KR1 plc - Interim Report for the Half Year Ended 30 June 2022 PR Newswire

30 September 2022

KR1 Plc

(“KR1”, or the “Company”)

Interim Report for the Half Year Ended 30 June 2022

KR1 plc (KR1: AQSE), a leading digital asset investment company, today announces its half year results for the six months ended 30 June 2022 (HY22).

Financial highlights

  • Net current assets of £46,741,375, -56% on HY21; -75% on FY21
  • NAV per share of 30.59p as at 30 June 2022
  • Income from digital assets £16,567,889, +203% on HY21

Investment highlights

  • Continued investments in innovative decentralised blockchain projects
  • Investment made in base layer protocol Subspace
  • Investment made in prediction market protocol Zeitgeist

Strategic highlights

  • Continued strong revenue stream from digital assets, in particular from staking in ‘Proof-of-Stake’ network such as Polkadot or Cosmos and other rewards with a view to adding further streams going forward

Outlook

  • We are nearing, or could be at, a market bottom as macroeconomic conditions and geopolitical tensions continue, causing uncertainty
  • The long-term outlook for DeFi remains extremely positive – with on-chain liquidity holding up extremely well through crypto's recent liquidation and credit crisis

George McDonaugh and  Keld van Schreven, Managing Directors of KR1 plc, commented: “It has undoubtedly been a challenging time for all investors, but we remain confident in the long-term prospects for blockchain technology, and we were glad to see how DeFi and the underlying technology held up through crypto's recent liquidation crisis. Bear markets bring with them opportunities, and as valuations begin to normalise we will look to add new investments to our high quality digital asset portfolio. Increased institutional and retail interest, alongside positive regulatory activities, all point to a bright future for crypto and digital assets.”

Chairman’s Report

At 30 June 2022, the net asset value of KR1 plc was 30.59 pence per share as compared with 80.30 pence per share a year earlier. The net assets of the Company at 30 June 2022 was £46,741,375, as compared with £105,736,099 a year earlier.

The underlying progress of the Company’s investments is strongly positive and it is gratifying to see the Company’s investment team navigate the vagaries of the digital asset investment cycle in executing their singular investment thesis.

On behalf of the Board of Directors, I thank all Shareholders for their support.

Sincerely yours,

Rhys Davies

Chairman

Managing Directors’ Statement

After last year’s record results, owing to the growth of digital asset value and portfolio performance, the first half of 2022 saw KR1’s portfolio heavily impacted by the wider macro correction of speculative asset prices, or more specifically crypto. By mid 2022, we had entered bear market territory and as such saw prices of all digital assets fall steeply. As in previous downturns, the Company remains steadily focused on its long-term investments in innovative decentralised technology. While we are increasingly attracted to the low risk profile and opportunities provided by staking and other opportunities to produce a yield on portfolio assets, which these half year results demonstrate strongly, we do not engage in complex trading strategies or utilise leverage.

As we entered the bear market, we continued to see and invest in the most disruptive projects with fair valuations. An overhang from a fading bull market meant that many valuations were still unsustainable, and this was reflected in the wider investment market downturn. The bear market has a number of distinct benefits, which include giving project teams more time to deliver on roadmaps without constant price pressure. These conditions allow teams to gain traction with their products and services. Ultimately this will set the stage for better times ahead and for the onboarding of the next tranche of users and investors into crypto.

The entire market witnessed the epic collapse of Terra Luna and the subsequent 3 Arrows Hedge Fund collapse, which were seismic shocks to the whole system. While private enterprises engaged with over-leverage and a lack of transparency, on-chain activity proved to be very robust and without any crisis. This demonstrates the benefits of blockchain versus more traditional trading structures. And, of course, the crypto bear market has been set against the backdrop of wider macroeconomic uncertainty and geopolitical tensions, from the invasion of Ukraine, to the inflationary environment and current cost of living crisis.

However, there remain many reasons to be optimistic as to the future of digital assets. We continued to see a constant stream of new institutions coming onboard to crypto, which included Blackrock, Brevan Howard and many other respected financial institutions. Regulation is also starting to be formulated and this will ultimately cement digital assets as a recognised asset class and increase the inbound activity of institutional and retail investors.

As of writing, Ethereum's 'Merge' (i.e. complete transition to a 'Proof-of-Stake' network) has finally happened. It’s been a long wait for this milestone to complete and it was very encouraging to see. This transition was necessary to become more efficient, both in terms of technology and energy efficiency as we increasingly witness the troubling impacts of climate change.

As an investment company, we keep ourselves more focussed on the disruptive potential of the technology. Prices may rise and fall but our thesis remains the same: we are in a unique, once-in-a-generation wealth creation phase. Our position as capital allocators in the space gives us a privileged overview into what is coming down the line. We expect to see innovation and disruption continuing at pace with projects like Celestia pushing the boundaries of blockchain design and data availability. By keeping to our thesis, investment principles and process, we remain extremely confident that KR1 will emerge from the bear market strongly and well-positioned for the cyclical upturn.

Statement of Comprehensive Income

6 months to
30 June 2022
6 months to
30 June 2021
12 months to
31 December 2021
Unaudited
£
Unaudited
£
Audited
£
Revenue
Gain on disposal of intangible assets
2,510,663

4,881,832

20,758,540
Income from digital assets 16,567,889 5,473,597 20,959,934
Loss on disposal of financial assets
-

-

-
Direct costs (188,380) (14,793) (122,716)
Gross profit 18,890,172 10,340,636 41,595,758
Administrative expenses (1,683,567) (11,973,395) (33,047,971)
Share options (39,328) 17,526 67,103
Movement in credit loss provision
-

(6,474)

-
Operating profit / (loss) 17,167,277 (1,621,707) 8,614,890
Taxation (180) - -
Profit / (loss) after taxation 17,167,097 (1,621,707) 8,614,890
Other comprehensive income:
Movement in fair value of intangible assets
(155,483,650)

69,725,002

138,894,148
Movement in fair value of financial assets at fair value through profit and loss

(15,315)


(217,996)


(3,765,107)
Total other comprehensive income for the year
(155,498,965)

69,507,006

135,129,041
Total comprehensive income attributable to the equity holders of the Company

(138,331,868)


67,885,299


143,743,931
Earnings per share attributable to the equity owners of the company (pence):
Basic earnings per share (90.69) 51.56 106.39
Diluted (loss) per share (90.40) (1.23) 6.38

Statement of Financial Position

At 30 June 2022 At 30 June 2021 At 31 December 2021
Unaudited
£
Unaudited
£
Audited
£
Assets
Current assets
Intangible assets 69,142,950 119,573,398 207,786,430
Fixed asset investments - 100 -
Financial assets at fair value through profit and loss
7,667,478

694,154

6,026,270
Cash and cash equivalents 785,252 870,449 3,488,421
Trade and other receivables 42,737 42,202 103,305
Total current assets 77,638,417 121,180,303 217,404,426
Total assets 77,638,417 121,180,303 217,404,426
Equity and liabilities
Current liabilities
Trade and other payables 30,897,042 15,444,204 32,374,261
Total current liabilities 30,897,042 15,444,204 32,374,261
Equity
Share capital 762,070 721,926 758,320
Share premium 6,505,061 3,056,443 6,505,061
Revaluation surplus 13,426,658 103,521,763 168,925,801
Option reserve 224,855 235,104 185,527
Profit and loss account 25,822,731 (1,799,137) 8,655,456
Total equity 46,741,375 105,736,099 185,030,165
Total equity and liabilities 77,638,417 121,180,303 217,404,426
Net Asset Value per share 30.59 pence 80.30 pence 122.68 pence

Statement of Changes in Equity

Share
capital
Share premium Revaluation surplus Option surplus Profit and loss account
Total
£ £ £ £ £ £
Balance at 1 January 2021 720,076 3,056,443 33,796,760 252,630 40,567 37,866,476
Profit for the financial period - - 69,725,003 - (1,839,704) 67,885,299

Total comprehensive income for the year

-

-

69,725,003

-

(1,839,704)

67,885,299
Issue of options
(17,526)
Transactions with owners, recorded directly in equity 1,850 (17,526)
Balance at 30 June 2021 721,926 3,056,443 103,521,763 235,104 (1,799,137) 105,736,099
Balance at 1 January 2022 758,320 6,505,061 168,925,801 185,527 8,655,456 185,030,165
(Loss) / profit for the financial period - - (155,499,143) - 17,167,275 (138,331,868)

Total comprehensive income for the year

-

-

(155,499,143)

-

17,167,275

(138,331,868)
Issue of options 3,750 - - 39,328 - 43,078
Transactions with owners, recorded directly in equity
3,750

-

-

39,328

-

43,078
Balance at 30 June 2022 762,070 6,505,061 13,426,658 224,855 25,822,731 46,741,375

Statement of cash flows

6 months to
30 June 2022
6 months to
30 June 2021
12 months to
31 December 2021
Unaudited
£
Unaudited
£
Audited
£
Cash flows from operating activities
(Loss) / profit for the period (138,331,868) 67,885,299 173,888,175
Adjustments for:
Movement in fair value of intangible assets 155,483,650 (69,725,002) (138,810,157)
Gain on disposal of intangible assets (2,510,663) (4,881,832) (20,758,541)
Movement in credit loss provision - 6,474 100
Foreign exchange gain/(loss) 1,606 1,237 17,354
Movement in fair value of financial assets at fair value through profit and loss  15,315 217,996 3,681,118
Share option issue 39,328 (17,526) (67,103)
14,697,368 (6,513,354) 17,950,946
(Increase)/decrease in debtors 60,568 (17,642) (72,271)
Increase/(decrease) in creditors (1,477,221) 11,153,322 (2,060,863)
(1,416,653) 11,135,680 (2,133,134)
Net cash inflow from operating activities 13,280,715 4,622,326 15,817,812
Cashflows from investing activities
Net sales/(purchases) of investments 495,264 (3,884,750) 4,422,383
Net cash inflow/(outflow) from investing activities 495,264 (3,884,750) 4,422,383
Cashflows from financing activities
Proceeds from issue of ordinary shares 3,750 1,850 3,486,862
Net cash generated by financing activities 3,750 1,850 3,486,862
Net increase in cash 13,779,729 739,426 23,727,057
Cash and at the beginning of the year 3,488,421 332,535 332,535
Effect of exchange fluctuations on cash (1,605) (1,236) (17,458)
Non-cash transactions (16,481,293) (200,276) (20,553,713)
Cash and at 31 December 785,252 870,449 3,488,421
Represented by:
Cash at bank 785,252 833,528 3,163,061
Cash held on trading platforms - 36,921 325,360
785,252 870,449 3,488,421

Interim report notes

1.   Interim report

The information relates to the 6-month period from 1 January 2022 to 30 June 2022. 

The interim report was approved by the Directors on 30 September 2022.

2.   Basis of accounting

a. While the financial information included in this interim financial report has been prepared in accordance with International Financial Reporting Standards (“IFRSs”), this interim financial information does not itself contain sufficient information to comply fully with IFRSs.

b. These interim financial statements are the financial statements of the Company.

c. The financial statements are prepared under the historical cost convention except for the modification to a fair value basis for certain financial instruments as specified in the accounting policies below and are in accordance with applicable accounting standards.

d. Current assets 

i.     Current assets are valued at the lower of cost and net realisable value.  Foreign denomination loans are translated into sterling at the rate of exchange ruling at the balance sheet date.  For those current assets listed on a recognised market, net realisable value is taken as mid-market price. Where the directors consider the market price of a current asset is likely to irreversibly fall, additional write downs in valuation to below mid-market price are made.

ii.    The net realisable value of certain current assets is not readily determinable by reference to a quoted market price. The directors have therefore made their own assessment of the net realisable value and adjusted the carrying value of the current asset where it is considered less than cost. This estimate requires estimation techniques, which are reliant upon their experience and expertise.

iii.   The Company accounts for digital currencies, as Intangible Assets in accordance with IAS 38 and the revaluation model has been applied as there is an active market for the cryptocurrencies. Intangible assets held are measured initially at cost and are subsequently carried at a revalued amount (based on fair value) less any subsequent impairment losses, using rates obtained from various exchanges, including Oanda and Coinmarket. The rates obtained from these sources represent a generally well recognised quote price in an active market, which market and database is accessible to the Company on an ongoing basis.

Revaluation increases are recognised in other comprehensive income and accumulated in the revaluation surplus within equity except to the extent that they reverse as revaluation decrease previously recognised in profit and loss. Gains are not recycled however if the gain reverses a prior reduction in the asset’s value, the loss is recorded in other comprehensive income and the reduce the carrying amount of the asses in the revaluation reserve to the extent of the gain previously recognised.

e. The Company will report again for the full year to 31 December 2022.

The Directors of KR1 plc accept responsibility for this announcement.

--ENDS--

For further information please contact:

KR1 PLC
George McDonaugh
Keld van Schreven
+44 (0)1624 630 630
Peterhouse Capital Limited (AQSE Corporate Adviser)
Mark Anwyl
+44 (0)20 7469 0930
FTI Consulting LLP (PR Adviser)
Laura Ewart
Gina Magnin
+44 (0)7711 387 085
KR1@fticonsulting.com

About KR1 plc

KR1 plc is a leading digital asset investment company supporting early-stage decentralised and open source blockchain projects. Founded in 2016 and publicly traded in London on the AQSE Growth Market (KR1:AQSE), KR1 has one of the longest and most successful track records of investment in the digital assets space by investing in decentralised platforms and protocols that are emerging to form new financial and internet infrastructures.

www.KR1.io

Market Abuse Regulation (MAR) Disclosure

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation EU 596/2014 as it forms part of retained EU law (as defined in the European Union (Withdrawal) Act 2018).