Annual Results for year ended 31 May 2019
Craven House Capital plc
("Craven House" or the "Company")
Annual Results for year ended 31 May 2019
CRAVEN HOUSE CAPITAL PLC
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 MAY 2019
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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 2019.
As forecast in the 2018 accounts, the year to May 2019 saw an increased level of activity in North America; In January 2019, the Company successfully completed the sale of its subsidiary, IIU Inc., to LM Funding America Inc ("LMFA") for $5.1m. $3.6m of this consideration was paid by way of a convertible note and we retain the option to convert this note into shares in LMFA (subject to LMFA shareholder approval) and we have acquired further shares in LMFA in the market. In addition we made a number of investments into other publicly listed securities during the period as outlined in the Investment Manger's report below.
Net Asset Value per share basis fell marginally from $9.95 to $9.89 (prior to accrual of performance fees payable to the Investment Manager). An increase in the gross value of Craven's investment holdings (from $27.0m to $27.4m) was offset marginally by an increase in inter-company liabilities. Total liabilities relative to assets remain very low; creditors external to the Company totaled $1.15m at the year end, $800,000 of which is in the form of a convertible loan not due until 2022 owing to GEM Global Yield Fund LLC relating to historic fees ($300,000 of this loan was converted post year-end).
In accordance with the terms of the Management Services Agreement, between the Investment Manager and the Company, as set out in the annual report for the year ended 31 May 2014, the Investment Manager is entitled to receive a management performance fee equal to 20% of the increase in the net asset value per share above the prior 'high-water mark', subject to a hurdle rate of at least 5%. The Investment Manager agreed to waive payment of the performance fee in the prior two periods (May 2017 and May 2018). For the year to May 2019 the Investment Manager has been awarded a performance fee of $1.66m, which has been accrued under trade payables. This fee is calculated on the increase in NAV per share from the previous 'high-water mark' of $6.57 in May 2016 to the NAV per share of $9.89 per share as of May 2019. As has been the case with all prior performance fees, the Investment Manager will accept payment of fees in shares of Craven at $12.50 per share. This value represents the highest price at which shares were issued to investors and is a significant premium to both the NAV and the prevailing share price. The board are pleased to report this outcome as it confirms, once again, the long-standing position of the Investment Manager that their interests are aligned with Craven's shareholders.
As has been reported previously, the High Court has approved the reduction in share capital related to the proposed share buy-back. We will proceed with completion of this process at a time when the Company benefits from a surplus in working / investment capital and feels that other investment opportunities do not offer the potential for more favourable returns than the acquisition of our own shares. Further announcements will be made on this subject in due course as required.
Mark Pajak Acting Chairman
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CRAVEN HOUSE CAPITAL PLC
INVESTMENT MANAGER'S REPORT
FOR THE YEAR ENDED 31 MAY 2019
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Statement by the Investment Manager
For the year ending 31 May 2019, Craven House Capital Plc (the "Company" or "Craven") reported an increase in the gross asset value of its holdings from $27.0m to $27.4m. The Net Asset Value on a per share basis fell marginally from $9.95 to $9.89 (prior to accrual of performance fees payable to the Investment Manager).
The Company's investments are held at fair value in accordance with the IPEVC guidelines. Details of valuation methodologies are provided in the notes to the accounts. A summary of the Company's investments is as follows with further information provided in notes 8 and 14 below;
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DLC Holdings Corp.
During the period the performance of DLC remained steady with its agricultural land holdings in Brazil and macadamia factory in South Africa maintaining their value. The valuation of Craven Industrial Holdings Plc's direct shareholding in DLC illustrated in the table above has reduced as a result of the transfer of shares in DLC from Craven Industrial Holdings to Craven House Capital North America LLC during the period. Shares in DLC ended the period trading at CAD$0.27 per share vs. CAD$0.25 per share in May 2018.
DLC is aggressively seeking acquisitions in North America that will add value on a per share basis and balance the portfolio between emerging market assets and developed market assets. These transactions will have the added benefit of reducing Craven House's percentage ownership in the business. Currently DLC's ability to grow while it remains a subsidiary of Craven House is constrained by the prospective triggering of reverse-takeover regulations at the Craven level. DLC and Craven House are actively evaluating ways to reduce Craven's ownership to a level where DLC will not be deemed a controlled subsidiary. We have great confidence in the pipeline of acquisitions currently under evaluation by DLC and believe DLC will prove to be a very valuable and profitable holding for Craven House as well as a source of future liquidity. Further information can be found in DLC's public filings.
CRAVEN HOUSE CAPITAL PLC
INVESTMENT MANAGER'S REPORT - continued FOR THE YEAR ENDED 31 MAY 2019
Craven House Angola Lda.
The reduction in the valuation of our holding in Craven Angola reflects loan repayments received during the year which reduced the outstanding principal of balances owed to Craven Angola.
The economic situation on the ground in Angola remains challenging for domestic and foreign corporations. The country's near total dependency on the hydrocarbon industry and significant indebtedness to China have dampened the economy since the collapse in oil prices over four years ago. Capital controls remain in place and the availability of foreign currency remains minimal. This is especially acute in an economy that is dependent on the importation of most essential goods and services. When we entered the market we were expecting the economic cycle to be directly tied to the oil price and this has proven to be the case. Although we are hedged in our foreign currency exposure, we recognise that the currency movements have been painful for our operating partners (counterparties) who continue to adjust and reposition their offerings as the currency devalues. We view ourselves more as partners than lenders and when we commit to a partnership in a challenging emerging market we enter into the relationship ready for the ebb and flow of crisis and recovery. 7 Mobile has been able to adjust to the currency fluctuations and is wisely managing inventory and pricing to ensure they do not oversupply the market. While they can re-price their handsets and tablets in local currency to maintain margins, the consumer's purchasing power takes longer to catch up. FMCH is in a privileged position because it sells most of its refined petroleum products in US dollars to major international companies who pay in US dollars. We are prepared for a long slow period of stagnation in Angola until the reforms initiated by the new government take hold. After decades of authoritarian rule under the Dos Santos family, local businessmen and international investors are watching with a wary eye to see just how liberal the market reforms will be over the next four to five years. Even with the best intentions and the most enlightened free market reforms, we believe the Angolan economy will not turn a corner until oil prices remain comfortably over $60 a barrel for a sustained period of time.
Qeton Ltd.
Qeton continued to import electronics to Angola from China during the period albeit at a more conservative pace than in the previous year. Adjusted EBITDA earnings for the period to May 2019 were €148,075 vs. €612,753 for the prior year, resulting in a lower carrying value for this investment which is based on a multiple of EBITDA. The economic situation in Angola remains challenging and 7 Mobile's management has prudently reduced inventory until the period of uncertainty passes. Consumer confidence is lower year over year and the mobile device industry is not immune to the effects of the weaker currency. Demand for new mobile devices remains strong but the consumer is waiting longer to replace their existing handsets than they were before the recent rounds of currency devaluation. Qeton remains profitable with high margins despite the lower volume. We believe that over time the importation of consumer electronics in Angola and other African nations will be a growth business.
Craven House Capital North America LLC
The increase in the valuation of our holding in Craven House North America has resulted from the sale of the IIU business to LMFA during the period as well as the transfer of shares in DLC Holdings Corp. from the parent company Craven Industrial Holdings Plc.
As discussed in the 2018 report, North America presents significant opportunities to build a portfolio of private and publicly listed securities. The initial investment in IIU and subsequent sale to LMFA is the first of what we hope to be a series of private acquisitions that are subsequently sold to or merged with a publicly listed firm. As is detailed elsewhere in this report, we believe market dynamics provide for rare opportunities in micro cap companies listed in the US and Canada. There is an excellent opportunity to become a supportive and active shareholder in companies that have been abandoned by a market fixated on passive investing products that by design cannot purchase companies with a market capitalisation below $100 million dollars.
CRAVEN HOUSE CAPITAL PLC
INVESTMENT MANAGER'S REPORT - continued FOR THE YEAR ENDED 31 MAY 2019
Craven House Capital North America LLC - continued
In the first volume of "Of Permanent Value", Andrew Kilpatrick highlights that in the early years of the Buffet Partnership, Warren Buffet divided investments into two primary categories; The first were undervalued securities where he believed the market would eventually re-price the company higher and the second and more interesting were potential control positions where the partnership could slowly build a controlling position in an undervalued company and then take active measures to unlock value. We are taking a similar view towards the small and micro capitalizations companies we own in the US. In addition to LMFA which falls into the latter category, we are building positions in several under the radar companies we believe have been completely missed by the investing population either by neglect or design. Below are a few anonymised examples, the identities of which we have not disclosed because trading volumes in these stocks are low and we do not want to cause price movement as a result of our commentary: Mining Companies: We are building meaningful positions in two listed mining companies. Both now have market capitalizations below $100 million dollars with a very strong shareholder base of founding partners and institutional investors. However, commodity companies, especially small miners are completely out of favour. Both companies have lost over 60% of their market capitalisation as their shares sold off on very limited volume. As their market capitalisations decreased fund managers with prohibitions against holding companies below a certain size became forced sellers regardless of the manager's view of the company's prospects. Because of their small size they are not included in any indexes and they are not in the data set of the algorithms who dominate the market. They have no built in market. These companies both have cash flowing operating mines that are fully financed and producing at or ahead of plan. Both are selling for a fraction of their replacement cost and both have shareholder friendly management teams who are significant shareholders in the company. All of the assets are in mining friendly jurisdictions where the rule of law is well established. Why do companies such as these sell at such a low valuation? The answer is that when you combine a cyclical industry with the recent abandonment of small public companies by the asset management industry asymmetrical opportunities arise.
By way of background, the last metals and mining bull market ran from 2002 until 2011. Capital flowed aggressively into the largest mining companies. When the global financial crisis hit fiscal and monetary stimulus in China and other emerging markets increased demand for commodities while all other market sectors suffered. Commodities seemed immune to the overall economic crisis and more capital flowed into the sector. Management teams were encouraged by analysts and shareholders to build capacity and thus borrowed billions to finance an exploration and acquisition spree. When the commodity cycle turned and the major international mining companies started haemorrhaging cash, investors demanded they reduce debt and limit CAPEX. Both of the companies we own bought assets from global companies for a fraction of what the majors had invested in the projects. This happens frequently in the metals and mining industry. The small companies then apply focus and financial discipline to develop these assets. If history is any guide these companies or their assets will be bought for a significant premium when the cycle turns. The current bear market has been brutal and many marginal companies have gone bust. We believe we have at least another year to quietly build our position in these superior companies before one or both are sold at a significant premium.
Energy Infrastructure: A similar story exists within the energy infrastructure complex. The oil and gas industry has been abandoned by the market since the oil crash of 2015. While only a few short years ago investors couldn't get enough of pipelines and storage companies, today they are being priced as if fossil fuels and petroleum based products will no longer be needed in a few years. During the bull market for oil and gas companies, the midstream energy companies could tap the capital markets at will for almost any growth initiative. Public companies expanded at a rapid pace with secondary equity offerings a regular occurrence. Then when the oil price collapsed so did the funding. The biggest players could no longer raise equity to fund committed capital expenditures and their debt loads looked precarious. This also coincided with the US Federal Reserve's foray into quantitative tightening. It was a perfect storm and investors fled the sector. Management teams were forced to postpone or cancel projects. Struggling E&P customers started to pay slowly or cancel contracts. Ratings agencies became concerned. As a final act of capitulation management teams slashed or suspended dividends.
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CRAVEN HOUSE CAPITAL PLC
INVESTMENT MANAGER'S REPORT - continued
FOR THE YEAR ENDED 31 MAY 2019
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Craven House Capital North America LLC - continued
The income investors who had long been attracted to the utility like distributions sold out and share prices cratered. Nearly five years later the balance sheets are stronger, revenues and profits are increasing and dividends have been resumed.
Regardless of the improved outlook, many of these companies are trading as if they are heading for bankruptcy. One midstream company in which we have a growing position is profitable, pays an 11% dividend, owns a nationwide portfolio of pipelines and storage assets, and requires no new funding to complete the next four years of growth projects. Its balance sheet is getting stronger while its share price is hitting new lows. We believe it is an ideal time to build a position and compound the distributions.
Another company in which we own a position has been around since the late 19th Century and pays nearly a 15% dividend. It is completely ignored by the market and most institutional investors won't purchase the shares because the company is controlled by a family who has owned their stake for almost half a century. We like the stability of a family with a long-term multi generational outlook but it doesn't seem to coincide with the current flavour of corporate governance.
A third company we own is one of the largest manufacturers and distributors of asphalt and other specialty petroleum products. They are well positioned for the growth in infrastructure spending and pay a steady distribution of over 10%. This company also has a family business as the controlling shareholder. They have the type of long-term outlook that we admire. We have a position in both the common shares and preferred shares. We believe that the entire sector will rebound and these shares will be re-priced to yield in the 5% range. That should result in over a 100% increase from our cost basis. In the interim we are happy to reinvest distributions and compound at a rate well above 10% annually. It is important to note that the tax situation in the US and Canada is relatively complicated for foreign investors. However, because we invest through our local subsidiaries we are not only not subject to withholding taxes, we are also able to take advantage of significant tax benefits specific to the oil and gas industry in North America. Over time these tax savings are significant and allow for more rapid compounding.
Kwikbuild Corporation Ltd
The reduction in the carrying value of KwikBuild Corporation has resulted from a revised valuation being applied to the real-estate holdings owned by KwikBuild's South African subsidiary, combined with a weakening of the Rand vs. the US Dollar during the period.
Where We Are Today
As highlighted in last year's annual letter and the four previous letters as well, we remain surprised by the current markets. Political risk and economic risks are elevated beyond levels we can comprehend. According to Morningstar Research and Deutsche Bank over 90% of the volume on the NYSE is derived from algorithmic trading, exchange traded funds or Index linked products. Funds continue to flow into products that require no analysis of the underlying companies. The flood of capital into structured products without the need for price discovery and the ability of corporations to borrow at very low rates to repurchase shares has led to rising share prices of every company included in an index. In our estimation, the price of these shares and therefore the index has risen largely without an increase in the actual value of the underlying businesses. The major share markets are determined by algorithms and capital flows.
If one considers the current situation in the equity markets odd then the debt market is truly mystifying. Unprecedented monetary policies enacted by the world's central banks have resulted in an artificial cycle of significant malinvestment and price distortion. Fixed income investors in the developed markets cannot cover the cost of administration, not to mention inflation with current yields. The market for the trillions of dollars of negative interest rate sovereign bonds is concentrated in regulated institutions such as banks and pension funds. Government regulators impose liquidity standards that necessitate the need to hold sovereign debt regardless of yield. The other buyer of those issues are managers so fearful of future returns elsewhere yet mandated to hold liquid securities. These bond buyers must prefer a guaranteed small loss over the prospect of a much larger potential losses in the corporate debt or equity markets.
CRAVEN HOUSE CAPITAL PLC
INVESTMENT MANAGER'S REPORT - continued
FOR THE YEAR ENDED 31 MAY 2019
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Where We Are Today - continued
Many investors not mandated to hold only these traditional fixed income securities have re-allocated further afield and further out on the risk curve. Some of these traditionally conservative investors have bought into the major equity indexes at all time highs deep into the longest bull market in history. Others have chased the extra hundred basis points to the ends of the earth. Oaktree Capital's Howard Marks openly admits that many of his clients are what he classifies as "handcuffed volunteers" because they normally would not venture into alternative investments were they not forced into it by the lack of yield in the sovereign and investment grade corporate bond markets. In the case of the 100 year Argentine bond we wrote about in 2017 the end of the earth may well be the end of the road.
What happens Next? Is 2020 the Year the Cycle Turns?
While we readily admit we cannot predict when this cycle will turn we remain confident it will be violent when it reverses. Institutional memories are short and expectations are more commonly set by the last few years' performance (and bonuses) than historical precedent. There is also a sense of fear, fatigue and capitulation setting in amongst prominent market participants. Many of the largest fund managers who have been lifted with the tide of rising prices since the beginning of the decade are tempering their expectations while many of those who have been shouting from deep within the financial wilderness about the "everything bubble" or the evils of "QE and Negative Rates" have either lost their voice or their ability to hold out against investor anger. We remain steadfast that time and patience will reward the prudent.
As we head into 2020 we believe there are five multi-decade long trends, many of them interwoven, which are ready for imminent reversal. These trends are largely driving the flow of capital and thus investment returns for at least the next several decades if not a generation. These trends, broadly defined are demographics, international political order, domestic politics, wealth consolidation, and technological revolution.
Demographics As Destiny
We continue to believe that the aging demographics globally will have the most significant effect on market returns. The significant concentration of capital that drives European and North American markets is derived mostly from the post war generation known collectively as the "Baby Boomers." This capital either provided directly via individual investors or through private and state pension funds reached its peak in 2009. Much of this capital has been allocated to greater risk assets in the wake of the financial crisis but is now exiting the market either by prudence, fear or edict. In North America regulation requires investors over 70 to withdraw a set amount from their tax-deferred pensions or face significant tax penalties. In most of Europe the pendulum has swung to the point where more withdrawals are required to meet obligations than is currently being paid into the system. These funds were the primary providers of debt and equity capital for the past three decades and are now being withdrawn from the system with far fewer people in the following generations to take up the slack. Additionally, as is often the case with subsequent generations those who experience a crisis in early adulthood display a lower tolerance for financial risk throughout their life. Unlike the baby boomers who came of age during the period of post war prosperity, younger workers today have experienced financial crisis, job losses and rising debt levels that make them less inclined towards risk assets later in life.
Europe, Canada, and China all have a critical shortage of younger workers, which render their current economic systems unsustainable without significant reform. The US also has a similar but less drastic imbalance because the millennial generation is larger than the rest of the developed world. Regardless of the jurisdiction, the basic social contract as designed in the post war period must be rewritten and expectations reset.
Our primary concern is that the reversal of these trends will be exacerbated and accelerated by the above market dynamics. If most of the market volume is now driven by fund flows into structured products and algorithmic trading then gains that developed slowly over a long period of time could reverse rapidly and violently. Most older workers or retirees cannot bear another drawdown similar to the 2008-2009 period. They may have been comfortable chasing the extra hundred basis points for the past few years even as the longest bull market in history started to show its age but at the first sign of a meaningful correction or recession we suspect they will hit the eject button in hopes of a peaceful retirement.
CRAVEN HOUSE CAPITAL PLC
INVESTMENT MANAGER'S REPORT - continued
FOR THE YEAR ENDED 31 MAY 2019
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Demographics As Destiny - continued
The obvious issue is that if a significant number of these investors or their advisors decide to exit the markets the same indiscriminate index driven volume would be much more violent on the way down. Whereas trillions of dollars entered the passive markets over the past decade the selling pressure would be concentrated in several months and compounded by algorithmic trading methodologies designed to extend trends in price movement. It is not inconceivable that any significant economic weakness could trigger the market equivalent of yelling fire in a crowded theatre. As value investors we relish the opportunity to acquire shares at a discount and panicked selling is the mother of such valuations yet we realise the pain may be prolonged before we return to an era of security analysis and rational price discovery in the markets.
The International Political Order
Last year we discussed our view that the post war economic order was changing forever. We highlighted our belief that the US led global security and trading systems were rapidly changing and not just because of the current administration's policy. A year further into this analysis we believe we may have previously understated the case for concern. Despite the political animosity between opposition parties in the US, the national mood is becoming more isolationist and more resentful of European and Asian nations that have benefited from the US military's protection of global trade routes and subsidies provided in the name of free trade. Whereas a decade ago, Americans seemed proud of their international role, today they seem resentful of the burden. We pass no judgement on the validity of the sentiments. We merely recognise it and try to analyse the investment implications. The US is the country least dependant on exports and trade outside of its territorial borders and that of its continental neighbours. Newly energy independent and openly questioning the benefits of the global trading regime as framed by the WTO the US is revaluations many long held beliefs.
In the last six months the rhetoric on both sides of the political spectrum has turned aggressively hostile towards China. Hong Kong's democracy movement is gaining supporters in congress and even those who were the driving force behind US involvement in the Trans Pacific Partnership are starting to highlight the CCP's abysmal record on human rights and property rights. In the span of the last several years the prevailing perception of China has evolved from critical economic partner to an "Orwellian" and totalitarian regime. It appears that the paradigm has been reset and regardless of the 2020 election results the US role in the world will be renegotiated. The European Union and NATO will no longer have the same significance for American leaders. This will result in significant budgetary shortfalls as EU members will need to fund their own defence without the outsized contribution of the US. In light of the demographic problems outlined above this couldn't happen at a more inconvenient time for Germany and France. Tax policies will certainly be impacted at a time when European economies are slowing. If global trade is disrupted either by increased tariffs or the US withdrawing naval resources dedicated to keeping the sea-lanes open and unmolested export reliant nations will suffer. While this would have seemed outrageous to contemplate a few short years ago it is a realistic possibility today. An energy independent and war weary United States is increasingly looking towards regional trade as the solution for their demographic and economic challenges and no longer feels an obligation towards its traditional allies in Europe.
This leads us to evaluate whom, if any other nation, would be able to step into the void. A few years ago the consensus would have been China. However, China has significant social issues of its own to cope with in Hong Kong and on the mainland. The one child policy has created a critical shortage of young productive people at the end of the most spectacular credit expansion. Recent analysis by prominent market participants indicate that China may be facing a hard currency shortage that would cripple its ability to finance the purchase of imported goods. Without the ability to finance raw material and food their economy would quickly devolve into chaos. Our own analysis leads us to believe that the Chinese economy and thus its political system may struggle to survive another economic crisis. Capital flight and civil unrest are very real prospects and with it a potential disruption in the global economic system. Closer to home, export-reliant countries in Northern Europe would struggle to cope with meaningful reduction in Chinese demand for their goods and services.
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CRAVEN HOUSE CAPITAL PLC
INVESTMENT MANAGER'S REPORT - continued
FOR THE YEAR ENDED 31 MAY 2019
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The International Political Order - continued
Our concern is that the markets are mispricing or not pricing the possibility of significant global disruptions in trade and security. Markets, already priced for perfection, move marginally from tweet to tweet with the expectation that the uncertainty derives not from a tectonic shift in the international political order but rather with the personality of a particularly colourful US president. We believe we are heading for a return to regional trading blocs and ideologically motivated international political alignment. Brexit and the change in US international policy will have ramifications well beyond the political machinations dominating the headlines today
Domestic Politics
For the first time in recent memory the major western economies of the world are all moving towards greater state involvement in the economy. British politicians of all stripes are promising to spend more from the public purse. The days of austerity are clearly over. Even the Germans are starting to waiver. In North America the Canadians have already leapt to the left with higher taxes and social policies that hadn't been discussed in over thirty years. In the United States both parties have abandoned any pretence of fiscal discipline. It seems to us that the unprecedented experiment with quantitative easing and aggressive monetary intervention has emboldened even the most prudent of policy makers. There is a greater acceptance of the idea that deficits do not matter and a feeling of comfort gained by the fact that "everyone else is doing it." Japan has been the great demographic and economic laboratory of monetary and fiscal experimentation. There seems to be a prevailing attitude amongst politicians that Japan may have had a lost decade or two but it wasn't the catastrophe predicted by many. The clear trend is now towards greater state involvement in the economy and away from the classical liberal economics that has held sway since the end of the Cold War. The great Austrian economist Ludwig Von Mesies who inspired and influenced the likes of Heyak, Friedman and Laffer wrote that there are only two ways for a credit-fuelled expansion to end. Either the credit is removed from the system and the economy corrects and contracts or the credit is perpetuated and the currency is devalued. This is logical and throughout history has proven to be an accurate statement. It is also appealing to those who believe it is moral to live within ones means and those who do not should bear the consequences of profligacy. Every time politicians have tried to suspend economic gravity through the expansion of credit beyond a short period of systemic crisis it has ended in economic catastrophe. Maybe this time it is different? Perhaps quantitative easing, negative interest bonds and reserve banks buying equities is the new paradigm and those of us clinging to out-dated views on the role of government and economic policy are doomed to the dustbin of history? We do not know how this will play out eventually but we are quite certain that there is a meaningful shift in political positioning and the traditional left and right are willing to fight over who will be the champions of government action to achieve aggressive social and economic goals. This is a significant change and those positioning their portfolio's for a return to laissez faire policies and conservative fiscal policies will suffer.
Wealth Concentration and Wealth Redistribution
John D. Rockefeller was reported to have said that he "feared the boom" because the masses violently resent the boom but coalesce in times of hardship. In "The Lessons of History" by Will and Ariel Durant the authors observe that history revolves around the accumulation and redistribution of wealth. It is looking increasingly likely that we may have reached another inflection point in this cycle. The western world has experienced forty years of wealth accumulation. This has coincided largely with the increases in economic freedom and policies designed to allow individuals to maximise their potential. We might argue that this is both the moral and the most beneficial system of organizing society. However, it also results in greater wealth disparity. Human beings are not always rational. Politicians are almost always practical. We believe we are entering a period where those who have never seen or known anyone who has experienced the tyranny of equality will reach the critical electoral mass. The younger generation in the US and Europe seem determined to experiment with some form of mandatory wealth redistribution. Some may rightfully decry this as socialism while others may laude it as the natural rebalancing needed to curb excess within the free market system. Regardless of our view it seems inevitable that the pendulum will swing back towards forced redistribution of wealth.
CRAVEN HOUSE CAPITAL PLC
INVESTMENT MANAGER'S REPORT - continued
FOR THE YEAR ENDED 31 MAY 2019
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Wealth Concentration and Wealth Redistribution - continued
We believe that like the fiscal and monetary policies described above there may be an entirely modern manifestation of this turn of the age old cycle. Quantitative Easing has been described as "socialism for the rich" because it utilized public policy to inflate the value of financial assets held primarily by the wealthiest members of society. It seems that the recent discussions and widespread acceptance of Modern Monetary Theory (MMT) is the equivalent of "People's QE". Social theorists and economists of different ideological persuasions are starting to adopt the idea or at least willingly contemplate the idea of "helicopter money" or as the woke techies call it Universal Basic Income provided directly from the Treasury or the Exchequer. The debate is no longer about if it would work or if it is moral but rather how it will be implemented and who will claim the credit. MMT is the ultimate and likely final point of fiscal stimulus. Given that politicians and central bankers have been unwilling and unable to effect any Quantitative Tightening (raising rates) without creating a cacophony of public outrage, it seems to us that "People's QE" will be attempted as a first step towards wealth redistribution. It may work or it may end in tears.
Summary Thoughts
As old fashioned deep value investors we have lamented the lack of opportunities for the better part of a decade. Since the lows of 2009 asset prices have been stimulated and indexed to heights we cannot comprehend. Each year since 2016 we have predicted that valuations will return to our comfort level. There is little reason to believe we are any closer to that point this year than we were last year. There is even less reason to believe we are better prognosticators of big economic, political and social trends than we are at calling a market top or bottom. We readily admit that we know we do not know. We are, however, highly confident that the economic and political mood is changing and while economic gravity seems to have been temporarily suspended, demographic destiny is harder to avoid. We believe the pendulum has started to swing away from financial assets, away from the post war international order, away from free markets and away from wealth concentration. Each of these trends will be long lasting and will effect the investment landscape in ways we cannot entirely comprehend. Sadly each has the potential to cause disruption and even violence. Each will certainly stretch if not tear the societal fabric which has cloaked the past half century.
The Value of an AIM Quote
Last year we wrote about our concerns regarding the costs of an AIM quotation. We are reiterating that concern and highlighting the fact that AIM regulations and the AIM Rules are now proving to be an impediment to our growth. The market is not suitable for a diversified investment holding company with such eclectic and some may say Quixotic holdings. Perhaps it is more accurate to say we are not suitable for the market. The only benefit we see to remaining on the AIM market is to give small shareholders the limited liquidity provided by a quote. Once again we are prepared to put this to shareholders to decide if they find value in remaining a public company.
Desmond Holdings Ltd
Investment Manager to Craven House Capital Plc
CRAVEN HOUSE CAPITAL PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 MAY 2019
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The directors present the Strategic Report of Craven House Capital plc for the year ended 31 May 2019.
Principal activity
The Company's Investing Policy is to invest in or acquire a portfolio of companies, partnerships, joint ventures, businesses or other assets globally in any geographic jurisdiction. The Company will invest in both developed and developing markets and may from time to time invest in special situations including distressed equity and debt. 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. It is anticipated that the investments will be held for the medium-to-long term but the Board will place no minimum or maximum limit on the length of time that any investment may be held. The Company intends to deliver Shareholder returns through capital growth with a medium term objective of implementing a dividend policy.
Key performance indicators considered by the Company
The Company focuses on the key performance areas as outlined in its Investing Policy and concentrates on the Net Asset Value of investments, calculated on a per share basis. The Company's Investment Manager, Desmond Holdings Ltd, submits regular management reports to the Board of Directors, which includes a calculation of the Company's Net Asset Value. During the year NAV per share decreased marginally from $9.95 per share in May 2018 to $9.89 per share in May 2019 whereby a small increase in the value of gross assets was offset by increases in inter-company liabilities. The increase in NAV per share from the previous high-water mark of $6.57 per share in May 2016 resulted in a performance fee becoming payable to the Investment Manager of $1,657,439. The Investment Manager agreed to waive payment of the performance fee in the prior two periods (May 2017 and May 2018). Net of performance fees, administrative expenses were reduced from $988k to $627k during the year, resulting in an overall operating loss of $1.8m for the year.
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. Craven House continued to seek to acquire businesses in emerging and developed markets utilising its AIM quoted shares as acquisition currency. We also continue to target businesses with distressed shareholders in need of rapid liquidity. As forecast in the 2018 accounts, the year to May 2019 saw an increased level of activity in North America; In January 2019, the Company successfully completed the sale of its subsidiary, IIU Inc., to LM Funding America Inc. ("LMFA") in a transaction whereby the majority of the consideration ($3.6m) was paid by way of a convertible loan note, convertible into shares of LMFA, subject to the approval of LMFA shareholders. In addition Craven House, via its subsidiary, acquired shares in LMFA via a private placing and acquired further shares in the open market (LMFA is listed on the Nasdaq). The result of this activity is that Craven House currently owns 26% of the share capital of LMFA with the option to convert the outstanding loan note (upon approval from LMFA shareholders) to increase their shareholding to c.49.9% of the share capital of LMFA. Separately, the Company is pleased to report a dividend of $100,000 was received from its subsidiary, Qeton Ltd during the year and reported as 'Other Income'. The status of the underlying investments of Craven Industrial Holdings Plc are disclosed in further detail in note 8 and note 14 below.
Position of the Company's business at the end of the year
The Company's NAV decreased slightly from $24.9 million to $24.7 million during the year (prior to accrual of the performance fee payable to the Investment Manager). Total liabilities relative to assets remain low; creditors external to the Company totaled $1.15m at the year end, $800,000 of which is in the form of a convertible loan not due until 2022 ($300,000 of this loan was converted post year-end, with $500,000 remaining outstanding as of the date of this report). Accrual of the performance fee and an increase in inter-company loan balances resulted in an increase in payables from $2.47m to $4.49m. The Company maintains minimal cash reserves as excess cash is deployed for investment at the subsidiary level. Sufficient cash is available to the Company from its subsidiaries to ensure it is able to meet its liabilities as they fall due. Outside of the board of directors, the Company has no employees; the majority of overhead expenditure relates to regulatory, accounting and audit costs.
CRAVEN HOUSE CAPITAL PLC
STRATEGIC REPORT - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
Principal risks and uncertainties facing the business
The principal risks to the business continue to be the inherent instability in some of the markets in which we operate. Our strategy is directly exposed to swings in currencies, political and economic instability. Our continued focus on emerging markets and distressed sellers in developed markets expose the Company to these type of risks. These are risks that the Company actively seek as they provide the opportunity to acquire assets at a discount to their intrinsic value utilising our share capital at a premium to market prices. 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
CRAVEN HOUSE CAPITAL PLC
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 MAY 2019
|
|
The directors present their annual report with the audited financial statements of the Company for the year ended 31 May 2019.
DIVIDENDS
No dividends have been distributed during the year ended 31 May 2019. 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 R Burrows (resigned 17 October 2018);
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 ongoing investment strategy by seeking transformative acquisition targets. 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;
Vidacos Nominees Ltd - 14.7%
Aurora Nominees Ltd - 13.6%
WB Nominees Ltd - 9.8%
Desmond Holdings Ltd - 9.1%*
Xenod Tour Oikod Epeix Afon - 8.0%
Mr. Martin Brink - 6.2%
Lynchwood Nominees Ltd - 4.2%
Ferlim Nominees 3.4%
HSBC Client Holdings Nominee (UK) - 3.1%
*Connected to Mark Pajak, Non-Executive Director and Acting Chairman.
CRAVEN HOUSE CAPITAL PLC
REPORT OF THE DIRECTORS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
DIRECTOR SHAREHOLDINGS
Shareholdings in the Company by directors as of the date of this report are as follows;
Mr B S Bindra - 9,536 ordinary shares of $1.00
Mr C P Morrison - 2,452 ordinary shares of $1.00
Mr M J Pajak's indirect holdings (via Desmond Holdings Ltd) are disclosed in 'significant shareholdings' above.
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 will be proposed for re-appointment 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
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 2019 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 company's affairs as at 31 May 2019 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, as applied to SME listed entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern 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.
|
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF
CRAVEN HOUSE CAPITAL PLC - continued
|
|
This is not a complete list of all risks identified by our audit.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CRAVEN HOUSE CAPITAL PLC - continued
Our application of materiality In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our testing and evaluate the impact of misstatements identified.
Based on our professional judgement, we determined overall materiality for the company's financial statements as a whole to be $273,700. In determining this, we considered a range of benchmarks with specific focus on the financial assets at the statement of financial position date. This materiality level represents 1% of financial assets.
We report to the Audit Committee all identified unadjusted errors in excess of $13,700 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 below.
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.
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.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CRAVEN HOUSE CAPITAL PLC - continued
Responsibilities of directors As explained more fully in the Statement of Directors' Responsibilities set out on page 14, 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.
Brendan Mullally Senior Statutory Auditor for and on behalf of RBK Business Advisers Chartered Accountants & Statutory Audit Firm Boole House Beech Hill Road Clonskeagh Dublin 4 D04 A563 Ireland
Date:
|
CRAVEN HOUSE CAPITAL PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2019
|
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|
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|
|
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||
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|
|
|
|
|
|
|
||
|
|
|
|
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2019 |
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2018 |
||
|
|
|
|
|
$'000 |
|
$'000 |
||
|
|
|
|
|
|
|
|
||
|
CONTINUING OPERATIONS |
|
|
|
|
|
|
||
|
Changes in fair value |
|
|
|
376 |
|
590 |
||
|
|
|
|
|
|
|
|
||
|
Other income
|
4 |
|
|
99 |
|
3 |
||
|
Administrative expenses |
|
|
|
(2,284) |
|
(988) |
||
|
|
|
|
|
|
|
|
||
|
OPERATING LOSS AND LOSS BEFORE INCOME TAX |
|
|
|
(1,809) |
|
(395) |
||
|
|
|
|
|
|
|
|
||
|
Income tax |
6 |
|
|
- |
|
- |
||
|
|
|
|
|
|
|
|
||
|
LOSS FOR THE YEAR AND TOTAL COMPREHENSIVE INCOME |
|
|
|
(1,809) |
|
(395) |
||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
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Loss per share expressed |
|
|
|
|
|
|
||
|
in cents per share: |
|
|
|
|
|
|
||
|
Basic and diluted |
7 |
|
|
(72.39) |
|
(15.80) |
||
|
|
|
|
|
|
|
|
||
The notes on pages 23 to 42 form part of the financial statements.
CRAVEN HOUSE CAPITAL PLC Company Number 05123368
STATEMENT OF FINANCIAL POSITION
AS AT 31 MAY 2019
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|
|
|
|
|
|||||
|
|
|
|
2019 |
|
|
2018 |
||||
|
|
Notes |
|
$'000 |
|
|
$'000 |
||||
|
ASSETS |
|
|
|
|
|
|
||||
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NON-CURRENT ASSETS |
|
|
|
|
|
|
||||
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Investments at fair value through |
|
|
|
|
|
|
||||
|
profit or loss |
8 |
|
27,369 |
|
|
26,993 |
||||
|
|
|
|
27,369 |
|
|
26,993 |
||||
|
|
|
|
|
|
|
|
||||
|
CURRENT ASSETS |
|
|
|
|
|
|
||||
|
Trade and other receivables |
9 |
|
933 |
|
|
924 |
||||
|
Cash and cash equivalents |
10 |
|
46 |
|
|
213 |
||||
|
|
|
|
979 |
|
|
1,137 |
||||
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TOTAL ASSETS |
|
|
28,348 |
|
|
28,130 |
||||
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|
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|
|
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||||
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|
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||||
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EQUITY |
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|
||||
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SHAREHOLDERS' EQUITY |
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|
|
|
|
|
||||
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Called up share capital |
11 |
|
12,594 |
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|
12,594 |
||||
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Share premium |
|
|
25,128 |
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|
25,128 |
||||
|
Accumulated deficit |
|
|
(14,666) |
|
|
(12,857) |
||||
|
TOTAL EQUITY |
|
|
23,056 |
|
|
24,865 |
||||
|
|
|
|
|
|
|
|
||||
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LIABILITIES |
|
|
|
|
|
|
||||
|
CURRENT LIABILITIES |
|
|
|
|
|
|
||||
|
Trade and other payables |
12 |
|
4,492 |
|
|
2,465 |
||||
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
|
||||
|
Loans and borrowings |
13 |
|
800
|
|
|
800
|
||||
|
TOTAL LIABILITIES |
|
|
5,292 |
|
|
3,265 |
||||
|
TOTAL EQUITY AND LIABILITIES |
|
|
28,348 |
|
|
28,130 |
||||
Approved and authorised for issue by the Board on ………………….2019 and signed on its behalf by:
.................................................................
Mr M J Pajak - Director
The notes on pages 23 to 42 form part of the financial statements.
CRAVEN HOUSE CAPITAL PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2019
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|
|||||||||||
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Called up share capital $'000 |
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Share premium $'000 |
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|
Accumulated deficit $'000
|
Total $'000 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
Balance at 1 June 2017 |
12,594 |
|
25,128 |
|
|
(12,462) |
25,260 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
Changes in equity |
|
|
|
|
|
|
|
|
|||
|
Issue of share capital |
- |
|
- |
|
|
- |
- |
|
|||
|
Transactions with owners |
12,594 |
|
25,128 |
|
|
(12,462) |
25,260 |
|
|||
|
Loss for the year |
- |
|
- |
|
|
(395) |
(395) |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
Balance at 31 May 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 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
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CRAVEN HOUSE CAPITAL PLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MAY 2019
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||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
2018 |
|
|
|
|
|
Notes |
|
$'000 |
|
$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Loss before income tax |
|
|
|
(1,809) |
|
(395) |
|
|
|
Adjustments for non-cash items |
|
|
|
|
|
|
|
|
|
Fair value movement arising on investments |
|
|
|
(376) |
|
(590) |
|
|
|
Increase in trade and other receivables |
|
|
|
(9) |
|
(849) |
|
|
|
Increase in trade and other payables |
|
|
|
2,027 |
|
1,236 |
|
|
|
Increase in loans and borrowings |
|
|
|
- |
|
800 |
|
|
|
Dividend income classed as investing cash flows |
|
|
|
(98) |
|
- |
|
|
|
Net cash (used in)/generated by operating activities |
|
|
|
(265) |
|
202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Acquisition of investments |
|
|
|
- |
|
(2,500) |
|
|
|
Proceeds from loan advances repaid |
|
|
|
- |
|
2,500 |
|
|
|
Dividends received from joint ventures and associates |
|
|
|
98 |
|
- |
|
|
|
Net cash generated by investing activities |
|
|
|
98 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
|
|
|
(167) |
|
202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning |
|
|
|
|
|
|
|
|
|
of the year |
|
10 |
|
213 |
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the year |
|
10 |
|
46 |
|
213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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The notes on pages 23 to 42 form part of the financial statements. |
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CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2019
|
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 Company has considerable financial resources. As a consequence, 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 as excess cash is deployed for investment at the subsidiary level. There are some restrictions on the ability of certain subsidiaries to freely transfer funds to the Company. Capital controls in the respective jurisdictions mean that transfers to the Company from Craven House Angola LDA and the subsidiaries of Kwikbuild Corporation Ltd in South Africa mean that transfers must be authorised by the respective central banks in these locations. However, in addition to the cash on the Company's statement of financial position, sufficient cash is freely available to the Company from its subsidiaries (in the form of inter-company loans or dividends) to ensure it is able to meet its liabilities as they fall due and the restrictions described do not ultimately place any risks to the operations / 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.
|
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
1. ACCOUNTING POLICIES - continued
The Company has applied for the first time certain amendments to the standards
IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018, endorsed by the European Union on 22 September 2016).
IFRS 9 Financial Instruments and subsequent amendments (effective for annual periods beginning on or after 1 January 2018, endorsed by the European Union on 22 November 2016).
Amendments to IFRS 2 Classification and Measurement of Share-Based Payment Transactions (effective for annual periods beginning on or after 1 January 2018, endorsed by the European Union on 26 February 2018).
Annual improvements to IFRS Standards 2014-2016 Cycle (effective for annual periods beginning on or after 1 January 2018, endorsed by the European Union on 7 February 2018).
IFRIC 22 Foreign Currency Transactions and Advance Consideration (effective for annual periods beginning on or after 1 January 2018, endorsed by the European Union on 28 March 2018).
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 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, not yet endorsed by the European Union).
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.
Accounting standards adopted during the year
IFRS 15 Revenue from Contracts with Customers
IFRS 15 requires an expected qualitative impact of the application of IFRS 15 to be included in the financial statements. Dividend income recognition is not considered to change as a result of the transition as it is not contractual and does not fall within the scope.
IFRS 9 Financial Instruments
This standard of classification and measurement of financial assets and financial liabilities has replaced IAS 39 financial instruments: Recognition and measurement ("IAS 39"). IFRS 9 has two measurement categories: amortised cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent solely principal and interest. For liabilities, the standard retains most of the IAS 39 requirements.
This includes amortised-cost accounting for most financial labilities, with bifurcation of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
1. ACCOUNTING POLICIES - continued
IFRS 9 Financial Instruments - continued
IFRS 9 further introduced new requirements for hedge accounting that align hedge accounting more closely with risk managements. IFRS 9 replaces the "incurred loss" model in IAS 39 with an "expected credit loss" (ECL) model.
The new impairment model applies to financial assets measured at amortised cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments.
The following table explains the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the company's financial assets at 31 May 2019. The application of IFRS 9 has not had a material effect on the financial statements. Under IFRS 9 trade and other payables and loans and borrowings continue to be measured at amortised cost using the effective interest method.
|
Assets |
Original classification under IAS 39 |
New classification under IFRS 9 |
Original carrying amount under IAS 39 |
New carrying amount under IFRS 9 |
|
Investments at fair value through profit or loss |
Designated at fair value through profit or loss |
Financial assets at fair value through profit or loss |
$27.369m
|
$27.369m
|
|
Amounts owed by connected parties |
Loans and receivables |
Amortised cost |
$0.89m |
$0.89m |
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.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
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.
a) Quoted investments
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.
b) Unquoted investments
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.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
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.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
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
|
|
|
2019 |
|
2018 |
|
|
|
$'000 |
|
$'000 |
|
Wages and salaries - directors' remuneration |
|
83 |
|
114 |
|
|
|
|
|
|
The average monthly number of employees (including directors) during the year was as follows:
|
|
|
2019 |
|
2018 |
|
Directors |
|
3 |
|
4 |
The Company has no employees other than the directors.
Directors' remuneration is analysed as follows;
|
|
|
2019 |
|
2018 |
|
|
|
$'000 |
|
$'000 |
|
Fees: |
|
|
|
|
|
Mr R Burrows |
|
17 |
|
50 |
|
Mr M J Pajak |
|
56 |
|
58 |
|
|
|
73 |
|
108 |
|
Share based payments: |
|
|
|
|
|
Mr B S Bindra |
|
5 |
|
3 |
|
Mr C P Morrison |
|
5 |
|
3 |
|
|
|
10 |
|
6 |
|
Total |
|
83 |
|
114 |
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
3. EMPLOYEES AND DIRECTORS - continued
The service contracts of the directors who served during the year are as follows:
|
|
|
Basic annual fee |
|
|
Mr R Burrows |
|
$50,000 |
|
|
Mr M J Pajak |
|
£43,000 |
|
|
Mr B S Bindra Mr C P Morrison |
|
$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 (2018: 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 $97,514 (2018: $Nil).
5. LOSS BEFORE INCOME TAX
The loss before income tax is stated after charging:
|
|
|
2019 |
|
2018 |
|
|
|
$'000 |
|
$'000 |
|
Rental charges |
|
35 |
|
48 |
|
Fees payable to the Company's auditor for the audit of the Company's annual accounts |
|
29 |
|
29 |
|
Foreign exchange losses |
|
2 |
|
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
6. INCOME TAX
Analysis of charge in the year
|
|
|
2019 |
|
2018 |
|
|
|
$'000 |
|
$'000 |
|
Current tax: |
|
- |
|
- |
|
Deferred tax |
|
- |
|
- |
|
|
|
|
|
|
|
Tax on loss on ordinary activities |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
2018 |
|
|
|
$'000 |
|
$'000 |
|
Loss on ordinary activities before tax |
|
(1,809) |
|
(395) |
Analysis of charge in the year
|
|
|
|
|
|
|
|
|
2019 |
|
2018 |
|
|
|
$'000 |
|
$'000 |
|
Loss on ordinary activities multiplied by the Company's rate of corporation tax in the UK of 19% (2018: 19%) |
|
(344) |
|
(75) |
|
|
|
|
|
|
|
Effects of: |
|
|
|
|
|
Losses carried forward |
|
344 |
|
75 |
|
Current tax charge for the year as above |
|
- |
|
- |
|
|
|
|
|
|
At 31 May 2019, the Company had UK tax losses of $5,378,098 (2018: $3,258,487) available to be carried forward and utilised against future taxable profits. A deferred tax asset of $1,021,839 (2018: $619,113) 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.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
7. EARNINGS PER SHARE - continued
Reconciliations are set out below.
|
|
|
2019 |
|
|
|
Earnings $'000 |
Weighted average number of shares |
Per-share amount cents |
|
Basic EPS |
|
|
|
|
Earning attributable to ordinary shareholders |
(1,809) |
2,499,039 |
(72.39) |
|
|
|
|
|
|
|
|
2018 |
|
|
|
Earnings $'000 |
Weighted average number of shares |
Per-share amount cents |
|
Basic EPS |
|
|
|
|
Earning attributable to ordinary shareholders |
(395) |
2,499,039 |
(15.80) |
|
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 2019:
|
Subsidiary Name |
Holding |
Principal Place of Business |
Ownership Interest |
|
|
|
|
|
|
Craven Industrial Holdings Plc |
Direct |
Ireland |
100% |
|
DLC Holdings Corp. |
Indirect |
Canada |
68% |
|
Qeton Ltd |
Indirect |
Ireland |
50% |
|
Craven House Angola LDA |
Indirect |
Angola |
100% |
|
Craven House Capital North America LLC |
Indirect |
USA |
100% |
|
Kwikbuild Corporation Ltd |
Indirect |
Isle of Man |
97% |
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
|
|
8. |
INVESTMENTS -continued
|
Investments at fair value through profit or loss
|
|
|
|
|
|
Quoted equity investments $'000
|
|
Unquoted equity investments $'000
|
Total $'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 June 2017 |
|
|
|
|
- |
|
26,403 |
26,403 |
|
|
Additions |
|
|
|
|
9,033 |
|
2,500 |
11,533 |
|
|
Disposals |
|
|
|
|
- |
|
(11,533) |
(11,533) |
|
|
Fair value movement
|
|
|
|
|
2,050 |
|
(1,460) |
590 |
|
|
At 31 May 2018 |
|
|
|
|
11,083 |
|
15,910 |
26,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value movement
|
|
|
|
|
(2,326)
|
|
2,702
|
376
|
|
|
At 31 May 2019 |
|
|
|
|
8,757 |
|
18,612 |
27,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The revaluation outlined above represents the valuation applied to the investments held by Craven Industrial Holdings Plc, the Company's principal wholly owned subsidiary holding company, and its subsidiaries as at 31 May 2019 and are described in further detail below.
Unquoted investments at 31 May 2019 have been measured on a Level 3 basis as no observable market data was available.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
|
8. |
INVESTMENTS - continued
|
Shares in Craven Industrial Holdings Plc are valued at $27,368,571 representing a 100% holding. These have been valued based on the underlying investments within Craven Industrial Holdings Plc as at 31 May 2019. The value of Craven Industrial Holdings Plc is segmented across its principal investments as follows:
Shares in DLC Holdings Corp. are valued at $8,757,041 representing 43,785,206 preferred shares, which are freely convertible into common shares. Shares in DLC Holdings Corp. are quoted on the Toronto Stock Exchange and were valued at $CAD 0.27 per share as at 31 May 2019. During the year, Craven Industrial Holdings Plc transferred a total of 13,676,700 shares in DLC to its subsidiary Craven House Capital North America LLC.
Shares in Qeton Ltd are valued at $413,617 representing a 50% holding. This shareholding has been valued on an earnings multiple basis which the directors consider represents the best indication of the fair value at the year end. Qeton Ltd generated adjusted EBITDA earnings of €148,075 during the year to 31 May 2019 (adjusted to strip out non-continuing costs therefore reflecting the underlying profitability of the Qeton business). Shares in Qeton Ltd have been valued at 5x adjusted EBITDA earnings. This is judged to be a conservative and reasonable multiple, which appropriately reflects the relationship existing between Qeton Ltd and its largest customer, 7Mobile Lda. There is no long-term contract in place with 7Mobile Lda., however it is anticipated that the relationship between the companies will continue for the foreseeable future. Qeton Ltd has no debt and no material liabilities.
Shares in Craven House Angola LDA are valued at $7,921,212 representing a 100% holding. This shareholding has been valued on the net assets of Craven House Angola LDA, which the directors consider represents the best indication of the fair value at the year end. The vast majority of the net assets of Craven House Angola LDA comprise principal and accrued interest on loan facilities made to companies operating in Angola. As of 31 May 2019 all of these loans are performing according to their contractual terms (c.$280k in interest and principal repayments were received during the year) and have therefore been valued at face value. Interest accrued on loans has been deducted from the valuation of Craven House Angola as it is anticipated that early repayment of these loans might be negotiated in return for a reduction in the interest payable..Craven House Angola LDA has no debt and no material liabilities.
Shares in Craven House Capital North America LLC are valued at $7,907,782 representing a 100% holding. This shareholding has been valued on a net assets basis which the directors consider represents the best indication of the fair value at the year end. A proportion of Craven House Capital North America's assets comprise a convertible loan note, under the terms of which Craven House Capital North America is owed $3,581,982 by the Nasdaq listed company, LM Funding America, Inc. The loan note matures on the 10th January 2020 and, subject to approval by LM Funding America's shareholders, is convertible into shares in LM Funding America. In the event that the entire principal of the loan note is converted into shares in LM Funding America, Craven House Capital North America will become the majority shareholder of LM Funding America. The majority of the remaining assets of Craven House Capital North America LLC comprise a portfolio of liquid securities valued on a mark-to-market basis.
Shares in Kwikbuild Corporation Ltd are valued at $2,368,919 representing a 97% shareholding. This valuation is based on the value of the net assets of KwikBuild Corporation Ltd, which the directors believe represent the best indication of the fair value at the year-end. The vast majority of the net assets of Kwikbuild Corporation Ltd comprise shares in its wholly owned South African subsidiary, which are valued on a net asset basis. The South African subsidiary's assets comprise loan facilities, which are performing according to their contractual terms and real-estate holdings whose value is supported by a professional third-party valuation. Kwikbuild Corporation Ltd has no debt and no material liabilities.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
9. TRADE AND OTHER RECEIVABLES
Amounts owed by connected parties 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.
10. CASH AND CASH EQUIVALENTS
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:
11. CALLED UP SHARE CAPITAL
|
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CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
11. CALLED UP SHARE CAPITAL - continued
The aggregate nominal values of the ordinary and deferred 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.
The deferred shares carry no entitlement to receive notice of any general meeting, to attend, speak or vote at such general meeting. Holders are not entitled to receive dividends and, on a winding up of the Company, holders of deferred shares are entitled to a return of capital only after the holder of each Ordinary share has received a return of capital together with a payment of £1 million per share. The deferred shares may be cancelled at any time for no consideration by way of a reduction in capital.
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
|
|
|
2019 |
|
2018 |
|
|
|
$'000 |
|
$'000 |
|
Current: |
|
|
|
|
|
Trade payables |
|
698 |
|
445 |
|
Amounts owed to connected parties |
|
2,039 |
|
1,688 |
|
Accruals and deferred income |
|
1,755 |
|
332 |
|
|
|
4,492 |
|
2,465 |
Amounts owed to connected parties 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.
|
13. |
LOANS AND BORROWINGS |
|||||
|
|
|
2019 |
|
2018 |
|
|
|
|
|
$'000 |
|
$'000 |
|
|
|
Non-current: |
|
|
|
|
|
|
|
Other loans |
|
800 |
|
800 |
|
|
During the year ended 31 May 2018 the Company entered into a $800,000 convertible loan note by way of settlement of a supplier's outstanding fees in the sum of £600,000.
The loan note bears no interest and has a five year term.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
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;
|
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
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.
In relation to the Level 1 investment listed above, a 10% change in the share price of DLC Holdings Corp. would result in a decrease or increase in the valuation of this investment of $875,704. Shares in DLC Holdings Corp. are quoted in Canadian Dollars; a 10% fluctuation in the exchange rate between the US Dollar and the Canadian Dollar would result in a decrease or increase in the valuation of this investment of $603,934.
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:
The valuation the Company's shareholding in Qeton Ltd is estimated on an adjusted earnings multiple basis. The Investment Manager has applied a 5x multiple of adjusted EBITDA earnings (adjusted to strip put non-continuing costs therefore reflecting underlying profitability of the Qeton business). This is judged to be a conservative and reasonable multiple; in the experience of the Investment Manager valuations for businesses of this nature vary significantly but are often in the range of a multiple of 2x to 9x of income. A 10% change in EBITDA earnings would result in a decrease or increase in the valuation of this investment of $41,362. Whilst foreign exchange fluctuations might impact Qeton Ltd's sales volumes, its sales and cost of sales are tied to US Dollars.
The valuation of Craven House Angola LDA is based on its net asset value as of 31 May 2019. These net assets almost exclusively comprise a portfolio of loan facilities. These loans have performed in accordance with their agreed, contractual terms and the respective borrowers' creditworthiness continues to be satisfactory. Therefore, the Investment Manager has judged that outstanding principal of these loans is a reasonable basis for valuation of the net assets of Craven House Angola LDA. The Investment Manager has excluded interest accrued under these loans from the valuation of Craven House Angola as it is anticipated that early repayment of these loans might be negotiated in return for a reduction in the interest payable. The loans are either in US Dollars or are at pre-determined exchange rates tied to the US Dollar. It has been assumed that these loans continue to perform in accordance with their contractual terms and that potential losses associated with any unforeseen event of default would be recovered from the security associated with the respective loans.
The valuation of Craven House North America LLC is based on its net asset value as of 31 May 2019. A proportion of Craven House Capital North America's assets comprise a convertible loan note, under the terms of which Craven House Capital North America is owed $3,581,982 by the Nasdaq listed company, LM Funding America, Inc. The loan note is held on Craven House Capital North America's balance sheet at face value (which is judged to be a reasonable basis for the valuation of the loan note) and matures on the 10 January 2020 and, subject to approval by LM Funding America's shareholders, is convertible into shares in LM Funding America. In the event that the entire principal of the loan note is converted into shares in LM Funding America, Craven House Capital North America will become the 49.9% shareholder of LM Funding America. The vast majority of the remaining assets of Craven House Capital North America LLC comprise cash and a portfolio of liquid securities valued on a mark-to-market basis.
|
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
14. FINANCIAL INSTRUMENTS - continued
Shares in KwikBuild Corporation Ltd are valued based on its net asset value as of 31 May 2019. Over 96% of these net assets comprise the value of its shares in its wholly-owned South African subsidiary which are also valued on a net asset basis. 26% of the subsidiary's net assets comprise real-estate assets, which have been valued utilising a professional valuation provided by an independent third-party; A 10% fluctuation on the value of these real estate assets would result in a decrease or increase in the valuation of Kwikbuild Corporation of $60,216. The remaining assets of the subsidiary comprise a loan facility. The loan (denominated in US Dollars) has performed in accordance with its agreed, contractual terms and the borrowers' creditworthiness continues to be satisfactory. Therefore the Investment Manager has judged that the outstanding principal of this loan and accrued interest is a reasonable basis for its valuation. It has been assumed that this loan continues to perform in accordance with its contractual terms and that losses associated with any unforeseen event of default are recovered from the security associated with the loan.
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 as excess cash is deployed for investment at the subsidiary level. Sufficient cash is available to the Company from its subsidiaries to ensure it is able to meets its liabilities as they fall due. |
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
14. FINANCIAL INSTRUMENTS - continued
The table below summarises the maturity profile of the Company's financial liabilities based on contractual discounted payments.
|
|
On |
|
Less than |
|
3 to 12 |
|
More than |
|
|
|
demand |
|
3 months |
|
months |
|
12 Months |
Total |
|
Year ended 31 May 2019 |
$'000 |
|
$'000 |
|
$'000 |
|
$'000 |
$'000 |
|
|
|
|
|
|
|
|
|
|
|
Trade payables |
698 |
|
- |
|
- |
|
- |
698 |
|
Other payables |
2,039 |
|
|
|
|
|
- |
2,039 |
|
Accruals and deferred income |
1,755 |
|
- |
|
- |
|
- |
1,755 |
|
Loans and borrowings |
- |
|
- |
|
- |
|
800 |
800 |
|
|
4,492 |
|
- |
|
- |
|
800 |
5.292 |
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 May 2018 |
|
|
|
|
|
|
|
|
|
Trade payables |
445 |
|
- |
|
- |
|
- |
445 |
|
Other payables |
1,688 |
|
- |
|
- |
|
- |
1,688 |
|
Accruals and deferred income |
332 |
|
- |
|
- |
|
- |
332 |
|
Loans and borrowings |
- |
|
|
|
|
|
800 |
800 |
|
|
2,465 |
|
- |
|
- |
|
800 |
3,265 |
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 $2,736,857 (2018: $2,699,347 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 vast majority of the Company's underlying investments are US Dollar based.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
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 2019 |
|
|
|
|
|
|
|
|
||
|
Loans and receivables |
|
|
|
|
|
|
|
|
||
|
Trade and other receivables |
9 |
|
- |
|
- |
|
933 |
933 |
||
|
Cash and cash equivalents |
10 |
|
46 |
|
- |
|
- |
46 |
||
|
|
|
|
46 |
|
- |
|
933 |
979 |
||
|
Liabilities at amortised cost |
|
|
|
|
|
|
|
|
||
|
Trade and other payables |
12 |
|
- |
|
- |
|
(4,492) |
(4,492) |
||
|
Loans and borrowings |
13 |
|
- |
|
- |
|
(800) |
(800) |
||
|
|
|
|
- |
|
- |
|
(5,292) |
(5,292) |
||
|
Fair value through profit and loss Investments |
8 |
|
8,757 |
|
- |
|
18,612 |
27,369 |
||
|
|
|
|
8,803 |
|
- |
|
14,253 |
23,056 |
||
|
31 May 2018 |
|
|
|
|
|
|
|
|
||
|
Loans and receivables |
|
|
|
|
|
|
|
|
||
|
Trade and other receivables |
9 |
|
- |
|
- |
|
924 |
924 |
||
|
Cash and cash equivalents |
10 |
|
213 |
|
- |
|
- |
213 |
||
|
|
|
|
213 |
|
- |
|
924 |
1,137 |
||
|
Liabilities at amortised cost |
|
|
|
|
|
|
|
|
||
|
Trade and other payables |
12 |
|
- |
- |
|
|
(2,465) |
(2,465) |
||
|
Loans and borrowings |
13 |
|
- |
- |
|
|
(800) |
(800) |
||
|
|
|
|
- |
- |
|
|
(3,265) |
(3,265) |
||
|
Fair value through profit and loss Investments |
8 |
|
11,083 |
- |
|
|
15,910 |
26,993 |
||
|
|
|
|
11,296 |
- |
|
|
13,569 |
24,865 |
||
|
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEAR ENDED 31 MAY 2019
|
||||||||||
15. RELATED PARTY DISCLOSURES
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 $38,969 (2018: $38,969).
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 $777,645 (2018: $793,629).
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 $1,175,664 (2018: $896,781).
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 $813,443 (2018: $785,294).
Loan from Desmond Holdings Limited
During the year, the Company received a loan of $75,000 from Desmond Holdings Limited. At the year end the outstanding balance was $50,000.
All loans are 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 €934,832 (2018: €1,761,013) to 7Mobile LDA. Craven House Angola Lda., a subsidiary of the Company, has directors in common with 7Mobile Lda. and has provided a credit facility of $5.1m to 7Mobile Lda. at an interest rate of 5%. As at 31 May 2019 this loan balance remained outstanding and the loan was in good standing. At the year end, amounts receivable by Qeton Ltd. from 7Mobile LDA arising out of the normal course of business were €1,428,161 (2018: €1,485,747).
Management fees payable to 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 $219,860 (2018: $244,029) from Desmond Holdings Limited. At the year end, an amount of $424,426 (2018: $402,400) was due to Desmond Holdings Limited in relation to management fees. A further $50,000 was owed to Desmond Holdings Limited as of 31 May 2019 in relation to a working capital loan provided by Desmond Holdings Limited to the Company in October 2018. This loan accrues interest at 5% and is repayable on demand. Simultaneous with the finalisation of the preparation of the financial statements for the year to 31 May 2019, a performance fee of $1,657,439 became payable to Desmond Holdings Limited.
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.
CRAVEN HOUSE CAPITAL PLC
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 MAY 2019
|
|
16. ULTIMATE CONTROLLING PARTY
The directors consider that there is no ultimate controlling party.
17. EVENTS AFTER THE REPORTING PERIOD
6 June 2019: The Company acquired 71,282 shares in LM Funding America Inc ("LMFA") taking its holding to 711,282 shares representing 22.7% of LMFA's issued share capital.
10 June 2019: The Company acquired 63,027 shares in LMFA taking its holding to 774,309 shares representing 25% of LMFA's issued share capital.
3 July 2019: The Company announced that the High Court has approved the resolution passed by the Company on 24 August 2018 to grant the Company the authority to purchase and cancel up to $5,000,000 of its own ordinary common shares. This process is subject to the completion of final formalities.
22 July 2019: The Company announced that it had issued 14,400 ordinary shares of $1.00 at a price of $12.50 per share to Mr. Brian Winters as settlement for company secretarial services provided by him.
30 August 2019: GEM Global Yield Fund LLC ("GEM") gave notice that it wished to exercise its option to convert $50,000 worth of a convertible loan note. Henceforth, the Company allotted 18,510 ordinary shares of $1.00 each at a conversion price of $2.70 per share.
30 August 2019: The Company acquired a further 44,366 shares in LMFA taking its holding to 818,675 shares representing 26% of LMFA's issued share capital.
26 September 2019: The Company announced that its subsidiary DLC Holdings Corp., had conditionally agreed to acquire the entire share capital of Blacktail Mountain Ski Area LLC and Blacktail Mountain Inc for a consideration of $3.5m which will be satisfied by the issuance of shares in DLC Holdings Corp.
17 October 2019: GEM gave notice that it wished to exercise its option to convert $100,000 worth of a convertible loan note. Henceforth, the Company allotted 48,500 ordinary shares of $1.00 each at a conversion price of $2.06 per share.
15 November 2019: GEM gave notice that it wished to exercise its option to convert $150,000 worth of a convertible loan note. Henceforth, the Company allotted 83,333 ordinary shares of $1.00 each at a conversion price of $1.80 per share. At the date of approval of the financial statements, $500,000 of the loan note remains outstanding.
For further information please contact:
|
Craven House Capital Plc Mark Pajak
|
Tel: 0203 286 8130
|
|
SI Capital Broker Nick Emerson |
Tel: 01483 413500 |
|
SPARK Advisory Partners Limited Nominated Adviser
Matt Davis/Mark Brady |
Tel: 0203 368 3550
|
About Craven House Capital:
The Company's Investing Policy is to invest in or acquire a portfolio of companies, partnerships, joint ventures, businesses or other assets globally in any geographic jurisdiction. The company will invest in both developed and developing markets providing long term patient capital and is often involved in special situations, restructuring, expansion and turn around investments in crisis and transitioning economies.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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