Eight Capital Ptnrs. - Half-year Report
RNS Number : 4636A
Eight Capital Partners PLC
29 September 2020
 

29 September 2020

 

EIGHT CAPITAL PARTNERS PLC

 

("Eight Capital" or the "Company")

 

UNAUDITED INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2020

Eight Capital Partners plc (AQSE: ECP), announces its consolidated interim results for the half year ending 30 June 2020.

Chairman's Interim Report

I report on the Company's interim results for the six months to 30 June 2020.

Eight Capital Partners plc (the "Company" or "Eight Capital") is an investment vehicle quoted on the AQSE Growth Market. Its objective is to generate an attractive rate of return for shareholders, predominantly through capital appreciation, by taking advantage of opportunities principally to invest in the TMT1 and financial services sectors (including in other investment companies).

These interim results also consolidate the results of Epsion Capital Limited ("Epsion"), the boutique corporate advisory company that is a 100% owned investment. 

Since I last reported to you on the full year results to December 2019, the Company has seen the ongoing effects of the COVID-19 pandemic and that the first half of 2020 forecasts of some of our investments have not been realised as originally expected. We are therefore reporting a loss for the half year, mainly created through adverse currency movements and the volatile share price of our listed company investment Supply@Me Capital plc.

Nevertheless, some investments have been very successful. We invested £280,000 in Greencare Capital plc, also quoted on AQSE (GRE), in December 2019. This investment at 30 June 2020 had a quoted value of £704,000 and at the date of this report had a quoted value of £832,000. Greencare Capital is an investment vehicle seeking to identify investment opportunities in, and acquisitions of companies in the rapidly changing regulatory environment surrounding legal Medicinal Cannabis, as well as investment opportunities within the Hemp and CBD wellness sectors.

Epsion has also done well, with unaudited six-month revenues growing to £540,000, and a pre-tax profit of £155,000.

The other major development in the period under review was the reverse takeover (RTO) of Abal Group plc by Supply@Me S.r.l. (Supply@ME) in March 2020 and its move from AIM to the Standard Segment of the Main Market of the . Supply@ME is an innovative international Fintech Platform which provides inventory monetisation services to European manufacturing and trading companies. This is a high-growth international sector with a multi-trillion-dollar market size. Since its readmission to the , Supply@ME's share price has been particularly volatile in the context of delays to its business plan and, on 30 June this year, being the end of the reporting period, there was an unfortunate dip in the share price, which then recovered. That dip in share price at the reporting date translated into a £158,000 unrealised loss being borne by the income statement. Nevertheless, this has not diminished the Board's belief in this stock and it continues to have high hopes for the growth of Supply@ME, particularly in light of recent funding partnership announcements. 

The Company owns shares directly in Supply@ME and indirectly through its holding in Financial Partners Group (FPG), which is expected to make a cash and shares distribution to its shareholders in the next half year.

The Company also has an investment of €111,000 in a listed bond issued by FPG. Repayment of the bond is imminent and there will be a separate announcement in due course.

In May 2020, the Company agreed with IWEP Ltd that terms of a vendor loan, granted as part consideration for the Company's acquisition of the receivable due from FPG in August 2019, could be modified to allow IWEP to convert £100,000 of the loan into ordinary shares. Post period under review, the outstanding loan, which was due to mature in August 2020, was extended to August 2021.

We announced in July that we would be restructuring our investment in Finance Innovations Team (FIT). The restructuring, which was agreed after the period under review and announced on 27 July 2020, is now being implemented.

Foreign exchange has been an additional negative factor with the slump in the Pound against the Euro, causing us to record an unrealised loss of over £300,000 on our Euro financing liabilities. We would hope that some of the negative effect of this non-cash movement may correct itself by the year end.

In summary, I believe that with FPG about to release liquidity, Greencare's value moving very positively upwards, Epsion growing well and Supply@ME making positive announcements, the core of our portfolio is in good shape, despite the inevitable restrictions due to the pandemic. We have completed the majority of our first round of investment and are now beginning the phase of holding and progressive realisation.

Dominic White

Chairman

 

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

The directors of the Company take responsibility for this announcement.

For further information, please contact:

Eight Capital Partners plc

+44 20 3808 0029

Dominic White

info@eight.capital                                      

 

 

AQSE Exchange Growth Market Corporate Adviser

 

Cairn Financial Advisers LLP

+44 (0) 20 7213 0880

Jo Turner / James Lewis

 

 

Eight Capital Partners plc

Consolidated Statement of total comprehensive income

for the six months ended 30 June 2020

 

 

Note

Six months ended

30 06 2020

Unaudited

£'000

Six months ended

30 06 2019

Unaudited

£'000

Year ended

31 12 2019

Company only

Audited*

£'000

Income

 

 

 

 

Revenue

2

556

282

-

Other income

 

54

-

50

Total income

 

610

282

50

 

 

 

 

 

Cost of sales

 

(291)

(120)

-

Net change in unrealised gains/ (losses) on investments at fair value through profit and loss

 

 

           88

(215)

               164

Unrealised foreign exchange losses on financing

 

(312)

-

                     -

Loss on disposal of investments

 

-

(2)

-

Administrative expenses

 

(456)

(253)

(543)

Loss from operations

 

        (361)

(308)

(329)

 

 

 

 

 

Interest income

 

              4

                  4

                  7

Finance expense

 

(107)

  (2)

              (110)

 

 

 

 

 

Loss before tax

 

(464)

(306)

(432)

 

 

 

 

 

Tax expense

3

-

(12)

-

 

 

 

 

 

Loss for the period 

 

(464)

(318)

(432)

 

 

 

 

 

Total comprehensive loss attributable to: Equity holders of the parent company

 

 

(464)

(333)

(432)

Non-controlling interests

 

-

15

-

 

 

(464)

(318)

(432)

Loss per share attributable to the equity holders of the parent

 

 

 

 

 

 

 

 

 

Basic and diluted (pence):

4

(0.06)

(0.06)        

(0.07)         

             

 

* The 2019 audited accounts related only to the Company and did not consolidate Epsion Capital (see note 5)
 

 

Eight Capital Partners plc

Consolidated Statement of financial position at 30 June 2020

 

Note

As at

30 06 2020 Unaudited

£'000

As at

30 06 2019 Unaudited

£'000

As at

31 12 2019

Audited*

£'000

 

 

 

 

Company only

Current assets

 

 

 

 

Trade and other receivables

 

482

232

73

Investments

6

3,778

425

3,790

Cash and cash equivalents

 

287

18

420

Total current assets

 

4,547

675

4,283

 

 

 

 

 

Total assets

 

4,547

675

4,283

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

336

261

135

Borrowings

 

363

-

338

Provisions

 

32

12

11

Total current liabilities

 

731

273

484

 

Non-current liabilities

 

 

 

 

Long term bond

 

3,300

-

3,005

Borrowings

 

442

-

508

Total non-current liabilities

 

3,742

-

3,513

Total liabilities

 

4,473

273

3,997

 

 

 

 

 

Net assets

 

74

402

286

 

 

 

 

 

Equity

 

 

 

 

Share Capital

7

1,430

         1,360

1,360

Share premium account

 

2,001

          1,894

1,895            

Convertible loan notes

8

84

               85

84

Share option and warrant reserve

 

8

           8

        8

Retained earnings

 

(3,449)

   (2,962)

     (3,061)

Non-controlling interests

 

-

17

-

Total equity

 

74

402

286

 

 

* The 2019 audited accounts related only to the Company and did not consolidate Epsion Capital (see note 5)
 

Eight Capital Partners plc

Notes to the Interim Consolidated Financial Statements

For the six months ended 30 June 2020

 

1.   Accounting policies

Basis of preparation

These interim consolidated financial statements have been prepared in accordance with the principles of applicable United Kingdom accounting standards, including Financial Reporting Standard 102 - 'The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland' ('FRS 102').

 

They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2019 annual report. The statutory financial statements for the year ended 31 December 2019 were prepared in accordance with FRS 102 and in accordance with the requirements of the Companies Act 2006. The auditors reported on those financial statements; their Audit Report was unqualified.

 

The interim financial information is unaudited, has not been reviewed by the Company's auditors and does not constitute statutory accounts as defined in the Companies Act 2006.

 

The interim financial information was approved and authorised for issue by the board of directors on

22 September 2020.

 

Going concern

As an investment business, the Company has limited operating cash flow and is dependent on the performance of its investments and bond facilities for its working capital requirements. A number of its investments are either cash-generative or traded on liquid markets and it supports its cash flow by providing chargeable management services. As at the date of this report, the Company had in excess of £200,000 in cash reserves and approximately £100,000 of near term receivables. It is also anticipating a number of substantial cash-generative liquidity events in the near term.

 

The Directors are therefore of the opinion that the Company has adequate financial resources to enable it to continue in operation for the foreseeable future. For this reason, it continues to adopt the going concern basis in preparing the financial statements.

 

Basis of consolidation

The consolidated financial information incorporates the financial statements of the Company and its 100% owned investment, Epsion Capital Limited.

 

2.   Revenue

 

 

Six months ended 30 June 2020

£'000

Six months ended 30 June 2019

£'000

Year ended

31 December 2019

£'000

 

 

 

 

 

Product sales

 

541

246

-

Commission income

 

-

10

-

Services income

 

15

26

-

Total revenue

 

556

282

-

 

 

 

 

 

 

 

3.   Income tax

 

 

Six months ended 30 June 2020

£'000

Six months ended 30 June 2019

£'000

Year ended

31 December 2019

£'000

Current tax expense

 

 

 

 

UK corporation tax at 19%

 

-

12

-

Total tax expense

 

-

12

-

 

 

 

 

 

 

4.   Losses per share

 

 

Six months ended 30 June 2020

£'000

Six months ended 30 June 2019

£'000

Year ended

31 December 2019

£'000

 

 

 

 

 

Loss for the year attributable to owners of the Company

 

 

            (464)

 

(333)

(432)

 

 

 

 

 

Weighted average number of shares:

 

 

 

 

Basic and diluted (number)

 

796,642,433

553,024,641

618,720,310

 

 

 

 

 

Loss per share (pence)

 

(0.060)

(0.060)

(0.001)

 

 

 

 

 

The basic and diluted earnings per share were determined by dividing the loss attributable to the equity holders of the Company by the weighted average number of shares outstanding during the periods. Dilutive instruments are ignored when the overall result is a loss and/or when such dilutive instruments were not operative.

 

5.   Subsidiary investment

On 4 November 2019, further to an initial investment in March 2019, the Company acquired the entire share capital Epsion Capital Limited ("Epsion"), a boutique financial advisory and investment firm based in London. At 31 December 2019, the Board was holding Epsion for a partial sale that would have reduced its holding to below 50%. For this reason, and given the independence of Epsion's Board, the results of Epsion were not consolidated at 31.12.2019. This strategy has since been reconsidered and the activities of Epsion have been consolidated with effect from 1 January 2020.

 

Epsion contributed £540,000 of revenue for the period between the date of acquisition and the balance sheet date and £155,000 of profit before tax.

 

 

6.   Investments

 

Fair value

at

31 12 2019

 

Net change in unrealised gains/ (losses)

 

Fair value

at

30 06 2020

 

 

£'000

£'000

£'000

Quoted equity securities:

 

 

 

 

Supply@Me Capital plc

189

 (158)

31

 

Greencare Capital plc

653

51

704

 

Sport Capital Group plc

132

1

133

 

 

974

(106)

868

 

Unquoted equity securities:

 

 

 

 

Finance Partners Group SPA

1,608

115

1,723

 

Finance Innovations Team

1,015

73

1,088

 

 

2,623

188

2,811

 

 

Quoted debt securities:

 

 

 

 

Finance Partners Group: S.p.A. corporate bonds

 

93

 

6

 

99

 

 

93

6

99

 

Total investments

3,690

88

3,778

 

 

 

 

 

 

             

7.   Share capital

Movements in Ordinary share capital during the period are summarised below:

 

 

 

Number of Ordinary Shares of 0.01p

 Nominal value

 £'000

As at 31 December 2019

633,257,818

64

Issued during the period

708,000,000

71

As at 30 June 2019

1,341,257,818

135

 

In June 2019, Cosmos SICAV plc Value Added Fund converted £13,155.83 of the Convertible Bond facility (see Note 7 below) announced on 26 October 2018 into 93,091,058 ordinary shares in the Company.

 

Movements in Deferred share capital are summarised below:

 

 

 

Number of Deferred Shares of 0.24p

 Nominal value

 £'000

As at 1 January 2019

-

-

Sub-division of Ordinary Shares

540,166,760

1,296

As at 31 December 2019 and 30 June 2020

540,166,760

1,296

 

8.   Convertible Loan Notes

 

 

Convertible bonds

£'000

As at 1 January 2020

84

Issued in the year

-

As at 30 June 2020

84

 

This facility expires on 26 October 2020. The bonds, interest and attached warrants are redeemable against equity in the Company at the Company's option, subject to certain maximum shareholding criteria and are therefore treated as quasi-equity in the balance sheet.

 

9.   Related party transactions

Further to the reverse takeover of Abal plc by Supply@ME S.r.l. (SYME) in March 2020, Dominic White, who is a director of Eight Capital, also became a non-executive director of SYME, which has therefore become a Related Party in accordance with AQSE Growth Market Rules for Issuers.

In May 2020, the Company amended terms of a loan with IWEP Limited such that part of the loan may be converted. Further, the Company granted options to directors.  These transactions constitute related party transactions pursuant to Rule 52 of the AQSE Growth Market Rules for Issuers.

10.          Subsequent events

Investment in Financial Innovations Team srl

On 27 July, the Company announced it had completed the restructuring of its investment in Financial Innovations Team Srl ("FIT"). On 2 December 2019, the Company announced that it had acquired 59.9% of FIT, a financial services business operating in Europe. The aggregate consideration of €1.2 million for the acquisition was satisfied by way of €350,000 of cash, €450,000 of Eight Capital's bonds and a short-term vendor loan of €400,000. In its report and accounts for the year to 31 December 2019, which was notified on 6 July 2020, the Company advised that FIT had been impacted negatively by the COVID-19 pandemic in terms of advisory revenues and potential M&A fees.

 

In light of this, Eight Capital renegotiated its investment pursuant to the terms of the original share purchase agreement and enforced its rights against the vendors of the interest in FIT ("Vendors") to unwind its investment and seek recovery of the funds invested. The shares of FIT have been returned to the Vendors and an initial reimbursement of €750,000 of the investment cost is being effected through the cancellation of the €400,000 vendor loan and the return of €350,000 of Eight Capital's bonds, both issued as part consideration for the acquisition.

 

Following completion of the restructuring, the Company will recognise a reimbursement of €750,000 and it expects that the reimbursement should increase to at least €850,000 as the remainder of the Eight Capital bond held by the Vendor becomes unencumbered, representing approximately 70 per cent of the initial investment, within the next 12 months.

 

As further potential compensation, Eight Capital has paid £1 to secure an eighteen month option from the Vendors to acquire 60 per cent. of the issued share capital of Innovative Finance Srl ("InnFin"), an early stage Italian financial services business which is unrelated to FIT. The Board will be monitoring InnFin's pipeline of M&A transactions, revenue stream and value closely in the coming months Should Eight Capital exercise the option, a valuation will be provided by a jointly appointed independent valuer and, if acceptable to Eight Capital, settlement would be offset against any outstanding balance owed to it.

 

Further to signing the commitment letter of 22 June 2020 to extend a vendor loan note with IWEP Ltd, In July 2020, the Company completed this agreement and the outstanding loan notes with IWEP Ltd that were due to mature on 6 August 2020 have been extended to 7 August 2021 on the same terms.  IWEP Ltd is classified as a related party due to sharing a common director, Dominic White and, therefore, entering the agreement to extend the loans is a related party transaction pursuant to Rule 52 of the AQSE Rules for Issuers.

 

 

 

_____________________________

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