TIDMCRV
RNS Number : 0318G
Craven House Capital PLC
27 February 2015
27 February 2015
Craven House Capital Plc ("Craven House" or "the Company")
Interim Report for the period ended 30 November 2014
Highlights
* NAV of holdings decreased from GBP5.5m to GBP5.0m in
the six-month period. This was primarily the result
of a mark to market adjustment of our shareholding in
Pressfit Holdings Plc.
* The period was relatively quiet as management focused
on improving operations at existing portfolio
companies and evaluating larger transactions.
For further information please contact:
Craven House Capital Plc Tel: 07590 831 323
Alexandra Eavis
Non-Executive Director
and Company Secretary
www.Cravenhousecapital.com
SPARK Advisory Partners Tel: 0203 368 3550
Limited
Nominated Adviser
Matt Davis/Mark Brady
Overview
During the 6 months to 30 November 2014, Craven House focused on improving the
operational aspects of its portfolio companies as well as the evaluation of
several new opportunities.
We are disappointed to report a decrease in our NAV. This adjustment is primarily
as a result of the mark to market effects of Pressfit Holdings Plc, which was
listed on the AIM Market during the period. While we do not believe the market
value represents the intrinsic value of Pressfit, we do believe it was appropriate
and prudent to write down the holding on our books.
During the period, the Company evaluated several potential investments and we
continue to look at several transformational acquisitions. We spent significant
time and considerable effort on one particular transaction, which did not materialise,
as we simply could not get comfortable with the margin of safety we require
to commit capital. We are especially conservative when issuing new shares that
have a dilutive effect on existing shareholders. We remain firm in our stated
policy of using our shares as consideration in the acquisition only at 1.25p
or higher. If an acquisition does not increase the NAV on a per share basis,
except in very exceptional circumstances, we will not invest. While it is frustrating
for the board and shareholders alike that management time and resource is expended
without tangible result, we would rather err on the side of conservatism and
caution. In the period several of our holdings have undergone significant restructuring.
We believe this will result in enhanced earnings and increased valuations in
future periods.
Investment Activity
There were no new investments in the period.
Selected Performance Updates
* Pressfit Holdings Plc ('Pressfit') is a UK holding
company with subsidiaries manufacturing specialist
stainless steel pipe fittings in China. Craven
House's shareholding at the period end represented
25.3% ownership of Pressfit, through investments
totalling GBP516,648 with a further 2.1% of the
shares in Pressfit being available to the Company in
the event that an outstanding convertible loan is
exercised. The company listed on the AIM market
during the period and suffered from both a lack of
operational performance, mismanagement and market
apathy. Subsequent to the period, Pressfit was
de-listed from the AIM market after its Nominated
Adviser ("NOMAD"), Daniel Stewart & Company, lost its
NOMAD authorisation and Pressfit was unable to secure
a new NOMAD in the specified time period. We were
very frustrated with these events. We have voiced our
frustration and displeasure to the company and are
presently working with the other large shareholders,
one of which is an industry leader, to restructure
the management and move the company forward.
* Farm Lands of Africa. Farm Lands of Africa Ltd is a
private farming company with access to large-scale
farmland in Guinea. We remain intensely optimistic
about African farmland operations in general and
believe that Africa will become self sufficient in
food production. However, the outbreak of Ebola in
the area where our leases were located made
operations impossible. As our leases were contingent
on continuous operations we found it prudent to write
off our investment to zero at the prior year-end in
May 2014. We do believe once the country begins to
recover from the Ebola outbreak there will be
opportunity to renegotiate the leases and resume
operations. We cannot be certain any developments
will materialize but we are optimistic.
Working Capital
Operating and overhead costs continue to be managed very prudently. On-going
monthly operating costs were c.GBP15,000 (inclusive of all management fees),
during the period.
Immediate working capital needs will be met by cash in the bank, and the continued
support of the Company's major shareholder and Investment Manager, Desmond Holdings
Ltd. Desmond Holdings has confirmed it will continue to evaluate the extension
of existing loan facilities and to provide additional working capital loans
if and when required.
Interest and capital repayments of the mortgage over the Green Isle Hotel, and
cash generated by other existing investments, are expected to significantly
reduce the Company's requirement for additional working capital facilities going
forward.
Outlook
We are patient and opportunistic investors. We continue to be of the view that
our continuing focus on real assets in emerging markets and special situations
in developed markets will offer the best returns over the medium to longer term
particularly in the current global economic environment. We do not believe that
the Company's current stock market valuation accurately reflects the inherent
value of the investment portfolio nor the potential of our investment strategy.
We believe in creating long-term value for our shareholders and will not be
diverted by seeking short-term share price accretion with continual newsflow.
Our firm view is that risk is presently mispriced in the capital markets. Both
Bonds and Equities are overvalued and a reversal of capital flows will provide
a substantial opportunity for patient investors such as ourselves.
We are constantly seeking transformational acquisitions that would materially
enhance the valuation of your company and welcome introductions to new opportunities.
In particular we target businesses that balance high growth potential with the
risk mitigation that arises from being cash flow positive and having strong
management. We are particularly interested in generational transitions in family
businesses.
Conclusion
The board believes that Craven House Capital is an attractive acquisition vehicle
with increasing potential. When and where capital is scarce we will find the
best opportunities. Where capital is abundant and inexpensive, we will struggle
to find good value. Until such time as we find deep value we shall remain patient.
Our investment manager, Desmond Holdings, remains the largest shareholder of
Craven House Capital and has never sold a share. We are appreciative of the
support received from our shareholders to date and are committed to creating
value for the enterprise, and wealth for shareholders.
INCOME STATEMENT
FOR THE SIX MONTH PERIOD ENDED 30 NOVEMBER 2014
Six months ended Year
Ended
30 Nov 30 Nov 31 May
2014 2013 2014
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
CONTINUING OPERATIONS
Revenue - 249 249
Gross Portfolio return (469) 374 (845)
Other operating income - - -
Administrative expenses (96) (101) (307)
OPERATING PROFIT/(LOSS) (565) 522 (903)
Finance costs 2 (8) (10) (16)
Finance income 28 6 39
------------ ------------ ----------
PROFIT/(LOSS) BEFORE
INCOME TAX (545) 518 (880)
Income tax - - -
------------ ------------ ----------
PROFIT/(LOSS) FOR
THE PERIOD (545) 518 (880)
============ ============ ==========
Earnings per share
expressed
In pence per share:
Basic 6 (0.07) 0.09 (0.13)
Diluted 6 (0.06) 0.08 (0.13)
------------ ------------ ----------
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIOD ENDED 30 NOVEMBER 2014
Six months ended Year
Ended
30 Nov 30 Nov 31 May
2014 2013 2014
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
PROFIT/(LOSS) FOR
THE PERIOD (545) 518 (880)
OTHER COMPREHENSIVE - - -
INCOME
TOTAL COMPREHENSIVE
INCOME FOR THE PERIOD (545) 518 (880)
============ ============ ==========
TOTAL COMPREHENSIVE
INCOME ATTRIBUTABLE
TO:
Owners of the company (545) 518 (880)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT 30 NOVEMBER 2014
Six months ended Year
Ended
30 Nov 30 Nov 31 May
2014 2013 2014
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Investments at fair
value through
profit or loss 4 5,626 6,114 6,095
------------ ------------ ----------
5,626 6,114 6,095
------------ ------------ ----------
CURRENT ASSETS
Trade and other receivables 116 76 114
Cash and cash equivalents 296 6 -
------------ ------------ ----------
412 82 114
------------ ------------ ----------
TOTAL ASSETS 6,038 6,196 6,209
============ ============ ==========
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 5 8,519 8,423 8,519
Share premium 7,310 6,206 7,310
Retained earnings (10,844) (8,901) (10,299)
------------ ------------ ----------
TOTAL EQUITY 4,985 5,728 5,530
------------ ------------ ----------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 678 192 339
Financial liabilities-borrowings
interest bearing
loans and borrowings 7 375 276 340
------------ ------------ ----------
1,053 468 679
------------ ------------ ----------
TOTAL LIABILITIES 1,053 468 679
------------ ------------ ----------
TOTAL EQUITY AND
LIABILITIES 6,038 6,196 6,209
============ ============ ==========
STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTH PERIOD ENDED 30 NOVEMBER 2014
Called Profit
up share and loss Share Total
capital account premium equity
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 June 2013 8,313 (9,419) 4,948 3,842
Changes in equity
Issue of share capital 110 - 1,258 1,368
Total comprehensive
income - 518 - 518
---------- ---------- ---------- ----------
Balance at 30 November
2013 8,423 (8,901) 6,206 5,728
Changes in equity
Issue of share capital 96 - 1,104 1,200
Total comprehensive
income - (1,398) - (1,398)
---------- ---------- ---------- ----------
Balance at 31(st) May
2014 8,519 (10,299) 7,310 5,530
---------- ---------- ---------- ----------
Changes in equity
Issue of share capital - - - -
Total comprehensive
income - (545) - (545)
---------- ---------- ---------- ----------
Balance at 30 November
2014 8,519 (10,844) 7,310 4,985
---------- ---------- ---------- ----------
STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 30 NOVEMBER 2014
Six months ended Year
Ended
30 Nov 30 Nov 31 May
2014 2013 2014
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Cash generated from
operations 257 10 (103)
Interest paid (8) (10) (16)
Net cash used in operating
activities 249 - (119)
Cash used in investing
activities
Purchase of fixed asset
investments - (1,182) (2,382)
Sale of fixed asset - - -
investments
Other loans 35 (187) (123)
Exchange variance re - - -
investments
Interest received 28 6 39
------------ ------------ ----------
Net cash used in investing
activities 63 (1,363) (2,466)
Cash from financing
activities
Share issue - 1,368 2,568
------------ ------------ ----------
Net cash from financing
activities - 1,368 2,568
------------ ------------ ----------
Increase/(Decrease)
in cash and cash equivalents 312 5 (17)
Cash and cash equivalents
at the beginning (16) 1 1
of period
Cash and cash equivalents
at the end of the 296 6 (16)
============ ============ ==========
period
Cash and cash equivalents
consist of: 296 6 (16)
Cash and cash equivalents
included in current
assets/(Trade and other
payables)
NOTES TO THE FINANCIAL INFORMATION
FOR THE SIX MONTH PERIOD ENDED 30 NOVEMBER 2014
1. ACCOUNTING POLICIES
General Information
Craven House Capital plc is a company incorporated in the United
Kingdom under the Companies Act. 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 (code:
CRV).
The next annual financial statements of Craven House Capital plc
will be prepared in accordance with applicable International
Financial Reporting Standards (IFRS) as adopted for use by the
European Union. Accordingly, the interim financial information in
this report has been prepared using accounting policies consistent
with IFRS. IFRS are subject to amendment and interpretation by the
International Accounting Standards Board (IASB) and the
International Financial Reporting Interpretations Committee (IFRIC)
and there is an on-going process of review and endorsement by the
European Commission. The financial information has been prepared on
the basis of the IFRS that the directors expect to be applicable as
at 31(st) May 2015.
Changes in accounting standards
IFRS 10, 11 and 12 are effective for the year ended 31 May 2015,
therefore these standards have been adopted as part of the
preparation of the results for the period ended 30 November 2014.
The principal changes as a result of these standards arise from
IFRS 10, as well as "Investment Entities"(Amendments to IFRS 10,
IFRS 12 and IAS 27).
Under IFRS 10, companies are able to consider whether they are
classed as an investment entity. An investment entity is an entity
that:
(a) obtains funds from one or more investors for the purpose of
providing those investor(s) with investment management
services;
(b) commits to its investor(s) that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both; and
(c) measures and evaluates the performance of substantially all
of its investments on a fair value basis.
In assessing whether a company meets the definition of an
investment entity, the following characteristics must be
considered:
(a) it has more than one investment;
(b) it has more than one investor;
(c) it has investors that are not related parties of the entity;
and
(d) it has ownership interests in the form of equity or similar
interests.
The directors have considered the definition of an investment
entity in IFRS 10 as well as the
associated application guidance. The directors considered that
Craven House Capital met the definition of an investment
entity.
Previously, the financial information presented included that of
Craven House Capital plc and its subsidiary undertaking, Craven
House Industries Limited ('CHI'). With effect from the current
accounting period ending 30 November 2014,the investment in CHI
will be accounted for at fair value through profit and loss and CRV
will present information for them as an individual entity and not
as a group. This has had no impact on the net assets reported in
prior periods.
NOTES TO THE FINANCIAL INFORMATION - continued
FOR THE SIX MONTH PERIOD ENDED 30 NOVEMBER 2014
1. ACCOUNTING POLICIES (continued)
The financial information has been prepared under
the historical cost convention except in relation
to the fair value adjustments required by accounting
standards. The principal accounting policies have
been applied to all periods presented.
This financial information is unaudited and does
not constitute statutory financial statements within
the meaning of Section 434 of the Companies Act
2006. The financial statements of the Company for
the year ended 31 May 2014, which were prepared
in accordance with IFRS as adopted for use by the
European Union, have been reported on by the Company's
auditors and delivered to the Registrar of Companies.
The report of the auditors was unqualified and did
not include any statement under Section 498 of the
Companies Act 2006.
This financial information is presented in pounds
sterling, rounded to the nearest GBP'000. Pounds
sterling is the currency of the primary economic
environment in which the company operates.
The directors do not propose the issuance of a dividend.
The interim financial information for the six months
ended 30 November 2014 was approved by the directors
on 27 February 2015.
Going concern
At the balance sheet date, the Company had drawn down
non-interest bearing loans from Desmond to enable it to make
qualifying investments under its Investing Policy and to provide
working capital for the Company. Although amounts drawn down are
repayable within 12 months of the balance sheet date, Desmond has
agreed that it will not seek repayment of outstanding balances in
respect of both facilities unless the Company is in a position to
make the repayment. Of the initial amount drawn down, GBP299,000
remained outstanding at the period end. The Directors also aim to
generate cash from yield-based investments; and full / partial
exits of the Company's more liquid investments (if required).
Further to the successful private placing; the ongoing working
capital facility provided by Desmond; and income generated by
investments, the Board is pleased to report that the Company can
prepare accounts on the going concern basis.
2. Finance expense
Six months ended Year
Ended
30 Nov 30 Nov 31 May
2014 2013 2014
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Loan interest 8 10 16
8 10 16
-------------- ------------ ----------
NOTES TO THE FINANCIAL INFORMATION - continued
FOR THE SIX MONTH PERIOD ENDED 30 NOVEMBER 2014
3. Taxation
No tax charges arose in the period or in comparative
periods as a result of losses incurred.
4. Investments at fair value through profit or
loss
Quoted Unquoted
Investments Investment Total
GBP'000 GBP'000 GBP'000
At 1 June 2014 (audited) 11 6,084 6,095
Additions - - -
Revaluations (573) 104 (469)
Reclassification 1,182 (1,182) -
At 30(th) November
2014 (unaudited) 620 5,006 5,626
============= ============ =========
Quoted investments at 30 November 2014 are as
follows;
Shares held in Farm Lands of Africa Inc, a company
listed on the OTC markets in New York are valued
at GBP12,407. The shares in Farm Lands of Africa
Inc have been measured on a Level 3 basis due
to these not being traded in an active market.
Shares held in Pressfit Holdings Plc, a company
listed on the AIM Market of the London Stock Exchange,
are valued at GBP516,648. These have been measured
on a Level 1 basis due to these being traded in
an active market.
A convertible loan to Pressfit Holdings Plc valued
at GBP91,376. This has been valued based on the
number of shares that Craven House Capital would
receive on conversion at the market price of the
shares at the date of its IPO as the Directors
belive this is the best indication of the fair
value of the loan at the reporting date.
Unquoted investments at 30 November 2014 have
been measured on a Level 3 basis as no observable
market data was available. These investments are
as follows:
Shares in Ceniako Limited valued at GBP796,061,
representing a 49% holding. These have been valued
at the price paid by Craven House Capital as the
Directors believe that the price of recent investment
continues to represent the best indication of
the fair value at the period end.
Shares in Finishtec Acabamento Tecnicos em Matais
Ltda valued at GBP639,551. This is held through
a 95% subsidiary Craven House Industries Limited
giving the group a 50.1% stake. These have been
valued at the price paid by Craven House Capital,
as the Directors believe that the price of recent
investment continues to represent the best indication
of the fair value at the period end.
NOTES TO THE FINANCIAL INFORMATION - continued
FOR THE SIX MONTH PERIOD ENDED 30 NOVEMBER 2014
4. Investments at fair value through profit or loss
(continued)
Shares in EmVest Barvale (Pty) Ltd valued at GBP438,735,
representing a 49% holding. These have been valued at the price
paid by Craven House Capital, as the Directors believe that this is
the best indication of the value at the period end.
Shares in EmVest Evergreen (Pty) Ltd valued at GBP0,
representing a 49% holding. These have not been attributed a value
as the Directors believe that this is the best indication of the
value at the period end.
Shares in EmVest Evergreen Properties (Pty) Ltd valued at
GBP493,514, representing a 49% holding. These have been valued at
the price paid by Craven House Capital as the Directors believe
that this is the best indication of the value at the period
end.
Shares in EmVest Foods (Pty) Ltd valued at GBP164,505,
representing a 49% holding. These have been valued at the price
paid by Craven House Capital, as the Directors believe that this is
the best indication of the value at the period end.
Shares in Royalty Sports Brands Ltd valued at GBP1,279,019,
representing a 49% holding. These have been valued at the price
paid by Craven House Capital, as the Directors believe that this is
the best indication of the value at the period end.
Shares in Farm Lands of Africa Ltd valued at GBP311,966,
representing a 50% holding. The value of the shares have been
written down to zero as the Directors believe that this is the best
indication of the value at the period end considering the recent
Ebola outbreak in Guinea.
A loan with Greentel Limited valued at GBP1,194,090. The period
end valuation is based on the agreed conversion of the loan into a
facility of EUR1,500,000 on 28 November 2013, which the Directors
believe is the most appropriate indicator of the period end
valuation based on the information available to them.
5. CALLED UP SHARE CAPITAL
The Company's authorised share capital is as follows:
Number Class: Nominal 30 Nov 31May
Value 2014 2014
(Unaudited) (Audited)
GBP'000 GBP'000
2,280,038,212 Ordinary 0.001 2,280 2,280
77,979,412 Deferred 0.09 7,018 7,018
77,979,412 Deferred 0.009 702 702
------------ ----------
10,000 10,000
============ ==========
NOTES TO THE FINANCIAL INFORMATION - continued
FOR THE SIX MONTH PERIOD ENDED 30 NOVEMBER 2014
5. CALLED UP SHARE CAPITAL (continued)
Issued and fully paid share capital as at 30 November
2014 are as follows:
Number Class: Nominal 30 Nov 31 May
Value 2014 2014
(Unaudited) (Audited)
GBP'000 GBP'000
798,466,557 Ordinary 0.001 799 799
(2013: 702,466,557)
77,979,412 Deferred 0.09 7,018 7,018
77,979,412 Deferred 0.009 702 702
-------------- ----------
8,519 8,519
============== ==========
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 GBP1 million
per share. The deferred shares may be cancelled
at any time for no consideration by way of a reduction
in capital.
There was no movement in share capital in the six
months ended 30 November 2014.
6. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the loss
attributable to the equity holders for the period of GBP545,000 and
on weighted average number of shares in issue of 798,466,557 (Six
months ended 30 November 2013: profit of GBP518,000 and 606,865,654
shares; Year ended 31 May 2014 loss of GBP880,000 and 673,998,159
shares) being the weighted average number of shares, in issue
during the period.
The calculation of diluted earnings per share is based on the
loss attributable to the equity holders for the period of
GBP545,000 and on weighted average number of shares and warrants in
issue of 880,692,823 (Six months ended 30 November 2013: profit of
GBP518,000 and 689,091,920 shares; Year ended 31 May 2014 loss of
GBP880,000 and 710,752,399 shares) being the weighted average
number of shares and warrants, in issue during the period.
7. LOANS
Other loans of GBP375,000 comprise advances made by Desmond
Holdings Ltd ("Desmond") totalling GBP299,000 and loans made by
Wise Star Capital Investment Limited totalling GBP76,000, both
being Hong Kong investment companies. The loans were provided to
enable the Company to make qualifying investments under its
Investing Policy and to provide working capital for the
Company.
NOTES TO THE FINANCIAL INFORMATION - continued
FOR THE SIX MONTH PERIOD ENDED 30 NOVEMBER 2014
7. LOANS (continued)
The terms of the loans provided by Desmond are as follows:
a) Investment facility
Non-interest bearing loan facility of up to GBP700,000,
originally provided in December 2010. The majority of this has now
been repaid and as at 30 November 2014, the Company's borrowings
under this facility totalled GBP47,000.
b) Working capital loans
Interest-bearing loans provide financial support to enable the
Company to meet its reasonable working capital requirements. The
facility will remain in place for at least 12 months from the date
of approval of the financial statements. Desmond has agreed that it
will not seek repayment of outstanding balances in respect of both
facilities unless the Company is in a position to make the
repayment.
The loan provided by Wise Star Capital Investment Limited
includes interest payable at a rate of 6% per annum. The loan was
provided for 12 months dated 1st September 2011; however this loan
has since been extended. The amount owed to Wise Star Capital
Investment Limited at the balance sheet date was GBP76,000.
7. RELATED PARTY DISCLOSURES
During the period, the Company entered into the following
transactions with related parties and connected parties:
Loans from Desmond Holdings Limited
At the period end the Company owed GBP299,000 to Desmond
Holdings Limited, the Company's Investment Manager and major
shareholder in the Company.
Management fees payable to Desmond Holdings Limited
At the period end, included in trade creditors, is an amount of
GBP35,000 payable to Desmond Holdings Limited, in respect of
management services provided. The total amount owed to Desmond in
respect of unpaid invoices at the balance sheet date was
GBP227,500.
Investment in Pressfit Holdings Plc
At the period end the Company held shares in Pressfit Holdings
Plc and a convertible loan was owed to the Company, both of which
were included in quoted investments. During the period Mark Pajak
was Chairman of Pressfit Holdings Plc.
8. EVENTS AFTER THE REPORTING PERIOD
No reportable events occurred after the reporting period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BQLLLELFXBBD
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