Company Number 05123368
REPORT OF THE DIRECTORS AND
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
FOR
CRAVEN HOUSE CAPITAL PLC
CRAVEN HOUSE CAPITAL PLC
CONTENTS OF THE FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 MAY 2020
Company Information
Chairman’s Statement
Investment Manager’s Report
Strategic Report
Report of the Directors
Independent Auditor’s Report
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Page
1
2
3
4
5
7
11
12
13
14
15
CRAVEN HOUSE CAPITAL PLC
COMPANY INFORMATION
FOR THE YEAR ENDED 31 MAY 2020
DIRECTORS:
Mr M J Pajak
Mr B S Bindra
Mr C P Morrison
SECRETARY:
Ms T Spink
REGISTERED OFFICE:
776-778 Barking Road
London
E13 9PJ
REGISTERED NUMBER:
05123368 (England and Wales)
AUDITOR:
BANKERS:
NOMINATED ADVISER:
SOLICITORS
Edwards Veeder (UK) Limited
Chartered Accountants & Business Advisors
Ground Floor
4 Broadgate
Broadway Business Park
Chadderton
Greater Manchester
OL9 9XA
Royal Bank of Scotland
280 Bishopsgate
London
EC2M 4RB
Spark Advisory Partners Ltd
5 St John’s Lane
London
EC1M 48H
Marriott Harrison LLP
11 Staple Inn
London
WC1V 7QH
1
CRAVEN HOUSE CAPITAL PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 MAY 2020
Dear Shareholder
I am pleased to provide an introduction to the annual report and financial statements for Craven House Capital
Plc for the year ending 31 May 2020. During the period the Company completed a fundamental restructuring
of its holdings involving distribution of a dividend in specie to our shareholders, comprising the bulk of Craven’s
historic investment portfolio, and transfer of intercompany loan accounts and creditors to Craven Industrial
Holdings Plc.
As had been communicated repeatedly to shareholders in recent years, the Company’s Investment Manager
and the Board had, for some time, been evaluating the suitability of the Company’s AIM quotation compared
with alternative trading venues and other options available. During the period, the Board determined that the
AIM market was no longer suitable for its portfolio at the time and presented the restructuring proposal to
shareholders at a General Meeting of Craven House on the 22 May 2020. The proposal secured the approval
of the overwhelming majority of the Company’s shareholders and the restructuring process was completed
prior to the year end. The investment portfolio retained by the Company and resulting balance sheet are
significantly simplified, focused, more suitable to AIM and, we believe in time, will be better understood by the
market.
Mark Pajak
Acting Chairman
2
CRAVEN HOUSE CAPITAL PLC
INVESTMENT MANAGER’S REPORT
FOR THE YEAR ENDED 31 MAY 2020
Statement by the Investment Manager
Following the restructuring approved by shareholders on the 22 May 2020, the Company’s investment portfolio
is significantly simplified and comprises minority shareholdings in five Swedish-managed eCommerce
businesses.
The Company’s investments are held at fair value in accordance with the IPEVC guidelines. Given the
proximity of the acquisition date of the shareholdings in the businesses listed below (March 2020) to the year-
end of Craven (May 2020), the original acquisition price of “Price of Recent Investment” has been applied as
the valuation methodology. A summary of the Company’s investments is as follows with further information
provided in notes 8 and 14 below;
Investment
Value at 31 May
2020
Value at 31 May
2019
Shares in Craven Industrial Holdings Plc
-
$27,368,571
Comprising:
Shares in Garimon Ltd
Shares in Rosedog Ltd
Shares in OneBas.com Ltd
Shares in IZYRadio Ltd
Shares in YRRO Ltd
$1,600,000
$1,600,000
$1,600,000
$1,600,000
$1,600,000
-
-
-
-
-
We are confident that the impact of the COVID-19 pandemic has not impaired the prospects or therefore the
valuation of these businesses since the time of acquisition. Their respective strategies, which include the online
marketing and distribution of magazines, music and dietary supplements are, in fact, likely to benefit from the
shift in consumer behaviour resulting from the pandemic. The development of each business remains at an
early stage and we look forward to reporting on material developments within the portfolio as appropriate.
Desmond Holdings Ltd
Investment Manager to Craven House Capital Plc
3
CRAVEN HOUSE CAPITAL PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MAY 2020
The directors present the Strategic Report of Craven House Capital plc for the year ended 31 May 2020.
Principal activity
Shareholders approved the adoption of a revised Investing Policy during the year. The Investing Policy is
primarily to invest in or acquire a portfolio of companies, partnerships, joint ventures, businesses or other
assets participating in the e-Commerce sector. The investments or acquisitions may be funded wholly by
cash, the issue of new shares or debt, or a mix thereof, as the Board deems appropriate. The Company’s
equity interest in a proposed investment may range from a minority position to 100% ownership; the proposed
investments may be either quoted or unquoted, although will likely be unquoted in the majority of cases. The
Company will specifically target investments which the Board believes offer high growth opportunities or
steady cash flows and where the exit will be a liquidity event, such as a trade sale or IPO.
Review of the Business in the year
A comprehensive review of the Company’s performance and business activities is included in the Investment
Manager’s Report above. At a General Meeting of the Company on 22 May 2020, shareholders approved a
fundamental restructuring of the Company which was completed prior to the year end. The historic investment
portfolio of the Company was distributed to shareholders via a dividend in specie; the majority of the
Company’s current assets and liabilities were transferred to Craven Industrial Holdings Plc, whose shares
were issued to Ordinary Shareholders. Following the distribution of the dividend in specie, the Company’s
portfolio comprised minority stakes in five e-commerce businesses which were acquired in March 2020. The
status of the underlying investments is disclosed in further detail in note 8 and note 14 below.
Position of the Company’s business at the end of the year
As a result of the restructuring outlined above, the Company’s balance sheet as of May 2020 shows significant
movement vs. the prior year. The investment portfolio retained as of year-end, which did not form part of the
dividend in specie, was valued at $8m, unchanged from the price of acquisition of these assets in March
2020. Receivables and cash reserves totaled $52,000. Sufficient cash is available to the Company from its
subsidiaries and via external loan facilities to ensure it is able to meet its liabilities as they fall due. The majority
of the $254,000 in liabilities payable by the Company as of May 2020 were paid post year end. Outside of the
board of directors, the Company has no employees and the majority of overhead expenditure continues to
comprise regulatory, accounting and audit costs.
Principal risks and uncertainties facing the business
The principal risks to the business include the ability of the Company to successfully execute its Investing
Policy and the early / pre-revenue stage of the development of the current portfolio of investments. Description
of these risks are further detailed in note 14 below.
Corporate governance
The directors place a high degree of importance on ensuring that high standards of Corporate Governance
are maintained and have therefore chosen to apply the framework as provided by the Quoted Companies
Alliance Corporate Governance Code for small and medium size companies (2018) (the ‘QCA Code’). Further
details are available on the Company’s website.
Mr M J Pajak – Director of behalf of the Board
Date
4
CRAVEN HOUSE CAPITAL PLC
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MAY 2020
The directors present their annual report with the audited financial statements of the Company for the year
ended 31 May 2020.
DIVIDENDS
On 22 May 2020 at a General Meeting of the Company, shareholders approved the payment of a special
dividend in specie to Ordinary Shareholders comprising shares in the Company’s subsidiary and principal
holding company, Craven Industrial Holdings Plc. Payment of this dividend was completed on 29 May 2020. A
fair review of the business and disclosure of the Company’s activities and principal risks and uncertainties are
included in the Investment Manager’s Report and the Strategic Report.
EVENTS SINCE THE END OF THE YEAR
Information relating to events since the end of the year is given in the note 17 to the financial statements.
DIRECTORS
The directors who held office during the year were:
Mr M J Pajak;
Mr B S Bindra; and
Mr C P Morrison.
Directors’ remuneration and details of service contracts are given in note 3 to the financial statements.
POLITICAL AND CHARITABLE CONTRIBUTIONS
No charitable or political donations were made during the year.
FINANCIAL RISK MANAGEMENT POLICIES
Information on the use of financial instruments by the Company and its management of financial risk is
disclosed in note 14 to the financial statements.
FUTURE DEVELOPMENTS
In the coming year the Company will continue to execute its investment strategy. Details of post year end
transactions are disclosed in note 17.
SIGNIFICANT SHAREHOLDERS
Shareholders with holdings of more than 3% of the Company as of the date of this report are as follows;
Jim Nominees Ltd – 19.0%
Vidacos Nominees Ltd – 12.4%
Interactive Brokers LLC – 10.8%
Lynchwood Nominees Ltd – 10.2%
WB Nominees Ltd – 6.5%
PWB Enterprises Inc – 4.7%
DIRECTOR SHAREHOLDINGS
Shareholdings in the Company by directors as of the date of this report are as follows;
Mr M J Pajak indirect holdings (via Desmond Holdings Ltd) – 272,705 ordinary shares of $1.00
Mr B S Bindra – 14,440 ordinary shares of $1.00
Mr C P Morrison – 7,356 ordinary shares of $1.00
5
CRAVEN HOUSE CAPITAL PLC
REPORT OF THE DIRECTORS - continued
FOR THE YEAR ENDED 31 MAY 2020
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual 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 International Financial
Reporting Standards (IFRSs) as adopted by the European Union 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 or 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 accounting standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
- 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.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps
for the prevention and detection of 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 the accounts and the other information included in annual reports may differ from legislation
in other jurisdictions.
The Company is compliant with AIM Rule 26 regarding the Company’s website.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the
Companies Act 2006) of which the Company's auditors are unaware, and each director has taken all the steps
that he or she ought to have taken as a director in order to make himself or herself aware of any relevant
audit information and to establish that the Company's auditors are aware of that information.
AUDITOR
RBK Business Advisers, Chartered Accountants & Statutory Audit Firm resigned as auditors during the year
and Edwards Veeder (UK) Limited, Chartered Accountants & Business Advisors were appointed. A resolution
for the re-appointment of Edwards Veeder (UK) Limited, Chartered Accountants & Business Advisors will be
proposed in accordance with Section 489 of the Companies Act 2006 at the forthcoming Annual General
Meeting.
Mr M J Pajak – Director of behalf of the Board
Date
6
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CRAVEN HOUSE CAPITAL PLC
Opinion
We have audited the financial statements of Craven House Capital Plc (the ‘company’) for the year ended 31
May 2020 which comprise the statement of comprehensive income, the statement of financial position, the
statement of changes in equity, the statement of cash flows and the related 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 International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion, the financial statements:
•
give a true and fair view of the state of the company’s affairs as at 31 May 2020 and of its loss for the
year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union; 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, 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
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements
is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that
may cast significant doubt about the company’s ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months from the date when the financial statements are
authorised for issue.
•
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 matters
Investment valuation
For the financial year ended 31 May
2020, investments measured at fair
value amounted to $8,000,000 which
represents 99% of total assets.
Description of
risk
How the scope of our audit
addressed the risk
The company’s
assessment of the
valuation of
investments measured
at fair value requires
significant judgement.
Our audit work included but was not
restricted to:
• We reviewed the high level controls in
operation in relation to investment
valuations;
7
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CRAVEN HOUSE CAPITAL PLC - continued
Key audit matters
Description of risk
How the scope of our audit
addressed the risk
Investment valuation
(continued)
The valuation of investments is
considered a key audit matter as
investments represent significant
balances on the statement of
financial position.
There is a risk that the application
of an inappropriate valuation
methodology and/or the use of
inappropriate assumptions could
result in the valuation of
investments being materially
misstated as at 31 May 2020.
Investment ownership and
existence
The ownership and existence of
investments are considered a key
audit matter as investments
represent 99% of total assets on
the statement of financial position.
There is a risk that the company
does not own the rights to the
investments or that the
investments do not exist at the
year ended 31 May 2020.
Management override of
controls
We are required to consider how
management biases could affect the
results of the company.
There is a risk that management
may override the controls to suit
their objectives.
This is not a complete list of all risks identified by our audit.
• We considered if the
company’s valuation policy is
in line with The International
Private Equity and Venture
Capital Valuation (IPEV)
guidelines and IFRS;
• We reviewed and assessed
the reasonableness of the
assumptions applied in the
investment managers’
valuation memo for the
financial year ended 31 May
2020;
Our audit work included but was
not restricted to:
• Shareholder registers were
reviewed to confirm the shares
were held by the company;
• Shareholder and purchase
agreements were reviewed to
establish ownership;
• Certificates of incorporation
were reviewed for investments
acquired during the financial
year; and
Our audit work included but was
not restricted to
• We have considered the
controls in place, remained alert
for material and unusual items
and tested a sample of journals
to assess the risk.
8
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CRAVEN HOUSE CAPITAL PLC - continued
Our application of materiality
We apply the concept of materiality both in planning and performing our audit and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions
could influence the economic decisions of reasonable users that are taken on the basis of the financial
statements. Importantly, misstatements below these levels will not necessarily be evaluated as material, as we
also take into account the nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined the materiality for the financial statements as a whole to
be $121,000 which is based on 1.5% of total assets. We considered this as an appropriate benchmark.
We set performance materiality as 80% of the overall Financial Statement materiality.
We report to the Audit Committee all identified unadjusted errors in excess of $6,050 which is set at 5% of planning
materiality. Errors below that threshold would also be reported if, in our opinion as auditor, disclosure was required
on qualitative grounds.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the company and its environment, including controls and
assessing the risks of material misstatements.
We carried out a full scope audit of the company’s financial statements. This included specific audit procedures
where the extent of our audit work was based on our assessment of the risks of material misstatement.
All audit work to respond to the risks of material misstatement were performed directly by the audit engagement
team. We set out the key audit matters that had the greatest impact on our audit strategy and scope within the
key audit matters section.
Other information
The other information comprises the information included in the Chairman’s Statement, the Investment Manager’s
Report, the Strategic Report and the Report of the Directors. The directors are responsible for the other
information. 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. In
connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. 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 Report of the Directors for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Report of the Directors have been prepared in accordance with applicable
legal requirements.
9
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CRAVEN HOUSE CAPITAL PLC - continued
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 Report of the Directors.
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 Statement of Directors’ Responsibilities set out on page 7 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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: https://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.
Lee Lederberg
Senior Statutory Auditor
for and on behalf of Edwards Veeder (UK) Limited
Chartered Accountants & Statutory Audit Firm
Ground Floor, 4 Broadgate,
Broadway Business Park,
Chadderton,
Greater Manchester,
United Kiingdom,
OL9 9XA
Date:
10
CRAVEN HOUSE CAPITAL PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2020
CONTINUING OPERATIONS
Changes in fair value
Other income
Intercompany loans written off
Management fee accrual waived
Administrative expenses
OPERATING LOSS AND LOSS BEFORE
INCOME TAX
Income tax
LOSS FOR THE YEAR AND TOTAL
COMPREHENSIVE INCOME
Loss per share expressed
in cents per share:
Basic and diluted
4
6
7
2020
$’000
(6,892)
144
(7,158)
1,446
(727)
2019
$’000
376
99
-
-
(2,284)
(13,187)
(1,809)
-
-
(13,187)
(1,809)
(456.52)
(72.39)
The notes on pages 15 to 33 form part of the financial statements.
11
CRAVEN HOUSE CAPITAL PLC
Company Number 05123368
STATEMENT OF FINANCIAL POSITION
AS AT 31 MAY 2020
Notes
8
9
10
11
12
13
ASSETS
NON-CURRENT ASSETS
Investments at fair value through
profit or loss
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
SHAREHOLDERS’ EQUITY
Called up share capital
Share premium
Accumulated deficit
TOTAL EQUITY
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
NON-CURRENT LIABILITIES
Loans and borrowings
TOTAL LIABILITIES
TOTAL EQUITY AND
LIABILITIES
2020
$’000
8,000
8,000
46
6
52
8,052
3,802
11,153
(7,157)
7,798
254
-
254
2019
$’000
27,369
27,369
933
46
979
28,348
12,594
25,128
(14,666)
23,056
4,492
800
5,292
8,052
28,348
Approved and authorised for issue by the Board on ………………….2020 and signed on its behalf by:
.................................................................
Mr M J Pajak - Director
The notes on pages 15 to 33 form part of the financial statements.
12
CRAVEN HOUSE CAPITAL PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2020
Called up
share
capital
$’000
Share
premium
$’000
Accumulated
deficit
$’000
Total
$’000
Balance at 1 June 2018
12,594
25,128
(12,857)
24,865
Changes in equity
Issue of share capital
-
-
-
-
Transactions with owners
12,594
25,128
(12,857)
24,865
Loss for the year
-
-
(1,809)
(1,809)
Balance at 31 May 2019
12,594
25,128
(14,666)
23,056
Changes in equity
Issue of share capital
Cancellation of deferred shares
Reduction in share premium
Dividend in specie
1,365
(10,157)
-
-
11,025
-
(25,000)
-
-
10,157
25,000
(14,461)
12,390
-
-
(14,461)
Transactions with owners
3,802
11,153
6,030
20,985
Loss for the year
-
-
(13,187)
(13,187)
Balance at 31 May 2020
3,802
11,153
(7,157)
7,798
The notes on pages 15 to 33 form part of the financial statements.
13
CRAVEN HOUSE CAPITAL PLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MAY 2020
Cash flows from operating activities
Loss before income tax
Adjustments for non-cash items
Fair value movement arising on investments
Intercompany loans written off
Management fee accrual waived
Costs paid by shares
Repairs
Dividend income
Increase in trade and other receivables
Increase in trade and other payables
Net cash outflow from operating activities
Cash flows from investing activities
Dividends received from joint ventures
Net cash inflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Repayment of loan
Net cash inflow from financing activities
Notes
2020
$’000
Amended
2019
$’000
(13,187)
(1,809)
6,892
7,158
(1,657)
190
5
(144)
(3,394)
103
(4,034)
144
144
3,900
-
(50)
3,850
(376)
-
-
-
-
(98)
(9)
1,977
(315)
98
98
-
75
(25)
50
Net decrease in cash and cash equivalents
(40)
(167)
Cash and cash equivalents at the beginning
of the year
10
Cash and cash equivalents at the end of the year
10
46
6
213
46
The notes on pages 15 to 33 form part of the financial statements.
14
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2020
1. ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards
and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting
under IFRS as adopted by the EU.
Craven House Capital plc is a public company incorporated in the United Kingdom under the Companies Act
2006. The address of the registered office is given on the company information page. The Company is listed
on the AIM Market of the London Stock Exchange (ticker: CRV).
The directors have considered the definition of an investment entity in IFRS 10 as well as the associated
application guidance. The directors consider that the Company has met the definition of an investment entity.
The significant judgments and assumptions made by the directors in determining that the Company is an
investment entity are that; it has obtained funds from investors (its shareholders) and is providing those
investors with investment management services; it commits to its investors that its business purpose is to invest
funds solely for returns from capital appreciation, investment income, or both; and it measures and evaluates
the performance of substantially all of its investments on a fair value basis.
The main accounting implications for the preparation of the accounts as an investment entity are that the
accounts are not prepared on a consolidated basis. Instead the Company’s investments in its subsidiaries are
accounted for at fair value through its profit and loss account.
The financial statements have been prepared under the historical cost convention, except to the extent varied
below for fair value adjustments required by accounting standards, and in accordance with applicable
International Financial Reporting Standards (IFRS) as adopted for use by the European Union. The principal
accounting policies are set out below.
The financial statements are presented in US dollars which is the Company’s functional currency. Amounts are
rounded to the nearest thousand, unless otherwise stated.
Going concern
The Company’s business activities, together with the factors likely to affect its future development, performance
and position are set out in the Investment Manager’s Report. The financial statements include the Company’s
objectives, policies and processes for managing its capital; its financial risk management objectives; details of
its financial instruments; and its exposures to credit risk and liquidity risk. The directors believe that the
Company is well placed to manage its business risks successfully. The directors have a reasonable expectation
that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus
they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
The Company maintains minimal cash reserves, however in addition to the cash on the Company’s statement
of financial position, sufficient cash is available to the Company via credit facilities to ensure it is able to meet
its liabilities as they fall due and there is therefore no risk to the going concern status of the Company.
There are currently no commitments to provide support to any subsidiary, however the Company may elect to
provide capital to its subsidiaries at any time to further its stated Investing Policy.
15
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
1.
ACCOUNTING POLICIES – continued
The Company has applied for the first time certain amendments to the standards
Amendments to IAS 28: Long Term Interests in Associates and Joint Ventures (effective for annual periods
beginning on or after 1 January 2019, endorsed by the European Union on 8 February 2019).
Amendments to IFRS 9: Prepayment Features with Negative Compensation (effective for annual periods
beginning on or after 1 January 2019, endorsed by the European Union 22 March 2018).
IFRIC 23 Uncertainty Over Income Tax Treatments (effective for annual periods beginning on or after 1 January
2019, endorsed by the European Union on 23 October 2018).
Annual improvements to IFRS Standards 2015-2017 Cycle (effective for annual periods beginning on or after 1
January 2019, endorsed by the European Union on 14 March 2019).
None of these amendments have had an effect on the Company’s financial position and performance.
The following new and revised standards and interpretations have not been adopted by the Company,
whether endorsed by the European Union or not
Amendments to References to the Conceptual Framework in IFRS Standards (effective for annual periods
beginning on or after 1 January 2020, endorsed by the European Union on 29 November 2019).
Amendments to IAS 1 and IAS 8: Definition of Material (effective for annual periods beginning on or after 1
January 2020, endorsed by the European Union 29 November 2019).
Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform (effective for annual periods
beginning on or after 1 January 2020, endorsed by the European Union on 15 January 2020).
Amendments to IFRS 3: Business Combinations (effective for annual periods beginning on or after 1 January
2020, endorsed by the European Union on 21 April 2020).
The Company has assessed the impact of the adoption of these standards and interpretations on its financial
statements on initial adoption and do not expect these standards to have a material impact.
16
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
1.
ACCOUNTING POLICIES - continued
Financial assets
Purchases or sales of financial assets are recognised at the date of the transaction. Where appropriate criteria
are met, the Company makes use of the option of measuring non current investments upon initial recognition
as financial assets at fair value through profit or loss. These criteria include that the fixed asset investment
should meet the Company's published Investing Policy and form part of the Company's managed portfolio or
similar investments. Such financial assets are carried at fair value and movements in fair value are recognised
through profit and loss. For quoted securities, fair value is either the bid price or the last traded price, depending
on the convention of the exchange on which the investment is quoted.
Impairment of financial assets
A financial asset not classified at fair value through profit or loss is assessed at each reporting date to
determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective
evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss
event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
The new impairment model requires forward looking information, which is based on assumptions for the future
movement of different economic drivers and how these drivers will affect each other. It also requires
management to assign probability to various categories of receivables. Probability of default constitutes a key
input in measuring an ECL and entails considerable judgment; it is an estimate of the likelihood of default over
a given time horizon, the calculation of which includes historical data, assumptions and expectation of future
conditions.
The directors have determined that the application of IFRS 9’s impairment requirements does not have a
material impact on the financial statements.
17
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
1. ACCOUNTING POLICIES - continued
Measurement
Financial assets at fair value through profit or loss are initially recognised at fair value. Transaction costs are
expensed through profit and loss. Subsequent to initial recognition, all financial assets at fair value through
profit or loss are measured at fair value in accordance with International Private Equity and Venture Capital
Valuation (“IPEVCV”) guidelines, as the Company’s business is to invest in financial assets with a view to
profiting from their total return in the form of capital growth and income. Gains and losses arising from changes
in the fair value of the financial assets at fair value through profit or loss are presented in the year in which
they arise.
Valuation of investments
A number of the Company's assets are measured at fair value for financial reporting purposes. The Investment
Manager determines the appropriate valuation techniques and inputs for fair value measurements.
In estimating the fair value of an asset, the Investment Manager uses market-observable data to the extent it
is available. The Investment Manager reports its findings to the Board of Directors of the Company every
quarter to explain the cause of fluctuations in the fair value of the assets.
Information about the valuation techniques and inputs used in determining the fair value of various assets and
liabilities are disclosed in notes 8 and 14.
Financial instruments that are measured subsequent to initial recognition at fair value are grouped into Levels
1 to 3 based on the degree to which the fair value is observable:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 fair value measurements for those derived from inputs other than quoted prices included within Level
1 that are observable for the assets or liability, either directly or indirectly; and Level 3 fair value measurements
are those derived from inputs that are not based on observable market data.
Quoted investments
a)
Where investments are quoted on recognised stock markets and an active market in the shares exists, the
company values those investments at closing mid-market price on the reporting date. Where an active market
does not exist those quoted investments are valued by the application of an appropriate valuation methodology
as if the relevant investment was unquoted.
Unquoted investments
b)
In estimating the fair value for an unquoted investment, the Company applies a methodology that is
appropriate in light of the nature, facts and circumstances of the investment and its materiality in the context
of the total investment portfolio using reasonable data, market inputs, assumptions and estimates. Any
changes in the above data, market inputs, assumptions and estimates will affect the fair value of an investment.
Financial liabilities and equity
Financial liabilities are recognised when the Company becomes party to the contractual provisions of the
financial instrument and are measured initially at fair value adjusted for transaction costs. Financial liabilities
are measured subsequently at amortised cost using the effective interest method.
An equity instrument is any contract that evidences a residual interest in the assets of the Company after
deducting all its liabilities.
In accordance with IFRIC 19, when a financial liability is extinguished by the issue of equity, the equity
instrument issued is measured at fair value and any difference between the financial liability extinguished and
the measurement of the equity instrument is recognised in profit and loss.
18
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
1.
ACCOUNTING POLICIES – continued
Current and deferred tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the income statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Company's
liability for current tax is calculated using tax rates that have enacted by the statement of financial position
date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the
statement of financial position date where transactions or events that result in an obligation to pay more tax
in the future or a right to pay less tax in the future have occurred at the statement of financial position date.
Timing differences between the Company's taxable profits and its results as stated in the financial information
that arises from the inclusion of gains and losses in tax assessments in periods different from those in which
they are recognised in the financial information.
A deferred tax asset is only recognised for an unused tax loss carried forward if it is considered probable that
there will be sufficient future taxable profits against which the loss can be utilised.
Foreign currencies
In preparing the financial statements of the Company, transactions in currencies other than the entity's
functional currency are recorded at the rates of exchange prevailing at the dates of the transactions. At each
statement of financial position date, monetary items denominated in foreign currencies are retranslated at
the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for exchange
differences on monetary items receivable from or payable to a foreign operation for which settlement is
neither planned nor likely to occur; which form part of the net investment in a foreign operation and which
are recognised in the foreign currency translation reserve.
For the purposes of presenting US dollar financial statements, the assets and liabilities of the Company's
foreign operations are expressed using exchange rates prevailing at the statement of financial position date.
Income and expense items are translated at the average exchange rate for the period, unless exchange
rates fluctuated significantly during that period, in which case the exchange rates at the dates of the
transactions are used. Exchange differences arising, if any, are classified as equity and recognised in a
foreign currency translation reserve.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the directors.
The directors, who are responsible for allocating resources and assessing performance of the operating
segments, have been identified as the senior management that make strategic decisions.
Critical accounting estimates and judgements
Preparation of financial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the results
of which form the basis of making judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Further information regarding the assumptions relied upon and sensitivity
analysis around these assumptions is provided in note 14 below.
In particular, significant areas of estimation, uncertainty and critical judgements in applying accounting
policies that have the most significant effect on the amount recognised in the financial statements relate to
the valuation of investments.
19
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
1.
ACCOUNTING POLICIES – continued
Critical accounting estimates and judgements - continued
The Company has made a number of investments in the form of equity instruments in private companies
operating in emerging markets. The investee companies are generally at a key stage in their development
and operating in an environment of uncertainty in capital markets. Should planned development prove
successful, the value of the Company’s investment is likely to increase, although there can be no guarantee
that this will be the case. Should planned development prove unsuccessful, there is a material risk that the
Company’s investments may be impaired. The carrying amounts of investments are therefore highly sensitive
to the assumption that the strategies of these investee companies will be successfully executed.
The directors have also determined that the Company meets IFRS 10’s definition of an investment company
and that the functional currency is appropriate given that underlying transactions, events and conditions that
are most likely to impact on the Company’s performance are more closely linked to the US dollar than GB
sterling.
Share capital and share premium
Share capital represents the nominal (par) value of shares that have been issued.
Share premium includes any premium received on issue of share capital. Any transaction costs associated
with the issuing of shares are deducted from share premium.
2.
SEGMENTAL REPORTING
The operating segment has been determined and reviewed by the directors to be used to make strategic
decisions. The directors consider there to be a single business segment being that of investing activities,
therefore there is only one reportable segment.
3.
EMPLOYEES AND DIRECTORS
Wages and salaries – directors’ remuneration
2020
$’000
66
2019
$’000
83
The average monthly number of employees (including directors) during the year was as follows:
Directors
The Company has no employees other than the directors.
Directors’ remuneration is analysed as follows;
Fees:
Mr R Burrows (resigned 17 October 2018)
Mr M J Pajak
Share based payments:
Mr B S Bindra
Mr C P Morrison
Total
2020
3
2020
$’000
-
56
56
5
5
10
66
2019
3
2019
$’000
17
56
73
5
5
10
83
20
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
3.
EMPLOYEES AND DIRECTORS – continued
The service contracts of the directors who served during the year are as follows:
Mr M J Pajak
Mr B S Bindra
Mr C P Morrison
Basic annual fee
£45,000
$5,000**
$5,000**
** Payable in new ordinary shares of the company at $1.00 per share
Desmond Holdings Ltd is the Company’s Investment Manager. The directors are the key management
of the Company. There were no directors (2019: none) to whom retirement benefits were accruing
under money purchase schemes.
4.
OTHER INCOME
Other income includes dividends received from joint venture, Qeton Ltd, of $143,214 (2019: $97,514).
5.
LOSS BEFORE INCOME TAX
The loss before income tax is stated after charging:
Rental charges
Fees payable to the Company’s auditor for the audit of
the Company’s annual accounts
Foreign exchange losses
2020
$’000
17
17
-
2019
$’000
35
29
2
21
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
6. INCOME TAX
Analysis of charge in the year
Current tax:
Deferred tax
Tax on loss on ordinary activities
Loss on ordinary activities before tax
Analysis of charge in the year
Loss on ordinary activities multiplied by the
Company’s rate of corporation tax in the UK of 19%
(2019: 19%)
Effects of:
Intercompany balances written off
Dividends
Disallowed legal and professional costs
Investment valuation
Losses (utilised)/carried forward
Current tax charge for the year as above
2020
$’000
-
-
-
2020
$’000
(13,187)
2019
$’000
-
-
-
2019
$’000
(1,809)
2020
$’000
2019
$’000
(2,505)
(344)
1,360
(27)
12
1,309
(149)
-
-
(18)
-
(71)
433
-
At 31 May 2020, the Company had UK tax losses of $4,472,598 (2019: $5,378,098) available to be
carried forward and utilised against future taxable profits. A deferred tax asset of $849,794 (2019:
$1,021,839) has not been recognised due to uncertainties over the timing of when taxable profits will
arise.
7.
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders
by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share has not been disclosed as the inclusion of the unexercised warrants
described in note 11 would be non-dilutive.
22
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
7.
EARNINGS PER SHARE - continued
Reconciliations are set out below.
Basic EPS
Earning attributable to
ordinary shareholders
Earnings
$’000
2020
Weighted average
number of shares
Per-share amount
cents
(13,187)
2,888,529
(456.52)
Earnings
$’000
2019
Weighted average
number of shares
Per-share amount
cents
Basic EPS
Earning attributable to
ordinary shareholders
(1,809)
2,499,039
(72.39)
8.
INVESTMENTS
Investments at fair value through profit or loss
The Company adopted the valuation methodology prescribed in the IPEVCV guidelines to value its
investments at fair value through profit and loss.
The Company had the following holdings at 31 May 2020:
Name
Garimon Ltd
Onebas.com Ltd
IZYRadio Ltd
Rosedog Ltd
YRRO Ltd
Holding
Principal Place of
Business
Ownership
Interest
Direct
Direct
Direct
Direct
Direct
UK / Sweden
UK / Sweden
UK / Sweden
UK / Sweden
UK / Sweden
29.9%
29.9%
29.9%
29.9%
29.9%
23
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
8.
INVESTMENTS -continued
Investments at fair value through profit or loss
At 1 June 2018
Fair value movement
At 31 May 2019
Additions
Fair value movement
Transfer to Craven House
Industrial Holdings Plc
At 31 May 2020
Quoted
equity
investments
$’000
Unquoted
equity
investments
$’000
Total
$’000
11,083
(2,326)
15,910
2,702
26,993
376
8,757
18,612
27,369
-
(4,800)
(3,957)
8,000
(2,092)
8,000
(6,892)
(16,520)
(20,477)
-
8,000
8,000
As part of a group reconstruction undertaken during the year, the Company’s beneficial ownership of
its historic portfolio was transferred to Ordinary Shareholders via a dividend in specie of shares in its
wholly owned subsidiary, Craven Industrial Holdings Plc.
The value of Investments at 31 May 2020 therefore represents the Company’s acquisitions on 13 March
2020 of a 29.9% interest, at consideration of $1.6m each, in the above-named five UK entities. These
are all unquoted investments and have therefore been measured on a Level 3 basis as no observable
market data is available. Further information on each investment holding is as follows;
Shares in Garimon Ltd are valued at $1,600,000 representing a 29.9% holding. This shareholding has
been valued on a Price of Recent Investment basis which the directors consider represents the best
indication of the fair value at the year end. Garimon is the owner of "Magazinos.com", the world's
largest-by-content on-line media magazine and periodical content provision service. The management
of Magazinos are currently evaluating options available to broaden Magazinos' shareholder base by
means of IPO and/or partnering with a major industry investor.
Shares in Onebas.com Ltd are valued at $1,600,000 representing a 29.9% holding. This shareholding
has been valued on a Price of Recent Investment basis which the directors consider represents the
best indication of the fair value at the year end. Onebas.com Ltd is the owner of "ONEBas.com Music",
an optimised search engine providing a portal to music content freely circulating online.
Shares in IZYRadio Ltd are valued at $1,600,000 representing a 29.9% holding. This shareholding has
been valued on a Price of Recent Investment basis which the directors consider represents the best
indication of the fair value at the year end. IZYRadio Ltd is a UK/Swedish-based B2B and B2C venture
which aims to offer superior music quality and music videos to radio stations via software applications.
Shares in Rosedog Ltd are valued at $1,600,000 representing a 29.9% holding. This shareholding has
been valued on a Price of Recent Investment basis which the directors consider represents the best
indication of the fair value at the year end. Rosedog Ltd is the owner of Pro Vitos™, an online marketer
of vitamins and diet supplements and Omega 3 North Norway™, a distributor of branded diet
supplements
24
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
8.
INVESTMENTS – continued
Shares in YRRO Ltd are valued at $1,600,000 representing a 29.9% holding. This shareholding has
been valued on a Price of Recent Investment basis which the directors consider represents the best
indication of the fair value at the year end. YRRO is the owner of Ocean Skin Labs™, a distributor of
branded collagen supplements and Norwegian Fish Oil™, a distributor of branded diet supplements.
The businesses of all of the above portfolio investments are presently loss-making although their cost
bases are low and there is minimal committed future expenditure, meaning that the extent and timing of
the Company's further investment in the businesses are highly controllable. The Company and the
incumbent management teams of the investee companies will continue to work together with the aim
that these businesses become financially self-sustaining and generating surpluses within the short- to
medium-term and to crystallise additional capital value for shareholders through strategic, third-party
partnerships.
9.
TRADE AND OTHER RECEIVABLES
Current:
Amounts owed by connected parties
Prepayments and accrued income
10.
CASH AND CASH EQUIVALENTS
Cash at bank
2020
$’000
-
46
46
2020
$’000
6
The amounts disclosed in the statement of cash flows in respect of cash and cash
equivalents are in respect of the following statement of financial position amounts:
Year ended 31 May 2020
Cash and cash equivalents
Year ended 31 May 2019
Cash and cash equivalents
31.5.20
$’000
6
31.5.19
$’000
46
2019
$’000
890
43
933
2019
$’000
46
1.6.19
$’000
46
1.6.18
$’000
213
25
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
11. CALLED UP SHARE CAPITAL
Allotted, called up and fully paid
Equity shares
Number:
Class:
Nominal
Value:
3,863,590 (2019: 2,499,039) Ordinary
$1.00
Nil (2019: 77,979,412)
Nil (2019: 77,979,412)
Deferred
Deferred
£0.09
£0.009
2020
$’000
3,802
-
-
3,802
2019
$’000
2,437
9,234
923
12,594
During the year the Company cancelled all of its deferred shares for no consideration.
The aggregate nominal values of shares include exchange differences arising from the translation of
shares at historic rates and the translation at the rate prevailing at the date of the change in functional
currency.
During the year ended 31 May 2018, the Company extended the time scale of 78,632 fully transferable
exercisable warrants which were originally issued in the year ended 31 May 2012. At the date of issue,
the warrants could be exercised on or before 30 June 2014, this period has now been extended to 30
June 2020. The warrants are exercisable at a price of $15.00 per share.
12.
TRADE AND OTHER PAYABLES
Current:
Trade payables
Amounts owed to connected parties
Accruals and deferred income
13.
LOANS AND BORROWINGS
Non-current:
Other loans
2020
$’000
226
-
28
254
2020
$’000
-
2019
$’000
698
2,039
1,755
4,492
2019
$’000
800
During the year, $300,000 of the convertible loan note was satisfied by way of share issue. As part of
the group reconstruction, the outstanding balance of $500,000 was assigned to the Company’s wholly
owned subsidiary, Craven Industrial Holdings Plc.
26
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
14.
FINANCIAL INSTRUMENTS
Financial risk management objectives and policies
Management has adopted certain policies on financial risk management with the objective of:
i. ensuring that appropriate funding strategies are adopted to meet the Company's short-term and long-
term funding requirements taking into consideration the cost of funding, gearing levels and cash flow
projections;
ii. ensuring that appropriate strategies are also adopted to manage related interest and currency risk
funding; and
iii. ensuring that credit risks on receivables are properly managed.
Financial instrument by category
The accounting policies for financial instruments have been applied to the line items below:
Financial assets at fair value through profit or loss
Financial instruments that are measured subsequent to initial recognition at fair value are grouped into
Levels 1 to 3 based on the degree to which the fair value is observable:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets
for identical assets or liabilities;
Level 2 fair value measurements for those derived from inputs other than quoted prices included within
Level 1 that are observable for the assets or liability, either directly or indirectly; and
Level 3 fair value measurements are those derived from inputs that are not based on observable market
data.
Unquoted equity investments held at fair value through profit or loss are valued in accordance with the
IPEVCV guidelines as follows;
Investment valuation methodology
Quoted prices (unadjusted) (level 1)
Earnings multiple basis (level 3)
Net Assets (level 3)
Price of Recent Investment (level 3)
2020
$’000
-
-
-
8,000
8,000
2019
$’000
8,757
414
18,198
-
27,369
27
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
14. FINANCIAL INSTRUMENTS - continued
IFRS 13 and IFRS 7 requires the directors to consider the impact of changing one or more of the inputs
used as part of the valuation process to reasonable possible alternative assumptions.
The Level 3 valuations listed above include inputs based on non-observable market data as outlined
in note 8 above. The Investment Manager has derived a fair value for these investments based on the
value of the underlying net assets of the respective investments and / or has considered prospective
enterprise values for these investments from the perspective of a market participant.
The directors have considered a number of reasonable possible alternative assumptions regarding the
value of the Level 3 investments. IFRS 13 requires an entity to disclose quantitative information about
the significant unobservable inputs used.
A summary of the unobservable inputs, judgements and estimates made in relation to the Level 3
investments is as follows:
As of the year end, the valuation the Company’s minority shareholdings in each its investee companies
has been valued on a Price of Recent Investment basis which the directors consider represents the
best indication of the fair value at the year end. All five of these businesses are presently loss-making
although their cost bases are low and there is minimal committed future expenditure, meaning that the
extent and timing of the Company's further investment in the businesses are highly controllable.
However, each business operates in a competitive market place and there can be no guarantee that
any of the investee companies will ultimately be successful and that the future carrying value of these
companies will not need to be impaired. In the worst-case scenario of any one investment having to
be fully impaired, this would result in a decrease of valuation of the investment of $1,600,000.
28
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
14. FINANCIAL INSTRUMENTS – continued
The valuation method applied to each equity investment is that which is considered most appropriate
with regard to the stage of development of the investee business and the IPEVCV guidelines.
All other financial instruments, including cash and cash equivalents, trade and other receivables, trade
and other payables and loans and borrowings, are measured at amortised cost.
Due to their short-term nature, the carrying values of cash and cash equivalents, trade and other
receivables, trade and other payables and loans and borrowings approximates their fair value.
Credit risk
The Company's credit risk is primarily attributable to other receivables. Management has a credit policy
in place and the exposure to credit risks is monitored on an ongoing basis. In respect of other
receivables, individual credit evaluations are performed whenever necessary. The Company's maximum
exposure to credit risk is represented by loans, both those held as unquoted investments and included
in other receivables, and cash balances. The Company monitors the financial position of borrowing
entities on an ongoing basis and is satisfied with the quality of the debt. Investment of surplus cash
balances are reviewed on an annual basis by the Company and it is satisfied with the choice of
institution. The directors have assessed the amounts owed to connected parties for impairment in
accordance with IFRS 9 and concluded that there is no material impact.
Interest rate risk
The Company currently operates with positive cash and cash equivalents as a result of issuing share
capital in anticipation of future funding requirements. As the Company has no borrowings from the bank
and the amount of deposits in the bank are not significant, the exposure to interest rate risk is not
significant to the Company.
Liquidity risk
The Company manages its liquidity requirements by the use of both short-term and long-term cash flow
forecasts. The Company's policy to ensure facilities are available as required is to issue equity share
capital in accordance with agreed settlement terms with vendors or professional firms, and are typically
due within one year unless otherwise stated.
The Company maintains minimal cash reserves, however in addition to the cash on the Company’s
statement of financial position, sufficient cash is available to the Company via credit facilities to ensure
it is able to meet its liabilities as they fall due.
29
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
14. FINANCIAL INSTRUMENTS – continued
The table below summarises the maturity profile of the Company’s financial liabilities based on
contractual discounted payments.
On
demand
$’000
Less than
3 months
$’000
3 to 12
months
$’000
More than
12 Months
$’000
Total
$’000
226
28
-
254
698
2,039
1,755
-
4,492
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
800
800
226
28
-
254
698
2,039
1,755
800
5,292
Year ended 31 May 2020
Trade payables
Other payables
Accruals and deferred
income
Loans and borrowings
Year ended 31 May 2019
Trade payables
Other payables
Accruals and deferred
income
Loans and borrowings
Price risks
The Company's securities are susceptible to price risk arising from uncertainties about future value of
its investments. This price risk is the risk that the fair value of future cash flows will fluctuate because
of changes in market prices, whether those changes are caused by factors specific to the individual
investment or financial instrument or its holder or factors affecting all similar financial instruments or
investments traded in the market.
During the year under review, the Company did not hedge against movements in the value of its
investments. A 10% increase/decrease in the fair value of investments would result in a $800,000
(2019: $2,736,857 increase/decrease in the net asset value).
While investments in companies whose business operations are based in emerging markets may offer
the opportunity for significant capital gains, such investments also involve a degree of business and
financial risk, in particular for unquoted investments.
Generally, the Company is prepared to hold unquoted investments for a medium to long time frame, in
particular if an admission to trading on a stock exchange has not yet been planned. Sale of securities
in unquoted investments may result in a discount to the book value.
Currency risks
The Company is exposed to foreign currency risk on its investments held at fair value and adverse
movements in foreign exchange rates will reduce the values of these investments. There is no
systematic hedging in foreign currencies against such possible losses on translation/realisation.
Foreign exchange volatility is significantly reduced following the transition to US Dollar as the
Company’s currency exposures are now more closely matched to its functional and reporting currency.
The Company’s exposure to other foreign currency changes is not deemed to be material as the
Company’s investments are US Dollar based.
30
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
14.
FINANCIAL INSTRUMENTS – continued
Capital management
The Company's financial strategy is to utilise its resources to further grow its portfolio. The Company
keeps investors and the market informed of its progress with its portfolio through periodic
announcements and raises additional equity finance at appropriate times. The Company regularly
reviews and manages its capital structure for the portfolio companies to maintain a balance between
the higher shareholder returns that might be possible with certain levels of borrowing for the portfolio
and the advantages and security afforded by a sound capital position, and makes adjustments to the
capital structure of the portfolio in the light of changes in economic conditions. Although the Company
has utilised loans from shareholders to acquire investments, it is the Company's policy as far as possible
to finance its investing activities with equity and not to have gearing in its portfolio.
At the statement of financial position date the capital structure of the Company consisted of borrowings
disclosed in note 13, cash and cash equivalents and equity comprising issued capital and reserves.
The table below sets out the Company’s classification of each class of financial assets/liabilities, their
fair values (where appropriate) and under which valuation method they are valued:
Note
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total carrying
amount and
Fair
Value
$’000
31 May 2020
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Liabilities at amortised cost
Trade and other payables
Loans and borrowings
Fair value through profit and
loss
Investments
31 May 2019
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Liabilities at amortised cost
Trade and other payables
Loans and borrowings
Fair value through profit and
loss
Investments
9
10
12
13
8
9
10
12
13
8
-
6
6
-
-
-
-
6
-
46
46
-
-
-
8,757
8,803
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46
-
46
(254)
-
(254)
8,000
7,792
933
-
933
(4,492)
(800)
(5,292)
18,612
14,253
46
6
52
(254)
-
(254)
8,000
7,798
933
46
979
(4,492)
(800)
(5,292)
27,369
23,056
31
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
15. RELATED PARTY DISCLOSURES
Transactions with subsidiaries
During the year, the Company made a number of payments on behalf of, advanced and received loans
to/from its subsidiary undertakings, Craven Industrial Holdings Plc., DLC Holdings Corp., Craven House
Capital North America LLC, Craven House Angola LDA and Kwikbuild Corporation Ltd.
To facilitate the group reconstruction, all amounts due to/from DLC Holdings Corp., Craven House
Capital North America LLC, Craven House Angola LDA and Kwikbuild Corporation Ltd were assigned
to their immediate parent Craven Industrial Holdings Plc. At the year end, the resultant balance of
$7,158,248 due from Craven Industrial Holdings Plc. to the Company was written off in full.
Loan to Craven Industrial Holdings Plc
During the year, the Company made a number of payments on behalf of, and received a loan repayment
from its subsidiary Craven Industrial Holdings Plc. At the year end the outstanding balance was $nil
(2019: $38,969). During the year, a balance of £7,158,248 was written off in full as part of the group
reconstruction.
Loan to Craven House Capital North America LLC
During the year, the Company made a number of payments on behalf of, advanced and received loans
to/from its subsidiary Craven House Capital North America LLC. At the year end the outstanding
balance was $nil (2019: $777,645). During the year, a balance of £4,437,192 was transferred to
Craven Industrial Holdings Plc as part of the group restructuring mentioned above.
Loan from Craven House Angola LDA
During the year, the Company received a number of loans from its subsidiary Craven House Angola
LDA. At the year end the outstanding balance was $nil (2019: $1,175,664). During the year, a balance
of £1,208,187 was transferred to Craven Industrial Holdings Plc as part of the group restructuring
mentioned above.
Loan from Kwikbuild Corporation Ltd
During the year, the Company paid a number of costs on behalf of, advanced and received loans to/from
its subsidiary Kwikbuild Corporation Ltd. At the year end the outstanding balance was $nil (2019:
$813,443). During the year, a balance of £795,443 was transferred to Craven Industrial Holdings Plc
as part of the group restructuring mentioned above.
Loan from Desmond Holdings Limited
During the year, the Company received a loan of $nil (2019: $75,000) from Desmond Holdings Limited.
At the year end the outstanding balance was $nil (2019: $50,000). In May 2020 a balance of £3,529
was transferred to Craven Industrial Holdings Plc as part of the group restructuring mentioned above.
All loans accrue interest at a rate of 5% as of 1 June 2019 (prior to this date no interest was charged)
and are repayable on demand.
Sales to 7Mobile LDA
During the year, the Company’s joint venture, Qeton Ltd, made sales totalling €99,950 (2019: €934,832)
to 7Mobile LDA. Craven House Angola Lda., a subsidiary of the Company, has directors in common
with 7Mobile Lda. As of 31 May 2020, Qeton Ltd and Craven House Angola Lda are no longer owned
by the Company.
32
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2020
15. RELATED PARTY DISCLOSURES -continued
Desmond Holdings Limited
Desmond Holdings Limited is the Investment Manager of the Company. Mr M J Pajak is the sole
shareholder and director of Desmond Holdings Limited. During the year, the Company incurred
management fees of $211,614 (2019: $219,860) from Desmond Holdings Limited. At the year end, the
balance payable of $629,529 was assigned to Craven Industrial Holdings Plc.
Also during the year, an accrual for prior year management fees in the sum $1,657,438 was waived in
full. At the year end, $Nil (2019: $424,426) was due to Desmond Holdings Limited in relation to
management fees.
A further $50,000 owed to Desmond Holdings Limited as at 31 May 2019 in relation to a working capital
loan was repaid in full during the year.
All loans accrue interest at a rate of 5% as of 1 June 2019 (prior to this date no interest was charged)
and are repayable on demand.
Directors and key management
All key management personnel are directors and appropriate disclosure with respect to them is made in
note 3 of the financial statements. There are no other contracts of significance in which any director has
or had during the year a material interest.
16. ULTIMATE CONTROLLING PARTY
The directors consider that there is no ultimate controlling party.
17. EVENTS AFTER THE REPORTING PERIOD
None.
33