TIDMECP
RNS Number : 0842M
Eight Capital Partners PLC
12 September 2023
12 September 2023
EIGHT CAPITAL PARTNERS PLC
("Eight Capital", "ECP" or "the Company")
Annual Report and Financial Statements
For the year ended 31 December 2021
Eight Capital (AQSE: ECP), the investing company whose
investment strategy focuses on technology, media, telecoms and
financial services businesses, including listed investing
companies, announced, further to its announcement of 3 July 2023,
its reissued final results for the year ended 31 December 2021.
As announced on 3 July 2023, a delay in the audit process for
the financial year to 31 December 2022 arose as a result of the
directors' decision, in consultation with its auditors and the
Financial Reporting Council (FRC), to reclassify the accounting
treatment of its 1AF2 Ltd Sec. Bonds 21-24 fixed rate bonds. The
reclassification has resulted in the issue of these revised audited
accounts for the year to 31 December 2021.
The delayed final results to 31 December 2022 will also be
released shortly.
For further information, please visit www.eight.capital or
contact:
Eight Capital Partners plc +44 20 3808 0029
Dominic White, Chairman info@eight.capital
Luciano Maranzana, Group CEO
Cairn Financial Advisers LLP
AQSE Corporate Adviser
Jo Turner / Liam Murray +44 20 7213 0880
Walbrook PR Limited +44 20 7933 8780
Paul Vann/Nick Rome Paul.vann@walbrookpr.com
About Eight Capital Partners:
Eight Capital partners plc is a financial services operating
company that aims to grow revenue through businesses engaged in
"Fintech" operations including in the digital banking and lending
sectors.
ECP seeks to grow its group revenue in these high growth fintech
sub-sectors, which it expects to also increase in value, such that
they generate an attractive rate of return for shareholders,
predominantly through capital appreciation.
www.eight.capital
Eight Capital Partners operates two subsidiary businesses:
Epsion Capital:
Epsion Capital is an independent corporate advisory firm based
in London with an extensive experience in UK and European capital
markets. The team of senior and experienced ECM and M&A
professionals is specialised across multiple markets, sectors and
geographies and it prides itself on a commercial approach that
allows the clients to achieve their growth ambitions.
www.epsioncapital.com
Innovative Finance:
Innovative Finance is a corporate finance advisory business that
develops mergers and acquisitions and financing solutions across
multiple sectors, primarily in Europe, with access to international
transactions. It focuses on investments in Europe which are linked
to technological developments in the financial services industry.
www.innovfinance.com
Extract from the audited reissued report and accounts for the
year ended 31 December 2021
Revision of Financial Statements by Replacement
The following Annual Report and Financial Statements replaces
the original reports filed with the Registrar of Companies on 22
July 2022. These are now the statutory accounts of the Company for
the year ended 31 December 2021. This replacement Annual Report and
Financial Statements has been prepared at the date of the original
accounts and not as at the date of this revision and accordingly
does not deal with events between those dates.
Financial Reporting Council (FRC)
The Company was notified by the FRC that the Company's original
FY 2021 Audited Annual Report and Financial Statements had been
subject to a limited scope review in accordance with Part 2 of the
FRC Corporate Reporting Review Operating Procedures. A full review
of the original FY 2021 Annual Report and Financial Statements was
not undertaken and the review was subject to the following scope
and limitations of the FRC review.
The FRC also provides no assurance that the revised annual
report and accounts are correct in all material respects, including
(but not limited to) the carrying amounts of the assets and
liabilities affected by the revisions described below. The FRC has
not verified the assumptions made by management or the information
provided.
Scope and limitations of the FRC review
The FRC review is based on a review of the annual report and
accounts and does not benefit from detailed knowledge of the
Company's business or an understanding of the underlying
transactions entered into. It was however conducted by staff of the
FRC who have an understanding of the relevant legal and accounting
framework. The FRC provides no assurance that the annual report and
accounts are correct in all material respects, the FRC's role is
not to verify the information provided but to consider compliance
with reporting requirements.
Amendments to 2021 Audited Annual Report and Financial
Statements arising from FRC review and additional review by the
Company and its Auditor.
As a result of the FRC review and additional review carried out
by the Company and its Auditor, several amendments have been agreed
by the Board to be made to the Annual Audited Report and Financial
Statements.
Amendments arising from FRC review where the original Annual
Audited Report and Financial Statements did not meet the
requirements of the Companies Act 2006
1. Correction of 2021 entries in the cash flow statement
relating to the issue and redemption of loan liabilities, where the
transactions were non-cash exchanges of bonds.
The consolidated and company cash flow statements reported an
investing cash outflow of GBP33,620,000 and financing cash inflows
of GBP20,969,000 and GBP13,185,000. These non-cash transactions
should have been excluded from cash inflows and outflows presented
in the statements of cash flows.
2. Correction of the hierarchy level in which the fair value
measurement of the investment in bonds issued by 1AF2 Limited
('1AF2 Bonds') belongs, and additional disclosures required for
Level 3 measurement in accordance with paragraphs 93(d), (e), (f),
(g) and (h) of IFRS 13; correction of 2021 entries relating to the
carrying amount of the 1AF2 Bonds at 31 December 2021 and
recognition of fair value movements on the 1AF2 Bonds in the income
statement.
The Directors had previously reviewed the 1AF2 Bonds and
concluded that whilst the bonds benefitted from an exit fee based
on the performance of the underlying securitised assets in a listed
entity, they
considered the likelihood of achieving the exit fee to be
remote, and as such did not take it into account as part of the
assessment of the bonds. The Directors took the view that the Bonds
should have been held at amortised cost, whereas the FRC's view
upon review is that they should have been held at fair value based
on an appropriate valuation method.
Following a review with its Auditor, the Directors now consider
that the fair value measurement of the 1AF2 Bonds should have been
categorised within Level 3. As part of the Level 3 disclosure it
should have set out that there were no suitable quoted prices for
trading in the 1AF2 Bonds. The valuation method disclosed should
then have explained the methodologies used to value the bonds based
on 1) a valuation of the underlying securities and 2) a discounted
cash flow analysis, which involve the use of significant
unobservable inputs.
Underlying securities valuation methodology
Quoted shares were priced by the mid-point of the reporting
date.
Unquoted shares, the valuation was based on an average of 4
scenarios which included a 3 and 5 year financial plan discounted
using a Weighted Average Cost of Capital ('WACC').
The WACC included the following elements:
Risk-free rate - calculated as the 12 months weighted average
value of the 10Y US Government Bond
Equity risk premium - sourced from Ashwath Damodaran, a
Professor of Finance at the Stern School of Business at New York
University who is recognised as a provider of comprehensive data
for valuation purposes.
Beta - calculated as the median of the betas (2 years, weekly)
observed in a panel of comparable listed companies operating in the
regulatory and ICT industry
Small size premium - in order to take into account the different
size of the Company compared to the comparable entities used in the
management assessment of WACC.Execution risk premium - in order to
reflect the risk related to the projections
Country risk premium - it reflects the risk related to the main
regional areas where the company operates in each scenario
Cost of debt - equal to the sum of risk-free rate, the spread
resulting from the S&P credit spreads of the comparable and the
Italian default spread.
Tax rate - equal to the Italian corporate tax rate of 24%
WACC was converted from USD to EUR by using the inflation rates
in both jurisdictions.
Each scenario produced a different WACC, ranging from 14.5% to
16.6%.
Long Term Growth Rate ('LTGR') was prudently set at 1.9%.
Using the Financial plans for each scenario applying the DCF
method using the associated WACC and terminal value based on the
LTGR, the valuations given for the Company's share of the
underlying security package were between EUR40m and EUR63m. The
mid-range was taken as the average.
Weighted Average Cost of Capital
A summary of the unobservable inputs used in the WACC
calculation is set out below:
Scenario
Base 1 2 3
--------------------- ------ ------ ------ ------
Risk Free Rate 0.9% 0.9% 0.9% 0.9%
Market Risk Premium 4.7% 4.7% 4.7% 4.7%
Beta Unlevered 0.8 0.8 0.8 0.8
D/E Target 8.8% 8.8% 8.8% 8.8%
Tax Rate 24.0% 24.0% 24.0% 24.0%
Relevered Beta 0.9 0.9 0.9 0.9
Additional Risk
Premium 11.1% 12.1% 12.5% 13.4%
--------------------- ------ ------ ------ ------
Cost of Equity (Ke) 16.3% 17.3% 17.7% 18.5%
--------------------- ------ ------ ------ ------
Base rate 0.9% 0.9% 0.9% 0.9%
Default spread 1.9% 1.9% 1.9% 1.9%
Spread 2.0% 2.0% 2.0% 2.0%
Gross cost of Debt 4.8% 4.8% 4.8% 4.8%
Tax rate 24.0% 24.0% 24.0% 24.0%
--------------------- ------ ------ ------ ------
Net cost of Debt
(Kd) 3.7% 3.7% 3.7% 3.7%
--------------------- ------ ------ ------ ------
E/(E+D) 91.9% 91.9% 91.9% 91.9%
D/(E+D) 8.1% 8.1% 8.1% 8.1%
--------------------- ------ ------ ------ ------
WACC (USD) 15.2% 16.2% 16.6% 17.3%
--------------------- ------ ------ ------ ------
US inflation 2.4% 2.4% 2.4% 2.4%
WACC Real 12.6% 13.5% 13.6% 14.6%
EU inflation 1.8% 1.8% 1.8% 1.8%
--------------------- ------ ------ ------ ------
WACC (EUR) 14.5% 15.5% 15.9% 16.6%
--------------------- ------ ------ ------ ------
Bond Discounted Cash Flow valuation Methodology ("DCF")
A DCF valuation on the bond incorporating the four monthly
interest payments and repayment of the bond principal at 30 June
2024 was also carried out. We used the Base scenario WACC of 14.5%
which prudently includes an equity return as well as debt return.
When discounting the cashflows a value of EUR28.3m was computed
(the element held by the Company). The valuation did not include
any upside that may be due as part of the Exit Fee.
The board acknowledged that a valuation of the security and a
DCF valuation of the bond would meet the requirements of IFRS 13
and note this to be included in the 2022 accounts.
As a result of the change in valuation methodology, an
additional loss of GBP9.8m was reported in the Consolidated Income
Statement.
3. Recognition of a loss on modification of the loan liabilities
During the year under review the Company undertook a
restructuring of its debt liabilities to restructure a EUR40m 1.5%
interest vendor loan issued by IWEP into EUR15m 4.8% five-year
bonds and to modify the terms of the remaining EUR25m to remove the
interest charge. The Company had treated this transaction as part
of the same facility as it was with the same lender and only arose
due to a delay in the creation of the bond instrument. Despite
this, the FRC's view was that, while not a substantial modification
in accordance with paragraph 3.3.2 of IFRS 9, 'Financial
Instruments', the restructuring gave rise to a modification loss
owing to an increase in the liability measured by discounting
revised future cash flows at the original effective interest
rate.
The Board has accepted the FRC's view and has calculated a
EUR2.2m modification loss (GBP1.88m) that has been reported in the
Consolidated Income Statement. The modification loss was calculated
by comparing the amortised cost value of the original loan with the
discounted net present value of the new structure.
4. Commentary in the Strategic Reports, reflecting the revised
performance and position as at 31 December 2021, so as to provide a
fair, balanced and comprehensive review of each period.
The Board considers that the summary of results in the year in
the Chairman's Statement that is referenced in the Strategic Report
is the only commentary in the Strategic Reports that is required in
conjunction with this new section that sets out the amendments
required to the Accounts.
The updated commentary is as follows:
Results
Through its two subsidiaries, the Group recorded revenues for
the year under review of GBP444,000 with a gross margin of over
70%. This income was further supplemented by ECP itself providing
management services to certain investees and thereby recovering
GBP128,000 of overhead costs. Interest income less finance expense
was a net deficit of GBP1.7m and the net movement in fair value of
both realised and unrealised gains and losses on investments at
fair value (explained further below) was a loss of GBP9.5m.
Overheads were relatively high, at GBP0.7 million; partly a
reflection of the substantial professional support for the change
in status outlined in the September update, and the Group result
for the year was a loss before tax of GBP11.5m.
Additional narrative has also been added to the Chairman's
statement in relation to the Fair Value Adjustment on the 1AF2
bond, as follows:
Fair value adjustment on 1AF2 Bond
The valuation exercise undertaken on the 1AF2 Bond based on a
valuation of the underlying securities and a discounted cash flow
valuation assessed the value of the bond at EUR28.3m (GBP23.8m),
resulting in a fair value loss in the accounts of GBP9.8m.
5. Revision of the Consolidated Income Statement, Consolidated
Statement of Changes in Equity and Consolidated Cash Flow Statement
to correct the incorrect reporting of trading results for the
period.
During the Company's and its Auditor's review of the 2021
Financial Statements following the FRC enquiries, it became
apparent that the Consolidated Income Statement incorrectly
included 12 months of trading for the two subsidiaries, when the
effective date of consolidation upon the change in nature of the
group from an investment group to an operating group was 1 July
2021, a shorter period. For the period from 1 January 2021 to 30
June 2021, the Company was an investment vehicle and none of its
investment met the requirement of IFRS 10 for an investment
company. On 1 July 2021, the Company changed its status from an
investment vehicle to an operating company, and as a result, the
Company's investments in its subsidiaries have been consolidated
from 1 July 2021. The net effect was a reduction in the net loss
before tax of GBP165,000.
The opening retained losses shown within the Consolidated
Statement of Changes in Equity needed to be revised to GBP3,493,000
to align with the Company's 2020 retained losses.
This report was approved by the Board of Directors on 30 June
2022 and signed on behalf of the board by:
Dominic White
Chairman
Chairman's Statement
Dear Shareholder,
I am pleased to report on the Company's financial results for
the year ended 31 December 2021 and on a number of far-reaching
corporate developments that have occurred during the year,
particularly during the second half and which have continued into
the first half of 2022.
Change of status to an Operating Group
The most important development during the period under review,
and announced in an extensive market update on 27 September 2021,
was the change in status from being an investing company to
becoming an operating Group with an effective date of 1 July 2021.
This Report, therefore, for the first time, presents Eight Capital
Partners Plc's ("ECP" or "Eight Capital") financial statements
under IFRS reporting standards, consolidating the results and
balance sheets of its wholly owned subsidiaries, Epsion Capital
Limited ("Epsion"), and Innovative Finance Srl ("InnFin"), the
latter acquired in May 2021 (together "the operating
subsidiaries"), from the effective date of 1 July 2021 onwards.
ECP has therefore evolved into an international financial
services operating Group, whereby Epsion and InnFin source, advise
on, finance, and deliver transactions, primarily involving SME
businesses within the technology, media, telecoms and financial
services sectors and in which ECP itself will potentially
invest.
Results
Through its two subsidiaries, the Group recorded revenues for
the year under review of GBP444,000 with a gross margin of over
70%. This income was further supplemented by ECP itself providing
management services to certain investees and thereby recovering
GBP128,000 of overhead costs. Interest income less expense was a
net deficit of GBP1.7m and the net movement in fair value of both
realised and unrealised gains and losses on investments at fair
value (explained further below) was a loss of GBP9.5m. Overheads
were relatively high, at GBP0.7 million; partly a reflection of the
substantial professional support for the change in status outlined
in the September update, and the Group result for the year was a
loss before tax of GBP11.5m.
Subsidiary activities
Epsion, our wholly owned UK Corporate Finance subsidiary,
concentrated on two related companies, providing advice ahead of
potential standard listings, during the period since its results
were consolidated upon the group becoming an operating group (1
July 2021 onwards). If these companies are listed, there will be
commensurate fee earnings derived from these clients.
Innovative Finance S.r.l ("InnFin") our wholly owned unregulated
Italian Corporate Finance subsidiary, was acquired in May 2021 and
has been consolidated since 1 July 2021, the effective date when
the group became an operating group. Infin concentrated in the
period since consolidation on providing advice to investors and
companies ahead of listing on the Standard List of the LSE.
Approximately EUR350,000 of the fees are from advising investors
and the remaining EUR50,000 are fees for initial consulting work
for companies considering a listing. If these companies are listed
InnFin will earn appropriate fees.
Eight Capital: update on prior year's investments
ECP's investment portfolio now and as at 31 December 2021 is
comprised exclusively of quoted companies. The private investments
included in last year's report have either been sold (FPG - see
below) or integrated into the Group (Epsion and InnFin).
Finance Partners Group ("FPG") : Financial Services
This investment was disposed of during the year, originally
consisting of a receivable of EUR2 million with an ability to
convert into equity acquired for EUR1.9 million. The ability to
convert was exercised and the resultant holding in FPG of 28.7% was
sold for EUR2.15 million (equivalent to GBP1.83 million), of which
EUR1.57 million (GBP1.34 million) was paid on closing and the
balance of EUR580,000 (GBP487,000) payable in 2022. The gain on
disposal figure included in these accounts is GBP130,000
Retained investments : combined loss in value recorded in these
accounts: GBP116,000.
Supply@ME Capital Plc ("SYME ): Inventory securitisation
SYME is an inventory monetisation business based on a novel
asset securitisation concept, enabled by an innovative software
platform. SYME is listed on the Standard List of the London Stock
Exchange. SYME's share price has not performed well and ECP's
GBP250,000 investment, acquired at a share price of GBP0.11 has
seen a drop to GBP0.0017 at the year-end, with a total fall in
value of over GBP200,000 since purchase. The movement during the
year under review, included in the income statement, is a loss of
GBP90,000. Although the share price reduction has been a source of
concern, the Board recognises that the concept and possibilities
for SYME were, and still are, interesting once a critical mass of
investment capital to support securitisations can be delivered by
SYME's management.
Evrima Plc ("EVA") : Mining and exploration investment
Evrima was formerly Sports Capital Group ("SCG") and ECP
invested in a football related project from which SCG withdrew.
They reverted to their previous sector of investment: mining and
associated exploration and changed their name. The Company's
investment was approximately GBP140,000 and is currently
GBP131,000, based on its quote on AQSE Growth Market. We will
dispose of this investment in due course.
Greencare Capital Plc ("GRE"): Investment in Cannabis health
products and general wellness.
The Company invested both prior to and at IPO when GRE listed on
the AQSE Growth Market in December 2019. The total investment was
GBP280,000 and the average price paid per share was 10.9p. The
shares at the year-end - and currently - were quoted at 30.5p,
having fallen slightly since the end of 2020. It was recently
announced that Dominic White, Chairman of ECP, has become chairman
of GRE. We await positive developments.
Fair value adjustment on contingent liability
The terms of the acquisition of InnFin included an earn-out
formula contingent upon the attainment of certain levels of
profitability in future years, creating a contingent liability
towards the vendor at the date of acquisition in May 2021. The
fair-valuing of this liability at 31 December 2021 has resulted in
a positive adjustment in the income statement of GBP300,000.
Fair value adjustment on 1AF2 Bond
The valuation exercise undertaken on the 1AF2 Bond based on a
valuation of the underlying securities and a discounted cash flow
valuation assessed the value of the bond at EUR28.3m, resulting in
a fair value loss in the accounts of GBP9.8m.
Refined Growth Strategy
As part of its transformation into an operating group, ECP has
recently refined its growth strategy to focus increasingly on those
businesses engaged in "Fintech" operations, including the
digitisation of banking services and blockchain-backed
decentralised finance and other disruptive financial services
technologies, all of which seek to improve and automate the
delivery and use of financial services. Your Board also considers
there to be many value creation opportunities for shareholders from
the further aligning and expansion of the activities of Epsion and
InnFin.
By combining their advisory and transactional expertise with the
strategic utilisation of ECP's growing in-house capital resources,
ECP is able to provide significant support to the transactions
managed by the operating subsidiaries through the provision of
early-stage and growth co-investment capital to growing companies
seeking finance for expansion, development, consolidation or
acquisition, or as pre-IPO/RTO funding.
The competitive advantage of ECP's new operating structure is
its flexibility in terms of where it invests in the "capital stack"
pyramid, being equally comfortable with private or public debt
and/or equity positions, convertibles and structured equity or debt
facilities. Much of the financial services advisory market only
delivers third party capital and advice, without direct access to
supportive in-house capital, or having access to in-house capital
lines with a less flexible mandate.
Corporate Transactions during the year
Eight Capital successfully completed a number of corporate
transactions during the year, each one forming part of its
strategic objective to grow the market capitalisation of the
Company towards and beyond GBP50 million, and establishing a strong
balance sheet base from which to significantly expand its
operations and its own equity valuation.
To this end, in May 2021, the Company acquired InnFin, based in
Milan, which develops mergers and acquisitions and financing
solutions across multiple sectors, primarily in Europe.
In August, ECP disposed of its investment in Finance Partners
Group SPA ("FPG"), an Italian-based financial services business,
realising EUR2.15million. The profitable sale of this minority
stake has provided ECP with a better strategic alignment between
the Company's two remaining wholly owned subsidiaries and its other
activities with a primary focus on technological developments
within the financial services industry, such as fintech SME funding
solutions and digitisation of banking including decentralised
finance technology, to be key growth areas.
As announced on 4 August 2021 the purchaser agreed to pay ECP a
total of EUR2.15 million for the acquisition of FPG. The cash
element of EUR1.57 million was paid immediately. Discussions are
ongoing relating to the final part of the settlement EUR0.58
million, which remains due, and against which an extra amount of
Euros 10,000 has been paid to ECP plus further asset security
backing provided to support the receivable, to the benefit of the
Company. The agreed repayment is for 20 equal payments from 15 June
2023.
In addition to these corporate transactions, and as part of the
Board's key strategic objective to build scale to the business by
further strengthening the Balance Sheet, in August the Company
purchased EUR40m 2.5% Fixed Rate Secured Bonds at Par from IWEP
Limited, a company controlled by Dominic White, ECP's chairman and
ECP's major shareholder, which significantly increased ECP's gross
assets. Consideration for the acquisition of the Bonds was settled
by a one-year vendor loan which was subsequently restructured into
a EUR15 million 4.8% Bond described below and a EUR25 million
interest-free vendor loan ("Vendor Loan").
In September, the Company launched a EUR25million 4.8% Fixed
Rate five-year Bond Programme, with an initial tranche, placed at
launch and listed on The Vienna Stock Exchange. This Bond programme
also provided a logical next step towards the continuing expansion
of the Balance Sheet, whilst also providing better medium-term
visibility for the refinancing of ECP's existing 7% listed bonds
which mature in July of this year.
Corporate Transactions after the year end
On 23 May 2022, the Company announced that it had issued a
further EUR5 million tranche of its 7% Bond to a third party that
had acquired EUR5 million of the Vendor Loan from IWEP. In that
announcement, ECP also reinforced its commitment to a
transformational strengthening of the Company's balance sheet
through IWEP seeking to convert, subject to regulatory and
shareholder consent, as much as possible of its debt with the
Company into equity.
These current and proposed balance sheet transactions are
intended to consolidate and expand the Company's service offering
as well as helping it to develop a platform from which it can
develop as a multi-faceted financial services company, whilst also
providing a stronger base from which it can raise third party
capital.
Planned Placing and Open Offer
As announced in the Corporate Update in September 2021, it is
the Company's intention to raise new equity capital via a placing
once the restructuring of debt is completed. Your Board recognises
that those who have already invested in the Company may wish to
increase their investment and it is therefore anticipated that
current shareholders will be invited to participate in the
fundraise on the same terms as the debt conversions and equity
placing. Further information will be given in due course.
The Company also intends to provide an opportunity for all debt
investors to convert debt to equity on the same terms, including
the current outstanding 7% Bonds.
Strengthening of the Management Team
Integral to the success of the Company's transition to an
operating business has been the strengthening of its senior
management team, with the appointment to the Board in June 2021 of
former Bank of England Chief Accountant, David Bull, who joined
initially as a Non-Executive Director and then, following the
Company's successful transition to operating group status, was
appointed full-time Chief Executive Officer.
David has responsibility for leading the further development of
ECP's financial services business, both organically and through
acquisition, all within the context of fintech services. His
knowledge and experience of technology and the way it relates to
asset and commercial finance, international banking and the
digitisation of banking services, combined with his strong risk
management skills and proven business leadership qualities are
already proving invaluable as we move towards more advanced
technologies in the financial services sector. He will also be
strengthening the operational management team with further
additions in financial management and compliance, which will be at
the heart of the Company's operating activities.
The Group is also delighted to have announced on 13 May 2022,
the appointment of Richard Day to the Board of Epsion as its
Non-Executive Chairman. Richard was co-founder of institutional
stockbroker Arden Partners plc, where, from 2002 to when he left in
2015, he was head of corporate finance for much of that time,
whilst playing an important role in building its sectoral and
geographical presence. He currently holds chairmanships of two
quoted companies: Pelatro plc, a "Big Data" analytics company on
AIM and The British Honey Company plc, the premium British honey
and craft spirits producer. He also chairs Eden Geothermal Limited,
a private company drilling its first of two geothermal wells,
adjacent to the Eden Project in Cornwall in the south-west of
England. Richard's broad experience of public markets, corporate
finance and corporate governance across diverse business sectors is
already having a significant influence and will without doubt be a
huge asset not only to Epsion, but to the Group as a whole.
Outlook
2021 was a watershed year for Eight Capital. It successfully
transitioned into a financial service operating group, completing a
number of complementary corporate and financial transactions,
strengthening both the Company's operational capabilities and
putting in place actions to radically strengthen its Balance Sheet.
It has a clear strategy in place for the transformation of the
business in terms of its size, market value and influence within
the fintech sector of financial services and through our
wholly-owned subsidiaries, Epsion and InnFin.
The Board's strategy is to grow the business both organically
through the development of new financial, "fintech-led" services
and by selective acquisitions to boost revenue and market presence,
thereby significantly increasing shareholder returns.
The Group has made a good start to the current financial year.
We are nurturing earnings potential and structuring the business
and the Balance Sheet for future sustained growth, while building
value for shareholders. We have a strong and growing pipeline of
opportunities that we intend to deliver through our business model
and the management team in place to deliver significant growth over
the next two years. The Board views the future with increasing
confidence.
Dominic White
Chairman
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021
GBP'000
Revenue 444
Cost of Sales (127)
---------
Gross Profit 317
Administrative expenses (734)
Net change in unrealised/realised gains and losses on investments at fair value through profit
or loss (9,822)
Net gains and losses on fair value through profit or loss 300
Other income 128
Operating loss (9,811)
Interest income 418
Finance expense (2,151)
---------
Loss before tax (11,544)
Taxation -
Loss for the financial year (11,544)
Total comprehensive income attributable to the owners of the Parent (11,544)
Earnings per share (pence) from continuing operations attributable to owners of the
Company - Basic & Diluted (0.78)
Consolidated Statement Of Financial Position
As At 31 December 2021
2021
GBP'000
---------
Non-current assets
Goodwill 3,867
Intangible Assets 13
Property, plant & equipment 23
---------
Total non-current assets 3,903
---------
Current assets
Investments 24,734
Trade and other receivables 1,270
Cash and cash equivalents 202
Total current assets 26,206
---------
Current liabilities
Trade and other payables 330
Borrowings 21,380
Total current liabilities 21,710
---------
Non-current liabilities
Long term bond 17,866
Liability for contingent consideration 1,311
Borrowings 643
---------
Total non-current liabilities 19,820
---------
Net liabilities (11,421)
---------
Capital and reserves
Share capital 1,453
Share premium 2,068
Share option & warrant reserve 15
Convertible loan note 84
Currency translation reserve (4)
Retained earnings (15,037)
Total equity (11,421)
---------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Share capital Share premium Share option Convertible Currency Retained Total
& warrant loan note translation earnings
reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- -------------- ------------- ------------ ------------- ---------- ---------
As at 31 December
2020 1,431 2,001 11 84 - (3,493) 34
------------------- -------------- -------------- ------------- ------------ ------------- ---------- ---------
Loss for the year - - - - (11,544) (11,544)
Other - - - - - - -
comprehensive
income for the
year
------------------- -------------- -------------- ------------- ------------ ------------- ---------- ---------
Total
Comprehensive
Income - - - - - (11,544) (11,544)
------------------- -------------- -------------- ------------- ------------ ------------- ---------- ---------
Movement in
reserves - - - - (4) - (4)
Share based
payment - - 4 - - - 4
Issue of shares 22 67 - - - - 89
------------------- -------------- -------------- ------------- ------------ ------------- ---------- ---------
Total Transactions
with Owners 22 67 4 - (4) - 89
------------------- -------------- -------------- ------------- ------------ ------------- ---------- ---------
As at 31 December
2021 1,453 2,068 15 84 (4) (15,037) (11,421)
------------------- -------------- -------------- ------------- ------------ ------------- ---------- ---------
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
GROUP
2021
GBP'000
---------
Cash from operating activities
Loss before tax (11,544)
Adjustments for:
Net interest expense /(income) 1,733
Net change in unrealised gains on investments at fair value through profit and loss 9,822
Net gains and losses on fair value through profit or loss (300)
Share based payment expense 4
Provisions -
Foreign exchange 97
Increase in trade and other receivables (685)
Increase/(decrease) in trade and other payables 119
Net cash used in operating activities (754)
Cash flow from investing activities
Proceeds on disposal of investments 1,343
Acquisition of subsidiary, net of cash acquired (InnFin) (814)
Acquisition of subsidiary, net of cash acquired (Epsion) 120
Purchase of property, plant and equipment (10)
Purchase of intangible assets (2)
Interest income 380
Net cash from investing activities 1,017
Cash flows from financing activities
Loans received 1,097
Proceeds from bond issue 43
Repayment of loans (949)
Finance charges (455)
Net cash from financing activities (264)
---------
Net cash flow for the year (1)
---------
Cash and cash equivalents at beginning of year 203
-------------------------------------------------------------------------------------- ---------
Cash and cash equivalents at end of year 202
-------------------------------------------------------------------------------------- ---------
Net change in cash and cash equivalents (1)
-------------------------------------------------------------------------------------- ---------
Excluded from the consolidated statement of cash flows are the
following items included in the consolidated statement of financial
position :
-- Additions included within current asset investments amounting to GBP32.8m (at cost value);
-- Additions included within non-current assets relating to
goodwill on the acquisition of subsidiaries amounting to GBP3.0m;
and
-- Bond, loan and equity funding amounting to GBP37.7m.
The notes on pages 30 to 64 form part of these financial
statements.
Notes to the consolidated financial statements
For the year ended 31 December 2021
1. General information
Eight Capital Partners Plc ("the Company") is a public limited
company limited by shares and incorporated in England. Its
registered office is Kemp House, 160 City Road, London, EC1V
2NX.
The Company's shares are traded on the Aquis Stock Exchange
Growth Market under ticker ECP and ISIN number GB00BYT56612.
The consolidated financial statements of the Company consist of
the following companies (together "the Group"):
Eight Capital Partners plc UK registered company
Epsion Capital Limited UK registered company
Innovative Finance srl ("InnFin") Italian registered company
The Group's objective is to generate an attractive rate of
return for shareholders, predominantly through capital
appreciation, by taking advantage of opportunities to invest in the
financial services and technology, media, and telecoms (TMT)
sectors.
The information contained in this announcement has been
extracted from the reissued report and accounts for the year to 31
December 2021. Therefore certain events may now be superseded and
references, notes and page numbers may be incorrect. Shareholders
are encouraged to read the full reissued report and accounts, a
copy of which is available on the Company's website..
2. Accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below.
Basis of preparation
These consolidated financial statements have been prepared and
approved by the Directors in accordance with the UK-adopted
international accounting standards. These are the Group's first
financial statements prepared in accordance with the UK-adopted
international accounting standards.
The Company was classified as an investment vehicle in the prior
years ending 31 December 2021. On 1 July 2021 Eight Capital Plc
changed its status from an investment vehicle to an operating
company. As a result, and in accordance with IFRS 10, some of the
Company's investments have been consolidated from this date. No
consolidated comparative information has been disclosed as the
Company was an investment vehicle and none of its investments met
the requirements of IFRS 10 for an investment company.
These consolidated financial statements are prepared on a going
concern basis, under the historical cost convention, as modified by
the recognition of listed investments at fair value.
These consolidated financial statements are presented in Pounds
Sterling, rounded to the nearest thousand (GBP'000), which is the
Company's presentation and functional currency.
The presentational currency for Epsion Limited is Pounds
Sterling and for InnFin is Euro as the subsidiary is registered in
Italy.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 3 of the full report and
accounts.
Basis of consolidation
The Group financial statements consolidate the financial
statements of the Company and all its subsidiaries ("the
Group").
Subsidiaries include all entities over which the Group is
exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns
through its power over the investee. The existence and effect of
potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group
controls another entity. Subsidiaries are consolidated from the
date on which control commences until the date that control ceases.
Intra-group balances and any unrealised gains and losses on income
or expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements.
The acquisition method of accounting is used to account for
business combinations. The cost of an acquisition is measured as
the fair value of the assets given, equity instruments issued, and
liabilities incurred or assumed at the date of exchange, and the
equity interests issued. Identifiable assets acquired, and
liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair value at the
acquisition date. Acquisition related costs are expensed as
incurred. Where necessary, amounts reported by subsidiaries have
been adjusted to conform with the Group's accounting policies.
Going concern
As at 31 December 2021, the Group had cash of GBP183,000 and
current investments of GBP24,734,000.
As an operating business, the Group has fee income from its
corporate finance activities and the performance and income from
its investments, supported by aggregate bond facilities of up to
EUR35 million (of which EUR24 million has been utilised to date).
Annualised normal running costs of the Company are circa GBP1.5
million including debt service, reduced by rebilling of shared
services of approximately GBP120,000 and interest income of
GBP860,000. As at the date of this report, the Company had
approximately GBP100,000 cash at bank and anticipated near-term
divesting revenues of up to GBP650,000, of which GBP500,000 is
contractual for delivery in September 2022, and with a further
GBP750,000 of investment assets at current market value earmarked
for disinvestment in the second half of 2022. At Group level
additional fee income of circa GBP1.2 million is expected.
The Directors are therefore of the opinion that the Group 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.
3. First-time adoption of IFRS
These financial statements, for the year ended 31 December 2021,
are the first the Group has prepared in accordance with IFRS. For
periods up to and including the year ended 31 December 2020, the
Parent Company prepared its financial statements in accordance with
United Kingdom Accounting Standards, including Financial Reporting
Standard 102, "The Financial Reporting Standard applicable in the
United Kingdom and the Republic of Ireland" ("FRS 102").
Accordingly, the Group has prepared financial statements that
comply with UK-adopted international accounting standards as at 31
December 2021, as described in the summary of significant
accounting policies. In preparing the financial statements, the
Group's opening statement of financial position was prepared as at
1 January 2020, the Group's date of transition to IFRS.
There were no material adjustments applied to the Group
financial statements during the transition to IFRS.
4. Earnings per share
2021
Earnings (GBP)
Loss used in calculating basic and diluted earnings:
Loss for the year (GBP11,544,000)
Number of shares
Weighted average number of shares for the purposes of basic and diluted earnings per share 1,479,362,244
Loss per share (pence) (0.78)
The calculation of basic earnings per share of (0.78) pence is
based on the loss attributable to equity owners of the Company of
GBP11,544,000 and on the weighted average number of ordinary shares
of 1,479,362,244 in issue during the period. Dilutive instruments
are ignored when the overall result is a loss.
8. Related party transactions
Administrative services
During the year, the Company was invoiced GBP15,500 (2020:
GBP31,400) for administrative services provided by Marker
Management Services Ltd, a company controlled by Martin Groak, a
director of Eight Capital.
Acquisition of a EUR2 million receivable from Finance Partners
Group and conversion to equity
On 7 August 2019 the Company announced the acquisition from IWEP
Ltd. ("IWEP") of a EUR2 million convertible receivable (the
"Receivable") from Finance Partners Group SpA ("FPG"), an Italian
financial services company that invests in private companies
seeking future listings on public markets and whose principal
investment was in The AvantGarde Group.
On 14 May 2021, the Company converted GBP27,000 of the loan with
IWEP Ltd into 67,699,173 new ordinary shares at a price of
GBP0.00039 per share.
IWEP is a company connected to Eight Capital Partners' Chairman
Dominic White. In August 2019 Dominic White agreed to become a
non-executive board member of The Avantgarde Group to monitor the
Company's and IWEP's interests.
Related party funding
Included within current borrowing at year end was:
GBP367,138 shareholder loan from IWEP Ltd (2020: GBP435,911);
and
GBP21,012,485 vendor loan in relation to the EUR40m IAF2 bond
acquisition from IWEP Ltd
Included in non-current borrowing at year end was:
GBP184,910 (2020: GBPnil) loan from Maximum Return Systems
Limited, an entity controlled by Eight Capital Partners' Chairman
Dominic White;
GBP127,350 (2020: GBPnil) loan from Concreta Srl, a shareholder
in the company; and
GBP318,297 (2020: GBPnil) vendor loan from DB Investor in
connection to the acquisition of Innovative Finance S.r.l.
9. Post balance sheet events
On 23 May 2022, the Company announced that it had issued a
further EUR5 million tranche of its 7% Bond to a third party that
had acquired EUR5 million of the Vendor Loan from IWEP. In that
announcement, ECP also reinforced its commitment to a
transformational strengthening of the Company's balance sheet
through IWEP seeking to convert, subject to regulatory and
shareholder consent, as much as possible of its debt with the
Company into equity.
On 24 June 2022, the company announced that at a Bondholder
meeting held on 23 June, an Extraordinary Resolution approved a
proposal to modify the terms and conditions of the 7% Bond such
that the terms align with the more recently issued EUR25m 4.8% Bond
repayable on 3 September 2026.
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END
NEXLBMBTMTTBTRJ
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September 12, 2023 02:00 ET (06:00 GMT)
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