               31 Jul                  31 Jan 
                                               1 Feb 2021 to 31 Jul 2021                             2020 (unaudited)          2021 (audited) 
                                       Revenue              Capital                    Total 
                                   (unaudited)          (unaudited)              (unaudited)                    Total                   Total 
 Note                                      GBP                  GBP                      GBP                      GBP                     GBP 
       ----------------    -------------------  -------------------  -----------------------    ---------------------    -------------------- 
        Income 
        Interest income                    514                    -                      514                    1,398                   4,089 
        Gains/(losses) 
        on 
        investments                          -           36,734,638               36,734,638              (2,439,705)              42,012,143 
       ----------------    -------------------  -------------------  -----------------------                             -------------------- 
        Total 
        income/(loss)                      514           36,734,638               36,735,152              (2,438,307)              42,016,232 
       ----------------    -------------------  -------------------  -----------------------    ---------------------    -------------------- 
        Expenses 
        Investment 
        advisor's 
  5     fees                       (1,028,984)                    -              (1,028,984)                (937,976)             (1,937,207) 
  14    Directors' fees               (74,498)                    -                 (74,498)                 (77,000)               (154,000) 
        Share based 
        payment 
  6     expense                      (396,520)                    -           (396,520)                     (217,715)               (682,525) 
  7     Other expenses               (765,619)                    -                (765,619)                (342,047)               (669,769) 
        Total expense              (2,265,621)                    -              (2,265,621)              (1,574,738)             (3,443,501) 
       ----------------    -------------------  -------------------  -----------------------    ---------------------    -------------------- 
        Profit/(loss) 
        before 
        finance costs 
        and 
        tax                        (2,265,107)           36,734,638               34,469,531              (4,013,045)              38,572,731 
       ----------------    -------------------  -------------------  -----------------------    ---------------------    -------------------- 
 
        Finance charges 
 
        Interest on 
        unsecured 
        loan note 
  13    instruments                  (159,843)                    -                (159,843)                (159,842)               (319,685) 
        Profit/(loss) 
        for 
        the year before 
        taxation                   (2,424,950)           36,734,638               34,309,688              (4,172,887)              38,253,046 
        Taxation                             -                    -                        -                        - 
       ----------------    -------------------  -------------------  -----------------------    ---------------------    -------------------- 
        Profit/(loss) 
        for 
        the year                   (2,424,950)           36,734,638               34,309,688              (4,172,887)              38,253,046 
       ----------------    -------------------  -------------------  -----------------------    ---------------------    -------------------- 
        Other 
        comprehensive 
        income                               -                    -                        -                        - 
       ----------------    -------------------  -------------------  -----------------------    ---------------------    -------------------- 
        Total 
        comprehensive 
        income/(loss)              (2,424,950)           36,734,638               34,309,688              (4,172,887)              38,253,046 
       ----------------    -------------------  -------------------  -----------------------    ---------------------    -------------------- 
        Basic 
        earnings/(loss) 
        per ordinary 
        share 
  11    (pence)                         (7.54)               114.26                   106.72                  (12.69)                  116.69 
       ----------------    -------------------  -------------------  -----------------------    ---------------------    -------------------- 
        Diluted 
        earnings/(loss) 
        per ordinary 
        share 
  11    (pence)                         (7.54)               114.26                   106.72                  (12.69)                  116.69 
       ----------------    -------------------  -------------------  -----------------------    ---------------------    -------------------- 
 

The total column of this statement represents the Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue return 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 Financial Position

As at 31 July 2021

 
                                               31 July 2021 
                                                (unaudited)     31 January 2021 (audited)     31 July 2020 (unaudited) 
 Note                                                   GBP                           GBP                          GBP 
       ------------------------    ------------------------    --------------------------    ------------------------- 
        Non-current assets 
        Investments at fair 
        value through profit or 
  8     loss                                    159,573,313                   117,256,810                   82,107,768 
                                                159,573,313                   117,256,810                   82,107,768 
       ------------------------    ------------------------    --------------------------    ------------------------- 
        Current assets 
        Cash and cash 
        equivalents                              19,669,303                    27,854,701                   22,150,379 
        Trade and other 
        receivables                                  92,454                       197,564                      175,798 
       ------------------------    ------------------------    --------------------------    ------------------------- 
                                                 19,761,757                    28,052,265                   22,326,177 
       ------------------------    ------------------------    --------------------------    ------------------------- 
        Current liabilities 
        Trade and other 
        payables                                (1,026,055)                     (659,645)                    (641,238) 
        Unsecured loan note 
  13    instruments                             (3,967,124)                             -                            - 
       ------------------------    ------------------------    --------------------------    ------------------------- 
                                                (4,993,179)                     (659,645)                    (641,238) 
       ------------------------                                -------------------------- 
        Net current assets                       14,768,578                    27,392,620                   21,684,939 
       ------------------------    ------------------------    --------------------------    ------------------------- 
 
        Non-current liabilities 
        Unsecured loan note 
  13    instruments                                       -                   (3,956,822)                  (3,946,520) 
                                                               -------------------------- 
                                                          -                   (3,956,822)                  (3,946,520) 
       ------------------------    ------------------------    --------------------------    ------------------------- 
        Net assets                              174,341,891                   140,692,608                   99,846,187 
       ------------------------    ------------------------    --------------------------    ------------------------- 
        Equity 
  10    Share capital                             1,730,828                     1,730,828                    1,730,828 
        Share premium                            13,619,627                    13,619,627                   13,619,627 
        Capital reserve                         163,032,215                   126,297,577                   81,845,729 
        Revenue reserve                         (4,040,779)                     (955,424)                    2,650,003 
                                                               -------------------------- 
        Total equity                            174,341,891                   140,692,608                   99,846,187 
        Net asset value per 
  12    share (pence)                                542.30                        437.63                       303.04 
       ------------------------    ------------------------    --------------------------    ------------------------- 
 

Statement of Changes in Equity

For the six months ended 31 July 2021

 
 
                                                     Six months ended 31 July 2021 (unaudited) 
                                     Share capital         Share        Capital       Revenue          Total 
                                                         premium        reserve       reserve 
 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 
         period                                  -             -     36,734,638   (2,424,950)     34,309,688 
       -------------------------    --------------  ------------  -------------  ------------  ------------- 
        Contributions by and 
         distributions to owners 
        Share-based payment 
  6      charge                                  -             -              -       396,520        396,620 
        Share acquisition for 
         JSOP scheme                             -             -              -   (1,056,925)    (1,056,925) 
        Total transactions with 
    -    owners                                  -             -              -     (660,405)      (660,405) 
       -------------------------    --------------  ------------  -------------  ------------  ------------- 
        Balance at 31 July 2021          1,730,828    13,619,627    163,032,215   (4,040,779)    174,341,891 
       -------------------------    --------------  ------------  -------------  ------------  ------------- 
 
 
                                                       Year ended 31 January 2021 (audited) 
                                     Share capital         Share        Capital       Revenue          Total 
                                                         premium        reserve       reserve 
                                               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 
  6      charge                                  -             -              -       682,525        682,525 
        Share ownership scheme 
         participation                           -             -              -         3,943          3,943 
        Share acquisition for 
         JSOP scheme                             -             -              -     (786,140)      (786,140) 
        Provision for future 
         settlement                              -             -              -       216,323        216,323 
        Purchase of shares                       -             -              -   (2,068,761)    (2,068,761) 
        Issue of new shares                  3,875       129,801              -             -        133,676 
        Total transactions with 
         owners                              3.875       129,801              -   (1,952,110)    (1,818,344) 
       -------------------------    --------------  ------------  -------------  ------------  ------------- 
        Balance at 31 January 
         2021                            1,730,828    13,619,627    126,297,577     (955,424)    140,692,608 
       -------------------------    --------------  ------------  -------------  ------------  ------------- 
 
                                                     Six months ended 31 July 2020 (unaudited) 
                                     Share capital         Share        Capital       Revenue          Total 
                                                         premium        reserve       reserve 
                                               GBP           GBP            GBP           GBP            GBP 
       -------------------------    --------------  ------------  -------------  ------------  ------------- 
        Balance at 1 February 
         2020                            1,726,953    13,489,826     84,285,343     4,755,783    104,257,996 
        Total comprehensive 
         loss for the period                     -             -    (2,439,705)   (1,733,182)    (4,172,887) 
       -------------------------    --------------  ------------  -------------  ------------  ------------- 
        Contributions by and 
         distributions to owners 
        Share-based payment 
  6      charge                                  -             -              -       217,715        217,715 
        Share ownership scheme 
         participation                           -             -              -      (20,497)       (20,497) 
        Share acquisition for 
         JSOP scheme                             -             -              -     (786,140)      (786,140) 
        Provision for future 
         settlement                              -             -              -       216,324        216,324 
        Issue of new shares                  3,875       129,801              -             -        133,676 
       -------------------------    --------------  ------------  -------------  ------------  ------------- 
        Total transactions with 
         owners                              3,875       129,801              -     (372,598)      (238,922) 
       -------------------------    --------------  ------------  -------------  ------------  ------------- 
        Balance at 31 July 2020          1,730,828    13,619,627     81,845,729     2,650,003     99,846,187 
       -------------------------    --------------  ------------  -------------  ------------  ------------- 
 

Statement of Cash Flows

For the six months ended 31 July 2021

 
 
                                                                1 Feb 2021            1 Feb 2020            1 Feb 2020 
                                                                 to 31 Jul             to 31 Jan             to 31 Jul 
                                                          2021 (unaudited)        2021 (audited)      2020 (unaudited) 
 Note                                                                  GBP                   GBP                   GBP 
       -------------------------------------    --------------------------    ------------------    ------------------ 
        Operating activities 
        Interest income received                                       514                 4,089                 1,398 
        Expenses paid                                          (1,495,782)           (2,896,656)           (1,335,075) 
        Net cash used in operating 
         activities                                            (1,495,268)           (2,892,567)           (1,333,677) 
       -------------------------------------    --------------------------    ------------------    ------------------ 
 
        Investing activities 
  8     Purchase of investments                               (22,520,000)           (5,320,330)           (1,000,000) 
  8     Proceeds from investments                               17,314,775            13,612,853                     - 
        Loan from associates                                     (278,440)                     -             (164,550) 
        Net cash (used in)/generated 
         from investing activities                             (5,483,665)             8,292,523           (1,164,550) 
       -------------------------------------    --------------------------    ------------------    ------------------ 
        Financing activities 
        Unsecured loan note interest 
         paid                                                    (149,540)             (299,080)             (149,540) 
        Purchase of shares                                               -           (2,854,901)                     - 
        Share acquisition for JSOP 
         scheme                                                (1,056,925)                     -             (786,140) 
        Share ownership scheme participation                             -                 3,943              (20,497) 
        Net cash used in financing 
         activities                                            (1,206,465)           (3,150,038)             (956,177) 
       -------------------------------------    --------------------------    ------------------    ------------------ 
        (Decrease)/increase in cash 
         and cash equivalents                                  (8,185,398)             2,249,918           (3,454,404) 
        Cash and cash equivalents 
         at start of period/year                                27,854,701            25,604,783            25,604,783 
       -------------------------------------    --------------------------    ------------------    ------------------ 
        Cash and cash equivalents 
         at end of period/year                                  19,669,303            27,854,701            22,150,379 
       -------------------------------------    --------------------------    ------------------    ------------------ 
 

Notes to the Financial Statements

For the six months ended 31 July 2021

   1    The Company 

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 interim financial statements are as at and for the six months ended 31 July 2021, comprising the Company and its associates. The interim financial statements are unaudited.

The financial statements of the Company as at and for the year ended 31 January 2021 are available upon request from the Company's business office at Liberation House, Castle Street, St Helier, Jersey, JE1 2LH and the registered office at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda, or at www.epespecialopportunities.com .

The Company's portfolio investments are held in three associates (ESO Investments 1 Limited, ESO Investments 2 Limited and ESO Alternative Investments LP). The remainder of the Company's subsidiary companies and associates are to be dissolved or are in the process of liquidation.

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 Company has no employees.

   2    Statement of compliance 

These interim financial statements for the six months ended 31 July 2021 have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with Company's last annual financial statements as at and for the year ended 31 January 2021. They do not include all of the information required for a complete set of financial statements prepared in accordance with IFRS Standards. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's financial position and performance since the last annual financial statements.

The annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards. They were previously prepared in accordance with IFRS as adopted by the EU. This change has no impact on the financial statements.

These interim financial statements were authorised for issue by the Company's Board of Directors on 6 September 2021.

   3    Significant accounting policies 

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.

   4    Financial risk management 

The financial risk management objectives and policies are consistent with those disclosed in the financial statements as at and for the year ended 31 January 2021.

   5    Investment advisory, administration fees and profit share 

Investment advisory fees

Company

The investment advisory fee payable to EPIC Investment Partners LLP, previously known as EPIC Private Equity LLP, 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 shall be 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 period was GBP1,028,984 (for the period ended 31 July 2020: GBP937,976; year ended 31 January 2021: GBP1,937,207). The amount outstanding as at 31 July 2021 was GBP528,984 (for the period ended 31 July 2020: GBP500,000; year ended 31 January 2021: GBP500,000).

Administration fees

EPIC Administration Limited, trading as EPIC Investments Partners and previously known as EPE 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 administration 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 period was GBP108,424 (for the period ended 31 July 2020: GBP70,242; for the year ended 31 January 2021: GBP163,212).

Other administration fees during the period were GBP38,272 (for the period ended 31 July 2020: GBP27,441; for the year ended 31 January 2021: GBP66,234).

Profit share 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 in the base value of investment. For the period ended 31 July 2021, GBP400,872 (for the period ended 31 July 2020: GBP1,633,929; for the year ended 31 January 2021: GBP767,311) has been credited to the profit share account of the Investment Advisor in the records of ESO Investments 1 Limited.

Profit share 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 in the base value of investment. For the period ended 31 July 2021, GBP26,191,448 (for the period ended 31 July 2020: GBP4,736,542; for the year ended 31 January 2021: GBP16,125,708) has been credited to the profit share account of the Investment Advisor in the records of ESO Investments 2 Limited.

   6    Share-based payment expense 

Certain employees (including Directors) of the Company and the Investment Advisors receive remuneration in the form of equity settled share-based payment transactions, through a Joint Share Ownership Plan ("JSOP").

The cost of equity settled transactions with certain Directors of the Company and other participants (including employees, members and consultants of the Investment Advisor) ("Participants") is measured by reference to the fair value at the date on which they are granted. 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 rest of the ordinary shares.

The Trust held 1,748,193 (for the period ended 31 July 2020: 1,419,004; for the year ended 31 Jan 2021: 1,419,004) matching shares at the period end which have traditionally not voted.

During the period, 329,189 shares were acquired by the Trust for the JSOP scheme (2021: 462,435). No shares were vested during the period to the JSOP participants (2021: nil). 154,110 shares were awarded to the JSOP participants in the period (2021: 271,995).

The amount expensed in the income statement has been calculated by reference to the grant date at a fair value of the equity instrument 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 expense recognised on the share-based payments during the period amounts to GBP396,520 (for the period ended 31 July 2020: GBP217,715; for the year ended 31 Jan 2021: GBP682,525), of which GBP320,869 related to expenses incurred during the period ended 31 July 2021 and GBP75,651 related to expenses incurred in the year ended 31 January 2020. Of the total share-based payment expense during the period ended 31 July 2021, GBP23,386 related to the Directors (31 Jan 2021: GBP48,588) and the balance related to members, employees and consultants of the Investment Advisor.

   7    Other expenses 

The breakdown of other expenses presented in the statement of comprehensive income is as follows:

 
                                                   1 Feb 2021              1 Feb 2020              1 Feb 2020 
                                                    to 31 Jul               to 31 Jul          to 31 Jan 2021 
                                             2021 (unaudited)        2020 (unaudited)               (audited) 
                                                        Total                   Total                   Total 
                                                          GBP                     GBP                     GBP 
------------------------------------   ----------------------  ----------------------  ---------------------- 
 Administration fees                                (146,696)                (97,683)               (229,446) 
 Directors' and officers' insurance                  (11,286)                (11,103)                (22,356) 
 Professional fees                                  (478,027)               (136,941)               (221,697) 
 Board meeting and travel expenses                      (155)                 (1,981)                 (1,981) 
 Auditors' remuneration                              (24,546)                (36,535)                (55,000) 
 Bank charges                                           (751)                   (303)                   (659) 
 Irrecoverable VAT                                      (360)                   (450)                   (675) 
 Sundry expenses                                     (47,241)                 (6,224)                (33,111) 
 Nominated advisor and broker 
  fees                                               (29,343)                (29,072)                (60,710) 
 Listing fees                                        (27,214)                (21,755)                (44,134) 
-------------------------------------  ----------------------  ----------------------  ---------------------- 
 Other expenses                                     (765,619)               (342,047)               (669,769) 
-------------------------------------  ----------------------  ----------------------  ---------------------- 
 
   8    Investments at fair value through profit or loss 
 
                                                31 July 2021               31 January        31 July 2020 
                                                                                 2021 
                                                 (unaudited)                (audited)         (unaudited) 
                                                         GBP                      GBP                 GBP 
 Investments at fair value through 
  profit and loss                                159,573,313              117,256,810          82,107,768 
                                                 159,573,313              117,256,810          82,107,768 
                                           -----------------  -----------------------  ------------------ 
 
 
 Investment roll forward schedule 
                                                      31 July 2021                     31 January          31 July 
                                                       (unaudited)                 2021 (audited)             2020 
                                                                                                       (unaudited) 
 
 Investments at fair value as at 
  1 February                                           117,256,810                     83,382,923       83,382,923 
 Purchase of investments                                22,520,000                      5,320,330        1,000,000 
 Income from investments                              (17,314,775)                   (13,612,853)                - 
 Distributions (non-cash distribution)                           -                       (66,664)                - 
 Fair value movements                                   36,734,638                     42,012,143      (2,439,705) 
 Loan to associates                                        278,440                        220,931          164,550 
 Reclassification of debtor balance 
  to investee                                               98,200                              -                - 
        Investments at fair value as at 
                    31 July/ 31 January                159,573,313                    117,256,810       82,107,768 
---------------------------------------  -------------------------  -----------------------------  --------------- 
 
   9    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 equity 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 is a Level 1 asset. For Level 1 assets, the Company calculates the holding value from the latest market price (without adjustment).

Unquoted private equity investments and unquoted fund investments

Private equity investments and fund investments are classified as Level 3 in the IFRS 13 fair value hierarchy. The Company's investments in Whittard, David Phillips, Rayware, Pharmacy2U, Atlantic Credit Opportunities Fund Limited, Prelude and European Capital Private Debt Fund LP 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, in conjunction with cross referencing of the valuation to quoted comparables multiples, as 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 3                 Total 
 31 July 2021                                              GBP                 GBP                   GBP 
------------------------------------------   -----------------  ------------------  -------------------- 
 Financial assets at fair value through 
  profit or loss 
 Unquoted private equity investments 
  (including debt)                                           -          41,117,869            41,117,869 
 Unquoted fund investments                                   -           5,652,508             5,652,508 
 Quoted equity investments                         112,423,187                   -           112,423,187 
-------------------------------------------  -----------------  ------------------  -------------------- 
 Investments at fair value through profit 
  or loss                                          112,423,187          46,770,377           159,193,564 
-------------------------------------------  -----------------  ------------------  -------------------- 
 
 Other asset and liabilities (held at 
  cost)                                                      -                   -               379,749 
-------------------------------------------  -----------------  ------------------  -------------------- 
 Total                                             112,423,187          46,770,377           159,573,313 
-------------------------------------------  -----------------  ------------------  -------------------- 
 
                                                       Level 1             Level 3                 Total 
 31 January 2021                                           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 equity 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 asset and liabilities (held at 
  cost)                                                      -                   -                96,790 
-------------------------------------------  -----------------  ------------------  -------------------- 
 Total                                              88,737,691          28,422,329           117,256,810 
-------------------------------------------  -----------------  ------------------  -------------------- 
 
 
 
                                                       Level 1             Level 3                Total 
 31 July 2020                                              GBP                 GBP                  GBP 
------------------------------------------   -----------------  ------------------  ------------------- 
 Financial assets at fair value through 
  profit or loss 
 Unquoted private equity investments 
  (including debt)                                           -          22,179,014           22,179,014 
 Unquoted fund investments                                   -           1,393,452            1,393,452 
 Quoted equity investments                          57,306,094                   -           57,306,094 
-------------------------------------------  -----------------  ------------------  ------------------- 
 Investments at fair value through profit 
  or loss                                           57,306,094          23,572,466           80,878,560 
-------------------------------------------  -----------------  ------------------  ------------------- 
 
 Other asset and liabilities (held at 
  cost)                                                      -           1,229,208            1,229,208 
-------------------------------------------  -----------------  ------------------  ------------------- 
 Total                                              57,306,094          24,801,674           82,107,768 
-------------------------------------------  -----------------  ------------------  ------------------- 
 

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 July 2021             31 January 
                                                                 (unaudited)                   2021 
                                                                                          (audited) 
 Unquoted investments (including debt)                                   GBP                    GBP 
----------------------------------------  ----  ----------------------------  --------------------- 
 Balance as at 1 February                                         28,422,329             25,405,230 
 Additional investments                                           22,520,000              5,339,953 
 Capital distributions from investments                            (306,090)              (223,018) 
 Change in fair value through profit 
  and loss                                                       (3,865,862)            (2,099,836) 
 Balance as at 31 July / 31 January                               46,770,377             28,422,329 
----------------------------------------------  ----------------------------  --------------------- 
 

Significant unobservable inputs used in measuring fair value

The table below sets out information about significant unobservable inputs used at 31 July 2021 in measuring financial instruments categorised as Level 3 in the fair value hierarchy.

 
             Description                  Fair value at 31      Significant unobservable 
                                              July 2021                           inputs 
------------------------------------                           ------------------------- 
                                                          GBP 
------------------------------------  -----------------------  ------------------------- 
 Unquoted private equity investments                               Sales/EBITDA multiple 
  (including debt)                                 41,117,869 
 Unquoted fund investments                                            Reported net asset 
                                                    5,652,508                      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. Adjustments are made to third party valuations where considered necessary to arrive at the Director's estimate of fair value.

Although management believes that its estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value. For fair value measurements of Level 3 assets, changing one or more of the assumptions used to reasonably possible alternative assumptions would have the following effects on the Level 3 investment valuations:

-- For the Company's investment in mature Level 3 assets, the valuations used in the preparation of the financial statements imply an average EV to EBITDA multiple of 6.4x (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 period would have been GBP11,074,537 higher. If these inputs had been taken to be 25 per cent. lower, the value of the Level 3 assets and profit for the period would have been GBP15,776,787 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 1.5x (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 period would have been GBP878,792 higher. If these inputs had been taken to be 25 per cent. lower, the value of the Level 3 assets and profit for the period would have been GBP878,792 lower. A corresponding increase or decrease in the asset's financial forecasts would have a similar impact on the Company's assets and profit.

10 Share capital

 
                                31 July 2021               31 January 2021                 31 July 2020 
                                (unaudited)                   (audited)                     (unaudited) 
                        ---------------------------  ---------------------------  ------------------------------ 
                                 Number         GBP           Number         GBP          Number             GBP 
---------------------   ---------------  ----------  ---------------  ----------  --------------  -------------- 
 Authorised share 
  capital 
 Ordinary shares 
  of 5p each                 45,000,000   2,250,000       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     34,616,554      1,730,828 
 Ordinary shares 
  of 5p each held 
  in treasury               (2,467,731)           -      (2,467,731)           -     (1,668,251)               - 
                             32,148,823   1,730,828       32,148,823   1,730,828      32,948,303       1,730,828 
                        ---------------  ----------  ---------------  ----------  --------------  -------------- 
 

11 Basic and diluted loss per share (pence)

Basic profit per share is calculated by dividing the profit of the Company for the period attributable to the ordinary shareholders of GBP34,309,688 (for the period ended 31 July 2020: loss of (GBP4,172,887); for the year ended 31 January 2021: profit of GBP38,253,046) divided by the weighted average number of shares outstanding during the period of 32,148,823 after excluding treasury shares (for the period ended 31 July 2020: 32,885,795; for the year ended 31 January 2021: 32,782,089).

Diluted profit per share is calculated by dividing the profit of the Company for the period attributable to ordinary shareholders of GBP34,309,688 (for the period ended 31 July 2020: loss of (GBP4,172,887); for the year ended 31 January 2021: profit of GBP38,253,046) divided by the weighted average number of ordinary shares outstanding during the period, as adjusted for the effects of all dilutive potential ordinary shares, of 32,148,823 after excluding treasury shares (for the period ended 31 July 2020: 32,885,795 ; for the year ended 31 January 2021: 32,782,089).

12 NAV per share (pence)

The Company's NAV per share of 542.30 pence (for the period ended 31 July 2020: 303.04 pence; for the year ended 31 January 2021: 437.63 pence) is based on the net assets of the Company at the period end of GBP174,341,891 (for the period ended 31 July 2020: GBP99,846,187; for the year ended 31 January 2021: GBP140,692,608) divided by the shares in issue at the end of the period of 32,148,823 after excluding treasury shares (for the period ended 31 July 2020: 32,948,303 ; for the year ended 31 January 2021: 32,148,823).

The Company's diluted NAV per share of 542.30 pence (for the period ended 31 July 2020: 303.04 pence; for the year ended 31 January 2021: 437.63 pence) is based on the net assets of the Company at the period end of GBP174,341,891 (for the period ended 31 July 2020: GBP99,846,187; for the year ended 31 January 2021: GBP140,692,608) divided by the shares in issue at the end of the period, as adjusted for the effects of dilutive potential ordinary shares of 32,148,823 after excluding treasury shares (for the period ended 31 July 2020: 32,948,303; for the year ended 31 January 2021: 32,148,823).

13 Unsecured loan note instruments

The Company has issued Unsecured Loan Notes ("ULN") 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 July 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 period ended 31 July 2021 was GBP10,303 (for the period ended 31 July 2020: GBP10,303; for the year ended 31 Jan 2021: GBP20,605). The carrying value of the ULNs in issue at the period end was GBP3,967,124 (for the period ended 31 July 2020: GBP3,946,520; for the year ended 31 Jan 2021: GBP3,956,822). The total interest expense on the ULNs for the period is GBP159,843 (for the period ended 31 July 2020: GBP159,842; for the year ended 31 Jan 2021: GBP319,685). This includes the amortisation of the issue costs. The carrying value of ULN is presented under current liabilities in the current period (previously presented under non-current liabilities) as they are redeemable within 12-month period from the Statement of Financial Position date.

14 Related parties

Directors' fees expense during the period amounted to GBP74,498 (for the period ended 31 July 2020: GBP77,000; for the year ended 31 January 2021: GBP154,000) of which GBP10,333 is accrued as at 31 July 2021 (for the period ended 31 July 2020: GBP12,833; for the year ended 31 January 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 6).

Four of the Directors have interests in the shares of the Company as at 31 July 2021 (31 July 2020: five). Nicholas Wilson holds 131,265 ordinary shares (31 July 2020: 131,265), Clive Spears holds 136,314 ordinary shares (31 July 2020:133,270), Heather Bestwick holds 22,307 ordinary shares (31 July 2020: 19,263) and David Pirouet holds 14,073 shares (31 July 2020: 11,162). Robert Quayle resigned during the period ended 31 July 2021. During the period of his directorship with the Company, he held 112,577 ordinary shares (31 July 2020: 112,577).

15 Subsequent events

On 2 September 2021, Michael Gray was appointed as a Director of the Company .

Company Information

 
 Directors                            Administrator and Company Address 
 C.L. Spears (Chairman)               Langham Hall Fund Management 
                                       (Jersey) Limited 
 H. Bestwick                          Liberation House 
 D.R. 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                   Nominated Advisor and Broker 
 EPIC Investment Partners LLP         Numis Securities Limited 
 Audrey House                         10 Paternoster Square 
 16-20 Ely Place                      London EC4M 7LT 
 London EC1N 6SN 
 
 
 Auditors and Reporting Accountants   Registered Agent (Bermuda) 
 KPMG Audit LLC                       Conyers Dill & Pearman 
 Heritage Court                       Clarendon House, 2 Church Street 
 41 Athol Street                      Hamilton HM 11 
 Douglas                              Bermuda 
 Isle of Man IM1 1LA 
 
 
 Bankers                              Registrar and CREST Providers 
 Barclays Bank plc                    Computershare Investor Services 
                                       (Jersey) Limited 
 1 Churchill Place                    Queensway House 
 Canary Wharf                         Hilgrove Street 
 London E14 5HP                       St. Helier JE1 1ES 
 
 HSBC Bank plc                        Investor Relations 
 1st Floor                            Richard Spiegelberg 
 60 Queen Victoria Street             Cardew Company 
 London EC4N 4TR                      5 Chancery Lane 
                                      London EC4A 1BL 
 
 Santander International 
 PO Box 545 
 19-21 Commercial Street 
 St Helier, Jersey, JE4 8XG 
 
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END

IR EANNKEAKFEFA

(END) Dow Jones Newswires

September 07, 2021 02:00 ET (06:00 GMT)

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