TIDMECP
RNS Number : 5569D
Eight Capital Partners PLC
30 June 2021
30 June 2021
EIGHT CAPITAL PARTNERS PLC
("Eight Capital", "ECP" or "the Company")
Annual Report and Financial Statements
For the year ended 31 December 2020
Eight Capital (AQSE: ECP), the investing company whose
investment strategy focuses on technology, media, telecoms and
financial services businesses, including listed investing
companies, is pleased to announce its final results for the year
ended 31 December 2020. The Company's audited report and accounts
can be found below. A copy of the final results will shortly be
available from the Company's website and will be sent to all
shareholders.
A separate announcement providing details of the 2020 Annual
General Meeting will be made shortly.
The Directors of the Company accept responsibility for the
content of this announcement. This announcement contains inside
information for the purposes of Article 7 of EU Regulation
596/2014.
For further information, please visit www.eight.capital or
contact:
Eight Capital Partners plc
Dominic White/Martin Groak +44 20 3808 0029
info@eight.capital
Cairn Financial Advisers LLP
Aquis Stock Exchange Corporate Adviser
Jo Turner/James Lewis +44 20 7213 0880
Walbrook PR Limited
Paul Vann/Nicholas Johnson +44 20 7933 8780
+44 7768 807631
eightcapital@walbrookpr.com
Company number 09301329 (England and Wales)
Chairman's Report
Dear Shareholder
I am pleased to report on the Company's results for the year to
31 December 2020 and the recent developments in the portfolio.
Eight Capital Partners Plc (the "Company", "Eight Capital" or
"ECP") is an investment company quoted on the Aquis Stock Exchange
Growth Market ("AQSE"), the successor to NEX Exchange Growth
Market. At the end of December 2020, our investment portfolio stood
at approximately GBP3.2 million, compared to almost GBP3.8 million
at the end of 2019. This reduction in the portfolio was mainly as a
result of two disposals: a bond we invested in for EUR110,000
maturing and successfully being repaid, plus withdrawing from an
investment that was seriously affected by the Covid 19 Pandemic.
This latter exit did not incur a loss as the conditions of the
acquisition contract provided the Company with appropriate
protection.
During the year where the COVID-19 pandemic caused uncertainty
and disruption in many businesses, our investment strategy was in
"hold" mode and some of our key investments saw delays in their
development programmes. Nevertheless, the portfolio itself recorded
a positive movement overall of GBP240,000 - approximately 8%.
As reported last year, we had issued bonds quoted on the Vienna
Stock Exchange and as at 31 December 2020, we had bonds in issue to
the value of EUR3.29 million, of which EUR2.29 million were placed
for cash (of which EUR190,000 during the year) and EUR1 million
issued as part consideration for an acquisition. The Bonds are
repayable at the end of July 2022 and carry a 7% annual coupon,
payable in two half-year tranches. Epsion Capital, one of our
strategic investments, were instrumental in finding investors in
our bonds and we expect them to continue to be an important
strategic partner going forward.
Operations
There were no Board changes during the year under review and no
personnel changes. The Company continues to use third party
resources for most of its operations, which has been a particularly
helpful strategy during this period of lockdown during the
pandemic. As a result, our work has not been disrupted.
Investments
Our declared strategy is to invest in Financial Services
including in investing companies, and the technology, media, and
telecoms ("TMT") sectors, with the objective of generating an
attractive rate of return predominantly through capital
appreciation. The portfolio accretion has stayed consistently
within those parameters.
Regarding future direction, we strongly believe in the
opportunity that the digitisation of financial services brings and
in particular the technology that is driving decentralised finance
initiatives.
Our view is that we are about to transition from a centralised
middleman economy to a decentralised service economy through the
implementation of technologies such as blockchain. Financial
services may prove to be the most valuable use case for blockchain
- we are witnessing the birth of a brand new distributed financial
system springing up in parallel and ultimately relacing the
traditional finance system which will find it very difficult to
compete. This will make banking, borrowing, lending and investing
more accessible and cheaper for billions of people.
DeFi or decentralised finance aims to do for finance what the
internet has done for so many other businesses - it removes the
middleman.
With that optic in mind, as recently announced, we are delighted
to welcome David Bull to the Board as a Non-Executive Director.
David is a Chartered Accountant and former Bank of England Chief
Financial Accountant with a financial services digitisation mindset
and who will undoubtedly make a major contribution to the business
as it evolves.
Update on the prior year's investments
Finance Partners Group ("FPG"): Financial Services
September 2018 - Investment of EUR111,100 in 8% corporate bond
matured 2020
The bond was successfully repaid in full and all interest
instalments were made on time.
August 2019 - Investment of EUR1.9 million to acquire a
convertible receivable of EUR2m. During the year the Company
converted the receivable to equity and currently owns 28.7% of
FPG.
The consideration was satisfied by cash of EUR300,000;
short-term convertible loan notes of EUR600,000 and EUR1million of
Bonds. The vendor was IWEP Ltd, a related party controlled by
Dominic White, who converted EUR113,000 of the convertible loan
note to equity in the Company during the year which increased his
shareholding to 29.8%.
The intention is to monetise this investment during 2021. A
positive return is anticipated.
Supply@Me Capital plc ("SYME"): FinTech (formerly ABAL Group
Plc)
October 2018 - Equity investment totalling GBP250,000
(GBP160,000 initial equity + GBP90,000 convertible loan note
("CLN"))
The Company held 22.25 million shares at the year end. Current
investment at cost: GBP244,824. ECP also holds warrants on a
one-for-two basis.
In March 2020, ABAL completed a reverse takeover of Supply@ME
Capital srl (SYME), 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. It
has acquired a significant number of customers seeking to use the
platform, once securitisation agreements with funders have been
finalised, the first of which SYME has announced as being imminent.
Delays in finalising funding arrangements have had a negative
impact on SYME's share price, but it is expected to recover once
the first financing scheme becomes operational.
SYME is listed on the Standard List of the London Stock
Exchange
Evrima plc ("EVA"): Mining and Exploration Investment (formerly
Sports Capital Group "SCG")
December 2018 - Equity investment GBP138,000 + 1,333,333
warrants
Following significant activity by SCG relating to the purchase
and subsequent sale of a football club in Q1 2019 and follow-on
deeper analysis of the sports sector in Q2 2019, SCG's management
decided to work towards a recapitalisation of the business and move
away from the sports sector and return to its previous activity of
investing in mining and exploration projects.
During the year, the company renamed itself Evrima plc and
instigated a 1-for-10 share swap.
ECP is considering an exit of the investment through the sale of
its shares in the public market. The share price is unchanged from
the date of initial investment.
Epsion Capital Ltd ("Epsion"): Financial Services
March & November 2019 - Equity investments total GBP100,000
(March: GBP3,500 / November GBP96,500)
Epsion is a boutique financial advisory and investment firm
based in London. Its strategy is to expand its financial services
activities into Europe, through organic growth or acquisition, and
to continue to increase revenue. Its year one achievement was circa
GBP550,000. The full year two (2020) revenue was more than
GBP1m.
The rationale for the original GBP3,500 investment was to create
synergies with Epsion by allowing them to provide advisory services
to ECP's investee companies as well as third party clients.
It is currently seeking full regulatory status in order to
enable it to extend its activities to continental Europe.
Financial Innovations Team Srl ("FIT"): Financial Services
December 2019 - Equity Investment of EUR1.2 million - Exited: no
profit / no loss.
ECP acquired a 59.9% holding in FIT, which was soon after
seriously impacted by the pandemic. As the acquisition contract
allowed for the unwinding of the investment, the Company decided
that this was the preferential route, as announced to the market on
27 July 2020.
The consideration for this acquisition was satisfied by
EUR350,000 of cash, EUR450,000 of Bonds and a short-term vendor
loan of EUR400,000. The short-term vendor loan was cancelled and
the EUR450,000 of the Company's Bonds were returned.
As collateral for the EUR350,000 cash, an option was granted for
GBP1 to acquire a 60% interest in Innovative Finance srl
("InnFin"), an early stage financial services business under the
same ownership.
As announced to the market on 10 May this year, following a
period of due diligence and an independent valuation, the Board
decided to acquire 100% of InnFin, part of the consideration of
which is represented by a reimbursement of the EUR350,000 owed to
the Company under the unwinding of the FIT deal.
Greencare Capital Plc ("GRE"): Financial Services Investing
December 2019 - Equity investments totalling GBP280,000
Two investments, one prior to and one on IPO have given ECP a
21.2% holding in GRE at an average holding price of GBP0.109 per
share. GRE is quoted on AQSE (formerly NEX).
Greencare is focused on the rapidly positively changing
regulatory environment surrounding legal Medicinal Cannabis as well
as investment opportunities within the Hemp and CBD wellness
sectors. This is a high growth international sector.
Greencare was admitted to trading on AQSE on 30 December 2019,
raising GBP515,000 on admission and aims to identify investment
opportunities in the medicinal cannabis, CBD and hemp sectors
predominantly in Europe. Its team are aware of a number of
attractive investment opportunities that they are seeking to
execute in the short term.
The Board recognises the significant growth potential in the
cannabis sector and has seen extraordinary growth in this area in
other regions of the world. This growth is just arriving in Europe
and Greencare is one of only a small number of quoted investment
companies in Europe ready to take advantage of this
opportunity.
At the time of Greencare's flotation, AQSE was the only UK stock
market prepared to accept companies in the medicinal cannabis
sector. Since then, all other UK stock markets have withdrawn those
restrictions and interest in the sector is moving sharply in the
positive direction. We are therefore expecting a significant push
by Greencare to take advantage of this increased interest. The
share price has increased to 31.5 p from 27.5p over the year.
Post year end Greencare replaced its CEO with a corporate
finance expert that has strong transaction experience in the
cannabis sector. It is expected that he will be able to make a
significant contribution towards the growth of the company.
Results
In the year under review, the operational activity was
relatively muted but the reduction of legal and professional fees
for due diligence was more than compensated by other professional
costs incurred through the FIT exit and the Sport Capital
redirection. What we were able to do, however, was provide
rechargeable services to investees. We were therefore able to
reduce our net operating costs, which when coupled with the profit
in the portfolio, allowed us to record a significantly smaller
operating loss of GBP196,000 compared to the prior year
(GBP329,000). However, after the finance costs of the Bond, the
outcome for the year, a loss of GBP432,000, is the same as 2019
(loss GBP432,000).
The Net Assets at the end of the year stood at GBP0.04 million
(2019: GBP0.3 million), a reflection of the braking effect of
Covid-19 on the progress we expected to see - particularly in SYME
and Greencare's share prices.
Outlook
2020 was definitely a year of holding and we have great
expectations for the next phase of development of the Company as
Europe emerges from lockdown, we monetise our first batch of
investments, move forward with our renewed focus on digitisation of
financial services and fintech opportunities and leverage the many
valuable strategic alliances we have formed and continue to
form.
Dominic Whi te
Executive Chairman
Strategic Report
The Directors present their strategic report for Eight Capital
Partners Plc (the "Company") for the year ended 31 December
2020.
Principal Activity
Eight Capital Partners Plc is an investment company quoted on
the Aquis Stock Exchange Growth Market ("AQSE"). Its shares were
admitted to trading on AQSE on 3 July 2018. In the period prior to
that date, the Company was quoted on AIM as a Rule 15 Cash
Shell.
The Company's principal activity is to invest in quoted entities
in the technology, media, and telecoms ("TMT") and financial
services sectors with the objective of generating an attractive
rate of return for its shareholders, predominantly through capital
appreciation.
The closing price of the Company's shares at 31 December 2020
was 0.025 pence per share (2019: 0.04 pence).
Business Review
The Statement of Comprehensive Income and Statement of Financial
Position for the year are set out below. A review of developments
affecting the Company during the year and of its prospects for the
future appear in the Chairman's Statement above.
Key Performance Indicators
The Key Performance Indicators ("KPIs") for the Company are
listed as follows:
2020 2019 % change
Earnings/(loss) per share (pence) (0.04p) (0.07p) 47%
During the year, as the Company was essentially in "holding"
mode - neither actively acquiring nor disposing of assets, the
Board's prime focus was twofold: first to assist the management
teams of our investments wherever possible to advance their
business plans and secondly to ensure that the unwinding of the FIT
transaction was at worst neutral to the Company's financial
position.
From a KPI perspective, the returns on our two most promising
quoted investments (Supply@ME Capital Plc and Greencare Capital
Plc) have been affected by the pandemic, in that neither reached
critical milestones for accelerated growth during 2020, but the
Board's expectations for these two businesses in the second half of
2021 are positive. Our two principal unquoted investments (Epsion
Capital and FPG) are held at cost and therefore any returns will be
recognised either on a liquidity event or a restructuring.
Future developments
The Chairman's Statement above provides information on the
outlook of the Company.
Principal risks and uncertainty
The Company's strategy is to follow an appropriate risk policy,
which effectively manages exposures related to the achievement of
business objectives. The Board is responsible for approving the
Company's strategy and determining the appropriate level of risk.
The key risks which the Company faces are detailed as follows:
Business and investment performance risk (continued)
Business performance risk is the risk that the Company may not
perform as expected either due to internal factors or due to
competitive pressures in the markets in which they operate. The
Company seeks investments in companies with growth potential. The
Directors identify suitable investment opportunities in accordance
with its investment strategy.
By their nature, smaller businesses, whether quoted or unquoted,
are more volatile than larger, more
established businesses and less robust to withstand economic
pressures.
The risk is that the Company's investments may encounter
circumstances that result in a loss of value which could in turn
damage the Company's share price.
The Board is of the view that obtaining timely information on
the position of its investments is the most effective management
tool and to reduce this risk has put in place monitoring reports on
the performance of, and regular dialogue with the boards of the
Company's investments.
Valuation risk
Valuation risk is the risk that the value of the investment when
made was overstated. The Board seeks to mitigate this risk by
conducting due diligence on the history and prospects of investment
targets and sourcing independent valuations and opinions. The risk
is further mitigated by seeking to invest where there is a high
valuation margin (valuation per share compared to price paid per
share) and the prospect of early returns.
Market conditions
Market conditions, especially in the context of the COVID-19
pandemic, may have a negative impact on the Company's ability to
make investments in suitable entities which generate acceptable
returns, or to disinvest in a timely manner such that acceptable
returns can be realised.
This risk is mitigated by selecting quoted investments listed on
liquid markets and unquoted investments where due diligence has
indicated near-term liquidity events.
Foreign exchange
The Company has issued Euro-denominated bonds and has made
Euro-denominated investments. This may give rise to exposure to
movements in the exchange rate between the Euro and GBP. This risk
is mitigated by virtue of the bond liability and invested assets
providing a natural hedge and management will seek at all times to
mitigate any latent exposure by active currency management. The
Company is monitoring matters and seeking advice from foreign
exchange specialists as to how to mitigate the risks arising if and
when they may occur and would consider using derivates to lock out
exposures.
Political and Country Risk - Departure of the UK from the
European Union
The Company is quoted in the United Kingdom (UK) and has made
investments in entities that operate in the UK and European Union.
The Company's Euro investments may be subject to the impact of the
UK leaving the European Union in terms of their share price and in
turn the value of the Company's investments. As a result, given the
ongoing uncertainty surrounding the situation the Company is
monitoring matters and will be seeking advice as to how to mitigate
the risks arising if and when they may occur.
Promotion of the Company for the benefit of the members as a
whole
The Director's believe they have acted in the way most likely to
promote the success of the Company for the benefit of its members
as a whole, as required by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
-- Consider the likely consequences of any decision in the long term,
-- Act fairly between the members of the Company,
-- Maintain a reputation for high standards of business conduct,
-- Consider the interests of the Company's employees,
-- Foster the Company's relationships with suppliers, customers and others, and
-- Consider the impact of the Company's operations on the community and the environment.
The Company is an early-stage investment company quoted on a
minor exchange and its members will be fully aware, through
detailed announcements, shareholder meetings and financial
communications, of the Board's broad and specific intentions and
the rationale for its decisions. The Company pays its employees and
creditors promptly and keeps its costs to a minimum to protect
shareholders funds. When selecting investments, issues such as the
impact on the community and the environment have actively been
taken into consideration; as is clear from the portfolio set out in
the Chairman's report.
The application of the s172 requirements can be demonstrated in
relation to the unwinding of the FIT acquisition at no loss to the
Company, including the option to acquire a quid pro quo
shareholding in Innovative Finance Srl to compensate for the cash
element of the original FIT acquisition that would otherwise have
been lost. This was considered to be the best route to enhanced
longer term shareholder value for existing members.
This strategic report was approved by the board of directors on
29 June 2021 and signed on its behalf by:
Dominic White
Executive Chairman
Directors' Report
The Directors present their report and the audited financial
statements of the Company for the year ended 31 December 2020.
Directors
The Directors of the Company during the year were:
Dominic White Chairman
Martin Groak Independent Non-Executive Director
The Directors' biographies can be found in the Directors'
Profiles section below.
Dividends
The Directors do not recommend payment of a dividend for the
year ended 31 December 2020 (2019: GBPnil).
Directors' remuneration
The total remuneration of the Directors for the year was as
follows:
Fees/ Paid in Total Total
Basic Salary Ordinary Shares 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Dominic White (note 1) 90 - 90 112
Martin Groak *28 15 *43 *21
John Treacy (Resigned 8 Nov 2019) - - - 23
118 15 133 156
---------------------------------------- ----------------- --------- ---------
note 1 Included within the fees and basic salary for 2019 were
pension costs of GBP7,200. There were no pension entitlements for
2020.
*Included in the above are GBP16,400 in 2020 and GBP11,700 in
2019, relating to fees incurred by Marker Management Services
Limited, a company controlled by Martin Groak.
Pensions
The Company had no pension schemes in place during the period
under review. Dominic White is entitled to a contribution to a
pension scheme of his choice, by the Company of 12% of his annual
salary, subject to certain capital-raising targets having been met.
As at 31 December 2020, no provision was recognised (2019:
GBP10,800), as disclosed in Note 14.
Directors' interests
The following Directors had interests in the shares of the
holding Company at the end of the year:
Total 2020 Total 2019
No. of ordinary shares of 0.01p No. of ordinary shares of 0.01p
----------------------- --------------------------------- ---------------------------------
Martin Groak (note 2) 60,143,000 143,000
Dominic White(note 3) 400,000,000 -
note 2 Held through Marker Management Services Ltd, a company controlled by Martin Groak
note 3 Held through IWEP Ltd, a company controlled by Dominic White
Option scheme
At 31 December 2020, there were 134,000,000 share options issued
to the Directors (2019: none), see Note 17.
Events after balance sheet date
Details of significant events since the balance sheet date are
contained in Note 22 to the financial statements.
Future developments
The Chairman's Statement above provides information on the
outlook of the Company.
Financial instruments
Details of the use of financial instruments by the Company are
contained in Note 19 to the financial statements.
Substantial shareholdings
As far as the Directors are aware, as at 22 June 2021 the
following shareholders are Company Directors or interested in 3% or
more of issued share capital of the Company.
Shareholder Number of Ordinary Shares of 0.25p each % of Issued Share Capital
Dominic White* 467,669,173 29.90%
---------------------------------------- --------------------------
Cosmos SICAV Value Added Fund 184,757,658 11.81%
---------------------------------------- --------------------------
Concreta Srl 155,388,471 9.93%
---------------------------------------- --------------------------
Jim Nominees Limited 86,825,765 5.55%
---------------------------------------- --------------------------
Martin Groak ** 60,143,000 3.84%
---------------------------------------- --------------------------
Rajesh Kandeth 52,000,000 3.32%
---------------------------------------- --------------------------
Fabio Carretta 50,000,000 3.20%
---------------------------------------- --------------------------
* Held through IWEP Ltd, a company controlled by Dominic
White
**Held through Marker Management Services Ltd, a company
controlled by Martin Groak
Going concern
As at 31 December 2020, the Company had cash of GBP203,000 and
investments of GBP3,179,000. As an investment business, the Company
has limited operating cash flow and is dependent on the performance
of its investments and a bond facility of up to circa GBP4,200,000
(of which GBP3,000,000 has been utilised to date) for its working
capital requirements. Annualised normal running costs of the
Company are circa GBP610,000 including debt service, reduced by
rebilling of shared services of approximately GBP170,000. As at the
date of this report, the Company had approximately GBP240,000 cash
at bank and anticipated and near-term divesting revenues of up to
GBP1,720,000, with a further GBP850,000 earmarked for disinvestment
in the first half of 2022.
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.
The Company's employees can carry out their duties remotely, via
the network infrastructure in place. As a result, there was no
disruption to the operational activities of the Company during the
COVID-19 social distancing and working from home restrictions. All
key business functions continue to operate at normal capacity.
Within the Company's portfolio are investments that have
experienced a slowdown within their own operations during the
COVID-19 crisis, however the operating performance of those
investments is not expected to have any material impact on the
Company's cash flows.
Statement of directors' responsibilities
The Directors are responsible for preparing the Strategic
Report, the Directors' Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law).
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit and
loss for that period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable United Kingdom Accounting Standards,
have been followed subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. The
Directors are also responsible for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Statement of disclosure of information to auditors
Each Director in office at the date of approval of this
Directors' report confirms that:
-- So far as the Director is aware, there is no relevant audit
information of which the Company's auditor is unaware; and
-- The Director has taken all the steps that he ought to have
taken as a director in order to make themselves aware of any
relevant audit information and to establish that the Company's
auditor is aware of that information.
Independent auditor
PKF Littlejohn LLP have expressed their willingness to continue
in office as auditor and will be proposed for reappointment at the
next Annual General Meeting.
This report was approved by the Board of Directors on 29 June
2021 and signed on behalf of the board by:
Dominic White
Executive Chairman
Directors' Profiles
Board of Directors
As at the date of this report, the Board of Directors consisted
of:
Dominic White
Chairman
-- Member of the Institute of Financial Analysts.
-- 24 years' experience in the investment sector.
-- Held Board level investment positions at international
institutions including Security Capital European Realty, Henderson
Global Investors and Cordea Savills Invest Management.
Martin Groak
Independent Non-Executive Director
-- Over 35 years of international business experience.
-- Retired Chartered Accountant (ICAEW: 1978-2012).
-- Multi-lingual, with a strong background in finance and financial control.
-- Broad sectoral experience: oil exploration, energy, mining, logistics and physical trading.
-- Formerly a director of five UK publicly listed companies.
Currently Non-Executive Director of Tanfield Group plc, an AIM
quoted investment company focused on the engineering sector.
-- Various Interim CFO positions, including managing the
finances of the UK's second-generation nuclear power station
fleet.
Independent auditor's report to the members of Eight Capital
Partners plc
Opinion
We have audited the financial statements of Eight Capital
Partners plc (the 'company') for the year ended 31 December 2020
which comprise the Statement of Other Comprehensive Income, the
Statement of Financial Position, the Statement of Changes in
Equity, the Statement of Cash Flows and notes to the financial
statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their
preparation is applicable law and United Kingdom Accounting
Standards, including FRS102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland (United Kingdom
Generally Accepted Accounting Practice).
In our opinion, the financial statements:
-- give a true and fair view of the state of the company's
affairs as at 31 December 2020 and of its loss for the year then
ended;
-- have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the company
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
director's use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the directors assessment of the company's ability to
continue to adopt the going concern basis of accounting included
obtaining management's assessment of going concern and associated
cash flow forecasts for 12 months from the date of approval of the
financial statements. We reviewed the inputs to the cash flow
forecast for reasonableness, compared to historic financial
information, and stress-tested where appropriate.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
company's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit and evaluating the effect of misstatements. At
the planning stage, materiality is used to determine the financial
statements areas that are included within the scope of our audit
and the extent of sample sizes during the audit. This is updated
accordingly during the fieldwork and completion depending on the
adjustments made during the audit.
Company materiality for the period ending 31 December 2020 Basis for materiality
GBP70,000 (31 December 2019: GBP19,780) 2% Gross Assets (31 December 2019: 3% of Expenses)
---------------------------------------------------
In the prior year, our calculation of materiality was calculated
using the loss before tax, which was considered to be the most
appropriate benchmark for the company's financial position and
performance used by shareholders. In the current period, we believe
the most appropriate metric for measuring materiality to be Gross
Assets. Eight Capital's business model is to hold investments for a
gain. Therefore, the most meaningful balance in the financial
statements is deemed to be the Investment balance, which makes up
the majority of gross assets in the current year.
The company was audited with a performance materiality of
GBP49,000 (31 December 2019: GBP14,000). The threshold of items
considered to be trivial was GBP3,500 (31 December 2019:
GBP1,000).
Our approach to the audit
In designing our audit, we determined materiality, and assessed
the risk of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective
judgements, for example in respect of significant accounting
estimates such as the share-based payment, intangible asset and
inventory valuations.
We also addressed the risk of management override of internal
controls, including evaluating whether there was evidence of bias
by the directors that represented a risk of material misstatement
due to fraud.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter How the scope of our audit responded
to the key audit matter
Valuation of investments
As at 31 December 2020, the
company holds equity investments * Listed investments - We ascertained the share price
of GBP3,179kk (2019: GBP3,790k. from the relevant stock exchange each listed
As reported in note 9, these investment is held on and recalculated the value of
equity investments comprise: the investment.
* GBP1,175k of listed investments measured at fair
value through profit or loss (FVTPL). These
investments are listed on AIM and the AQSE Growth * Unlisted investments - We obtained support from
Market; and management as to how the value carrying value of the
investment was deemed to be above its value in use.
* GBP2,004k of unlisted investments which are measured
at cost less impairment. * We reviewed the disclosures made within the financial
statement to ensure compliance with FRS 102.
There is the risk that investments Our findings showed that the
have not been considered appropriately Listed investments were valued
for impairment in accordance correctly in line with the live
with FRS 102. share prices and that the unlisted
investments were held at a carrying
amount that was below the recoverable
amount and no impairments were
required.
==================================================================
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information contained within these reports. Our opinion on
the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the
directors' report for the financial period for which the financial
statements are prepared is consistent with the financial
statements; and
-- the strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or
the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
-- We obtained an understanding of the company and the sector in
which it operates to identify laws and regulations that could
reasonably be expected to have a direct effect on the financial
statements. We obtained our understanding in this regard through
detailed discussions with management about and potential instances
of non-compliance with laws and regulations. We also selected a
specific audit team based on experience with auditing AQSE Growth
Market ("AQUIS") listed entities within this industry, of a similar
size.
-- We determined the principal laws and regulations relevant to
the company in this regard to be those arising from:
-- AQUIS Listing rules
-- Companies Act 2006 requirements
-- UK GAAP requirements
-- We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by
the company with those laws and regulations. These procedures
included, but were not limited to:
-- Making enquiries of management
-- Review of Board minutes
-- Review of accounting ledgers
-- Review of RNS announcements
-- We also identified the risks of material misstatement of the
financial statements due to fraud. Aside from the non-rebuttable
presumption of a risk of fraud arising from management override of
controls, we did not identify any significant fraud risks.
As in all of our audits, we addressed the risk of fraud arising
from management override of controls by performing audit procedures
which included, but were not limited to: testing over all journals
on a risk based approach to identify any unusual transactions that
could be indicative of fraud; reviewing accounting estimates for
evidence of bias; evaluating the business rationale of any
significant transactions that are unusual or outside the normal
course of business; and reviewing transactions through the bank
statements to identify potentially large or unusual transactions
that do not appear to be in line with our understanding of business
operations
Because of the inherent limitations of an audit, there is a risk
that we will not detect all irregularities, including those leading
to a material misstatement in the financial statements or
non-compliance with regulation. This risk increases the more that
compliance with a law or regulation is removed from the events and
transactions reflected in the financial statements, as we will be
less likely to become aware of instances of non-compliance. The
risk is also greater regarding irregularities occurring due to
fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities .
This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's 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 and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Zahir Khaki (Senior Statutory Auditor)
15 Westferry Circus
For and on behalf of PKF Littlejohn LLP
Canary Wharf
Statutory Auditor
London E14 4HD
29 June 2021
Statement of Comprehensive Income
2020 2019
Note GBP'000 GBP'000
Administrative expenses (717) (543)
Net change in unrealised/realised gains and losses on investments at fair value through
profit
and loss 9 240 164
Other income 281 50
Operating loss 4 (196) (329)
--------- ---------
Interest income 6 22 7
Finance expense 6 (258) (110)
Loss before tax (432) (432)
Taxation 7 - -
Loss for the financial year (432) (432)
Other comprehensive income for the year - -
Total comprehensive loss (432) (432)
Earnings per share (pence) from continuing operations attributable to owners of the
Company - Basic & Diluted 8 (0.04) (0.07)
The notes below form part of these financial statements.
Statement of Financial Position
2020 2019
Note GBP'000 GBP'000
Current assets
Investments 9 3,179 3,790
Trade and other receivables 10 153 73
Cash and cash equivalents 203 420
Total current assets 3,535 4,283
--------- ------------
Total assets 3,535 4,283
--------- ------------
Current liabilities
Trade and other payables 13 120 135
Borrowings 12 436 338
Provisions 14 - 11
Total current liabilities 556 484
--------- ------------
Non-current liabilities
Long term bond 11 2,945 3,005
Borrowings 12 - 508
--------- ------------
Total non-current liabilities 2,945 3,513
--------- ------------
Total liabilities 3,501 3,997
--------- ------------
Net assets 34 286
--------- ------------
Capital and reserves
Share capital 15 1,431 1,360
Share premium 2,001 1,895
Share option and warrant reserve 17 11 8
Convertible loan note 18 84 84
Retained earnings (3,493) (3,061)
Total equity 34 286
--------- ------------
Statement of Changes in Equity
Share Share Share Convertible Retained Total
capital premium option loan note earnings
& warrant reserve
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ----------- ------------ ---------- --------
As at 1 January
2019 1,350 1,891 8 48 (2,629) 668
---------------------- --------- --------- ----------- ------------ ---------- --------
Loss for the year - - - - (432) (432)
Other comprehensive - - - - - -
income for the
year
---------------------- --------- --------- ----------- ------------ ---------- --------
Total Comprehensive
Income - - - - (432) (432)
---------------------- --------- --------- ----------- ------------ ---------- --------
Issue of shares 10 4 - (14) - -
Issue of convertible
loan notes - - - 50 - 50
---------------------- --------- --------- ----------- ------------ ---------- --------
Total Transactions
with Owners 10 4 - 36 - 50
---------------------- --------- --------- ----------- ------------ ---------- --------
As at 31 December
2019 1,360 1,895 8 84 (3,061) 286
---------------------- --------- --------- ----------- ------------ ---------- --------
Loss for the year - - - - (432) (432)
Other comprehensive - - - - - -
income for the
year
---------------------- --------- --------- ----------- ------------ ---------- --------
Total Comprehensive
Income - - - - (432) (432)
---------------------- --------- --------- ----------- ------------ ---------- --------
Share based payment - - 3 - - 3
Issue of shares 71 106 - - - 177
---------------------- --------- --------- ----------- ------------ ---------- --------
Total Transactions
with Owners 71 106 3 - - 180
---------------------- --------- --------- ----------- ------------ ---------- --------
As at 31 December
2020 1,431 2,001 11 84 (3,493) 34
---------------------- --------- --------- ----------- ------------ ---------- --------
Statement of Cash Flows
2020 2019
GBP'000 GBP'000
-------- --------
Cash from operating activities
Loss before tax (432) (432)
Adjustments for:
Net interest expense /(income) 236 103
Net change in unrealised gains on investments
at fair value through profit and loss (240) (162)
Share based payment expense 3 -
Provisions (11)
Foreign exchange 165 (31)
(Increase)/decrease in trade and other
receivables (81) (57)
(Decrease)/ increase in trade and other
payables (15) 125
Net cash used in operating activities (375) (454)
Cash flow from investing activities
Purchase of investments - (1,862)
Proceeds on disposal of investments 854 11
Interest income 22 7
Net cash used in investing activities 876 (1,844)
Cash flows from financing activities
Proceeds from issue of convertible
bond - 50
Proceeds from issue of shares (net 177 -
of issue costs)
Loans received/(cancelled) (410) 846
(Repayment)/Proceeds from bond issue (227) 1,841
Finance charges (258) (110)
Net cash from financing activities (718) 2,627
-------- --------
Net cash flow for the year (217) 329
-------- --------
Cash and cash equivalents at beginning
of year 420 91
------------------------------------------------ -------- --------
Cash and cash equivalents at end of
year 203 420
------------------------------------------------ -------- --------
Net change in cash and cash equivalents (217) 329
------------------------------------------------ -------- --------
Notes to the financial statements
1. General information
Eight Capital Partners Plc 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 Company'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.
2. Accounting policies
Basis of preparation
The financial statements of Eight Capital Partners plc have been
prepared in compliance 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") and the Companies Act 2006.
These 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.
The financial statements are presented in Pounds Sterling, which
is the Company's presentation and functional currency.
The preparation of the financial statements requires the use of
certain critical accounting estimates. It also requires management
to exercise its judgment in the process of applying the Company's
accounting policies. The areas involving a higher degree of
judgment and complexity, or areas where assumptions and estimates
are significant to the financial statements are disclosed in Note 3
to the financial statements.
Going concern
As at 31 December 2020, the Company had cash of GBP203,000 and
investments of GBP3,179,000. As an investment business, the Company
has limited operating cash flow and is dependent on the performance
of its investments and a bond facility of up to circa GBP4,200,000
(of which GBP3,000,000 has been utilised to date) for its working
capital requirements. Annualised normal running costs of the
Company are circa GBP610,000, including debt service, reduced by
rebilling of shared services of approximately GBP170,000. As at the
date of this report, the Company had approximately GBP240,000 cash
at bank and anticipated ad hoc cost recovery and near-term
divesting revenues of up to GBP1,720,000, with a further GBP850,000
earmarked for disinvestment in the first half of 2022.
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.
The Company's employees can carry out their duties remotely, via
the network infrastructure in place. As a result, there was no
disruption to the operational activities of the Company during the
COVID-19 social distancing and working from home restrictions. All
key business functions continue to operate at normal capacity.
Within the Company's portfolio are investments that have
experienced a slowdown within their own operations during the
COVID-19 crisis, however the operating performance of those
investments is not expected to have any material impact on the
Company's cash flows.
Other income
Other income is derived from recharging to investee companies'
certain costs associated with the investment process or recharging
for the use of the Company's own resources. It is classified as
other income on the face of the income statement and is recognised
when the Company's right to receive payment is established.
Interest income
Interest on debt securities held at fair value through profit
and loss is accrued on a time-proportionate basis, by reference to
the principal outstanding and the effective interest rate
applicable, which is the rate that discounts estimated future cash
receipts over the expected life of the debt security to its net
carrying amount on initial recognition. Interest income is
recognised gross of withholding tax, if any.
Interest income on unquoted debt securities is recognised as a
separate line item in the statement of comprehensive income and
classified within investing activities in the cash flows
statement.
Interest payable
Interest payable on both quoted and unquoted debt instruments
held at fair value through profit and loss is accrued on a
time-proportionate basis, by reference to the principal outstanding
and the effective interest rate applicable.
In the case of interest payable on long-term bonds, where a
proportion of those bonds is issued to third parties and the
balance issued to the Company, interest on the total number of
bonds issued must be paid in the first instance to the Paying Agent
prior to the due date. The amount of interest relating to the bonds
issued to the Company is then remitted back to the Company on the
due date. Only the net interest burden (the total interest less the
amount remitted back to the Company) is recognised in the income
statement.
Taxation
Taxation expense for the period comprises current and deferred
tax recognised in the reporting period.
The Company's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the end of
the reporting period and is the amount of income tax payable in
respect of the taxable profit for the year or prior year.
Deferred tax is recognised on all timing difference between the
carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation
of taxable profit. The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be
recovered.
Deferred tax assets and labilities are measured at the tax rates
that are expected to apply in the period in which the liability is
settled or the asset realised, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the end of the
reporting period.
Provisions
Where a measurable obligation exists at the accounting date, but
which is dependent upon a set of conditions realistically being
able to be satisfied, a provision to accommodate that obligation is
charged
to the income statement and maintained in the balance sheet
until such time as the obligation is either crystallised or
reversed.
Financial instruments
The Company has elected to apply the provisions of Section 11
'Basic Financial Instruments' and Section 12 'Other Financial
Instruments Issues' of FRS 102 to all of its financial
instrument.
Financial assets
Basic nancial assets, including trade and other receivables and
Cash and cash equivalents balances, are initially recognised at
transaction price, unless the arrangement constitutes a nancing
transaction, where the transaction is measured at the present value
of the future receipts discounted at a market rate of interest.
Such assets are subsequently carried at amortised cost using the
effective interest method.
At the end of each reporting period nancial assets measured at
amortised cost are assessed for objective evidence of impairment.
If an asset is impaired the impairment loss is the difference
between the carrying amount and the present value of the estimated
cash ows discounted at the asset's original effective interest
rate. The impairment loss is recognised in pro t or loss.
If there is decrease in the impairment loss arising from an
event occurring after the impairment was recognised the impairment
is reversed. The reversal is such that the current carrying amount
does not exceed what the carrying amount would have been had the
impairment not previously been recognised.
The impairment reversal is recognised in pro t or loss.
Financial assets for which a fair value can be measured reliably
(whether this is an active or non-active market) are measured at
fair value with changes in fair value recognised in profit or
loss.
Listed investments
The fair value of financial instruments traded in active markets
is based on quoted market prices at the reporting date. A market is
regarded as active if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing
service, or regulatory agency, and those prices represent actual
and regularly occurring market transactions on an arm's length
basis. The quoted market price used for financial assets held by
the Company is the current bid price. These instruments are
included as listed investments. Instruments included in quoted
investments, which for the Company comprise AIM and AQSE
investments. Changes in fair value are recognised in pro t or
loss.
Unlisted investments
Unlisted investments that are not publicly traded and whose fair
value cannot be measured reliably, are measured at cost less
impairment.
Financial assets are derecognised when (a) the contractual
rights to the cash ows from the asset expire or are settled, or (b)
substantially all the risks and rewards of the ownership of the
asset are transferred to another party or (c) control of the asset
has been transferred to another party who has the practical ability
to unilaterally sell the asset to an unrelated third party without
imposing additional restrictions.
Financial liabilities
Basic nancial liabilities include trade and other payables.
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary
course of business from suppliers. Payables are classi ed as
current liabilities if payment is due within
one year. If not, they are presented as non-current liabilities.
Trade payables are recognised initially at transaction price and
subsequently measured at amortised cost using the effective
interest method.
Long-term bonds
Bonds are a form of fixed interest borrowing over a
pre-determined period. The Company makes use of tradeable bonds to
fund investments in unlisted entities and for general
overheads.
The Company issued 5,000 bonds of EUR1,000 each (the "Bonds") to
raise up to EUR5 million on the Vienna Stock Exchange's
multilateral trading facility ("MTF") on 26 July 2019. The
principal terms of the Bonds are as follows: - Issue price and
redemption at par; - Interest of 7% per annum paid semi-annually in
arrears; - Issue date of 26 July 2019 with a redemption date of 26
July 2022.
Bonds that are not issued to third parties remain as issued to
the Company for future trading and only those that are issued to
third parties are recognised as liabilities.
Financial liabilities are derecognised when the liability is
extinguished, that is when the contractual obligation is
discharged, cancelled or expires.
Share Capital
Share Capital consists of two classes of share: ordinary shares
and deferred shares.
Both classes of share are classi ed as equity. Incremental costs
directly attributable to the issue of new ordinary shares or
options are shown in equity as a deduction, net of tax, from the
proceeds.
Ordinary shares bestow full rights on shareholders.
On 23 July 2018, each of the existing ordinary shares of 0.25
pence were sub-divided into one new ordinary share of 0.01 pence
and one deferred share of 0.24 pence.
The deferred shares do not entitle their holders to receive
notice of or to attend or vote at any general meeting of the
Company, or to receive any dividend or other distribution. On a
return of capital on a winding up or dissolution of the Company,
the holders of the deferred shares shall be entitled to receive an
amount equal to the nominal amount paid up thereon, but only after
the holders of new ordinary shares have received GBP100,000 per new
ordinary share.
The holders of deferred shares are not entitled to any further
right of participation in the assets of the Company. The Company
shall have the right to purchase the deferred shares in issue at
any time for no consideration. As such, the deferred shares
effectively have no value. Share certificates were not issued in
respect of the deferred shares, and they have not been admitted to
trading on the Aquis Stock Exchange Growth Market.
Warrants
Warrants are an option to acquire shares between two future
dates at a fixed price. They are occasionally issued to third
parties that invest in the Company's equity and are granted at the
time of that equity investment.
There is a notional cost of the warrants expensed through the
income statement in the period in which the warrants are granted,
based on the fair value of the option and recalculated for each
subsequent accounting period. The fair value itself is determined
using the Black-Scholes model.
If the warrant options are exercised, the Company issues new
shares. The proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value) and
share premium.
Exceptional Items
The Company classifies certain one-off charges or credits that
have a material impact on the Company's financial results as
'exceptional items'. These are disclosed separately to provide
further understanding of the financial performance of the
Company.
Convertible Loan Notes
The convertible loan note ("CLN") is a financial instrument that
can be converted to share capital at the option of the holder. As,
the facility can only be converted to equity at the end of the term
or earlier, it has been recognised in equity only, with no
liability component.
Cash and cash equivalents
Cash and cash equivalents comprise cash at hand and current
balances at banks.
Foreign currencies
Functional and presentation currency
The financial statements are presented in Pounds Sterling, which
is the Company's presentation and functional currency.
Transactions and balances
Transactions in foreign currencies are converted into the
functional currency on initial recognition, using the exchange
rates approximating to those ruling at the transaction dates. At
each period end foreign currency monetary items are translated
using the rates ruling as of that date. Non-monetary assets and
liabilities are not retranslated. All exchange differences are
recognised in profit or loss.
3. Critical accounting estimates and judgements
Management makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including the expectations
of future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
Critical judgements in applying the entity's accounting
policies
(a) Carrying value of investments
The Company is required to make judgments over the carrying
value of investments in unquoted companies where fair values cannot
be readily established and evaluate the size of any impairment
required.
It is important to recognise that the carrying value of such
investments cannot always be substantiated by comparison with
independent markets and, in many cases, may not be capable of being
realised immediately. Management's significant judgement in this
regard is that the value of their investment
represents their cost less previous impairment.
Further details relating to management's assessment of the
carrying value of unlisted investments can be found in the
Strategic Report. Management have concluded that there are no
indications of impairment to the value to the unlisted investments
following this assessment.
4. Operating loss
The operating loss is stated after charging/(crediting):
2020 2019
GBP'000 GBP'000
--------- ---------
Net change in unrealised gains on investments
at fair value through profit and loss (202) (162)
Commission on placing of bonds - 117
Corporate finance advice 144 116
Share based payment expense 3 -
Staff costs 129 158
Auditors' remuneration:
* Audit fees 15 15
* Other taxation services 2 2
--------- ---------
The auditor of the Company is PKF Littlejohn LLP, who also
provided tax return filing services to the Company in earlier years
that were settled in 2019 and 2020.
5. Staff costs
2020 2019
--------- ---------
The average number of persons (including
executive directors) employed by the
Company during the year: 2 3
2020 2019
GBP'000 GBP'000
Wages and salaries (including directors) 102 137
Directors' fees 16 19
Social security costs 11 2
129 158
--------- ---------
Director's remuneration
2020 2019
GBP'000 GBP'000
--------- ---------
Salaries and fees 118 156
Other employment costs 11 2
--------- ---------
129 158
--------- ---------
6. Interest income and expense
2020 2019
GBP'000 GBP'000
--------- ---------
Interest income
Interest income 22 7
22 7
--------- ---------
Finance costs
Other finance expenses (258) (110)
--------- ---------
(258) (110)
--------- ---------
Other finance expenses relate to the net interest burden to the
Company of the 7% bonds issued by the Company on the Vienna Stock
exchange during 2019 and described more fully in Note 11 below.
7. Taxation
2020 2019
GBP'000 GBP'000
---------- ----------
Analysis of tax charge/(credit) for
the period
Current tax
UK corporation tax at 19.00% - -
---------- ----------
Deferred tax
Origination and reversal of timing - -
differences
---------- ----------
Tax on profit on ordinary activities - -
========== ==========
Deferred tax asset not recognised (237,927) (227,144)
---------- ----------
Reconciliation of tax charge
Loss on ordinary activities before
taxation (432) (432)
========== ==========
Current tax on loss of the year at
standard rate of UK corporation tax
of 19% (2019 - 19%) (82) (82)
Expenses not deductible for tax purposes 3 7
Income not taxable for tax purposes (38) (38)
Losses carried forward 117 113
---------- ----------
Tax in the income statement - -
========== ==========
The Company has tax losses of approximately GBP165,287 (2019:
GBP83,204) to carry forward against future profits. The Directors
have not recognised a deferred tax asset on the losses to date due
to the uncertainty of recovery.
8. Earnings per share
2020 2019
-------------- -------------
Earnings (GBP'000)
Loss used in calculating basic and
diluted earnings:
Loss for the year (432,000) (GBP432,000)
-------------
Number of shares
Weighted average number of shares for
the purposes of basic and diluted earnings
per share 1,069,696,174 618,720,310
Loss per share (pence) (0.04) (0.07)
The calculation of basic earnings per share of (0.04) pence is
based on the loss attributable to equity owners of the Company of
GBP432,000 and on the weighted average number of ordinary shares of
1,069,696,174 in issue during the period. Dilutive instruments are
ignored when the overall result is a loss.
9. Investments
The table below sets out the fair value measurements.
Categorisation has been determined on the basis of listed or
unlisted investments as follows:
Unlisted Listed Total
Investments Investments
GBP'000 GBP'000 GBP'000
------------- ------------- ---------
Fair value at 1 January 2019 102 480 582
------------- ------------- ---------
Purchase of investments 2,920 342 3,262
Investment disposals - (11) (11)
Fair value gain on investments - 162 162
Effects of foreign exchange (205) - (205)
------------- ------------- ---------
Fair value at 31 December 2019 2,817 973 3,790
------------- ------------- ---------
Investment disposals (854) - (854)
Fair value gain on investments - 202 202
Effects of foreign exchange 41 - 41
Fair value at 31 December 2020 2,004 1,175 3,179
------------- ------------- ---------
Gains on investments held at fair value through
profit or loss
Fair value gain on investments 202 202
Realised gain on disposal of investments 6 32 38
--- ---
Net gain on investments held at fair value
through profit or loss 6234 240
=== ===
Further Information on each investment can be found in the
Chairman's Statement above.
10. Trade and other receivables
2020 2019
GBP'000 GBP'000
Trade receivables 142 59
Other receivables 3 7
Prepayments 8 7
153 73
--------- ---------
The directors consider that the carrying amount of receivables
is not materially different to their fair value.
11. Long-term bonds
2020 2019
GBP'000 GBP'000
Opening balance at 1 January 3,005 -
Bonds issued 176 3,241
Bonds returned (403) -
Foreign exchange adjustment 167 (236)
---------
Closing balance at 31 December 2,945 3,005
--------- ---------
The Company launched 5,000 bonds of EUR1,000 each (the "Bonds")
to raise up to EUR5 million on the Vienna Stock Exchange's
multilateral trading facility ("MTF") on 26 July 2019. The
principal terms of the Bonds are as follows: - Issue price and
redemption at par; - Interest of 7% per annum paid semi-annually in
arrears; - Issue date of 26 July 2019 with a redemption date of 26
July 2022.
Bonds that are not issued to third parties remain as issued to
the Company for future trading and only those that are issued to
third parties are recognised as liabilities. At 31 December 2020 a
total of 3,290 (2019: 3,550) Bonds representing a liability of
EUR3,290,000 (2019: EUR3,550,000) had been issued to third parties
and 1,710 (2019: 1,450) Bonds with a par value of EUR1,710,000
(2019: EUR1,450,000) were issued to the Company and available to be
traded.
Subsequent to year end, a further EUR700,000 of Bonds have been
issued as part of the investment in Innovative Finance Srl
discussed further in Note 22.
12. Borrowings
2020 2019
GBP'000 GBP'000
Non-current
Long-term loans - 508
========= =========
Current
Short-term loans 436 338
========= =========
At 31 December 2019, borrowings comprised of loans received from
IWEP Ltd for EUR600,000 and from DMF RE for EUR400,000. Both loans
accrue interest at a rate of 5% per annum. The repayment dates are
June 2021 and November 2020 respectively. As part of the
compensation received from the investment in FIT, the EUR400,000
loan, along with all accrued interest, was waived in the current
year.
On 21 May 2020, the Company converted GBP100,000 of the loan
with IWEP Ltd into 400,000,000 new ordinary shares at a price of
GBP0.00025 per share, and on 22 June 2020 the repayment term was
extended to at least 6 August 2022. IWEP Ltd is classified as a
related party due to sharing a common director, Dominic White.
13. Trade and other payables
2020 2019
GBP'000 GBP'000
Trade payables 7 75
Taxation and social security 16 -
Accruals and other payables 97 60
120 135
--------- ---------
14. Provisions
2020 2019
GBP'000 GBP'000
At 1 January 11 3
(Credited)/Charged to profit and loss (11) 8
At 31 December - 11
--------- ---------
The provision was created in 2019 for the potential contribution
entitlement due to a Director, that may be payable, to a pension
scheme of his choice, subject to the relevant conditions being met.
The performance conditions were not met for the year ended 31
December 2020 and the provision was subsequently released.
15. Share capital
Movements in ordinary share capital are summarised below:
Number of Number of Nominal value
Ordinary New Ordinary GBP'000
Shares of Shares of
0.25p 0.01p
--------------
As at 1 January 2019 - 540,166,760 54
------------ -------------- --------------
Issue of equity upon conversion
of loan note 93,091,058 9
-------------- --------------
As at 31 December 2019 - 633,257,818 63
------------ -------------- --------------
Issue of equity 708,000,000 71
-------------- --------------
As at 31 December 2020 - 1,341,257,818 134
------------ -------------- --------------
On 21 May 2020, the Company issued new ordinary shares as
follows:
-- 400,000,000 new ordinary shares were issued to IWEP to convert GBP100,000 of the vendor loan;
-- 242,000,000 new ordinary shares in respect of creditor conversions; and
-- 66,000,000 new ordinary shares in respect of subscriptions.
Movements in Deferred share capital are summarised below:
Number of Deferred Shares of 0.24p Nominal value
GBP'000
---------------
As at 1 January 2019 540,166,760 1,296
----------------------------------- ---------------
Issue of equity upon conversion of loan note - -
----------------------------------- ---------------
As at 31 December 2019 540,166,760 1,296
----------------------------------- ---------------
Issue of equity upon conversion of loan note - -
----------------------------------- ---------------
As at 31 December 2020 540,166,760 1,296
----------------------------------- ---------------
The deferred shares do not entitle their holders to receive
notice of or to attend or vote at any general meeting of the
Company, or to receive any dividend or other distribution. On a
return of capital on a winding up or dissolution of the Company,
the holders of the deferred shares shall be entitled to receive an
amount equal to the nominal amount paid up thereon, but only after
the holders of new ordinary shares have received GBP100,000 per new
ordinary share.
The holders of deferred shares are not entitled to any further
right of participation in the assets of the Company. The Company
shall have the right to purchase the deferred shares in issue at
any time for no consideration. As such, the deferred shares
effectively have no value. Share certificates were not issued in
respect of the deferred shares, and they have not been admitted to
trading on the Aquis Stock Exchange Growth Market.
16. Reserves
The Company's reserves are as follows:
- The share premium represents premiums received on the initial
issuing of the share capital. Any transaction costs associated with
the issuing of shares are deducted from share premium, net of any
related income tax benefits.
- The share option and warrant reserve arise from the
requirement to value share options and warrants in existence at the
grant date (see Note 17).
- Convertible loan note reserve represents the equity component
of convertible bonds issued by the Company.
- Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income.
17. Share option and warrant reserve
The share option and warrant reserve are made up as follows:
Warrants
On 26 October 2018 warrants for 52,627,560 shares were issued,
which expire on 26 October 2021.
The total expense for the year in respect of the warrants issued
was GBPnil (2019: GBPnil).
Warrants outstanding and their weighted average exercise price
are as follows:
Number Weighted average exercise price (pence)
----------- ----------------------------------------
Outstanding at 1 January 2019 52,627,760 0.03p
----------- ----------------------------------------
Issued - 0.03p
----------- ----------------------------------------
Outstanding at 31 December 2019 52,627,760 0.03p
----------- ----------------------------------------
Issued - 0.03p
----------- ----------------------------------------
Outstanding at 31 December 2020 52,627,760 0.03p
----------- ----------------------------------------
The fair value is estimated as at the issue date using a
Black-Scholes model, considering the terms and conditions upon
which the warrants were granted. The following table lists the
inputs to the model.
2018
Exercise price (pence) 0.03p
Number of warrants 52,627,760
Risk free interest (%) 1.5%
Dividend yield 0.0%
Time to expiration at date of grant (i.e. life
of warrants) in years 3
Share options
On 21 May 2020 the Company granted 134,000,000 share options to
the Company's Directors; 80,000,000 share options were issued to
Dominic White and 54,000,000 share options to Martin Groak.
The total expense for the year in respect of the share options
issued was GBP3,000.
Share options outstanding and their weighted average exercise
price are as follows:
Number Weighted average exercise price (pence)
------------ ----------------------------------------
Outstanding at 1 January 2020 - -
------------ ----------------------------------------
Issued 134,000,000 0.025p
------------ ----------------------------------------
Outstanding at 31 December 2020 134,000,000 0.025p
------------ ----------------------------------------
The fair value is estimated as at the issue date using a
Black-Scholes model, considering the terms and conditions upon
which the warrants were granted. The following table lists the
inputs to the model.
2020
Exercise price (pence) 0.025p
Number of options 134,000,000
Volatility 50%
Risk free interest (%) 0.5%
Dividend yield 0.0%
Time to expiration at date of grant (i.e. life
of warrants) in years 2
18. Convertible Loan Notes
The Company has entered into an agreement which provides a
facility for the Company to issue up to GBP2.5m of Convertible
Bonds (the "Bonds") to Cosmos SICAV plc Value Added Fund (the
"Investor").
The Bonds will each be valid for twenty-four (24) months (the
"Maturity Date") from the date of their issue and will be freely
transferrable. The key terms of the Bonds are:
- they will be issued at 95% of their nominal value;
- they can be issued at the Company's election in 50 tranches of
GBP50,000 up to a maximum commitment of GBP2.5million;
- to the extent issued, each Bond shall carry a coupon of 5%;
- interest is payable at six-monthly intervals, but the Company
may, subject to certain conditions, elect to convert any interest
due to the Investor into ordinary shares of 0.01 pence each in the
Company ("Ordinary Shares") at an issue price of 10 per cent. below
the 20 Trading Day average mid-price of the Ordinary Shares (the
"Conversion Price")
On the Maturity Date, any Loan Notes issued but not converted,
together with any accrued interest, will be mandatorily converted
into Ordinary Shares at the Conversion Price. It is a condition of
the Bonds that such a conversion will only be valid if it will not
result in a Bondholder, or any person acting in concert with such
Bondholder holding Ordinary Shares representing voting rights in
excess of 29.9 per cent of the Company's entire issued share
capital or which would otherwise give rise to the Bondholder being
required to make a mandatory offer for the remaining ordinary share
capital of the Company pursuant to Rule 9 of the Takeover Code.
On 6 June 2019, the Company converted GBP13,155.83 of the drawn
down convertible bond facility into 93,091,058 ordinary shares.
The facility can only be converted to equity at the end of the
term or earlier. More specifically, there is no contractual
obligation to pay cash, no obligation to issue a variable number of
shares, or a fixed number of shares to settle an instrument whose
book value is variable. It has therefore been recognised in equity
only, with no liability component.
19. Financial instruments
The Board of Directors attribute great importance to
professional risk management, proper understanding and negotiation
of appropriate terms and conditions and active monitoring,
including a thorough analysis of reports and financial statements
and ongoing review of investments made.
The Company has investment guidelines that set out its overall
business strategies, its tolerance for risk and its general risk
management philosophy and has established processes to monitor and
control the economic impact of these risks. The Board of Directors
review and agrees policies for managing the risks as summarised
below.
The Company has exposures to the following risks from financial
instruments:
-- Credit risk
-- Liquidity risk
-- Market risk
- Interest rate risk
- Currency risk
- Price risk
The Company's overall risk management process focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Company's financial
performance.
The Company has no interest rate derivative nancial instruments
(2019: none).
The carrying values of the Company's financial assets and
liabilities are summarised by category below:
2020 2019
GBP'000 GBP'000
--------- ---------
Financial assets
Measured at fair value through profit and loss
Current asset listed investments (see Note 9) 1,175 973
Other receivables 4 7
--------- ---------
Measured at cost less impairment
Current asset investments (see Note 9) 2,004 2,817
Financial liabilities
Measured at cost less impairment
Trade payables 7 75
Other payables 113 60
--------- ---------
The Company's income, expense, gains and losses in respect of
financial instruments are summarised below:
2020 2019
GBP'000 GBP'000
Interest expense
Total interest expense for financial liabilities 258 110
--------- ---------
Fair value gains and losses
On listed investments measured at fair value through profit and loss 202 162
--------- ---------
Credit risk
Credit risk is the risk of financial loss to the Company if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Company is subject to credit risk
on its investments and cash.
In accordance with the Company's policy, the Board of Directors
monitors the Company's exposure to credit risk on an ongoing basis.
The credit quality of the investments in equities and debt
securities, which are held at fair value and include debt and
equity elements, is based on the financial performance of the
individual investments and they are not rated.
The Company only deposits its cash with major banking
institutions. The risk is therefore considered to be limited.
Liquidity risk
Liquidity risk arises from the Company's management of working
capital. It is the risk that the Company will encounter difficulty
in meeting its financial obligations as they fall due.
The Company's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it seeks to maintain cash balances
to meet expected requirements for a period of at least 30 days. The
majority of the investments held by the Company are quoted and not
subject to specific restrictions on transferability or disposal.
However, the risk exists that the Company might not be able to
readily dispose of its holdings in such markets at the time of its
choosing and also that the price attained on a disposal may be
below the amount at which such investments were included in the
Company's balance sheet.
Market risk
Market risk is the risk that changes in market prices, such as
equity prices, foreign exchange rates and interest rates will
affect the Company's income or the value of its holdings of
financial instruments. The Company's sensitivity to these items is
set out below.
a) Interest rate risk
The Company holds quoted debt securities at fixed rates of
interest and is therefore exposed to interest rate risk. The impact
of an increase or decrease on interest rates of 100 basis points on
cash and deposits, based on the closing balance sheet position over
a 12-month period, is considered immaterial.
In addition, the Company has indirect exposure to interest rates
through changes to the financial performance and valuation in
equity investments in the companies that have issued debt caused by
interest rate fluctuations. Short term receivables and payables are
excluded as the risks due to fluctuation in the prevailing levels
of market interest rates associated with these instruments are not
significant and is limited to the Company's investments.
b) Currency risk
The Company's holds Euro denominated investments to the total of
EUR850,000, which expose the Company to the risk that the exchange
rate of the Euro against the pound will change in a manner which
adversely impacts the Company's net profit and net assets
attributable to shareholders. A 10% increase in the Euro exchange
rate against the pound would result in an increase in fair value of
those bonds of approximately GBP76,000. A 10% decrease in exchange
rates against the pound would have an equal and opposite
effect.
c) Price risk
The Company's management of price risk, which arises primarily
from quoted and unquoted equity and debt instruments, is through
the selection of financial assets within specified limits as
approved by the Board of Directors.
For quoted equity securities, the market risk variable is deemed
to be the market price itself. A 10% change in the price of those
investments would have a direct impact on the statement of
comprehensive income and statement of financial position. At 31
December 2020, the effect of such a change in market price would
have been approximately GBP120,000 (2019: GBP97,000).
20. Related party transactions
Administrative services
During the year, the Company was invoiced GBP31,400 (2019:
GBP11,700) for administrative services provided by Marker
Management Services Ltd, a company controlled by Martin Groak, a
director of Eight Capital. Of this amount invoiced, GBP15,000 was
settled by the issue of 60,000,000 ordinary shares in the company
at a price of 0.25 pence per share.
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 21 May 2020, the Company converted GBP100,000 of the loan
with IWEP Ltd into 400,000,000 new ordinary shares at a price of
GBP0.00025 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.
After the year end, Dominic White paid GBP16,500 to the company
to cover a Debtor relating to 66,000,000 Ordinary shares issued in
2020 which were unpaid at year end.
21. Ultimate controlling entity
There was no single controlling party as at 31 December
2020.
22. Post balance sheet events
-- Pursuant to the signing of an option agreement announced on
24 July 2020, which entitled ECP to acquire 60% of Innovative
Finance Srl ("InnFin"), a corporate finance advisory business that
develops mergers and acquisitions and financing solutions across
multiple sectors, primarily in Europe, with access to international
transactions, on 10 May 2021, the Company announced to the market
that the Board has decided to acquire 100% of InnFin, part of the
consideration of which is represented by a reimbursement of the
EUR350,000 owed to the Company under the unwinding of the FIT deal
which is currently held in the value of the option.
The initial consideration for the acquisition was EUR2.45
million and was settled by the payment of EUR1m in cash, EUR328,700
of vendor loan at a 5 per cent. interest rate accruing for 24
months ("IF Vendor Loan"), GBP62,000 (EUR71,300 at an exchange rate
of GBP1:EUR1.15) in shares of Eight Capital ("Consideration
Shares"), the offset of EUR350,000 that was owed to Eight Capital
by the vendor as
part of the Option Agreement, and EUR700,000 of the Company's
listed bonds. The balance of the consideration, being a maximum of
EUR2.45 million, would be settled through an earn-out related to
future performance of the acquired business.
In the same announcement on 10 May 2021, the board announced
that ECP's Chairman, Dominic White, had agreed to lend EUR1.1m to
the Company by way of a 24 month, unsecured loan, at an accruing
interest rate of 5% p.a. ("Term Loan"), to enable the acquisition
to proceed and to provide working capital to the Company.
Following the issue of the Consideration Shares, IWEP Ltd
("IWEP"), the Company's largest shareholder, agreed to convert
GBP27,000 (equivalent to EUR31,050 at an agreed rate of GBP1:
EUR1.15) of its outstanding vendor loan ("IWEP Vendor Loan") into
67,669,173 new ordinary shares ("Conversion Shares") at a price of
0.039p per share ("Conversion"). IWEP Ltd is a company controlled
by Dominic White, ECP's Chairman.
-- On 24 June 2021 the Company announced the appointment of
David Bull as Non-executive Director.
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END
NEXFLMLTMTTTBRB
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June 30, 2021 02:00 ET (06:00 GMT)
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