Interim Results
October 29 2004 - 5:59AM
UK Regulatory
RNS Number:6222E
EPIC Reconstruction PLC
29 October 2004
EPIC Reconstruction plc
Interim Report and Unaudited Accounts
For the period 25 July 2003 to 31 July 2004 (unaudited)
Chairman's statement
Background and Results
EPIC Reconstruction plc ("ER" or the "Company") is a closed-end Isle of Man
registered Company, investing in companies emerging from distressed and
insolvent situations in the UK. The Company was listed on the Alternative
Investment Market on 16th September 2003, having raised #28.1m net of issue
expenses in a placing to institutional investors.
ER is advised by EPIC Specialist Investments Limited ("ESI" or "the Manager").
ER has clearly defined investment criteria which target businesses with strong
asset backing, high cash generation and the potential for significant
operational improvement, driven by an experienced management team. ER makes its
investments through a combination of securities, which include shareholder
loans, mezzanine, debt financing, secured stock financing, plant and machinery
financing, invoice discounting and additional equity. ER invests through a third
party, EPIC Structured Finance, which acts as the guarantor of ER's investments.
The balance and structure varies from deal to deal, but ER seeks to ensure that
they represent the optimal returns for the shareholders. Through this
combination of securities ER provides a one-stop shop to companies in the short
time frames determined by distressed situations.
The results since the listing of the Company have shown a total income of
#729,108 from commissions and interest, leading to a net investment income of
#147,556 after expenses. In addition, the net realised and unrealised gain on
the revaluation of investments of #353,782 has resulted in a cumulative increase
in net assets of #501,338 for the period.
The approach adopted by the Company for the purpose of determining the profit
available for distribution by way of dividends is that all commissions received,
preference share dividends received and capital gains realised within the twelve
months following an investment are included in the calculation of the profit
available for distribution .Similarly, commission received and preference share
dividends received after twelve months following an investment are included in
the calculation of the profit available for distribution, but capital gains
realised after twelve months are not so included.
Once fully invested, ER is targeted with returning a minimum of an 8% annual
dividend to its investors. ER looks to provide third party finance through its
close relationship with a major UK clearing bank. In addition, ER will take
equity stakes in businesses to which financing is provided, so as to participate
in any long term value uplift in those businesses.
Dividends
ER proposes paying an Interim Dividend of 1.67p per share.
Recent Investments
ER has completed seven deals of varying sizes since the Company listed ten
months ago. The first completed investment was in a subsidiary of Carpets
International, a US based carpet manufacturer that went into Chapter 11 in 2003.
With ER's support, the management cut the overhead base by rationalising three
UK manufacturing facilities into one plant in Wales thereby improving the
operational efficiency of the business. ER supported the incumbent management
team, providing total access to funds of up to #10m for the business.
Other investments have ranged between #0.2m and #7.0m of total funding provided
to companies in the Food, Beverage, Building Materials, Engineering and Support
Services sectors. There have been more opportunities to invest in equity than
was anticipated at the time of listing, and ER retains significant equity stakes
in six of the seven investments. Currently, there are #9.7m of funds outstanding
from ER and the UK clearing bank.
In addition, ER has already sold one of the portfolio investments during the
year. The Company invested #0.6m in a small Internet Retail business selling
digital cameras. A trade buyer looking for expansion in this increasingly
competitive market offered an attractive price, which ER accepted, yielding
circa 1.5 times our original investment in six months.
Investment Outlook and Strategy
To date, the Company has made fewer individual investments but of a greater
average size and with larger equity stakes than was expected at the time of the
listing. The Manager expects this trend towards larger investment opportunities
to continue as the fund becomes increasingly recognised within the marketplace.
The Manager has reviewed over 100 potential transactions to date from a wide
range of sources. In addition, the Manager decided not to pursue seven
investments at the latter stages of Due Diligence, as it became apparent those
investments did not fulfil our investment criteria. The pipeline of potential
deals remains strong and is increasing as our sources become more aware both of
the Company's existence and our strict investment criteria.
Conclusion
The opportunity to invest in distressed and insolvent situations within the UK
remains strong, and has the potential to increase as the Bank of England
tightens monetary policy. The pipeline of investment opportunities has so far
validated our original objectives for the Company and I am confident this will
continue going forward. I believe good opportunities for larger investments with
greater lending potential are beginning to present themselves.
The deals completed to date have proved resilient and there remains the
potential for further value creation through ER's residual equity stakes.
Additional repayments from the portfolio companies and a continued strong deal
flow is required if we are to achieve our 8% dividend target at the year end. I
look forward to reporting further on our progress early in the New Year.
Donald Adamson
EPIC Reconstruction plc
Consolidated Statement of Operations
For the period 25 July 2003 to 31 July 2004 (unaudited)
25 July 2003 to
31 July 2004
(unaudited)
# #
Income:
Bank interest 537,657
Commission income 191,451
----------
Total income 729,108
Expenses:
Investment advisor's fees (325,745)
Administration fees (43,734)
Directors' fees (84,784)
Directors and Officers Insurance (38,673)
Professional fees paid (22,026)
Crest Service Provision (2,252)
Printing and advertising expenses (9,687)
Travel expenses (5,402)
Auditors' remuneration (7,726)
Bank interest and other charges (382)
Statutory Expenses-Share Capital
Duty (4,875)
Stock Exchange fees (5,362)
Advisor and Broker Fees (30,904)
----------
Total Expenses (581,552)
Net investment income 147,556
Gains/(losses) on investments
Net realised gain 166,348
Movement in unrealised gain on
revaluation of investments 187,434
----------
353,782
Net increase in net assets 501,338
Dividends -
----------
Total profit transferred to revenue
reserve 501,338
----------
Basic earnings per ordinary share
(pence) 1.671p
EPIC Reconstruction plc
Consolidated Statement of Assets and Liabilities
As at 31 July 2004 (unaudited)
31 July 2004
(unaudited)
#
Non-current assets
Available-for-sale investments 8,206,805
Current assets
Debtors and prepayments 357,815
Cash at bank and in hand 20,230,901
-----------
20,588,716
-----------
Current liabilities
Accrued expenses (143,704)
-----------
(143,704)
-----------
Net current assets 20,445,012
----------
Net assets 28,651,817
----------
Represented by:
Ordinary shares 300,000
Share premium 27,850,479
Revenue reserve 501,338
----------
28,651,817
----------
Net asset value per ordinary share (pence) 95.506p
EPIC Reconstruction plc
Consolidated Statement of Changes in Net Assets
For the period 25 July 2003 to 31 July 2004
25 July 2003 to
31 July 2004
#
Net assets at start of period -
Capital share proceeds 28,150,479
Net profit for the period 501,338
Dividends payable -
-----------
Net assets at end of period 28,651,817
-----------
EPIC Reconstruction plc
Consolidated Statement of Cashflow
For the period 25 July 2003 to 31 July 2004 (unaudited)
25 July 2003 to
31 July 2004
(unaudited)
#
Operating activities
Bank interest 280,758
Commission income 100,337
Expenses paid (447,650)
-----------
Net cash outflow from operating
activities (66,555)
-----------
Investing activities
Purchase of investments (22,099,023)
Sale of investments 14,246,000
-----------
Net cash outflow from investing
activities (7,853,023)
-----------
Financing activities
Proceeds on issue of equity shares 30,000,000
Issue cost expenses (1,849,521)
-----------
Net cash inflow from financing
activities 28,150,479
-----------
Increase in cash 20,230,901
Cash and cash equivalents at start of period -
-----------
Cash and cash equivalents at end
of period 20,230,901
-----------
Note to the Statement of Cash Flow
Net Investment Income 147,556
Adjustment for non-cash items
Increase in debtors and prepayments (357,815)
Increase in accrued expenses 143,704
-----------
Net cash outflow from operating activities (66,555)
-----------
P.P. Scales
Company Secretary.
29 October 2004
This information is provided by RNS
The company news service from the London Stock Exchange
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