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Summerway Cap PLC (SWC)

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Tuesday 11 May, 2021

Summerway Cap PLC

Interim Report

RNS Number : 1479Y
Summerway Capital PLC
11 May 2021
 

11 May 2021   

Summerway Capital Plc

("Summerway" or the "Company")

Interim Report for the six months ended 28 February 2021

London, 11 May 2021 - Summerway Capital Plc announces its unaudited condensed interim results for the six months ended 28 February 2021.

Over the period, Summerway incurred a loss after taxation of £217.6k (2020: £86.7k), reflecting operating expenses of £106.5k (2020: £97.9k), share based payment expense of £20.4k (2020: Nil), one-off costs relating to the placing of shares and change in investment strategy of £92.2k (2020: Nil) and finance income of £1.5k (2020: £11.2k). As at 28 February 2021, Summerway held £6.957 million cash (31 August 2020 £5.488 million).

Vin Murria OBE, Summerway's Chairman, commented:

  "The Group continues to pursue its recently approved investment strategy and has an active pipeline of investment and acquisition opportunities, which are currently under assessment.  As a Board, we remain encouraged about the opportunity for securing the Group's inaugural transaction, and we look forward to updating Shareholders on progress in due course."

The Interim Report is also available on the Company's website at  www.summerwaycapital.co.uk

Enquiries:

Summerway Capital Plc


Tony Morris

+44 (0) 20 7440 7520



N+1 Singer (Nominated Adviser and Broker)


Sandy Fraser, Amanda Gray

+44 (0) 20 7496 3000



LEI Code: 213800YXCATORT475807

CHAIRMAN'S STATEMENT

 

I am pleased to present to shareholders the Interim Condensed Consolidated Financial Statements of Summerway Capital Plc (the "Company") for the six months ended 28 February 2021.

 

Strategy

 

The Company's investment strategy remains focused on investment and acquisition opportunities across the software, Software-as-a-Service and digital technologies and services sectors. The Board believe there are a number of opportunities to invest in, or acquire businesses that can be organically or acquisitively grown to become leading providers of enterprise software, solutions and services.

 

Results and Developments in the Period

 

The Group's loss after taxation for the six months to 28 February 2021 was £217,588 (2020: £86,730), reflecting operating expenses of £106,560 (2020: £97,904), share based payment expense of £20,408 (2020: Nil), one-off costs relating to the placing of shares and change in investment strategy of £92,159 (2020: Nil) and finance income of £1,539 (2020: £11,174).

 

On the 15 January 2021, the Company's Shareholders approved its new investment strategy and the Company also completed a placing, which raised proceeds of £1,675,000.  As at 28 February 2021, Summerway held £6,957,201 cash (31 August 2020 £5,547,414). 

 

In conjunction with the change in strategy, a number of directorate changes occurred, including the appointment of Vin Murria OBE as Chairman of the Company, and Paul Gibson and Tony Morris as Non-Executive Directors, as well as the resignations of Alexander Anton and Mark Farmiloe.

 

Outlook

 

The Group continues to pursue its recently approved investment strategy and has an active pipeline of investment and acquisition opportunities, which are currently under assessment.  As a Board, we remain encouraged about the opportunity for securing the Group's inaugural transaction, and we look forward to updating Shareholders on progress in due course.

Vin Murria OBE

Chairman

 

SUMMERWAY CAPITAL PLC

Consolidated Statement of Comprehensive Income

For the six months ended 28 February 2021

 

 



Six months ended

Six months ended

Year

 ended



28 February 2021

29 February 2020

31 August 2020


Note






£

£

£











Administrative expenses

4

(219,127)

(97,904)

(186,552)

Operating loss


(219,127)

(97,904)

(186,552)






Finance income


1,539

11,174

12,041

Finance income


1,539

11,174

12,401






Loss before income tax


(217,588)

(86,730)

(174,511)






Income tax


-

-

-

Net loss for the period


(217,588)

(86,730)

(174,511)

Total other comprehensive income


-

-

-

Total comprehensive loss


(217,588)

(86,730)

(174,511)






Attributable to:





Owners of the Company


(217,588)

(86,730)

(174,511)






Loss per ordinary share





Basic and diluted loss per share attributable to ordinary equity holders of the Company

5

(3.30)p

(1.41)p

(2.85)p

 

The Company's activities derive from continuing operations.

 






Consolidated Statement of Financial Position

As at 28 February 2021

 



As at

As at

As at



28 February

29 February

31 August



2021

2020

2020


Note






£

£

£

Assets





Current assets





Cash and cash equivalents


6,957,201

5,547,414

5,487,991

Other receivables

7

32,490

24,112

9,779

Total current assets


6,989,691

5,571,526

5,497,770






Total assets


6,989,691

5,571,526

5,497,770






Current liabilities





Trade and other payables

9

35,516

15,690

29,715



35,516

15,690

29,715

Non-current liabilities





Incentive shares

10

20,300

12,000

12,000



20.300

12,000

12,000

Total liabilities


55,816

27,690

41,715

Net Assets


6,933,875

5,543,836

5,456,055






Capital and reserves attributable to equity holders of the parent





Share capital

8

80,334

61,300

61,300

Share premium reserve


7,367,052

5,711,086

5,711,086

Capital redemption reserve


49,500

49,500

49,500

Accumulated losses


(563,011)

(278,050)

(365,831)

Total Equity


6,933,875

5,543,836

5,456,055






 

Consolidated Statement of Changes in Equity

For the six months ended 28 February 2021

 

 


Notes

Share

capital

Share

Premium

reserve

Capital

Redemption

reserve

Accumulated

losses

Total

equity



£

£

£

£

£

Balance as at 31 August 2019


61,300

5,711,086

49,500

(191,320)

5,630,566

Loss for the period


-

-

-

(86,730)

(86,730)

Balance as at 29 February 2020


61,300

5,711,086

49,500

(278,050)

5,543,836

Loss for the period


-

-

-

(87,781)

(87,781)

Balance as at 31 August 2020


61,300

5,711,086

49,500

(365,831)

5,456,055

Issue of shares


19,034

1,655,966

-

-

1,675,000

Warrants - share based payment expense


-

-

-

20,408

20,408

Loss for the period


-

-

-

(217,588)

(217,588)

Balance as at 8 February 2021


80,334

7,367,052

49,500

(563,011)

6,933,875

 

 

 

 

Consolidated Statement of Cash Flows

For the six months ended 28 February 2021

 

 



Six months ended

Six months ended

Year

 ended



28 February 2021

29 February 2020

31 August 2020


Note






£

£

£






Cash flows from operating activities





Operating loss


(219,127)

(97,904)

(186,552)

Adjustment for share based payment expense


20,408

-

-






Adjustments to reconcile loss before income tax to operating cash flows:





(Increase)/decrease in other receivables

7

(22,711)

(8,442)

5,891

Increase/(decrease) in trade and other payables

9,10

14,101

(5,251)

8,774

Bank interest received


1,539

11,174

12,041

Net cash used in operating activities


(205,790)

(100,423)

(159,846)






Cash flows from financing activities





Proceeds from issue of share capital

  8

1,675,000

-

-

Net cash generated from financing activities


1,675,000

-

-











Net increase/(decrease) in cash and cash equivalents


1,469,210

(100,423)

(159,846)

Cash and cash equivalents at beginning of the period


  5,487,991

  5,647,837

  -

Cash and cash equivalents at the end of the period


5,547,414

5,487,991






 

 

 

Notes to the Financial Statements

For the six months ended 28 February 2021

 

 

1.  GENERAL INFORMATION

 

Summerway Capital plc is an investing company (for the purposes of the AIM Rules for Companies) and is incorporated in England and Wales and domiciled in the United Kingdom (company number: 11545912). It is a public limited company and the address of the registered office is 32-33 Cowcross Street London EC1M 6DF. The Company is the parent company of Summerway Subco Limited (company number: 11565845).

 

The activity of the Company is the investment, acquisition and development of companies operating within the software, Software-as-a-Service ("SaaS") and digital technologies and services sectors. The Directors believe there are numerous opportunities to invest in or acquire businesses that can be organically or acquisitively grown to become leading providers of enterprise software, solutions and services. Under its strategy, the Company will identify target companies within the software, SaaS and digital technologies and services sectors, where the Board believe there are tangible opportunities across the UK and EU to drive strategic, operational and performance improvement, either as standalone entities or as a part of an enlarged group.

 

2.  BASIS OF PREPARATION

 

These Interim Condensed Consolidated Financial Statements and accompanying notes have neither been audited nor reviewed by the auditor, do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and do not include all the information and disclosures required in annual statutory financial statements. They should be read in conjunction with the Group's Annual Report and Accounts for the year ended 31 August 2020 which are available on the Group's website. Those statutory accounts were approved by the Board of Directors on 1 February 2021 and have been filed with Companies House. The report of the auditors on those accounts was unqualified.

 

These Interim Condensed Consolidated Financial Statements were approved by the Board of Directors on 10 May 2021. 

 

 

3.  ACCOUNTING POLICIES

 

The accounting policies applied by the Group in these interim condensed consolidated financial statements are the same as those applied by the Group in the audited consolidated financial statements for the year ended 31 August 2020 and which will form the basis of the 2021 Annual Report.

 

There have been no new accounting standards or changes to existing accounting standards applied for the first time since 1 September 2020 which have a material effect on these interim results. The Group does not currently expect any material impact of any other standards issued by the IASB, but not yet effective.

 

 

4.  ADMINISTRATION EXPENSES





Period ended 28 February

2021

Period ended 29 February

2020

Year ended

 31 August

2020

 





£

£

£

 

Group expenses by nature







 

One-off costs related to the issue of shares and change in investing strategy




92,159

-

-

 

Staff related costs




31,017

27,000

54,780

 

Office costs

 




-

19,498

21,890

 

NOMAD, registrar and Stock Exchange costs




27,149

22,309

46,391

 

Audit, accountancy and professional costs




36,596

21,659

50,997

 

Share based payment expense




20,408

-

-

 

Other expenses




11,798

7,438

12,494

 





219,127

97,904

186,552

 








 

 

5.  LOSS PER SHARE

 

Basic loss per ordinary share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

 



Period ended 28 February

2021

Period ended

29 February

2020

Year ended

 31 August

2020











Loss attributable to the owners of the Company


£ (217,588)

£ (86,730)

£ (174,511)

Weighted average number of ordinary shares in issue


6,592,707

6,130,000

6,130,000

Basic and diluted loss per share


(3.30) p

(1.41) p

(2.85) p





 

 

6.  INVESTMENTS

 

Principal subsidiary undertakings of the Group

The Company directly owns the ordinary share capital of its subsidiary undertakings as set out below:

 

The issued share capital of the subsidiary comprises 1 A ordinary share of £0.01 and 1,450,000 B ordinary shares of £0.01.

 

Subsidiary

 

 

Nature of business

 

 

 

Country of incorporation

 

Proportion of A ordinary shares held by Company

 

Proportion of B ordinary shares held by Company

 







Summerway Subco Limited

Incentive vehicle

England and Wales

100%

0%








The address of the registered office of Summerway Subco Limited (the "Subsidiary") is 32-33 Cowcross Street London EC1M 6DF . The subsidiary was incorporated on 12 September 2018 and prepares its own financial statements for the period ended 30 September each year.

The A ordinary shares have full voting rights, full rights to participate in a dividend and full rights to participate in a distribution of capital.

The B ordinary shares do not have voting rights. No dividends shall be declared in relation to any of the B ordinary shares without the consent of the Parent company.

The B ordinary shares have been issued to certain participants of the Company's Subsidiary Incentive Scheme. A summary of the Company's Subsidiary Incentive Scheme can be found on pages 6 and 7 of the Company's Circular issued to Shareholders on 23 December 2020 and in Note 12.

 

7.  OTHER RECEIVABLES

 

All receivables are current. There is no material difference between the book value and the fair value of receivables.

 





As at

28 February

2021

As at

29 February

2020

As at

31 August

2020





£

£

£

Amounts falling due within one year







Prepayments




5,880

18,550

9,180

Other receivables




26,610

5,562

599





32,490

24,112

9,779

 

 

8.  CALLED UP SHARE CAPITAL

 



As at

28 February

2021

As at

29 February

2020

As at

31 August

2020



£

£

£

Issued





8,033,409 (2020: 6,130,000) ordinary shares of 1p each


80,334

61,300

61,300






 






 

 

 

 

On 15 January 2021 1,903,409 ordinary of £0.01 each were issued pursuant to a placing at a price of 0.88 per share and were admitted to trading on AIM.

 

 

9.  TRADE AND OTHER PAYABLES

 

There is no material difference between the book value and the fair value of the trade and other payables.

 




As at

28 February

2021

As at

29 February

2020

As at

31 August

2020




£

£

£

Trade payables



14,436

180

315

Accruals



17,868

14,791

28,800

Other tax and social security payables



3,212

719

600




35,516

15,690

29,715

 

 

 

10. NON-CURRENT LIABILITIES

 



As at

28 February

2021

As at

29 February

2020

As at

31 August

2020



£

£

£

Incentive shares


20,300

12,000

12,000








20,300

12,000

12,000

 

The incentive shares liability is estimated at fair value through profit and loss using level 3 fair value measurement techniques.

 

Fair values are categorised into different levels in a fair value hierarchy based on the degree to which the inputs to the measurement are observable and the significance of the inputs to the fair value measurement in its entirety:

· 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 are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

· Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

On 15 January 2021, the Company amended its Subsidiary Incentive to cater for the change in investment strategy approved by Shareholders and previously announced board changes.  Details pertaining to the amendments to the Subsidiary Incentive Scheme are outlined on pages 6 and 7 of the Circular issued to Shareholders on 23 December 2020.

 

The B shares issued to date by the subsidiary under the amended Share Incentive Scheme were deemed to have an implied aggregate subscription price of £20,300, based on the nominal value per B share plus a premium. The initial subscription price of the B shares under the amended Share Incentive Scheme remains the best estimate of the fair value of the liability associated with the incentive shares as none of the criteria for potential value creation have yet been met. The fair value of the liability is assessed at each reporting date with any changes accounted for as a fair value gain or loss and recognised directly in the statement of comprehensive income.

 

11. SHARE-BASED PAYMENTS

 

On 15 January 2021, the Company granted Vin Murria a warrant providing for a right to subscribe for an additional 3,246,062 new Ordinary Shares at 88 pence per share.  The warrant instrument is exercisable at any time from grant date up to and including the eighteen-month anniversary of grant date.  As at 28 February 2021, all of the 3,246,062 warrants remain outstanding, and the share-based payments expense for the period to 28 February 2021 was £20,408.

 

The fair value of the outstanding warrants has been estimated using the Black-Scholes option pricing model.  Volatility has been estimated at 19.75 per cent. using the arithmetical mean of both the 1 year AIM All Share volatility index and the 3 year AIM All Share volatility index as at 28 February 2021.  Additional assumptions used in the calculation of fair value are outlined as follows:

 



28 February

2021

Net asset value per share at grant date


£0.88

Exercise price


£0.88

Expected volatility


19.75%

Dividend yield


0%

Expected life of option


1.5 years

Risk free rate


0.003%

 

12. RELATED PARTY DISCLOSURES

 

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party, or the parties are under common control or influence, in making financial or operational decisions.

In conjunction with the corporate events announced on the 15 January 2021, the Company continued with, entered into, amended and terminated a number of related party arrangements. These are set out below.

Service agreements

 

Under the terms of the Chairman and Non-Executive Director service agreements, the Chairman and the Non-Executives are each paid a monthly fee of £1,500 per calendar month in arrears.

Administrative and accounting services

 

The Company engaged Fraser Real Estate, a company in which Alexander Anton is an indirect shareholder to provide administrative and accounting services throughout the period. The Company paid Fraser Real Estate £2,464 during the period for the provision of these services.

Placing agreement and issue of warrants

 

On 15 January 2021, the Company raised gross proceeds of £1,675,000 through the issuance of 1,903,409 new ordinary shares of the Company to Vin Murria at a placing price of 88 pence per share. At the same time, the Company issued Vin Murria with 3,246,062 warrants which provides for a right to subscribe for an addition 3,246,062 additional new ordinary shares of the Company at an exercise price of 88 pence per share. The warrants may be exercised in whole or in part during an exercise period commencing on the date of issue of the warrants and terminating 18 months after the date of issue. Vin Murria also purchased 500,000 existing Ordinary Shares at 85 pence per share from a shareholder on 15 January 2021.

Subsidiary Incentive Scheme

 

Under the amendments to the Subsidiary Incentive Scheme, the Founder Director's B shares were subject to a buyback by the Company at their original subscription price of £0.012 per B share for a total consideration of £4,000 per Founder Director (£12,000 in aggregate).

Following this buyback, the articles of Summerway Subco Limited were amended in order to implement the proposed changes to the Subsidiary Incentive Scheme as described in Notes 6 and 10. Alexander Anton, Benjamin Shaw, Mark Farmiloe, Tony Morris, Vin Murria and Paul Gibson subscribed for newly issued B shares at a revised subscription price of £0.014 per B share.

 

The current allocations of B shares in issue are set out below.

 

Name   B Shares held

Alexander Anton  75,000

Benjamin Shaw  75,000

Mark Farmiloe  75,000

Tony Morris  175,000

Vin Murria  1,000,000

Paul Gibson  50,000

Total  1,450,000

 

Corporate advisory agreements

 

On 15 January 2021, the Corporate Advisory Agreement entered into between the Company and AFS Advisors LLP (an entity wholly-owned by Alexander Anton, Benjamin Shaw and Mark Farmiloe) was terminated at nil cost to the Company. As at 28 February 2021 no charges had been incurred under the agreement as the legal of completion of the first acquisition did not occur.

On 15 January 2021, the Company entered into a new agreement with Tessera Investment Management Limited ("Tessera") pursuant to which Tessera has agreed to provide strategic and general corporate advice, and M&A and capital raising transaction support services to the Company (the "Tessera Corporate Advisory Agreement"). Tessera charge £12,500 per month (plus VAT) payable monthly in arrears from the date of the agreement. In order to align the parties' collective interests and ensure the parties share in the risk and reward of certain successful transactions, a discretionary bonus may be awarded to Tessera by the Board in the event of the successful completion of certain transactions. Tony Morris, Non-Executive Director of the Company, is a director and shareholder of Tessera.

 

13. COMMITMENTS AND CONTINGENT LIABILITIES

 

There were no commitments or contingent liabilities outstanding at 28 February 2021 that require disclosure or adjustment in these financial statements.

14. POST BALANCE SHEET EVENTS

 

On 7 April 2021, Vin Murria sold 1,000,000 ordinary shares of the Company at 165 pence per share to a leading UK based institutional investor.  Following the sale, Vin Murria continues to hold 1,403,409 ordinary shares of the Company, representing 17.5 per cent. of its issued share capital.

 

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