ENERGISER INVESTMENTS PLC
FINANCIAL STATEMENTS
DECEMBER 2018
Board of Directors and advisers
Non-executive Chairman
Stephen Wicks
Directors
Nishith Malde
John Depasquale (Non-executive)
Company registration number
00298654
Registered office
Decimal Place
Chiltern Avenue
Amersham
Buckinghamshire
HP6 5FG
01494 762450
Email
info@energiserinvestments.co.uk
Website
www.energiserinvestments.co.uk
Company Secretary
Kathryn Worth
Bankers
Barclays Bank
Barclays Corporate
Fourth Floor
Apex Plaza
Forbury Road
Reading
RG1 1AX
Auditor
UHY Hacker Young
Chartered Accountants & Statutory Auditor
6 Broadfield Court
Broadfield Way
Sheffield
S8 0XF
Nominated adviser and broker
Cairn Financial Advisers LLP
62-63 Cheapside
London
EC2V 6AX
Registrars
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
B63 3DA
0121 585 1131
1
Chairman’s statement
I am pleased to present the accounts for Energiser Investments plc (“Energiser” or “the Group”) for the year ended 31 December 2018.
Energiser Investments Plc is an investment company whose strategy is to invest in quoted and unquoted companies to achieve capital
growth. Much activity has taken place over the last few years and the Company is now invested in just one company, the AIM listed
KCR Residential REIT plc ("KCR"). This investment endorses the focus in property, particularly in the residential sector.
In February 2018, Energiser invested £494,100 in a short-term loan secured on a 21,900 sq. ft office property in Croydon with planning
permission to convert into 71 residential units. The loan represented 30% of the estimated value of the property and the interest was
covered by rental income at a ratio of 4:1 (rent: interest). The gross interest paid on the loan was 7.5% p.a. The loan was novated as
part of our investment in KCR.
In March 2018, Energiser acquired 2,435,710 new KCR ordinary shares at £0.70 a share for a total of £1,704,997. The investment,
made by participation in a subscription alongside other investors, was made at a 9% discount to net asset value per share of KCR as
reported by KCR on 19 March 2018. The subscription was funded with cash of £1,210,897 and the novation of the rights to its short-
term loan investment of £494,100 described above. The Group’s holding represents 15.42% of KCR’s ordinary share capital.
KCR is an AIM quoted Real Estate Investment Trust (“REIT”) and its objective is to acquire and manage a substantial rented residential
property portfolio in the UK that generates both income flow and capital appreciation for its shareholders. It intends to prioritise the
acquisition of special purpose vehicles containing one or more residential properties as this structure has inherent benefits for the
REIT. KCR’s focus is to invest in more affordable rental properties for private tenants.
KCR’s share price closed at £0.54p on 31 December 2018 and our investment has therefore been written down by £390,000 to
£1,315,000.
KCR’s portfolio of properties was valued at £24.6m at 31 December 2018 and its net asset value per share was 70.97p (30 June 2018:
88.17p). There is strong demand and a shortage of supply of good quality affordably- priced housing in the UK. Residential dwellings at
this level should deliver attractive rental and capital value performance over the medium term. KCR targets low to mid-price blocks of
apartments for rent, aimed at new entrants and young professionals. The Company has found this to be a resilient segment of the
rental market and has experienced positive rental growth at every rented asset in its portfolio.
Results
The Group had no revenues during the period (2017: £138,000) as it had sold its revenue-generating investments in the previous year.
Administrative expenses have reduced by 61%, principally due to a significant reduction in salary costs. The Group made a loss before
tax of £498,000 (2017: profit £604,000) which included a provision against the investment in KCR of £390,000.
The Group’s net assets have decreased from £1.77m to £1.28m and now equate to 1.03p per share (2017: 1.43p).
Outlook
Our investment in KCR represents a significant part of our asset base and we will continue to watch its progress while searching for
other investment opportunities to achieve capital growth.
Stephen Wicks
Non-executive Chairman
2
Directors
Stephen Wicks
Non-executive Chairman
Has worked in the construction and housebuilding sector all of his working life and has extensive knowledge of local and national
planning policies on both greenfield and brownfield sites. He is currently the chief executive of Inland Homes plc, having founded the
company in June 2005. Prior to this, Mr Wicks was the founding shareholder and chief executive of Country & Metropolitan plc, which
floated on the main market of the London Stock Exchange in December 1999 with a market capitalisation of £6.9m. He directed the
growth of Country & Metropolitan plc until its disposal in April 2005 to Gladedale Holdings plc for approximately £72m.
Nishith Malde
Director
Qualified as a Chartered Accountant in 1985 with KPMG and specialised in advising owner-managed businesses. He left KPMG in
1989 to set up a consultancy firm which later merged with an audit practice where he was the partner responsible for the affairs of
Country & Metropolitan plc. Mr Malde joined Country & Metropolitan plc as finance director and company secretary in November 1998.
He was actively involved in the preparation for the flotation of Country & Metropolitan plc in December 1999 and its further
development (which included acquisitions and disposals) until it was acquired by Gladedale Holdings plc in April 2005. He is also a
founding shareholder and finance director of Inland Homes plc which floated onto AIM in April 2007.
John Depasquale
Director (Non-executive)
Has almost 30 years’ financial services experience working in the areas of corporate finance, equity capital markets and financial
regulation. John started his career at the London Stock Exchange plc in equity capital markets where he focused on vetting and
approving equity transactions for listed companies. Later, John moved into corporate finance, predominantly working with Main Market
and AIM quoted companies, where he has held senior roles at a number of firms, including Seymour Pierce, ZAI Corporate Finance
and Zeus Capital. To date, he has worked on over 50 IPOs across a range of sectors and jurisdictions. John currently works at Allenby
Capital Limited.
3
Group Strategic Report
for the year ended 31 December 2018
The Directors present their Strategic Report on the Group for the year ended 31 December 2018.
Review of the business
The Company is registered as a Public Limited Company (plc). The Company’s shares of 0.1p each are listed on AIM, part of the
London Stock Exchange.
The Group subscribed for 2,435,710 of ordinary shares in KCR Residential REIT plc at 70p per share. The chairman’s statement
provides further details on KCR’s activities.
Results and performance
The results of the Group for the year, as set out on pages 13 to 17, show a loss on ordinary activities before and after taxation of
£498,000 (2017: profit of £604,000 and £572,000). The shareholders’ funds were £1,276,000 (2017: £1,774,000).
Investment properties were sold during the year ended 31 December 2017 and thus there was no rental income during the year. The Group’s
cash was used predominantly to acquire the investment in KCR.
Strategy
Energiser’s strategy as an investing company is to invest, directly or indirectly, in quoted and unquoted companies and in the property
sector to achieve capital growth in the medium term.
Key performance indicators (“KPIs”)
The Group’s KPIs are the return on project investment and the net assets position of the Group including net assets per share. These
indicators are monitored by the Board and the details of performance against these are given below.
Return on project investment
Net assets
Net assets per ordinary share
2017
2018
—
£104,000
£1,276,000 £1,774,000
1.43p
1.03p
Principal risks and uncertainties
The management of the business and the nature of the Group’s strategy are subject to a number of risks. The Directors have set out
below the principal risks facing the business. Where possible, processes are in place to monitor and mitigate such risks. The Group
operates a system of internal control and risk management in order to provide assurance that the Board is managing risk while
achieving its business objectives. No system can fully eliminate risk and, therefore, the understanding of operational risk is central to
the management process.
To enable shareholders to appreciate what the business considers are the main operational risks, they are briefly outlined below:
Housing market
Risk
A fall in the housing
market in the regions in
which the Group operates
Potential impact
•
Inability to realise maximum
value in a timely fashion
• Adverse effect on the timing of
sales
Strategy
The Group seeks to ensure that investment is
made either directly or indirectly into the
residential property sector with a view to
preserving capital
Interest rates
Significant upward
changes in interest rates
Increased borrowing costs and a
detrimental effect on profit
The Group mitigates any adverse exposure to
interest rate changes by controlling its gearing
Financial risk management objectives and policies
The Company’s policy in respect of financial instruments and risk profile is set out in the Directors’ Report on pages 5 to 7 and in Note
16 to the accounts.
Future developments
The Group will continue to focus on direct and indirect investment in the property sector. It will continue to invest in property operating
companies in the residential market.
By order of the Board
Stephen Wicks
Non-executive Chairman
4
Directors’ Report
for the year ended 31 December 2018
The Directors have pleasure in submitting their report, together with the financial statements of the Group and Company, for the year
ended 31 December 2018.
Principal activity
The principal activity of the Group is as an investment company investing in quoted and unquoted companies to achieve capital growth.
The Group will also seek to invest in investment properties and residential property development projects.
Future developments
The intended activity of the Group is disclosed in the Strategic Report.
Directors
The Company supports the concept of effective Board leadership and control of the Company. The Board is responsible for approving
Company policy and strategy. All Directors have access to advice from the Company Secretary and independent professionals at the
Company’s expense. All Directors are subject to re-election every three years and at the first Annual General Meeting (AGM) after
appointment.
As announced on 20 July 2018, Dominic White, the former chief executive officer of the Company, stepped down from the Board on 1
September 2018 to focus his attention on the Company’s principal investment asset, KCR Residential REIT plc. John Depasquale, who
has experience in the equity capital markets and corporate finance, was appointed on 21 December 2018.
The Board members are listed on page 1.
Relations with shareholders
The Company values the views of its shareholders and recognises their interest in the Company’s strategy and performance, Board
membership and quality of management. It therefore encourages shareholders to offer their views.
The AGM provides an opportunity for shareholders, particularly private investors, to question the Board on issues arising.
The notice convening the AGM is the notice of the meeting sent to shareholders with this report. A separate motion will be put to the
meeting on each substantial issue.
Accountability and audit
The Board endeavours to present a balanced and understandable assessment of the Group’s position and prospects in all reports as
well as in the information required to be presented by statutory requirements.
Going concern
The financial statements have been prepared on the going concern basis, the Directors having considered the cash balance at the year
end was sufficient to cover in excess of 12 months expenditure from the date of the approval of these financial statements. In doing so,
they have given due regard to the risks and uncertainties affecting the business as set out in the Directors’ Report and the liquidity risk
disclosed in Note 16. On this basis, the Directors have a reasonable expectation that the funds available to the Group are sufficient to
meet the requirements indicated by those forecasts.
Internal control
The Board is responsible for maintaining a sound system of internal control to safeguard shareholders’ investments and the Company’s
assets, and for reviewing its effectiveness. Such a system is designed to manage, but not eliminate, the risk of failure to achieve
business objectives. There are inherent limitations in any control system and, accordingly, even the most effective systems can provide
only reasonable, and not absolute, assurance against material misstatement or loss.
Assessment of business risk
The Board regularly reviews operating and strategic risks.
The Group’s operating procedures include a system for reporting financial and non-financial information to the Board as and when
appropriate, including:
•
•
•
reports from management with a review of the business at each Board meeting, focusing on any new decisions/risks arising;
reports on the performance of investments;
reports on selection criteria of new investments; and
• consideration of reports prepared by third parties.
Control procedures
Operational procedures have been developed for each of the Group’s operating businesses that embody key controls over relevant
areas. The implications of changes in law and regulations are taken into account by the Group.
The Board has considered the need for an internal audit function but has decided that this is not justified at present given the size of
the Group. However, it will keep the decision under review on an annual basis at least.
5
Appointment of Directors
The Board deals with all matters relating to the appointment of Directors, including determining the specification, identifying suitable
candidates and selection of the appointee. No separate Nominations Committee has been formed.
Throughout the year, the Articles of Association have required each Director to seek re-election after no more than three years in office.
Therefore, the Board considers it inappropriate that Non-executive Directors be appointed for a fixed term as recommended by the
Code.
Significant shareholdings
According to the Company’s register of substantial shareholdings at 21 May 2019 the following had notified the Company of their
interest in 3% or more of the Company’s issued ordinary share capital, other than the Directors discussed below:
Highlands Village Limited
Flemmings Property Services Limited
Directors and Company Secretary
Mrs Kathryn Worth was appointed Company Secretary on 16 April 2019.
Number
of shares
17,375,000
7,500,000
%
14.00
6.05
Those Directors who held office during the year and their interests in shares of the Company, which include beneficial and family
interests, are shown below:
S D Wicks*
J Depasquale
D White
N Malde†
As at 31 December 2018
ordinary shares of 0.1p
As at 31 December 2017
ordinary shares of 0.1p
35,289,930
—
1,750,000
12,689,964
35,289,930
—
1,750,000
12,689,964
* The beneficial holding of Stephen Wicks comprises his direct shareholding of 28,558,855 shares and an interest of 6,731,075 shares
in the Company held by way of his shareholding in Highlands Village Limited, of which he owns 38.74%.
† The beneficial holding of Nishith Malde comprises his direct shareholding of 11,230,464 shares and an interest of 1,459,500 shares
in the Company held by way of his shareholding in Highlands Village Limited, of which he owns 8.4%.
Nishith Malde has a notice period of six months. Details of Directors’ remuneration are shown in the Remuneration Report on pages 31
and 32.
Taxation status
The close company provisions of the Income and Corporation Taxes Act 1988 do not apply to the Company.
Principal financial risks and uncertainties
The Group’s financial instruments comprise its investments, cash balances, receivables and payables that arise directly from its
operations and derivative instruments. The Group is exposed to market risk through the use of financial instruments and specifically to
liquidity risk, market price risk and credit risk, which result from the Group’s operating activities.
The Board’s policy for managing these risks is summarised below.
Liquidity risk
The Group makes investments for the long term. Accordingly, the Group rarely trades investments in the short term, however, it will do
so in order to meet its funding requirements. It should be noted that, the market in small capitalised companies can be illiquid.
Accordingly, the Directors monitor the market and make disposals as appropriate.
Credit risk
The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group monitors capital on the basis of carrying amount of equity, less cash and cash equivalents as presented on the face of the
Statement of Financial Position. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Directors’ responsibilities statement
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 are required to
prepare financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
6
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 and of the profit or loss of the Parent Company and Group 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 they have been prepared in accordance with IFRSs as adopted by the European Union, 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;
prepare a directors’ report and a strategic report which comply with the requirements of the Companies Act 2006.
•
•
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.
Website publication
The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial
statements are published on the company’s website in accordance with legislation in the United Kingdom governing the preparation and
dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the
company’s’ website is the responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the financial
statements contained therein.
Auditor
UHY Hacker Young have been appointed as auditor for the ensuing year in accordance with section 487 of the Companies Act 2006.
ON BEHALF OF THE BOARD
Stephen Wicks
Non-executive Chairman
21 May 2019
7
Corporate Governance Statement
Introduction from the Chairman on the Corporate Governance Statement
Following amendments made to the AIM Rules, which took effect on 28 September 2018, all AIM companies are required to apply a
recognised corporate governance code and to make additional website disclosures relating to their compliance with that code. In compliance
with the new requirement, the company has adopted the Quoted Companies Alliance’s (QCA) Corporate Governance Code and has updated
its website to include additional disclosures required by the QCA Code and the AIM Rules.
As Chairman of Energiser Investments PLC, I have overall responsibility for ensuring that corporate governance is embedded within the
business. Corporate governance is at the heart of this organisation to maintain integrity, ensure we operate effectively and deliver value for
our shareholders.
The Board recognises the importance of sound corporate governance and applies the ten principles of the QCA Code insofar as reasonably
practicable given the Company’s nature and size. Further details on compliance with the principles are provided below. The Company’s
priority is to generate value for shareholders through making investments in accordance with its investment strategy as detailed on page 9
of this report. The Board believes that the QCA Code provides Energiser Investments with a practical and rigorous corporate governance
framework to support this strategy and the Company’s success.
Stephen Wicks
Chairman
21 May 2019
8
Corporate Governance Statement
Strategy and model
The Company is an investing company. Our strategy to generate value for shareholders by investing in quoted and unquoted companies
to achieve capital growth, with focus on the property sector. We take equity positions in operating and investing companies whose
activities or investments are focussed on property sectors that exhibit imbalances and are expected to generate value for shareholders
in the medium term.
While capital growth is the Board’s priority, investments may also generate income by way of interest or dividends. The investment focus
includes companies that combine an interest in a property portfolio with an overriding operating business, such as the provision of
serviced-residential, serviced-storage or serviced-leisure facilities.
In deciding upon equity investments, the Board seeks to take positions which will deliver value in the medium term (three to five years)
in preference to higher growth/higher risk investments. The Company’s investments are typically in the £500,000 to £2,000,000 range.
However, if a compelling proposition is presented to the Company which would require a greater commitment (particularly where capital
is to be invested by way of staged payments), the Board will consider seeking additional equity from existing shareholders and external
investors or raise debt finance to enable the Company to make such an investment.
Risk management
The Board has overall responsibility for risk management and has established a framework which ensures that principle risks are
discussed, understood, mitigated and prevented where possible. Risk assessment is an integral part of any investment decision and the
Company’s risk framework ensures that decisions are made on an informed basis to reflect agreed business strategy and agreed risk
tolerance.
The Board considers that the key risks faced by the Company are:
• A lack of suitable investment opportunities.
• A fall in the value of residential or other property to which the Company has exposure.
•
Longer-term economic or political environments, which cannot be predicted currently, but which may affect the sphere of activity
for the Company.
The Board’s strategies to mitigate these risks are as follows:
•
•
•
To maintain a high level of awareness of investment opportunities through their own knowledge and through a network of experts
and professionals in the real estate sector.
To seek to ensure that investments are made in real estate investing or operating companies which operate in sectors and
geographies that are likely to be least affected by a fall in values.
To keep the Company’s investments under regular review in light of the economic and political climate and, where possible, to
structure investments to mitigate these risks from the onset.
Board composition and independence
The Board is collectively responsible for the long-term success of the Company and for its leadership, strategy, values, control and
management. Board meetings are held at such times as are required for the effective operation of the Company’s investment strategy
and monitoring of investments. All directors commit the time necessary to fulfil their roles, and this position is kept under review. Given
the size of the Board and the scale and nature of the Company’s business, the Company does not have a separate nominations or audit
committee.
The current directors of the Company are Stephen Wicks, the non-executive Chairman of the Company, Nishith (Nish) Malde, the finance
Director and John Depasquale, non-executive Director. The Board has considerable experience and expertise in the real estate sector
and the running of publicly traded companies. Stephen and Nish are not considered to be independent directors of the Company by
reason of their executive director positions at Inland Homes Plc, where they are, respectively, the Chief Executive Officer and Group
Finance Officer. John is an independent director.
Full biographical details of Stephen Wicks, Nish Malde and John Depasquale can be found at
http://www.energiserinvestments.co.uk/board_of_directors.php.
Given the size of the Board, we do not currently operate a formal evaluation process for members, however this is kept under review; as
are the skills and experience required to set the strategy of the business. The Directors have due regard to appropriate succession
planning as part of the ongoing evaluation of the overall effectiveness of the Board and, at the appropriate time, will take steps to ensure
that any successor is fully acquainted with the Company’s investment strategy.
9
Communication with Shareholders
The Board is keen to ensure that the Company’s shareholders and any potential investors have a good understanding of the business
and its performance. During the year, enquiries are received and answered on a wide spectrum of topics relevant to the business directly
or through periodic updates The Company communicates with shareholders in a number of ways:
Corporate website
Our corporate website has a dedicated investor section at www.energiserinvestments.co.uk which includes annual and interim financial
reports, RNS releases and full Rule 26 disclosures.
AGM
The AGM allows the Board to update the shareholders on the Company’s progress and provides an opportunity for shareholders to pose
questions to Directors. In particular, the AGM provides an opportunity for shareholders, particularly private investors, to engage in wider
discussion with the Board on issues of concern or interest to them, and to share their thoughts on the Company’s strategy and business
model.
10
Independent auditor’s report
to the members of Energiser Investments plc
Opinion
We have audited the Group and Parent Company financial statements of Energiser Investments plc for the year ended 31 December
2018 which comprise the Statement of 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 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 group’s and the parent’s affairs as at 31 December 2018 and of their
results 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 12 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.
Valuation and disclosure of investments
Risk: During the year, the Group invested in KCR Residential REIT Plc, the accounting for which relies upon determining whether this
investment has been correctly valued and presented in the financial statements.
Response: Our audit work included, but was not limited to, confirming the share price of KCR.
Our application of materiality
We use materiality during the planning stage of our audit to determine the nature and extent of our testing, and also to assess the
results of our work. We calculate materiality based on the magnitude of misstatement that could reasonably influence the economic
decisions of users of the financial statements.
The materiality for the financial statements as a whole was set at £37,500, representing 2.5% of gross assets of £1.5m, and was
considered appropriate in view of the nature of the Group. Performance materiality was set at 62.5% of the above figure and we agreed
that any individual misstatements in excess of £375 would also be reported to the directors alongside any smaller differences that
warranted reporting on qualitative grounds.
An overview of the scope of our audit
The scope of our audit was determined by gaining an understanding of the nature of the company, the system of internal control,
determining materiality and assessing the risks of material misstatement or omission. As is typical of all audits, we also considered the
risk of management override of internal controls. Our audit was fully substantive in nature.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon. 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.
11
Opinion 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 year 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 on 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 and the part of the directors’ remuneration report to be audited 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 set out on pages 6 to 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 group’s and the parent 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 www.frc.org.uk/auditscopeukprivate. 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.
Andrew Hulse (Senior Statutory Auditor)
For and on behalf of UHY Hacker Young
Chartered Accountants
Statutory Auditor
6 Broadfield Court
Broadfield Way
Sheffield
S8 0XF
21 May 2019
12
Group statement of comprehensive income
for the year ended 31 December 2018
Continuing operations
Revenue arising in the course of ordinary activities
Cost of sales
Gross (loss)/profit
Administrative expenses
Operating loss
Finance costs
Finance income
(Loss)/Gain on investments
Gain on financial instrument
(Loss)/profit before taxation
Taxation
(Loss)/profit for the year attributable to shareholders of the Group
Total comprehensive (loss)/profit for the year attributable to shareholders of the
Group
(Loss)/profit per share
Basic and diluted (loss)/profit per share from total and continuing operations
Notes
2
3
3
5
2018
£’000
—
(1)
(1)
(92)
(93)
—
6
(411)
—
(498)
—
(498)
(498)
2017
£’000
138
(34)
104
(235)
(131)
(54)
—
16
773
604
(32)
572
572
6
(0.40)p
0.46p
Diluted (loss)/profit per share is taken as equal to the basic (loss)/profit per share as the Company’s average share price during the
period is lower than the exercise price of the share options and therefore the effect of including share options is anti-dilutive.
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
13
Group statement of financial position
as at 31 December 2018
ASSETS
Non-current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Tax and social security
Total liabilities
Net assets
EQUITY
Share capital
Share premium account
Convertible loan
Merger reserve
Retained earnings
Total equity
Notes
2018
£’000
2017
£’000
7
10
11
11
12
1,315
1,315
8
177
185
185
190
34
224
224
1,276
2,392
7,189
88
1,012
(9,405)
1,276
—
—
33
1,959
1,992
1,992
185
33
218
218
1,774
2,392
7,189
88
1,012
(8,907)
1,774
The consolidated financial statements were approved by the Board of Directors and authorised for issue on 21 May 2019.
Nishith Malde
Director
Stephen Wicks
Non-executive Chairman
Company Number
00298654
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
14
Company statement of financial position
as at 31 December 2018
ASSETS
Non-current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Tax and social security
Total liabilities
Net assets
EQUITY
Share capital
Share premium account
Convertible loan
Merger reserve
Retained earnings
Total equity
Notes
2018
£’000
2017
£’000
7
10
11
11
12
1,315
1,315
1,277
156
1,433
1,433
1,943
2
1,945
803
2,392
7,189
88
1,012
(9,878)
803
—
—
1,278
1,949
3,227
3,227
1,934
1
1,935
1,292
2,392
7,189
88
1,012
(9,389)
1,292
The loss for the year was £489,000 (2017: £73,000).
The financial statements were approved by the Board of Directors and authorised for issue on 21 May 2019.
Nishith Malde
Director
Stephen Wicks
Non-executive Chairman
Company Number
00298654
The accompanying accounting policies and notes form an integral part of these financial statements.
15
Group statement of changes in equity
for the year ended 31 December 2018
At 1 January 2017
Total comprehensive loss
Issue of equity
Balance at 31 December 2017
Total comprehensive loss
Balance at 31 December 2018
Share
capital
£’000
2,392
—
—
2,392
—
2,392
Share
premium
account
£’000
7,198
—
(9)
7,189
—
7,189
Convertible
loan
£’000
Merger
reserve
£’000
Revaluation
reserve
£’000
Retained
earnings
£’000
88
—
—
88
—
88
1,012
—
—
1,012
—
1,012
537
(537)
—
—
—
—
(9,479)
572
—
(8,907)
(498)
(9,405)
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
Company statement of changes in equity
for the year ended 31 December 2018
At 1 January 2017
Total comprehensive loss
Issue of equity
Balance at 31 December 2017
Total comprehensive loss
Balance at 31 December 2018
Share
capital
£’000
Share
premium
account
£’000
7,198
2,392
—
—
— (9)
7,189
—
7,189
2,392
—
2,392
Convertible
loan
£’000
Merger
reserve
£’000
Revaluation
reserve
£’000
88
—
—
88
—
88
1,012
—
—
1,012
—
1,012
420
—
—
420
—
420
Retained
earnings
£’000
(9,736)
(73)
—
(9,809)
(489)
(10,298)
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
Total
equity
£’000
1,748
35
(9)
1,774
(498)
1,276
Total
equity
£’000
1,374
(73)
(9)
1,292
(489)
803
16
Group statement of cash flows
for the year ended 31 December 2018
Cash flows from operating activities
(Loss)/Profit before taxation
Adjustments for:
Loss on sale of investment properties
Fair value adjustment for listed investments
Interest expense
Interest income
Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
Net cash generated (used in)/by operating activities
Cash flows from investing activities
Interest received
Purchase of investments
Mezzanine finance facility repaid
Sale of investment properties
Net cash generated (used in)/by investing activities
Cash flows from financing activities
Net proceeds on the issue of ordinary shares
Repayment of borrowings
Interest paid
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
2018
£’000
2017
£’000
(498)
604
23
390
—
(6)
3
5
(83)
6
(1,705)
—
—
(1,699)
—
—
—
—
(1,782)
1,959
177
(16)
—
54
—
51
(641)
52
—
—
16
2,816
2,832
(9)
(1,982)
(54)
(2,045)
839
1,120
1,959
The accompanying accounting policies and notes form an integral part of these consolidated financial statements.
17
Principal accounting policies
for the year ended 31 December 2018
The principal accounting policies adopted in the preparation of the Group and Company financial statements are set out below.
Basis of accounting
Basis of preparation
The Group and Company financial statements have been prepared under the historical cost convention, except as modified by the fair
value of investment property and financial assets and liabilities (including derivatives). They have also been prepared in accordance
with the Companies Act 2006 applicable to companies reporting under IFRS.
The Group and Company financial statements have been prepared in accordance with the accounting policies set out below and
International Financial Reporting Standards (IFRS) as adopted by the European Union and that were effective at 31 December 2018.
The accounting policies have been applied consistently throughout the Group and the Company for the purposes of the preparation of
these financial statements and the same accounting policies, presentations and methods of computation are followed in this set of
financial statements as were applied in the previous set of audited financial statements.
The financial statements have been prepared on the going concern basis, the Directors having considered the cash forecasts for the
next 12 months from the date of the approval of these financial statements. In doing so they have given due regard to the risks and
uncertainties affecting the business as set out in the Directors’ Report, the liquidity of investments and the liquidity risk disclosed in
Note 16. On this basis, the Directors have a reasonable expectation that the funds available to the Group are sufficient to meet the
requirements indicated by those forecasts.
The Parent Company has taken advantage of section 408 of the Companies Act 2006 and has not included its own Profit and Loss
Account in these financial statements. The Parent Company’s loss for the year was £489,000 (2017: loss £73,000).
Changes in accounting policies
New standards adopted during the year
IAS7 (amended) – Statement of Cash Flows
IFRS 9 Financial Instruments
This standard applies to classification and measurement of financial assets and financial liabilities, impairment provisioning and hedge
accounting. The group does not presently hold any complex financial instruments. Given that inter-group balances are eliminated on
consolidation and does not affect group results, no material impairment allowance adjustments are expected. Having substantially
completed our assessment, it is considered that the introduction of IFRS 9 is not expected to have a material impact on the results or
cash flows of either the Group or the Company.
Standards to be implemented
There will be a new standard with an effective date of 1 January 2020 titled “Amendments to References to Conceptual Framework in
IFRS Standards”.
Summary of significant accounting policies
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 31 December
2018. Subsidiaries are entities over which the Group is exposed to, or has rights to, the variable returns from its involvement with the
subsidiary and has the ability to affect those returns through its power over the subsidiary. The Group obtains and exercises control
through voting rights.
Intercompany transactions, balances and unrealised gains on transactions between the Parent Company and its subsidiaries are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group.
Acquisitions of subsidiaries are dealt with by the acquisition method. The acquisition method involves the recognition at fair value of all
identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not
they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of
the subsidiary are included in the Group Statement of financial position at their fair values, which are also used as the basis for
subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable
intangible assets. Goodwill represents the excess of fair value of consideration transferred over the fair value of the Group’s share of
the identifiable net assets of the acquired subsidiary at the date of acquisition.
Revenue
Properties are leased out on operating leases. Rental income is recognised within revenue (excluding VAT) on a straight-line basis
over the lease and direct operating expenses are reported within cost of sales.
18
Interest
Interest is recognised using the effective interest method which calculates the amortised cost of a financial asset and allocates the
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the net carrying amount of the financial asset.
Dividends
Dividends are recognised when the shareholders’ right to receive payment is established.
Taxation
Current tax is the tax currently payable based on taxable profit/(loss) for the period.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not
provided if reversal of these temporary differences can be controlled by the Group or Company and it is probable that reversal will not
occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the Group
or Company are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that
the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets
and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Statement of comprehensive income,
except where they relate to items that are charged or credited directly to other comprehensive income or equity, in which case the
related deferred tax is also charged or credited directly to other comprehensive income or equity.
Financial assets
Financial assets are divided into the following categories: loans and receivables (including trade and other receivables) and fair value
to profit and loss. Financial assets are assigned to the different categories by management on initial recognition, depending on the
purpose for which they were acquired. The designation of financial assets is re-evaluated at every reporting date, at which point a
choice of classification or accounting treatment is available.
All financial assets are recognised when the Group or Company becomes a party to the contractual provisions of the instrument.
Financial assets other than those categorised as at fair value through profit or loss are recognised at fair value plus transaction costs.
Fair value through profit and loss assets are initially recognised at cost in accordance with IFRS 9 and are subsequently remeasured at
the reporting date. The movement in fair value is recognised in the Statement of profit and loss and other comprehensive income in
accordance with IFRS 13.
Fair value through profit and loss assets consist of investments in a listed entity.
Subsequent to initial recognition they are measured at fair value, and changes therein, other than impairment losses, are recognised in
other comprehensive income and presented in the revaluation reserve in equity. When an investment is derecognised, the gain or loss
accumulated in equity is reclassified to the Statement of comprehensive income.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Trade receivables and certain other current assets are classified as loans and receivables. Loans and receivables are measured
subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their
value through impairment or reversal of impairment is recognised in the Statement of comprehensive income.
Provision against trade receivables is made when there is objective evidence that the Group or Company will not be able to collect all
amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the
difference between the asset’s carrying amount and the present value of estimated future cash flows. An assessment for impairment is
undertaken at least at each balance sheet date.
A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is
transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows
of the asset have been transferred or the Group or Company retains the contractual rights to receive the cash flows of the asset but
assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for
derecognition if the Group or Company transfers substantially all the risks and rewards of ownership of the asset, or if the Group or
Company neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.
Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group or Company becomes a
party to the contractual provisions of the instrument. Financial liabilities are recorded initially at fair value, net of direct issue costs.
19
They are subsequently measured at amortised cost using the effective interest method, with interest related charges recognised as an
expense in finance cost in the Statement of comprehensive income. Finance charges, including premiums payable on settlement or
redemption and direct issue costs, are charged to the Statement of comprehensive income on an accruals basis using the effective
interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which
they arise.
A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or
expires. When the obligation is extinguished by conversion to equity, a gain or loss is recognised in respect of the difference between
the carrying value of the debt compared to the fair value of the shares issued.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at their fair value in the Statement of financial position. Fair values are obtained from observable market prices or valuation
techniques such as discounted cash flow models. Generally, the best evidence of the fair value of a derivative at initial recognition is
the transaction price (i.e. the fair value of the consideration given or received). All derivatives are carried as assets when the fair value
is positive and as liabilities when the fair value is negative. Derivatives are used for matching exposures on assets and liabilities.
Where separate derivative instruments exist these are measured at fair value through profit or loss under IAS 39. The fair value liability
is recognised in the Statement of financial position, with the associated expense recognised in profit or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that
are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Equity
Equity comprises the following:
• Share capital represents the nominal value of equity shares;
• Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of
expenses of the share issue;
• Convertible loan represents the equity element of a convertible loan which has now been settled;
• Retained earnings represents retained profits/(losses);
• Merger reserve represents the excess of the nominal value of shares issued in the acquisition of a subsidiary undertaking and the
nominal value of the subsidiary undertaking’s shares; and
• Revaluation reserve represents the excess of the current and probable future value of an asset over the recorded historic cost of that
asset.
Segment reporting
In accordance with IFRS 8, information is disclosed to enable users of financial statements to evaluate the nature and financial effects
of the business activities in which the Group engages. In identifying its operating segments, management differentiates between
investment activities and rental of its freehold and leasehold properties. These segments are based on the information reported to the
chief operating decision-maker. The rental segment utilises its freehold properties within investment property. The Group’s result to
date is substantially derived from investment activities.
Share-based employee remuneration
The Group operates equity-settled share-based remuneration plans for its employees. None of the Group’s plans feature any options
for a cash settlement.
If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available
estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable.
Standards in issue but not yet effective
There were no IFRS standards or IFRIC interpretations adopted for the first time in these financial statements that had a material
impact on the Group or Company financial statements.
The following accounting standards, amendments to existing standards and interpretations are not yet effective and have not been
adopted early by the Group or Company:
•
IFRS 17 Insurance Contracts (EU effective date 1 January 2021)
The adoption of these standards, amendments and interpretations is not expected to have a material impact on the Group or
Company’s result for the year.
Critical judgements in applying the accounting policies
In the process of preparing the accounting policies, the Directors have applied critical judgements in adopting the going concern basis
to the financial statements as more fully set out in the basis of preparation paragraph of these accounting policies.
20
Key sources of estimation uncertainty
Fair value of loans
The fair value of other loans at initial recognition has been calculated in the absence of information for directly comparable instruments
as no active market exists for such items. Accordingly, the inputs to the valuation techniques and specifically the market-related rate of
interest rely on other sources of data, including the Directors’ knowledge of similar loans. The carrying value of other loans included in
borrowings was £nil (2017: £nil). The subsequent measurement of loans is at amortised cost (Note 16).
21
Notes to the financial statements
for the year ended 31 December 2018
1. Income and segmental analysis
The Group generates income by way of profits or losses on investments. It also generates rental and other related income from letting
properties and has provided a loan to a housebuilder under a mezzanine funding arrangement. These operating segments are
monitored by the Executive Directors and strategic decisions are made on the basis of segment operating results. The segmental
analysis of operations is as follows:
Segmental analysis by activity
Segment result
Investment activities:
Administrative expenses
Rental activities:
Net rental income
Administrative expenses
Operating profit
Finance income
Finance costs
Other gains and losses
(Loss)/Profit before tax
Segment assets
Rental activities:
Current assets – other
Investment activities:
Non-current assets – investment
Other
Total assets
Segment liabilities
Investment activities:
Current liabilities
Rental activities:
Current liabilities
Total liabilities
Total assets less total liabilities
The activity of investments arose wholly in the United Kingdom.
2018
£’000
2017
£’000
(105)
(105)
(1)
13
12
(93)
6
—
(411)
(498)
2018
£’000
—
—
1,315
185
1,500
2018
£’000
224
224
—
—
224
(232)
(232)
104
(3)
101
(131)
—
(54)
789
604
2017
£’000
1,992
1,992
—
—
1,992
2017
£’000
184
184
34
34
218
1,276
1,774
22
2. Operating (loss)/profit
Operating (loss)/profit is stated after charging:
Auditor’s remuneration for:
Audit services
– audit of the Group’s annual accounts
– audit of subsidiaries pursuant to legislation
Other services
– taxation services
3. Finance costs and finance income
Finance costs
Short-term loans
Finance income
Short-term loans
4. Directors and employees
Staff costs during the year were as follows:
Wages and salaries
2018
£’000
2017
£’000
7
4
2
7
4
2
2018
£’000
2017
£’000
—
—
6
6
54
54
—
—
2018
£’000
29
2017
£’000
104
The Directors and employees of the Group have waived £643,000 of remuneration as at 31 December 2018 (2017: 591,000), which
includes £52,000 in respect of the current year. See Remuneration Report on page 31 and 32.
The average number of employees (including Directors) of the Group was:
Management of investments and properties
2018
Number
3
2017
Number
3
Further details of individual Directors’ remuneration, pension fund and interests in the Company are shown in the table on page 31.
5. Income tax expense
There is no tax charge for the current year. The tax assessed for the prior year is lower than the standard rate of corporation tax in the
UK of 19% (2017: 19%). The differences are explained as follows:
(Loss)/Profit on ordinary activities before taxation
(Loss)/Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2017:
19%)
Effect of:
Disallowable items
Utilisation/Addition of tax losses arising
Total tax charge
2018
£’000
(498)
(95)
98
(3)
—
2017
£’000
604
114
(3)
(79)
32
The Group has unrecognised deferred tax assets of £1,438,000 (2017: £1,442,000) as a result of profits in the current year and losses
in prior periods carried forward of £7,570,000 (2017: £7,590,000).
6. (Loss)/Gain per ordinary share
The (loss)/gain per ordinary share is based on the weighted average number of ordinary shares in issue during the year of 51,824,942
ordinary shares of 0.1p (2017: 51,824,942 ordinary shares of 0.1p) and the following figures:
(Loss)/Profit attributable to equity shareholders (£’000)
(Loss)/Earnings per ordinary share
2018
(498)
(0.40)p
2017
572
0.46p
Diluted earnings per share is taken as equal to basic earnings per share as the Group’s average share price during the period is lower
than the exercise price of the share options and therefore the effect of including share options is anti-dilutive.
23
7. Investments
Group and Company
Investments listed on a recognised stock exchange
2018
£’000
1,315
2017
£’000
—
In accordance with IFRS 7, financial instruments are measured by level of the following fair value measurement hierarchy:
• Level 1: quoted prices in an active market for identical assets or liabilities. The fair value of financial instruments traded in active
markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and
regularly available 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 Group is the closing price on the last day of the financial year of the
Group. These instruments are included in level 1 and comprise FTSE and AIM-listed investments classified as held at fair value
through profit or loss.
• Level 2: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.
These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-
specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
The Group held an interest rate swap which was classified as level 2. Further details can be found in Note 16.
• Level 3: the fair value of financial instruments that are not traded in an active market (for example, investments in unquoted
companies) is determined by using valuation techniques such as earnings multiples. If one or more of the significant inputs is not
based on observable market data, the instrument is included in level 3.
There have been no transfers between these classifications in the period (2017: none). The change in fair value for the current and
previous years is recognised through profit or loss.
All assets held at fair value through profit or loss were designated as such upon initial recognition. Movements in investments held at
fair value through profit or loss are summarised as follows:
Cost
At 1 January 2017
At 31 December 2017
Fair value losses
At 1 January 2017
Movement in fair value losses
At 31 December 2017
Fair value
At 31 December 2017
At 31 December 2016
Cost
At 1 January 2018
At 31 December 2018
Fair value losses
At 1 January 2018
At 31 December 2018
Fair value
At 31 December 2018
At 31 December 2017
Level 1
Equity
investments
£’000
Level 3
Financial
instruments
£’000
Total
investments
£’000
(11)
(11)
4,907
4,907
4,896
4,896
11
—
11
—
—
—
1,705
—
(390)
1,315
—
(4,907)
—
(4,907)
(4,896)
—
(4,896)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
24
8. Investment property
Fair value
At 31 December 2016
Disposal
At 31 December 2017
Fair value adjustment
At 31 December 2018
At 31 December 2017
Residential
properties
Level 3
£’000
2,844
(2,844)
—
—
—
—
The different valuation method levels are defined below.
• Level 1: quoted prices (unadjusted) in an active market for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices; and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
These levels are specified in accordance with IFRS 13 Fair Value Measurement. Our property valuation approach is set out below.
Property valuations are inherently subjective as they are made on the basis of assumptions made by the valuer which may not prove to
be accurate. For these reasons, we have classified the investment properties as Level 3 as defined by IFRS 13.
The direct operating expenses for the period arising from the investment properties were £1,000 (2017: £34,000). The investment
properties generated income of £nil (2017: £138,000) during the period.
9. Fair Value through profit and loss assets
Cost
At 1 January 2018
Additions
At 31 December 2018
Fair value movements
At 1 January 2018
Fair value adjustment
At 31 December 2018
Fair value
At 31 December 2018
At 31 December 2017
Investment
£’000
—
1,705
1,705
—
(390)
(390)
1,315
—
Energiser Investments plc acquired shares in KCR Residential REIT plc at a price of £0.70 per share. The investment was classed as
fair value through profit and loss in accordance with IFRS 9. The investment was valued downwards at the year end in accordance with
IFRS 13. The closing value at 31 December 2018 was £1,315m.
10. Trade and other receivables
Other debtors
In the opinion of the Directors, fair value is equal to carrying value.
Group
2018
£’000
8
8
2017
£’000
33
33
Company
2018
2017
£’000
£’000
1,277 1,278
1,277 1,278
25
11. Trade and other payables
Current
Trade creditors
Amounts owed to subsidiary undertakings
Other creditors and accruals
Tax and social security
Total trade and other payables
In the opinion of the Directors, fair value is equal to carrying value.
12. Share capital
Allotted, called up and fully paid
123,912,956 (2017: 123,912,956) ordinary shares of 0.1p each
2,268,113,165 (2017: 2,268,113,165) deferred shares of 0.1p each
Ordinary shares
At 1 January 2018
At 31 December 2018
Group
Company
2018
£’000
2017
£’000
2018
£’000
2017
£’000
—
—
190
34
224
3
—
182
33
218
—
1,754
188
2
1,944
1
1,751
182
1
1,935
2018
£’000
124
2,268
2,392
2018
Number
2018
£’000
2017
Number
123,912,956
123,912,956
124 123,912,956
124 123,912,956
2017
£’000
124
2,268
2,392
2017
£’000
124
124
26
Deferred shares
The deferred shares have:
• no right to any dividend;
•
•
the right to receive notice of any general meeting and to attend such meeting but no right to vote thereat; and
the right on a winding up or other return of capital (after payment of the debts and liabilities of the Company and an amount equal to
the amounts paid up, or credited as paid up, including any premium on the ordinary shares of the Company, together with any
unpaid arrears of dividend declared on such shares) to an amount equal to the amounts paid up or credited as paid up on such
deferred shares.
Share option scheme
The Group operates an unapproved share option scheme. Awards under each scheme are made periodically to employees. The share
options in this scheme vest three years after the date of grant and have an exercise period of seven years. The options may only be
exercised by option holders while they are still employees of the Group. If death in service occurs the options can be exercised (to the
extent that they have vested) by the option holder’s personal representatives for a period of 12 months following the date of death. If an
option holder ceases to be employed and the Directors deem the option holder to be a ‘Good Leaver’ the options can be exercised (to
the extent that they have vested) for a period of six months following the date of cessation of employment.
A reconciliation of option movements over the year ended 31 December 2018 is shown below:
Outstanding at 31 December 2017
Lapsed during the year
Granted during the year
Outstanding at 31 December 2018
At 31 December 2018 outstanding options granted over ordinary shares were as follows:
Share option scheme
Company unapproved
Exercise price
3.25p
Number
1,500,000
Company unapproved
2p
10,850,000
Number
12,350,000
—
—
12,350,000
Exercise
price
—
—
Dates exercisable
15 February 2020 to 15 February
2027
4 October 2019 to 3 October 2026
Further details on the share options can be found in the Remuneration Report on pages 31 and 32.
The Group has used the Black-Scholes formula to calculate the fair value of outstanding share options. The assumptions applied to the
Black-Scholes formula for share options issued and the fair value per option are detailed in the table below for options issued in the
year. The charge calculated up to 31 December 2018 is £nil (2017: £nil). Volatility was calculated using historical share price
information.
Expected life of options based on options exercised to date
Volatility of share price
Dividend yield
Risk free interest rate
Share price at date of grant
Exercise price
Fair value per option
Unapproved
share options
2018 grant
3 years
1.1%
0%
2.05%
1.7p
2p
£0.00
13. Retirement benefits
Defined contribution pension scheme
The Group operates a defined contribution scheme for the benefit of certain employees and Directors. The assets of the scheme are
administered by trustees in a fund independent from those of the Company. There were no contributions during the year (2017: £nil).
14. Commitments under operating leases
The Group and Company have no commitments under operating leases (2017: £nil).
27
15. Transactions with related parties
Group and Company
Highlands Village Limited, a company in which S D Wicks and N Malde are both Directors and shareholders holds 17,375,000 ordinary
shares that were issued at 2p each in satisfaction of a prior year’s loan and £66,500 of accrued interest.
Company
Cedar Green Homes Limited, Energiser (Nominee) Limited and Development Funding Limited are wholly-owned subsidiaries of
Energiser Investments plc. Energiser Investments plc is exempt from the requirements of IAS 24 to disclose transactions with the
companies.
The key management personnel of the Company are considered to be the Directors.
16. Financial instruments and risk profile
The Group’s and Company’s financial instruments comprise of its investment portfolio, cash balances, debtors and creditors that arise
directly from its operations and derivative instruments. The Group and Company are exposed to risk through the use of financial
instruments and specifically to liquidity risk, market price risk and credit risk, which result from the Group’s operating activities.
The Board’s policy for managing these risks is summarised below.
Liquidity risk
The Group and Company make investments for the long term. Accordingly, the Group and Company rarely trade investments in the
short term. The group currently have investments in KCR Residential REIT plc. As this is a traded investment it is deemed liquid.
Market price risk
The Group and Company are exposed to market price risk as shown by movements in the value of its equity investments. Any such
risk would be regularly monitored by the Directors.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The
Group monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as presented on the face of the
Statement of financial position. The movement in the capital to overall financing ratio is shown below:
Equity
Less: cash and cash equivalents
Capital
Equity
Borrowings
Overall financing
Capital to overall financing
Group
Company
2018
£’000
1,276
(177)
1,099
1,276
—
1,276
86.1%
2017
£’000
1,774
(1,959)
(185)
1,774
—
1,774
(10.4)%
2018
£’000
803
(156 )
647
2017
£’000
1,292
(1,949)
(657)
803
—
803
80.6%
1,292
—
1,292
(50.9)%
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
Credit risk
The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date.
Trade and other receivables
Cash and cash equivalents
Group
2018
£’000
8
177
185
2017
£’000
33
1,959
1,992
Company
2018
£’000
1,277
156
1,433
2017
£’000
1,278
1,949
3,227
The Directors consider that all the above financial assets are of reasonable quality. No amounts shown above are considered to be
past their due date.
28
Summary of financial assets and liabilities by category
The carrying amount of financial assets and liabilities as recognised at the balance sheet date of the reporting periods under review
may also be categorised as below:
Current assets
Trade and other receivables
Cash and cash equivalents
Loans and receivables
Fair value though profit and loss assets
Current liabilities
Financial liabilities carried at amortised cost
Non-current liabilities
Financial liabilities carried at amortised cost
Group
2018
£’000
8
177
185
1,315
224
—
2017
£’000
33
1,959
1,992
Company
2018
£’000
2017
£’000
1,277
156
1,433
1,315
1,278
1,949
3,227
—
—
218
1,945
1,935
—
—
—
The financial instruments held at fair value through profit or loss have been valued in accordance with the International Private Equity
and Venture Capital Valuation guidelines. In the current year, these are determined by reference to quoted prices where there is an
active market for identical assets or liabilities. Otherwise, the fair value is determined by using valuation techniques such as earnings
multiples. There is no material difference between the carrying value and fair value of the Group’s aggregate financial assets and
liabilities.
Interest rate risk profile of financial liabilities
Floating rate financial liabilities
Fixed rate financial liabilities
Financial liabilities on which no interest is paid
Group
2018
£’000
—
—
224
224
2017
£’000
—
—
218
218
Company
2018
£’000
—
—
1,945
1,945
2017
£’000
—
—
1,935
1,935
29
Sensitivity analysis
The following table illustrates the sensitivity of profit/(loss) and equity to a reasonably possible change in interest rates of +/- 1%. These
changes are considered to be reasonably possible, based on observation of current market conditions. The calculations are based on a
change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive
to changes in interest rates. All other variables are held constant.
Group
31 December 2018
31 December 2017
Company
31 December 2018
31 December 2017
(Loss)/Profit for the year
£000
+ 1%
(503)
578
- 1%
(493)
566
(Loss)/Profit for the year
£000
+ 1%
(494)
(74)
- 1%
(484)
(72)
Equity
£000
+ 1%
1,289
1,792
Equity
£000
+ 1%
811
1,305
- 1%
1,263
1,756
- 1%
795
1,279
17. Subsidiary undertakings
At 31 December 2018 Energiser Investments plc held 50% or more of the equity of the following:
Company name
World Life Sciences Limited
Urco Limited
Development Funding Limited
Energiser (Nominee) Limited
Cedar Green Homes Limited
Country of registration Principal activity
England
England
England
England
England
Dormant
Dormant
Development finance
Development finance
Property development
Holding
100%
100%
100%
100%
100%
Class of shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
18. Company information
The Company is a Public Limited Company registered in England and Wales. The registered office is Decimal Place, Chiltern Avenue,
Amersham, Buckinghamshire, HP6 5FG.
19. Ultimate controlling party
The Directors believe that there is no overall controlling party of the Company.
20. Events after the balance sheet date
As referenced in the chairman’s statement.
30
Remuneration Report
for the year ended 31 December 2018
The Board submits its Remuneration Report for the year ended 31 December 2018.
The policy of the Board is to provide executive remuneration packages designed to attract, motivate and retain Directors of the calibre
necessary to maintain the Company’s position as a market leader and to reward them for enhancing shareholder value and return. It
aims to provide sufficient levels of remuneration to do this but to avoid paying more than is necessary. Due to the Board’s current size it
does not have a Remuneration Committee.
Main elements of remuneration
The three main elements of the Executive Directors’ remuneration package are basic annual salary, performance-related bonus and
share option incentives.
Basic annual salary
Any Executive Director’s basic salary is reviewed annually by the Board. In deciding upon appropriate levels of remuneration, the
Board believes that the Company should offer average levels of base pay reflecting individual responsibilities compared to similar jobs
in comparable companies.
Summary of Directors’ remuneration
Aggregate emoluments
Salary/
fees
2018
£’000
Salary/fees
waived
2018
£’000
Bonus
2018
£’000
Total
2018
£’000
38
29
—
14
81
(38)
—
—
(14)
(52)
—
—
—
—
—
—
29
—
—
29
Total
2017
£’000
—
104
—
—
104
Company contributions
to money purchase
pension scheme
2018
£’000
2017
£’000
—
—
—
—
—
—
—
—
—
—
Executive
N Malde
D White
J Depasquale
Non-executive
S Wicks
The Directors and employees of the Group have waived £643,000 of remuneration as at 31 December 2018 (2017: £591,000), which
includes £52,000 in respect of the current year.
Non-executive Director
The remuneration of the Non-executive Director is determined by the Board within the limits set out in the Articles of Association. A
contract of service is currently being prepared for the Non-executive Director.
Directors’ interests
The interests of the Directors and their families in the ordinary shares of the Company are shown below:
Ordinary shares
S D Wicks*
N Malde†
D White
Share options
S D Wicks
N Malde
D White
As at 31 December 2018
0.1p Ordinary shares
As at 1 January 2018
0.1p Ordinary shares
35,289,930
12,689,964
1,750,000
3,050,000
3,050,000
6,250,000
34,327,355
12,415,146
1,750,000
3,050,000
3,050,000
4,750,000
* The beneficial holding of Stephen Wicks comprises his direct shareholding of 28,558,855 shares and an interest of 6,731,075 shares
in the Company held by way of his shareholding in Highlands Village Limited, of which he owns 38.74%.
† The beneficial holding of Nishith Malde comprises his direct shareholding of 11,230,464 shares and an interest of 1,459,500 shares
in the Company held by way of his shareholding in Highlands Village Limited, of which he owns 8.4%.
The share options are part of a Company Unapproved scheme and are exercisable at 2p between 4 October 2019 and 3 October 2026
and were granted during the year. Details of the fair value of these options can be found in note 12.
31
The options granted to Mr White are subject to the multiple performance-related vesting criteria outlined below:
• Aggregate increase in share capital of £1.25m through the issue of shares for cash or used to acquire assets;
•
•
• Excluding any further equity fundraising but including profits in connection with investments made using further equity
25% will vest after 12 months from the date of grant;
25% will vest after 24 months from the date of grant;
fundraising:
o 25% will vest once the Company's net asset value increases to £2.2m; and
o 25% will vest once the Company's net asset value increases to £2.87m.
Other than shown above, no Director had any interest in the shares of the Company or any of its subsidiaries at 31 December 2018.
ON BEHALF OF THE BOARD
Stephen Wicks
Non-executive Chairman
21 May 2019
32