Capital for Colleagues plc / EPIC: CFCP / Market: AQSE / Sector: Investment

27 March 2020

CAPITAL FOR COLLEAGUES PLC

(‘Capital for Colleagues’ or the ‘Company’)

HALF YEARLY INVESTMENT UPDATE AND COVID-19 STATEMENT

Capital for Colleagues, the investment vehicle focused on opportunities in the Employee Owned Business (‘EOB’) sector, announces an investment update in respect of the six months ended 29 February 2020. 

Key Statistics for the six months:

    --  Portfolio comprised of 18 unquoted EOBs at the end of the six months (31
        August 2019: 18)

    --  Net Asset Value (‘NAV’) of £7,747,343 (31 August : £6,710,207 )

    --  NAV per share increased by 15.5% to 50.17 pence in the six-month period
        (31 August : 43.45 pence per share)

        Material developments in the six months:

    --  The Company invested a total of £405,000 in The Security Awareness Group
        Ltd (‘TSAG’) - £300,000 in preference shares and ordinary shares and a
        loan of £105,000.
    --  TSAG is a recently formed company, established to acquire the business
        and assets of The Security Company (International) Limited (‘TSC’),
        which has been delivering behavioural change and security awareness
        programmes since 1997. Huntingdon-based TSC has clients in numerous
        sectors, including pharmaceuticals, atomic energy, precious metals,
        banking, government, IT, insurance and law; its clients include
        household names, such as Specsavers, KraftHeinz, the British Red Cross
        and the Prince’s Trust.

Further information on the Company’s investment portfolio is set out below.

UNQUOTED INVESTMENTS

As at 29 February 2020, the Company’s portfolio of unquoted investments was valued at £8,116,008 and comprised 18 companies operating across a range of sectors, as set out below:

Industrials (value: £4,150,388; 51.14% of Portfolio)

Construction and Materials                                     Support Services
Civils Store Limited                          Anthesis Consulting Group Limited
Ecomerchant Natural Building Materials                Hire and Supplies Limited
Limited                                    Office for Public Management Limited
Employee Owners Group Limited                      Flow Control Company Limited
Merkko Group Limited                             Castlefield Corporate Advisory
TPS Investment Holdings Limited                                Partners Limited

                                                                    Engineering
                                                         TG Engineering Limited
Industrial Transportation
Place 2 Place Logistics Limited

Leisure & Travel (value: £232,000; 2.86% of Portfolio)

Recreational Services

South Cerney Outdoor Limited



Media (value: £596,519; 7.35% of Portfolio)

Exhibition Centres
The Homebuilding Centre (Holdings)
Limited


Technology (value: £3,137,101; 38.65% of Portfolio)

Software & Computer Services
2C Services Limited
Bright Ascension Limited
Computer Application Services Limited
The Security Awareness Group Ltd

The loans and investments made by the Company to unquoted EOBs are aimed at delivering equity-like returns.  Each loan or investment is tailored to the individual investee company’s operating performance and specific working capital needs.

The Directors believe that the unquoted EOBs in the Company’s portfolio currently generate total turnover of around £101 million per annum and support approximately 880 jobs. 

Total Unquoted Investments (including short term loans) as at 29 February 2020

Cost: £5,840,149

Valuation (including capitalised costs): £8,116,008

BASIS OF VALUATION

Each of the unquoted investments is included at the Directors’ assessment of fair value, in accordance with International Private Equity and Venture Capital Guidelines. The previous policy of providing a general provision equivalent to 2% of the value of the unquoted investments has now been discontinued in favour of a more specific and prudent review of individual investments.

Account is taken of any potential taxation liability in respect of the increase in value of investments on an annual basis, as at the Company’s year-end.

COVID-19 STATEMENT

The above financial figures were prepared as at 29 February 2020 in advance of the severe restrictions relating to Covid-19 and the consequential effect on the UK and the world economy. The Board of Directors of the Company has, since 29 February 2020, reviewed the position in the context of the Company’s own (and its investees’) ability to manage the businesses through the situation and assessed any direct effect on their enterprise value. 

    --  The Board applauds the UK government initiatives which mitigate against
        the worst effects for UK businesses. Our Employee Ownership principles
        will stand our investee businesses in good stead during the weeks and
        months ahead and leave them in good shape for the anticipated return to
        normal business in due course.

    --  Capital for Colleagues has sufficient cash resources to maintain its
        operations and to allow flexible treatment of investee companies and
        their obligations.

    --  Covid-19 has affected the value of all businesses and the Company will
        not be an exception to this. The Board has specifically reviewed the
        carrying values of all investments in the context of changes since 29
        February 2020 and has concluded that the value of the Company’s
        portfolio as a whole has likely reduced by an amount in the range of 10%
        to 15%. Therefore, the Directors believe that the declared NAV per share
        of 50.17p needs to be discounted (tax adjusted) to be within a range of
        45.1p and 42.6p per share.

    --  However, this is a rapidly evolving situation, with no guarantee as to
        when business life may revert to some semblance of normality. We will
        continue to monitor our investee companies in light of the changing
        situation, including considering any further impact upon the value of
        our portfolio of investments.

The Board would like to send all shareholders, investees, suppliers and staff its best wishes and offer its support over the coming months.

The Directors of the Company are responsible for the contents of this announcement.

**ENDS**

For further information, please visit www.capitalforcolleagues.com or contact:

CAPITAL FOR COLLEAGUES PLC       01985 201 980
Richard Bailey, Chairman
Alistair Currie, Chief Executive

PETERHOUSE CAPITAL LIMITED       020 7469 0930
Mark Anwyl
Duncan Vasey

Capital for Colleagues

Capital for Colleagues is an investment company focused on the UK EOB sector. The Company has a proven management team, with a wide network of contacts and affiliates, as well as established access to investment opportunities, enabling the Company to execute its strategy and capitalise on EOB-focused investment opportunities. In addition, the Company educates and assists companies that are looking to launch employee ownership schemes, advising them, amongst other things, on how to secure investment and achieve their objectives.

Market Abuse Regulation (MAR) Disclosure

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.