TIDMWCH
RNS Number : 2490C
Wilmcote Holdings PLC
28 September 2018
LEI number: 2138004EUUU11OVHZW75
Wilmcote Holdings plc
Publication of Annual Report & Financial Statements for the
period ended 30 June 2018
London, 28 September 2018 - Wilmcote Holdings plc ("Wilmcote" or
the "Company") announces the publication of its results for the
period from incorporation on 17 March 2017 to 30 June 2018.
Wilmcote continues to focus on its investment strategy of
creating value for its investors through the acquisition and
subsequent development of target businesses in the large and highly
fragmented downstream and specialty chemicals sector. The Company
has identified a number of attractive acquisition opportunities and
intends to acquire a controlling stake in a platform asset with
global reach, headquartered in the UK, Europe or North America.
Over the period, Wilmcote generated a loss after taxation of
GBP13.2 million, reflecting operating expenses and diligence costs
incurred in the continued pursuit of its stated investment
strategy. As at 30 June 2018, Wilmcote held GBP19.5 million in
cash. After deducting costs incurred and accrued in respect of
operating and due diligence expenses as at 30 June 2018, net cash
was approximately GBP11.5 million.
Adrian Whitfield, Wilmcote CEO, commented: "We continue to
progress a number of potential acquisition opportunities in the
downstream and specialty chemicals sector and remain excited about
our prospects of being able to execute our investment strategy to
unlock the full potential of acquired assets through operational
improvement and accretive M&A".
The Annual Report is also available on the Company's website at
www.wilmcoteplc.com
Enquiries:
Numis Securities Limited (Nominated Adviser and Joint
Broker)
Tel: +44(0)207 260 1000
Jamie Lillywhite
Nick Westlake
Will Baunton
Macquarie Capital (Europe) Limited (Joint Broker)
Tel: +44(0)203 037 2000
Ben Bailey
Nick Stamp
Alex Moraru
Teneo Blue Rubicon (Financial PR)
Tel: +44(0)207 260 2700
Charles Armistead
Rosie Oddy
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014.
Adrian Whitfield is Chief Executive Officer of Wilmcote Holdings
plc, which has offices at 11 Buckingham Street, London, WC2N
6DF.
WILMCOTE HOLDINGS PLC
Annual Report and Audited Financial Statements
From incorporation to 30 June 2018
CHIEF EXECUTIVE OFFICER'S STATEMENT AND STRATEGIC REPORT
I am pleased to present to shareholders the Annual Report and
audited Financial Statements (the "Financial Statements") of
Wilmcote Holdings plc (the "Company") for the period from
incorporation on 17 March 2017 to 30 June 2018, consolidating the
results of Wilmcote Holdings plc, WHJ Limited, Wilmcote Group
Limited and WCH Group Limited (collectively the "Group" or
"Wilmcote").
Strategy
Wilmcote has been established with the objective of creating
value for its investors through the acquisition and subsequent
development of target businesses in the downstream and specialty
chemicals sector. During this financial period, the Company raised
capital of GBP25 million: GBP10 million on initial launch and GBP15
million subsequently on its initial public offering. The capital
was raised for the purposes of demonstrating credible funding
support to potential target vendors as well as to fund working
capital and due diligence in relation to potential acquisition
targets, in accordance with the Company's investment strategy.
The Company intends to acquire a controlling stake in a company
or group of companies (the "Platform Acquisition"). The Company is
expected to need to raise additional external funding for these
purposes, and may use both equity and/or debt in this regard. It is
our belief that the downstream and specialty chemicals sector
offers opportunities for capitalising on attractive structural
trends and generating value through consolidation in fragmented
markets. We expect the acquired target to act as a platform for
follow-on acquisitions that complement the initial business.
Following the completion of a Platform Acquisition, the
Directors and senior management intend to use their multiple years
of industrial and managerial experience to deliver value through
the application of a buy-and-build strategy in the downstream and
specialty chemicals sector in order to achieve attractive,
compounding returns for shareholders.
Overview of the Period
Since listing on the AIM Market ("AIM"), which is operated by
the London Stock Exchange, in August 2017, the Company has pursued
its stated strategy. During the period to 30 June 2018, Wilmcote
explored a number of opportunities in line with its investment
strategy, in particular the potential acquisition of Arysta
LifeScience from Platform Specialty Products Corporation. Whilst
active discussions ceased on the asset on 18 June 2018, the Company
continues to monitor the situation closely.
During the period, the Company's purpose has been to identify
and analyse potential acquisition targets and consequently the
Company has no reported revenue. Operational and due diligence
expenses incurred are set out in note 7 to the Financial
Statements.
Results
The Group's loss after taxation for the period from
incorporation to 30 June 2018 was GBP13.2 million. In the same
period, the Group incurred GBP13.3 million of administrative
expenses, received interest of GBP0.1 million and at the period end
held a cash balance of GBP19.5 million. After deducting costs
accrued in respect of operating and due diligence expenses, the net
cash position was GBP11.5 million.
Dividend Policy
It is the Board's policy that prior to the Platform Acquisition,
no dividends will be paid. The Company has not yet acquired a
trading operation and the Directors therefore consider it
inappropriate to make a forecast of the likelihood of any future
dividends. Following the Platform Acquisition, and subject to the
availability of distributable reserves, dividends will be paid to
shareholders when the Directors believe it is appropriate and
commercially prudent to do so.
I would also like to welcome John McAdam to the Board, with
effect from 1 October 2018. John's appointment to the role of
Independent Non-Executive Director will further strengthen the
independence and capabilities of the Board. John brings a wealth of
complimentary experience, and exceptional skill set, ensuring the
Company is in the best possible position in advance of the
Company's Platform Acquisition. Further details of John's
experience can be found on page 6 of these financial
statements.
Outlook
The Group continues to pursue its stated investment strategy.
There are a large number of attractive buy-and-build opportunities
in the downstream and specialty chemicals sector and we remain very
excited about our prospects of being able to execute our investment
strategy to unlock the full potential of acquired assets. We
believe that the Company is well placed to progress identified
opportunities in the year ahead.
Adrian Whitfield
Chief Executive Officer
27 September 2018
GOVERNANCE |REPORT OF THE DIRECTORS
The Directors present their Annual Report and audited Financial
Statements for the period from incorporation on 17 March 2017 to 30
June 2018.
Principal activities
The Company has been formed to acquire a platform trading asset
in the downstream and specialty chemicals sector. Following
completion of such a Platform Acquisition, the Directors intend to
implement an operating strategy focused on generating shareholder
value through organic and inorganic growth, including potential
complementary bolt-on acquisitions. The Company has raised GBP25
million, in aggregate, on incorporation and at the time of its
initial public offering, with such funds being used for the purpose
of carrying out due diligence on potential Platform Acquisitions
and for general working capital purposes.
Results and dividends
For the period to 30 June 2018, the Group's loss was GBP13.2
million
It is the policy of the Company's board of directors (the
"Board") that prior to the Platform Acquisition, no dividends will
be paid. Following this, and subject to the availability of
distributable reserves, dividends will be paid to shareholders when
the Directors believe it is appropriate and commercially prudent to
do so.
Statement of Going Concern
The Group had cash resources of GBP19.5 million at 30 June 2018.
The directors have considered the financial position of the Group
and have reviewed forecasts and budgets for a period of 12 months
following the approval of the Financial Statements. As a result,
the Directors have concluded that, at the date of approval of the
Financial Statements, the Company and the Group have sufficient
resources for the foreseeable future and can continue to execute
its stated strategy. Accordingly, it is appropriate to adopt the
going concern basis in the preparation of the Financial
Statements.
Financial Risk Profile
The Group's financial instruments are mainly comprised of cash,
payables and receivables that arise directly from the Group's
operations. Details of the risks relevant to the Group are included
in the notes to the Financial Statements on pages 44 to 48.
Substantial Shareholdings
The Company has been notified that the following shareholders
held a beneficial interest of 3 per cent. or more of the Company's
issued share capital as at date of approval of the Financial
Statements:
Ordinary Shares Percentage
Held of Issued
Share Capital
Marwyn Asset Management Limited 12,591,670 60.44%
Invesco Asset Management
Limited 4,062,500 19.50%
Canaccord Genuity Group Inc 2,083,333 10.00%
Threadneedle Asset Management
Limited 818,682 3.95%
Stated Capital
Details of the stated capital of the Company during the period
are set out in note 15 to the Financial Statements.
Directors
The Directors of the Company who served during the period and/or
subsequent to the date of this report are:
Adrian Whitfield, Chief Executive Officer
Adrian is an experienced chief executive who previously spent
eight years at Synthomer plc (previously called Yule Catto & Co
plc), the FTSE 250 specialty polymer operator, where he
successfully implemented a turnaround and growth strategy.
Synthomer is a global manufacturer of specialty polymers for the
coatings, construction, textiles, paper and healthcare
industries.
Adrian was appointed chief executive officer of Synthomer in
2006 and led the transformation of a traditional chemical
conglomerate into a segment-leading specialty polymer chemical
business. In doing so, he grew revenue from GBP340 million to
nearly GBP1 billion, while also improving profit before tax margins
from 5.7 per cent. to 8.7 per cent. During Adrian's tenure,
Synthomer's market capitalisation increased 13 times from
turnaround lows, and free cash flow increased six times.
As part of the transformation of Synthomer, Adrian led a number
of successful non-core disposals and strategic acquisitions,
including the acquisition and integration of PolymerLatex, a major
competitor of Synthomer, in 2010 for GBP376 million, extracting
annual cost synergies of over GBP20 million per year. In
recognition of his efforts, he was awarded Turnaround of the Year
at the 2011 UK PLC Awards.
Prior to his role at Synthomer, Adrian was a divisional chief
executive at DS Smith, a manufacturer of paper and packaging
products, for seven years. There he set up a new plastics division,
growing its turnover to GBP200 million organically and through the
acquisition of six international businesses.
James Corsellis, Executive Director (appointed Chairman 24
September 2018)
James has over 15 years of investment management and corporate
finance expertise. Marwyn's 16 portfolio platforms to date have
issued over GBP2.7bn of equity capital, with James having
experienced a broad array of sectors and developed an extensive
network of relationships with co-investors, advisors and other
business leaders.
James brings an entrepreneurial mind-set to the management team,
having co-founded Marwyn alongside Mark Brangstrup Watts, and prior
to that founded one of the earliest strategic technology
consultancies. James was also previously Chief Executive Officer of
icollector Plc, a leading provider of live auction trading
platforms, later negotiating its joint venture with eBay.
James is a Managing Partner of Marwyn Capital LLP, Marwyn
Investment Management LLP and is a non-executive director of Marwyn
Asset Management Limited. Portfolio level executive directorships
include Safe Harbour Holdings Plc, Wilmcote Holdings Plc and Le
Chameau Group Plc.
James was previously on the board of BCA Marketplace Plc,
Breedon Aggregates Ltd and Advanced Computer Software Plc, and was
Chairman of Entertainment One Ltd, amongst others.
Mark Brangstrup Watts, Executive Director
As co-founder of Marwyn in 2002, Mark has many years of
experience deploying private equity investment strategies in the
public markets. Marwyn's highly acquisitive portfolio companies
have delivered approximately 100 bolt-on acquisitions with Mark
offering significant M&A, ECM and corporate finance
experience.
Mark brings his background in strategic consultancy to the
management team having been responsible for strategic development
projects for international clients including Ford Motor Company
(US), Cummins (Japan) and 3M (Europe).
Mark is a Managing Partner in Marwyn Capital LLP and Marwyn
Investment Management LLP. Mark is currently an Executive Director
of Le Chameau Group Plc, Safe Harbour Holdings Plc and Wilmcote
Holdings Plc. Mark is also a non-executive director of Marwyn Asset
Management Limited and Zegona Communications Plc and was previously
a non-executive director of BCA Marketplace Plc, Advanced Computer
Software Plc, Entertainment One Ltd, Melorio Plc, Inspicio Plc and
Talarius Plc, amongst others.
John McAdam, Independent Non-Executive Director (appointment
effective 1 October 2018)
John will bring to the Board a wealth of knowledge and a deep,
strategic understanding of a wide range of industries, having
served as a board director on a range of global businesses since
1999. In his role as Independent Non Executive Director, John will
bring a complimentary viewpoint ensuring constructive challenge in
interactions with the Board and management team, supporting the
Company in achieving its strategic aims and maximising value for
shareholders.
John spent 24 years at Unilever where he held a number of senior
management positions and later joined Imperial Chemical Industries
plc (ICI), taking the position of Group Chief Executive in 2003.
John has held a wide range of board positions, including Senior
Independent Director at J Sainsbury plc from 2005 to 2016,
Non-Executive Director of Sara Lee Corporation in America from 2008
to 2012, Non-Executive Director of Rolls-Royce plc from 2008 to
2017 and Senior Independent Director for Electra Private Equity
plc, a London Stock Exchange listed investment trust.
John currently serves as Chairman of Rentokil Initial plc and
was appointed as non-executive and Senior Independent Director of
Cobham plc on 1 August 2017. He is also Chairman of United
Utilities Group Plc.
John received a B.Sc. honours degree in Chemical Physics at
Manchester University and later gained a Ph.D. before becoming a
research fellow.
Directors' Interests
The Directors have no direct interests in the ordinary shares of
the Company. The Executive Directors have interests in the
Participation Shares, as detailed in note 18 to the Financial
Statements.
James Corsellis and Mark Brangstrup Watts are non-executive
directors and ultimate beneficial owners of Marwyn Asset Management
Limited which holds 60.44 per cent. of the issued share capital as
at 30 June 2018. James Corsellis and Mark Brangstrup Watts are also
managing partners of Marwyn Capital LLP, a firm which provides
corporate finance advice to the Company and are the ultimate
beneficial owners of Axio Capital Solutions Limited which provides
accounting and company secretarial services. Details of the related
party transactions which occurred during the period are disclosed
in note 19.
Save for the issue of Participation Shares as disclosed in note
18, no Director has or has had any interest in any transaction
which is or was unusual in its nature or conditions or significant
to the business of the Group. There were no loans or guarantees
granted or provided by the Company and/or any of its subsidiaries
to or for the benefit of any of the Directors.
Directors' Emoluments
The Directors emoluments are detailed in note 6 to the Financial
Statements. The highest paid Director, Adrian Whitfield, received
emoluments of GBP421,300 (comprising salary of GBP385,385, bonus of
GBP27,957 paid in July 2017 and taxable benefits comprising private
medical and dental insurance and travel insurance of GBP7,958)
during the period, excluding a bonus of GBP100,000 which has been
accrued at the balance sheet date and was paid in July 2018. Adrian
Whitfield receives a fixed annual salary of GBP300,000, payable
monthly in arrears, along with a guaranteed annual minimum bonus of
GBP100,000. Mark Brangstrup Watts and James Corsellis are paid fees
equal to the prevailing national minimum wage for 17.5 hours per
week. During the period, together they received director fees of
GBP17,564.
There were no share options exercised or exercisable during the
period. The Participation Shares owned directly or indirectly by
Directors are described in note 18 to the Financial Statements.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare Financial
Statements for each financial period. Under that law the Directors
have prepared the Group Financial Statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union. 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 Group
and of the profit or loss of the Group for that period. In
preparing the Financial Statements, the Directors are required
to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable IFRS as adopted by the European
Union have been followed for the Group Financial Statements,
subject to any material departures disclosed and explained in the
Financial Statements;
-- make judgments and accounting estimates that are reasonable and prudent; and
-- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Group will continue
in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that the
Financial Statements comply with the Companies Law (Jersey) 1991
and, as regards the Group Financial Statements, Article 4 of the
IAS Regulation.
The Directors are also responsible for safeguarding the assets
of the Group 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 Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Groups performance, business model and strategy.
Independent Auditors
PricewaterhouseCoopers LLP ("PwC") was appointed auditor of the
Company and its subsidiaries on 6 July 2017. PwC has expressed its
willingness to continue to act as auditors to the Group and a
resolution for its re-appointment will be proposed at the
forthcoming Annual General Meeting on 20 November 2018.
Disclosure of information to Auditors
Each of the Directors, whose names and functions are listed in
the Report of the Directors confirm that, to the best of their
knowledge:
-- the Group Financial Statements, which have been prepared in
accordance with IFRS as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
loss of the Group; and
-- the Report of the Directors includes a fair review of the
development and performance of the business and the position of the
Group and Company, together with a description of the principal
risks and uncertainties that it faces.
In the case of each Director in office at the date Report of the
Directors' is approved:
-- so far as he is aware, there is no relevant audit information
of which the Group's auditors are unaware; and
-- he has taken all the steps that he ought to have taken as a
Director in order to make himself aware of any relevant audit
information and to establish that the Group's auditors are aware of
that information.
On behalf of the Board
Adrian Whitfield
Chief Executive Officer
27 September 2018
GOVERNANCE|CORPORATE GOVERNANCE REPORT
Overview
This Corporate Governance Report ("Report") is presented
separately for the sake of clarity. Nevertheless, it forms part of
the Report of the Directors' and has been approved by the Board and
signed on its behalf as though it were a part of the Report of the
Directors'. The Directors recognise the importance of sound
corporate governance commensurate with the size of the Group and
the interests of shareholders and remain committed to evolving the
corporate governance arrangements as the business further
evolves.
During the period, the Board adopted the Quoted Companies
Alliance Corporate Governance Code ("QCA Code" or the "Code"), in
line with the London Stock Exchange's recent changes to the AIM
Rules for Companies requiring all AIM-quoted companies to adopt a
recognised corporate governance code, explain how the company
complies with that code's requirements and identify and explain
areas of non-compliance. The Company intends to re-evaluate its
corporate governance framework upon completion of the Company's
Platform Acquisition.
The following sections of this Report detail how Wilmcote
applies the QCA Code.
The Group's principal risks are described on pages 43 to 47. The
Report of the Directors' on pages 4 to20 also contains information
required to be included in this Report.
The Board of Directors
The Group is led and controlled by an effective Board. The Board
at the date of this Report comprises three Executive Directors and
an Independent Non-Executive Director who will be appointed
effective 1 October 2018. The three Executive Directors are Adrian
Whitfield (Chief Executive Officer ("CEO")), Mark Brangstrup Watts
and James Corsellis, who was appointed Chairman on 24 September
2018. The Independent Non-Executive Director will be John
McAdam.
Biographical details of all directors at the date of this Report
appear on pages 5 to 6.
The CEO is primarily responsible for the running of the Board
and for the day to day running of the Group. All Board members have
full access to the Group's advisers for seeking professional advice
at the Company's expense and the Group's culture is to openly
discuss important issues and frequently engage with Board members
outside of formal meetings. The Group's wider organisational
structure has clear lines of responsibility. Operating and
financial responsibility for all subsidiary companies is the
responsibility of the Board.
One of the ten principles of the QCA Code is to maintain 'the
board as a well-functioning, balanced team led by the chair'. To
achieve this principle, the QCA Code requires a balance between
executive and non-executive directors and at least two independent
non-executive directors to be in place. The Company deviates from
the QCA Code in this respect, as the Board will effective 1 October
2018 include only one independent non-executive director, John
McAdam. During the period, in the absence of a Chairman, the Board
was led by the CEO and effective from his appointment as Chairman
on 24 September 2018 James Corsellis will lead the Board.
The Board is comfortable that there is currently no Finance
Director appointed as the Directors provide the requisite financial
expertise. The Company does not currently conduct an operating
business and therefore its operations, finances and transactions
are relatively simple and the requisite administrative functions
have been effectively outsourced.
The Board believes that the Board composition is appropriate for
the Company's current operations and provides an appropriate mix of
experience, expertise and skills to support the business of the
Group in its current form, further strengthened by the appointment
of John McAdam. The Board remains committed to regularly reviewing
its composition to ensure it remains appropriate. At or around the
time of the Company's Platform Acquisition, it is anticipated that
the composition of the Board will be re-evaluated in the context of
the corporate governance framework of the enlarged group.
Board and Committee updates
The Board has always recognised that the Company's governance
arrangements will evolve in line with its size and strategic
direction. Effective 1 October 2018, John McAdam will be appointed
to the board, and an Audit and Risk Committee and Nomination and
Remuneration Committee will also be established on this date.
John provided the Company with consultancy services in relation
to the proposed acquisition of Arysta LifeScience ("Arysta").
During this process the Board were very impressed with the
experience, skills and knowledge John offered and the complimentary
viewpoint he brought to the Board in their discussions. The Board
believes that the qualities John brought make him an outstanding
candidate for the position of independent non-executive director.
Biographical details for John can be found on page 6.
John has spoken extensively to the Company's Board, senior
management team and advisors on a breadth of topics such as the
Group's strategy, potential opportunities for the Group and
operating and financial results and plans, as well as detailed
discussions on the proposed acquisition of Arysta.
The Board believes that these changes will further strengthen
the independence and capability of the Board and demonstrate the
positive intent of the Group to continue to challenge and enhance
its corporate governance framework as the business grows and
evolves and will ensure that the Company is well placed to execute
its investment strategy.
Board interaction
The Board meets formally at least six times a year but also
meets on an ad hoc basis where necessary. Meetings are prepared for
using a standing agenda capturing all of the ongoing corporate
governance requirements which is updated to incorporate all
relevant and ad hoc business or matters of interest. The Board is
presented with papers from management to support its discussions
including financial information, shareholder analysis and investor
relation information, subsidiary management reporting and details
of acquisition targets and deal progress.
The Board's culture is to openly discuss any important issues
and frequently engage and constructively challenge each other, both
at and outside of formal meetings. It is expected that the addition
of John McAdam to the Board will provide independent challenge and
additional expertise and further strengthen the Board's
composition.
Board attendance
The Audit and Risk Committee and Nomination and Remuneration
Committee will be established on 1 October 2018.
John McAdam was not a director during the period and therefore
has not been included in the Board attendance summary below.
Formal Board meetings Ad hoc Board meetings
Held Attended Held Attended
----------------------- -------- -------- --------------
Adrian Whitfield 7 7 12 12
-------- -------------- -------- --------------
Mark Brangstrup Watts 7 7 12 11
-------- -------------- -------- --------------
James Corsellis 7 6 12 9
-------- -------------- -------- --------------
The ad hoc Board meetings were held principally to discuss and
approve the initial public offering of the Company's shares on AIM
and the exploration of a number of potential acquisition
opportunities in line with the Company's investment strategy, in
particular the potential acquisition of Arysta LifeScience from
Platform Specialty Products Corporation, for which, as announced to
the market, discussions ceased on 18 June 2018.
Independence of the Board
Under the QCA Code, the Board is required to make a judgment as
to its independence. The Code states that "it may not be possible
in growing companies to meet all the objective criteria demanded of
the largest listed companies. Regardless, it is important for any
board to foster an attitude of independence of character and
judgment". The Board has considered whether its Directors, and
prospective Independent Non Executive Director are independent in
character and judgment and whether there are relationships or
circumstances which are likely to affect, or could appear to
affect, the Director's judgment. The Code also requires the Board
to state its reasons why a director may be considered independent
if there are grounds to question the independence.
John McAdam has previously provided consultancy services to the
Company in relation to the potential acquisition of Arysta for
which he was paid GBP30,000. The Board considers that the payment
of this fee, for advice provided over a short period of time and in
relation to a potential acquisition, does not affect his ability to
act independently as a Non-Executive Director. Consideration of
John's character, alongside John's 19 plus years of experience as a
board director in a wide range of companies, including positions as
chairman and senior independent director, further cement the
Board's conviction of John's independence.
The Board, therefore consider John to be independent in
character and judgment and strongly believe that John McAdam has no
relationships or circumstances which are likely to affect, or could
appear to affect, his judgment as a Non-Executive Director.
Board Committees
On 1 October 2018, the Board will establish two principal
committees, the Audit and Risk Committee and the Nomination and
Remuneration Committee, to assist the Board in the execution of its
duties. If the need should arise, the Board may set up additional
committees as appropriate. The Committees' terms of reference will
be available on the Company's website, www.wilmcoteplc.com, or by
request from the Company Secretary. Each of the Committees is
authorised, at the Company's expense, to obtain legal or other
professional advice to assist in carrying out its duties. No person
other than a Committee member is entitled to attend the meetings of
these Committees, except by invitation of the Chairman of that
Committee. It is anticipated that the Company's auditor PwC, be
invited to attend meetings of the Audit and Risk Committee.
Membership of the Committees will initially be as follows:
Audit and Risk Committee Nomination and Remuneration
Committee
Chairman Mark Brangstrup Watts Mark Brangstrup Watts
------------------------- ----------------------------
Member John McAdam John McAdam
------------------------- ----------------------------
Member James Corsellis James Corsellis
------------------------- ----------------------------
The composition of these Committees will be reviewed regularly,
to consider the recommendations of the Nomination and Remuneration
Committee. The Board appreciate that, where possible the Committees
should consist of a majority of independent directors, and as such
on appointment of any further independent directors to the Board,
committee composition will be revisited.
The Committees are to be established and as such no annual
report from either committee is included within this Report. During
the year the Board undertook the roles since delegated to the Audit
and Risk Committee and Nomination and Remuneration Committee and
therefore the board have prepared equivalent reports for the
period, which are included on pages 16 to 20 of these Financial
Statements.
The Company also recognises the importance of having systems and
procedures in place to ensure compliance by the Board, the Company,
and its applicable employees in relation to dealings in securities
of the Company and the management of inside information in
accordance with the EU Market Abuse Regulation (2014/596/EU). The
Board has established a Disclosure Committee, which consists of
Adrian Whitfield, Mark Brangstrup Watts and James Corsellis and
adopted a share dealing code for this purpose. The Directors
believe that these procedures and policies adopted by the Board are
appropriate for the Company's size and complexity and that it
complies with the EU Market Abuse Regulation (2014/596/EU).
Board Diversity
The Board considers diversity to be much broader than the
traditional definition which focuses on: race, gender, age,
beliefs, disability, ethnic origin, marital status, religion or
sexual orientation. Productive Board discussions require a breadth
of experience and perspectives achieved through hiring board
members with diverse experience. Board directors shall be appointed
in order to bring required skills, knowledge and experience and are
expected to positively impact the chemistry and dynamics of the
Board.
The Board currently consists of three Directors, all of whom are
male and, following the appointment of John McAdam, will consist of
four male directors. It is believed that the Board has the
requisite experience and skills for the Group to achieve its
immediate objective of acquiring a business in the downstream and
specialty chemicals sector. Details on the experience of the
current Directors and of John McAdam are included on pages 5 to 6
of these Financial Statements.
Around the time of the Company's Platform Acquisition the Board
and committee composition will be revisited to ensure that it meets
the changing needs of the business. During the recruitment process
for new directors, the Nomination and Remuneration Committee will
ensure that the diversity of the Board is considered in detail.
Board Effectiveness
The Board has not undertaken a board effectiveness review during
the period. Following the addition of John McAdam (effective 1
October 2018) and in consideration of the time passed since
incorporation, the Board believes it will be beneficial to conduct
an evaluation of its own performance and that of its to be
established committees, by means of a questionnaire requiring
written responses from the Directors during the next twelve months.
To ensure independence and objectivity, the Board intends for the
questionnaire to be designed, administered and collated on a
confidential basis by the Company Secretary.
The Directors intend that the questionnaire be drafted having
due regard to the balance of skills, experience, independence and
knowledge contributed by members of the Board, as well as the
successful operation of the Board as a unit, its diversity and
other factors relevant to its effectiveness.
Risk Management and Internal Controls
The Board is responsible for establishing and maintaining the
Company's systems for both risk management and internal controls
and reviewing the effectiveness of both. Internal control systems
are designed to meet the particular needs of the Company and Group
and the particular risks to which it is exposed. The procedures are
designed to manage rather than eliminate risk and, by their nature,
can only provide reasonable but not absolute assurance against
material misstatement or loss.
The Group does not have a separate internal audit function as
the Board does not feel this is necessary due to the current size
of the business and the simplicity and low volume of transactions,
coupled with the nature and the extent of internal controls,
management and Board oversight and involvement.
The Directors have carried out an assessment of the principal
risks facing the Group including those that would threaten its
business model, its future performance and the ability of the
company to fulfil its stated strategy, solvency or liquidity. This
assessment is continually reviewed and discussed, including during
the due diligence process for potential acquisitions in order to
evaluate the impact of such acquisitions on the risk profile of the
Group.
Principal risks faced by the Group are explained in detail on
pages 43 - 47. Key risks for the Group presently include those
which might jeopardise the successful completion of a Platform
Acquisition and the ongoing liquidity and solvency of the Group.
The Directors have considered appropriate mitigating controls in
relation to these risks including the recruitment and engagement of
an experienced management team and prudent pre-acquisition due
diligence. The Company has implemented financial procedures
including controls over cash management, the safeguarding of cash,
and monthly cash forecasting and budgeting.
The Company has in place numerous internal controls in relation
to financial reporting, such as the segregation of roles between
those preparing and those reviewing financial information. In
addition, the Company has established a multi-tier review process
with reviews undertaken by individuals with the appropriate level
of seniority and experience, reducing the risk of misstatement and
fraud. On a monthly basis, summary financial information, including
a balance sheet, profit and loss, actual cash flow and detailed
cash flow forecasts are reviewed by the CEO. Financial information
is also tabled at the periodic Board meetings where it is discussed
in detail by the Directors.
The Board has reviewed the Company's and Group's risk management
and internal control systems and believes that the controls and
risk management approach are satisfactory given the current nature
and size of the Company and Group.
Company Culture
The Board promotes a dynamic, entrepreneurial and transparent
culture. The recruitment of highly skilled, adaptable, driven and
experienced Directors and senior management are fundamental to
executing the Company's strategy. The Board therefore fosters a
forum whereby openness, constructive challenge and innovation are
actively encouraged.
Succession planning
Given the size, composition and nature of the Company at this
stage in its evolution, the creation and implementation of
succession plans are not considered to be appropriate or relevant
and as such no succession planning is in place. Adrian Whitfield is
central to the Company achieving its immediate goal of making its
first Platform Acquisition; he has exceptional industry specific
experience and knowledge on which the Company's strategy has been
built. Once a platform acquisition has been made, succession
planning will be revisited by the Board.
Directors' terms of service
The Articles of Association of the Company require that, at each
annual general meeting of the Company, one third of the Directors
retire from office and offer themselves for re-election, and each
Director shall retire from office and stand for re-election at
least every three years. Furthermore, each Director appointed in
the period since the previous annual general meeting shall stand
for election at the subsequent annual general meeting. Accordingly,
Adrian Whitfield and John McAdam will retire from office at the
Company's forthcoming annual general meeting and seek to be
re-elected by the Company's shareholders; John McAdam will seek to
be elected by the Company's shareholders at the Annual General
Meeting. The Chairman is satisfied that the Directors' performance
continues to be effective and demonstrates their ongoing commitment
to the role and as such supports their re-election.
The Director's service contracts establish the time commitment
each Director must devote to the Company. Adrian Whitfield is to
commit the whole of his time during normal office hours and at any
other such time as may reasonably require in the performance of his
role. Mark Brangstrup Watts, James Corsellis and John McAdam are to
devote the time necessary to ensure the proper performance of their
duties.
Continued Professional Development
The Board considers and reviews the requirement for continued
professional development. The Board undertakes to ensure that their
awareness of developments in corporate governance and the
regulatory framework is current, as well as remaining knowledgeable
of any industry specific updates. The Company Secretary, Nomad and
specialised external advisers all serve to strengthen this
development by providing guidance and updates as required.
Chair
The Chair will be responsible for leading the board effectively
and to overseeing the adoption, delivery and communication of the
company's corporate governance model. The Chair must display clear
vision and focus on strategy, capitalising on the skills,
experience, characteristics and qualities of the Board and
fostering a positive governance culture throughout the Group.
Company Secretary
The QCA Code provides details on the roles and responsibilities
of the Company Secretary within a Company. The Company Secretary
for the Group is Axio Capital Solutions Limited ("Axio") who were
appointed on 29 March 2017.
Axio performs the function of Company Secretary as outlined in
the Code. The role includes preparing for and running effective
Board and committee meetings, including the timely dissemination of
appropriate information. In addition, the Company Secretary is
responsible for assisting the Directors in ensuring that the group
entities are managed, controlled and administered within the
parameters of their governing documents and are compliant with
regulatory compliance and filing obligations.
Axio has established direct lines of communication with each of
the Directors and provides information, advice and guidance as
required.
Axio plays an active and central role in ensuring good
governance and acts as an additional point of contact between the
Company and the shareholders on matters of governance and investor
relations.
External Advisors
The Company is currently pursuing its investment strategy and
has engaged several advisors to help facilitate this. In
particular, whilst the Board was in discussions with Platform
Specialty Products regarding the potential acquisition of its
Agricultural Solutions segment, Arysta LifeScience, it engaged with
multiple service providers to help undertake the required due
diligence and other associated work. A list of current key external
service providers is included on page 48.
Relationships with key resources and external advisers are
developed and maintained through an open dialogue to ensure that
the Company is able to draw upon their expertise and assistance
when required.
Conflicts of Interest
The Articles of Association of the Company provide for a
procedure for the disclosure and management of risks associated
with Directors' conflicts of interest. At each board meeting, a
list of directorships for each Director is tabled to the meeting
with any potential conflicts being discussed in detail.
Notwithstanding that no material conflict of interest has arisen in
the period, the Board considers these procedures to have operated
effectively.
Relations with shareholders
The Board is always available for communication with
shareholders and the Executive Directors frequently engage
constructively with current and potential shareholders. All
shareholders have the opportunity, and are encouraged, to attend
and vote at the annual general meeting of the Company during which
the Board will be available to discuss issues affecting the
Company. The Board stays informed of shareholders' views via
regular meetings and other communications with shareholders.
Annual general meeting
The next annual general meeting ("AGM") of the Company will be
held at Covington & Burling LLP, 265 Strand, London WC2R 1BH at
12 p.m. on 20 November 2018. The AGM is an opportunity for
shareholders to vote on certain aspects of the Company's business.
The Directors will also be available to answer any shareholder
questions prior to and after the meeting. The Company will arrange
for the Financial Statements and related papers to be available on
the Company's website at www.wilmcoteplc.com in advance of the
meeting; a minimum of 14 clear days notice will be provided.
GOVERNANCE |AUDIT AND RISK
Audit and Risk
Effective 1 October 2018, the Board will establish an Audit and
Risk Committee to further strengthen the Company's corporate
governance framework. The Audit and Risk Committee is delegated
responsibility for oversight of Wilmcote's financial reporting,
internal controls, risk management and responsibility of the
relationship with the external auditor. Membership of the Audit and
Risk Committee is detailed on page 12 and the committee's role and
responsibilities are set out in its terms of reference, which will
be available on the Company's website and from the Company
Secretary. As the Audit and Risk Committee was not in existence
during the period, this report sets out the work performed by the
Board in its place.
Prior to the establishment of the Audit and Risk Committee the
Board is responsible for all matters normally handled by an Audit
and Risk Committee as set out by the QCA Code, including:
-- the review and challenge of the risk identification and risk
management process across the business including the risks in
connection with a potential acquisition;
-- the management of relations with the external auditor to
ensure that the annual audit is effective, objective, independent
and of high quality;
-- the oversight of the relationship with the external auditor
to ensure it remains appropriate and, that the service is
appropriately priced; and
-- the review of the Company's draft corporate reporting,
including the annual report and accounts.
The aforementioned items are discussed by the Board during their
periodic and ad-hoc meetings. A list of Board meetings held during
the year and attendees is included on page 11 of these Financial
Statements.
In particular, the Board undertook the following activities:
-- Reviewed the Financial Statements and interim financial
statements including the going concern assumption, and considered
whether the Financial Statements are fair, balanced and
understandable. As part of the review, the Board received a report
from the external auditor on its audit;
-- Considered the processes in place to generate forecasts of
cash flows, including the reasonableness and consistent use of
assumptions;
-- Reviewed the effectiveness of the Group's risk management and
internal controls and disclosures made in the Financial Statements
on this matter; and
-- Reviewed and agreed the scope of the audit work to be
undertaken by the external auditor and assessed their independence
and approved the fees to be paid.
The Board appointed PwC as external auditor during the period.
Auditor independence, reputation, experience and fee quote among
other factors were considered by the Board in determining the
external auditor appointment. PwC has been engaged by the Company
to provide other services in the period, including the reporting
accountant role on both the Company's IPO and the proposed
acquisition of Arysta LifeScience Inc. The reporting accountant
role is aligned with that of the Company's auditor and is not
considered by the Board to impinge on the independence of the
external auditor. PwC has also confirmed that it believes that it
has remained independent. The total amount paid for non-audit
services during the period was GBP1,374,266 of which GBP50,000
relates to the Company's IPO and GBP1,324,266 relates to the
proposed acquisition of Arysta LifeScience Inc.
GOVERNANCE|NOMINATION AND REMUNERATION
Nomination and Remuneration
Effective 1 October 2018, the Board established a Nomination and
Remuneration Committee. The roles and responsibilities of the
Nomination and Remuneration Committee are set out in its terms of
reference, which will be available on the Company's website and
from the Company Secretary.
Prior to the establishment of the Nomination and Remuneration
Committee, the Board is responsible for all Nomination and
Remuneration duties as set out in the QCA Code, with the
overarching objectives being to:
-- Ensure that the Company can recruit and retain high quality
executives through packages which are fair and attractive, but not
excessive;
-- Develop remuneration packages which motivate the directors
and senior management team and support the delivery of the business
in the short, medium and long term;
-- Align the interests of the Executive Directors and senior
management with the interests of medium to long-term shareholders;
and
-- Encourage executives to operate within the risk parameters set by the Board.
During the period, to help facilitate the objectives of its
Nomination and Remuneration related duties, the Board:
-- Established the remuneration package for the Executive
Directors, including an incentive scheme for Executive Directors
and senior management designed to align their interests with those
of medium to longer term shareholders;
-- Recruited a high quality candidate for senior management to
support the Executive Directors in achieving the Company's stated
strategy;
-- Considered the composition and balance of the Board in
conjunction with the Company's requirements and the provisions of
the QCA Code and recruited John McAdam as an independent
non-executive director to further strengthen the Board. It was
agreed that the appointment of John McAdam, effective 1 October
2018, will enhance the composition of the Board and its governance
and added to the mix of skills and experience for the Company to
pursue its stated strategy;
-- Decided to establish a Nomination and Remuneration Committee
and delegated responsibility to this committee; and
-- Reviewed the value of the incentive scheme for the Company's management and core investor.
Remuneration Report
The information included in this report is not subject to audit
unless specifically indicated. The Nomination and Remuneration
Committee is not currently established and as such the remuneration
report has been prepared by the Board for the period. The
objectives of the Board in relation to nomination and remuneration
are set out on page 17.
Annual statement
This is the Company's first Directors' Remuneration Report.
The remuneration philosophy of the Company is that executive
remuneration should be simple and transparent and support the
delivery of the business strategy by attracting the highest calibre
personnel. This philosophy is reflected in our remuneration
structure.
The Board feels very strongly that Directors' remuneration
should be linked to the creation and delivery of attractive returns
to shareholders. Although the Board feels it is important to
remunerate senior executives through their basic pay and benefits
at market levels commensurate with their peers, the Participation
Share scheme has been designed to provide ongoing remuneration in
alignment with shareholder's interests. The Participation Share
scheme has been in place since before the Company's IPO.
Participation Share Scheme
Subject to shareholders achieving a 10 per cent. preferred
return per annum on a compounded basis on their net invested
capital (the "Preferred Return"), the holders of the Participation
Shares are entitled, on exercise, to an aggregate return of 15 per
cent. (of which A1 Shares as a class are entitled 10 per cent. and
A2 Shares 5 per cent.) of the excess in the market value of the
Company over and above its aggregate paid up share capital,
allowing for any dividends and other capital returns.
The Participation Shares are subject to certain vesting
conditions, at least one of which must be (and continue to be)
satisfied in order for a holder of Participation Shares to exercise
his or her redemption rights and which ends on the fifth
anniversary of the date of the Platform Acquisition or such later
date as is agreed between the Company and the holders of at least
90 per cent. of the Ordinary Shares, A1 Shares and A2 Shares.
The vesting conditions are as follows:
(i) it is later than the third anniversary of the Platform Acquisition;
(ii) a sale of all or a material part of the business of WHJ Limited ("WHJ");
(iii) a sale of all of the issued ordinary shares of WHJ or a merger of WHJ;
(iv) a winding up of WHJ occurring; or
(v) a sale or change of control of the Company.
The Participation Shares are subject to a three year vesting
period and will lapse after five years. The vesting period
commences from the date of the Platform Acquisition.
More details on the Participation Share scheme and its
participants are included in note 18 of these Financial
Statements.
The Participation Share Scheme has been designed to align the
Company's shareholders' interests and the shareholders' expected
typical ownership period. The Board strongly believes that this
clear and transparent incentive framework is aligned with the
Company's strategy for growth and provides a strong platform for
the future success of the Company.
It is anticipated that the exercise of Participation Shares will
result in management receiving ordinary shares in the Company.
Those shareholdings could be substantial and should solve to
further align management and shareholders.
Directors' basic and performance related pay:
The below table sets out the remuneration of each Director
during the period:
For the 15 month Adrian Whitfield Mark Brangstrup James Corsellis
period Watts
Salary 385,385 8,782 8,782
Guaranteed bonus 127,957 - -
Taxable benefits 7,958 - -
521,300 8,782 8,782
Taxable benefits include private medical and dental insurance
and travel insurance.
The annual salary for Adrian Whitfield is GBP300,000, with a
guaranteed minimum annual bonus of GBP100,000. Mark Brangstrup
Watts and James Corsellis are paid fees equal to the prevailing
national minimum wage for 17.5 hours per week. During the period
they received fees of GBP8,782 each. Adrian, Mark and James are all
incentivised by the Participation Share scheme.
In determining Adrian's salary, his experience and anticipated
contribution to the business were considered. Adrian, Mark and
James' role are all expected to change as the business evolves, in
particular the expectations, responsibilities and demands are
expected to change significantly following the completion of the
Platform Acquisition, and as such their remuneration packages will
be reviewed at this time. Adrian Whitfield is also entitled to an
additional cash bonus upon completion of the Platform Acquisition
bonus. The Platform Acquisition Bonus is equal to 0.5 per cent. of
the Total Enterprise Value, calculated as the total value of the
consideration paid by the Company or any subsidiary for the
acquired equity or assets, plus the net debt of the acquired
business or company, such net debt to be reduced pro-rata where
less than 100 per cent. of the entire issued share capital of the
target business or company is acquired. The Platform Acquisition
Bonus is carefully designed to align with the Company's key
strategic milestones and a minimum of 50 per cent. of the Platform
Acquisition Bonus, net of tax, shall be automatically reinvested in
return for ordinary shares in the Company, bringing Adrian's
interests further in line with those of shareholders.
John McAdam's appointment will be effective 1 October 2018 and
he was therefore not paid during the period. John will be paid
GBP50,000 per annum for his role as Independent Non-Executive
Director. This is considered to be market rate for an independent
non-executive director of a business of this nature. As the nature
of the business changes, in particular following the Platform
Acquisition, John's role is expected to change and his remuneration
will be reviewed and revised accordingly.
Once the Company has made its first Platform Acquisition, the
objectives of the enlarged group will be established; at this point
the Director's service contracts will be revisited and as part of
this process the Nomination and Remuneration Committee will
consider the most appropriate key performance indicators, for the
Directors and senior management.
Performance Evaluation
The Board are committed to undertaking a Board evaluation within
the next 12 months, further details of which are set out on page 13
of the Financial Statements.
Risks
The Board are mindful of the potential risks associated with its
remuneration policy. The Board aims to provide a structure that
encourages an acceptable level of risk-taking (by benchmarking
against shareholder returns) and an optimal remuneration mix. Going
forward the Nomination and Remuneration Committee intend to
undertake annual evaluations to ensure its policy achieves the
correct balance and does not encourage excessive risk taking. The
Board has considered the risk involved in the Participation Share
scheme and the Platform Acquisition Bonus and is satisfied that the
Company's governance procedures mitigate these risks
appropriately.
The Board has sought to ensure that its approach to remuneration
drives behaviour aligned to the long term interests of the Company
and its shareholders.
On behalf of the board
Adrian Whitfield
Chief Executive Officer
27 September 2018
INDEPENT AUDITORS' REPORT
Independent auditors' report to the members of Wilmcote Holdings
plc
Report on the audit of the group financial statements
Opinion
In our opinion, Wilmcote Holdings plc's group financial
statements (the "financial statements"):
-- give a true and fair view of the state of the Group's affairs
as at 30 June 2018 and of its loss and cash flows for the 15 month
period 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 (Jersey) Law 1991.
We have audited the financial statements, included within the
Annual Report and Financial Statements (the "Annual Report"), which
comprise: the Consolidated Statement of Financial Position as at 30
June 2018; the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Cash Flows, and the Consolidated
Statement of Changes in Equity for the 15 month period then ended;
and the notes to the financial statements, which include a
description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities under ISAs (UK) are further described in the
Auditors' responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the Group in accordance with the
ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements.
Our audit approach
Overview
* Overall Group materiality: GBP200,000, based on 1% of
total assets.
* The Group comprises the parent entity and three
wholly owned subsidiaries. We performed a full scope
audit of the parent entity, Wilmcote Holdings plc,
and its subsidiary, WHJ Limited, in addition to the
Group consolidation. Taken together these accounted
for 100% of Group's total assets and 100% of the
Group's consolidated comprehensive loss.
* Valuation of share based payments.
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the Directors made
subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all
of our audits we also addressed the risk of management override of
internal controls, including evaluating whether there was evidence
of bias by the directors that represented a risk of material
misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors'
professional judgement, were of most significance in the 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) identified by the auditors, 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, and any comments we make on the
results of our procedures thereon, 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. This is not a complete list of all risks identified
by our audit.
Key audit matter How our audit addressed the key audit matter
======================================================== ============================================================
Valuation of share based payments We evaluated the work of management's expert utilising our
The Group provides incentives to senior management and own internal experts and assessed
others who are expected to make key the estimates used by management and its expert in
contributions to the success of the Group for their preparing the valuations of share-based
services rendered in the form of share-based payments for use in the financial statements and concluded
payments. These share-based payment transactions, made that these have been based on supporting
by the award of A1 and A2 shares in evidence and estimates that fall within a reasonable range.
WHJ Limited, a wholly owned subsidiary, are classified In particular, we considered the
by the Group as equity-settled share-based reasonableness of the following key inputs to the Monte
payments. The overall impact of share-based payments Carlo valuation model, an accepted
made by the Group was a charge of GBP248,588 valuation method for share based payments, which was used
in the Group Statement of Comprehensive Income for the to determine the fair value of the
period ended 30 June 2018. Group's share based payments:
The accounting for share-based payments incorporates a * Volatility rate;
number of estimates that are used to
determine the fair value of shares in WHJ Limited that
have been awarded to senior management * Risk free rate;
and others. Management has to apply and disclose
critical accounting estimates and judgements.
The Group engaged an external expert to assist it with * Investment size;
the valuation of its share-based payments.
The valuation method used utilised a Monte Carlo
simulation. This required inputs such as * Probability of IPO; and
volatility rate, risk free rate, probability of IPO and
probability of acquisition, many of
which require estimation. * Probability of acquisition.
We determined this to be a key audit matter due to the
quantum of the charge and the level
of estimation required. Our procedures performed in response to this risk included:
Refer to notes 2, 3 and 18 of the financial statements * Enquiries of management and management's valuation
for disclosure of the accounting policies, experts;
key estimates and details of the share-based payments
made.
* Comparing the terms and conditions for all
share-based payment awards issued during the period
to letters to the grantees;
* Obtaining the Group's external expert's valuation
report and assessing the reasonableness of selected
inputs used in valuation of the share-based payments.
In addition we assessed the competency of the Group's
external expert, including its experience and
qualifications;
* Comparing the grant date used in the expense
calculations to agreements and checking that the
expense is recognised over the appropriate vesting
period;
* Review of the appropriateness and mathematical
accuracy of the Monte Carlo methodology applied and
an assessment of the reasonableness of the fair value
calculation; and
* Evaluating the adequacy of disclosures made in the
financial statements.
We note that a number of these inputs are inherently
subjective and that the valuation of
the share options is highly sensitive to changes in certain
assumptions. Based on the procedures
outlined above, we consider that the overall valuation is
not unreasonable.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in
which it operates.
The Group comprises Wilmcote Holdings plc and its three
subsidiaries. A reporting package for each component is submitted
and consolidated by Wilmcote Holdings plc's finance function,
including its expenditure and financial position as prepared under
Group accounting policies which are in compliance with IFRSs. We
audited two components centrally (Wilmcote Holdings plc and WHJ
Limited), supplemented by auditing the Group consolidation.
Taken together our audit work achieved coverage of 100% of
consolidated expenditure, 100% of the total assets and 100% of
consolidated loss after tax. This is due to the fact that the
components not subject to a full scope audit had no revenues or
expenditure in the period and all assets on the balance sheets of
those entities eliminate on consolidation.
Materiality
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Overall materiality GBP200,000.
=============================== =====================================================================================
How we determined it 1% of total assets.
=============================== =====================================================================================
Rationale for benchmark applied Based on the benchmarks used in the Annual Report, total assets is currently the
primary measure
used by shareholders in assessing the performance of the Group, and is a generally
accepted
auditing benchmark given the nature of the Group's operations.
=============================== =====================================================================================
For each component in the scope of our Group audit, we allocated
a materiality that is less than our overall Group materiality. The
range of materiality allocated across components was between
GBP160,000 and GBP197,500.
We agreed with the Board of Directors that we would report to
them misstatements identified during our audit above GBP20,000 as
well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which ISAs (UK) require us to report to you when:
-- 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 Group'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.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Group's
ability to continue as a going concern.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our auditors'
report thereon. The Directors are responsible for the other
information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or any form of assurance 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 an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of 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 based on these
responsibilities.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Statement of Directors'
responsibilities set out on page 7, the Directors are responsible
for the preparation of the financial statements in accordance with
the applicable framework and for being satisfied that they give a
true and fair view. The Directors are also responsible for such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's 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 Group or to cease
operations, or have no realistic alternative but to do so.
Auditors' 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
auditors' report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditors' report.
Use of this report
This report, including the opinions, has been prepared for and
only for the Company's members as a body in accordance with Article
113A of the Companies (Jersey) Law 1991 and for no other purpose.
We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Other required reporting
Companies (Jersey) Law 1991 exception reporting
Under the Companies (Jersey) Law 1991 we are required to report
to you if, in our opinion we have not received all the information
and explanations we require for our audit. We have no exceptions to
report arising from this responsibility.
Jonathan Lambert
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants
London
27 September 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Period to
30 June 2018
Note GBP'000
Administrative expenses 7 (13,277)
--------------
Total operating loss (13,277)
Finance income 5 81
--------------
(13,196)
Income tax 8 -
--------------
Loss for the period (13,196)
Total other comprehensive income -
Total comprehensive loss for the period attributable
to owners of the parent (13,196)
==============
Loss per ordinary share pence
Basic 9 79.0
Diluted 9 79.0
The Group's activities derive from continuing operations.
The notes on pages 29 to 43 form an integral part of these
Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at
30 June 2018
Note GBP'000
Assets
Non-current assets
Property, plant & equipment 10 3
Total non-current assets 3
Current assets
Trade and other receivables 12 367
Cash and cash equivalents 13 19,473
Total current assets 19,840
Total assets 19,843
========================
Equity and liabilities
Equity
Stated capital 15 24,370
Share-based payment reserve 16 285
Accumulated losses 16 (13,196)
------------------------
Total equity attributable to equity holders
of the parent 11,459
Current liabilities
Trade and other payables 14 8,384
------------------------
Total liabilities 8,384
Total equity and liabilities 19,843
========================
The notes on pages 29 to 43 form an integral part of these
Financial Statements.
The Financial Statements were approved by the Board of Directors
on 27 September 2018 and were signed on its behalf by:
Adrian Whitfield James Corsellis
Chief Executive Officer Chairman
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share based
Stated payment Accumulated Total
Note capital reserve losses equity
---------------------- ------------ ------------ --------------------------------
GBP'000 GBP'000 GBP'000 GBP'000
Opening balance - -
15,
Issue of shares 18 25,000 36 25,036
Share issue
costs 15 (630) (630)
Loss and total
comprehensive
loss for the
period (13,196) (13,196)
Share-based
payment
expense 18 - 249 249
---------------------- ------------ ------------ --------------------------------
Balance as at 30 June
2018 24,370 285 (13,196) 11,459
====================== ============ ============ ================================
The notes on pages 29 to 43 form an integral part of these
Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Period to
30 June 2018
Note
------------------
GBP'000
Operating activities
Total operating loss (13,277)
Adjustments to reconcile total operating
loss to net cash flows:
Add back depreciation expense 10 2
Add back share based payment expense 18 249
Working capital adjustments:
Increase in receivables (367)
Increase in trade and other payables 8,272
Interest received 81
Net cash flows used in operating activities (5,040)
------------------
Investing activities
Purchase of property, plant & equipment 10 (5)
Net cash flows used in investing activities (5)
------------------
Financing activities
Proceeds from issue of ordinary share
capital 15 25,000
Proceeds from issue of WHJ Limited A1
and A2 share capital 18 148
Costs directly attributable to equity
raise 15 (630)
------------------
Net cash flows generated from financing
activities 24,518
------------------
Net increase in cash and cash equivalents 19,473
Cash and cash equivalents at the beginning
of the period -
------------------
Cash and cash equivalents at the end
of the period 13 19,473
==================
The notes on pages 29 to 43 form an integral part of these
Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Wilmcote Holdings plc ("Wilmcote", or the "Company"), an
"investing company" for the purposes of the AIM Rules for Companies
("AIM Rules"), is incorporated in Jersey (company number 123424)
and domiciled in the United Kingdom. It is a public limited company
with its registered office at One Waverley Place, Union Street, St
Helier, Jersey, JE1 1AX and is registered as a UK establishment
(BR019423) with its address at 11 Buckingham Street, London, WC2N
6DF. The Company is the parent (directly and indirectly) of a
number of subsidiaries (together with the Company, collectively the
"Group"), as detailed in note 11.
2. ACCOUNTING POLICIES
(a) Basis of preparation
The Company was incorporated on 17 March 2017.
The Consolidated Financial Statements are prepared in accordance
with International Financial Reporting Standards and IFRS
Interpretations Committee interpretations as adopted by the
European Union (collectively, "IFRS") and are presented in British
pounds sterling, which is the presentational currency of the Group
and the functional currency and presentational currency of the
Company. The Consolidated Financial Statements have been prepared
under the historical cost convention.
The principal accounting policies adopted in the preparation of
the Consolidated Financial Statements are set out below. The
policies have been consistently applied throughout the period
presented.
(b) Going concern
The Consolidated Financial Statements have been prepared on a
going concern basis, which assumes that the Group will continue to
be able to meet its liabilities as they fall due for the
foreseeable future. As the Group has significant cash reserves, the
Directors have concluded it remains appropriate to use the going
concern basis.
(c) New standards and amendments to International Financial Reporting Standards
Standards, amendments and interpretation effective and adopted
by the Group:
The accounting policies adopted in the presentation of these
Consolidated Financial Statements reflect the adoption of the
standards effective for periods beginning on or after 1 January
2017.
Standards, amendments and interpretations issued but not yet
effective:
The following standards are issued but not yet effective. The
Group intends to adopt these standards, if applicable, when they
become effective. It is not currently expected that these standards
will have a material impact on the Group.
Standard Effective date
IFRS 9 Financial Instruments 1 January 2018
IFRS 15 Revenue from Contracts with Customers 1 January 2018
IFRIC 22 Foreign Currency Transactions and 1 January 2018
Advance Consideration
Amendments to IFRS 2: Classification and Measurement 1 January 2018
of Share-based Payment Transactions
Amendments to IFRS 4: Applying IFRS 9 Financial 1 January 2018
Instruments with IFRS 4 Insurance Contracts
Annual improvements to IFRS Standards 2014-2016 1 January 2018
Cycle
Amendments to IAS 40: Transfers of Investment 1 January 2018
Property
IFRS 16 Leases 1 January 2019
IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019
Amendments to IFRS 9: Prepayment Features with 1 January 2019
Negative Compensation
Amendments to IAS 28: Long-term Interests in 1 January 2019
Associates and Joint Ventures
Annual improvement to IFRS Standards 2015-2017 1 January 2019
Cycle
IFRS 17 Insurance Contracts 1 January 2021
(d) Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Company. Control
exists when the Company is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. The
financial information of subsidiaries is fully consolidated from
the date that control commences until the date that control
ceases.
Intragroup balances, and any gains and losses or income and
expenses arising from intragroup transactions, are eliminated in
preparing the consolidated financial information.
(e) Property, plant & equipment
Property, plant & equipment is measured initially at
acquisition cost and subsequently carried net of any accumulated
depreciation and any impairment losses.
Property, plant & equipment is depreciated systematically on
the basis of the estimated useful life of the items, and the cost
of the assets is distributed on a straight-line basis over the
estimated useful lives, which have been assessed to be:
Useful life
Office Equipment 3 years
------------
(f) Trade and other receivables
Other receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less impairment.
(g) Cash and cash equivalents
Cash and cash equivalents comprise cash balances at banks.
(h) Stated capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are recognised in
stated capital as a deduction from the proceeds.
(i) Trade and other payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less. If not, they are
presented as non-current liabilities. Trade and other payables are
recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method.
(j) Corporation tax
Corporation tax for the period presented comprises current and
deferred tax.
Current tax is the expected tax payable on the taxable income
for the period. Taxable profit differs from profit reported in the
consolidated statement of comprehensive income because some items
of income and expense are taxable or deductible in different years,
or may never be taxable or deductible. Current tax is the expected
tax payable on the taxable income for the period. The Group's
current tax is calculated using tax rates enacted or substantially
enacted at the balance sheet date, and any adjustment to taxes
payable in respect of previous periods.
Deferred tax is the tax expected to be payable or recoverable in
the future arising from temporary differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit. Deferred tax is accounted for using the balance sheet
liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
(k) Pension benefits
The Group pays contributions to externally-administered pension
plans on behalf of employees. The Group has no further payment
obligations once the contributions have been paid. The
contributions are recognised as an expense using the accruals
basis.
(l) Loss per ordinary share
The Group presents basic earnings per ordinary share ("EPS")
data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is calculated by
adjusting the weighted average number of ordinary shares
outstanding to assume conversion of all dilutive potential ordinary
shares.
(m) Share based payments
The A1 Shares and A2 Shares in WHJ Limited ("WHJL") (the
"Participation Shares") represent equity-settled share-based
payment arrangements under which the Company receives services as a
consideration for the additional rights attached to these equity
shares, over and above their nominal price.
Equity-settled share-based payments to certain of the Directors
and others providing similar services are measured at the fair
value of the equity instruments at the grant date. The fair value
is expensed, with a corresponding increase in equity, on a
straight-line basis from the grant date to the expected exercise
date. Where the equity instruments granted are considered to vest
immediately, the services are deemed to have been received in full,
with a corresponding expense and increase in equity recognised at
grant date.
The dilutive effect of outstanding share-based payments is
reflected as share dilution in the computation of diluted EPS.
3. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES
The preparation of the Group's Consolidated Financial Statements
under IFRS requires the Directors to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities. Estimates and
judgments are continually evaluated and are based on historical
experience and other factors including expectations of future
events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
There are significant estimates and assumptions used in the
valuation of the Participation Shares. Management has considered at
the grant date, the probability of a successful first acquisition
by the Company and the potential range of value for the
Participation Shares, based on the circumstances on the grant date.
The fair value of the Participation Shares and related share-based
payment expense was calculated using a Monte Carlo valuation model.
A summary of the terms is set out in note 18.
For the period to 30 June 2018 and at the period end, the
Directors do not consider that they have made any other significant
estimates, judgments or assumptions which would materially affect
the balances and results reported in these financial
statements.
4. SEGMENT INFORMATION
The Board of Directors is the Group's chief operating
decision-maker. As the Group has not yet acquired an operating
business, the Board of Directors considers the Group as a whole for
the purposes of assessing performance and allocating resources, and
therefore the Group has one reportable operating segment.
5. FINANCE INCOME
For the period
to
30 June 2018
GBP'000
Interest on bank deposits 81
81
==============
6. EMPLOYEES AND DIRECTORS
(a) Employment costs for the Group during the period:
For the period
to
30 June 2018
GBP'000
Wages and salaries 781
Pension contributions 1
Social security costs 102
Short term employment benefits 16
Other employment related expenses 118
--------------
Total employment cost expense 1,018
==============
(b) Directors' emoluments
The highest paid Director, Adrian Whitfield, received emoluments
of GBP421,300 (comprising salary of GBP385,385, bonus of GBP27,957
paid in July 2017 and taxable benefits comprising private medical
and dental insurance and travel insurance of GBP7,958) during the
period, excluding a bonus of GBP100,000 which has been accrued at
the balance sheet date and was paid in July 2018. Adrian Whitfield
will receive a fixed annual salary of GBP300,000, payable monthly
in arrears along with a guaranteed minimum bonus of GBP100,000 pa.
On the completion of a Platform Acquisition by the Group, Adrian
Whitfield will be entitled to an additional cash bonus of an amount
equal to 0.5 per cent. of the Total Enterprise Value, calculated as
the total value of the consideration paid by the Company or any
subsidiary for the acquired equity or assets plus the net debt of
the acquired business or company, such net debt to be reduced
pro-rata where less than 100 per cent. of the entire issued share
capital of the target business or company is acquired. A minimum of
50 per cent. of the Platform Acquisition bonus, net of tax, shall
be automatically reinvested in return for ordinary shares in the
Company.
Mark Brangstrup Watts and James Corsellis are paid fees equal to
the prevailing national minimum wage for 17.5 hours per week.
During the period they received director fees of GBP17,564.
There were no share options exercised during the period. The
Participation Shares owned by Directors are described in note
18.
(c) Key management compensation
The Board considers the Directors of the Company, along with
certain senior employees, to be the key management personnel of the
Group.
The following table details the aggregate compensation due in
respect of the key management personnel of the Group, which is
comprised of the Executive Directors and Chris Carlisle.
For the period
to
30 June 2018
GBP'000
Salaries and short term employee benefits 713
Pension contributions 1
714
--------------
(d) Employed persons
The average monthly number of persons employed by the Group
(including Directors) during the period was as follows:
For the period
to
30 June 2018
Administrative 1
Key management 1
Directors 3
5
==============
7. ADMINISTRATION EXPENSES
For the period
to
30 June 2018
GBP'000
Group expenses by nature
Employment costs 1,018
Non-recurring project, professional
and diligence costs 10,281
Travel and entertaining 208
Office costs 118
Professional support 1,377
Share-based payment expense 249
Other expenses 26
---------------
13,277
===============
8. INCOME TAX
For the period
to
30 June 2018
GBP'000
Analysis of tax in period
Current tax on loss for the period -
Total current tax -
===============
Reconciliation of effective rate and tax charge:
For the period
to
30 June 2018
GBP'000
Loss on ordinary activities before tax (13,196)
---------------
Loss on ordinary activities multiplied by the
rate of corporation tax in the UK of 19 per cent. (2,507)
Effects of:
Losses carried forward for which no deferred tax
recognised 2,507
Total taxation charge -
===============
As at 30 June 2018, cumulative tax losses available to carry
forward against future trading profits were GBP13,195,599 subject
to agreement with HM Revenue & Customs. Prior to a Platform
Acquisition, there is no certainty as to future profits and no
deferred tax asset is recognised in relation to these carried
forward losses.
9. LOSS PER ORDINARY SHARE
Basic EPS is calculated by dividing the profit attributable to
equity holders of the company by the weighted average number of
ordinary shares in issue during the period. Diluted EPS is
calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive
potential
ordinary shares. The weighted average number of shares has not
been adjusted in calculating diluted EPS as there are no
instruments which have a current dilutive effect.
Refer to note 18 for instruments that could potentially dilute
basic EPS in the future.
For the period
to
30 June 2018
Loss attributable to owners of the parent (GBP'000) (13,196)
Weighted average number of ordinary shares in
issue 16,702,055
Weighted average number of ordinary shares for
diluted EPS 16,702,055
10. PROPERTY, PLANT & EQUIPMENT
For the period
to
30 June 2018
GBP'000
Office equipment
Cost
Opening balance on incorporation -
Additions 5
-----------------
Closing balance as at 30 June 2018 5
-----------------
Accumulated depreciation
Opening balance on incorporation -
Charge for the period (2)
----
Closing balance as at 30 June 2018 (2)
----
Net book value as at 30 June 2018 3
====
11. SUBSIDIARIES
Subsidiary undertakings of the Group
The Company owns, directly or indirectly, the whole of the
issued and fully paid ordinary share capital of its subsidiary
undertakings.
The subsidiary undertakings of the Company and Group as at 30
June 2018 are presented below:
Proportion
of ordinary Proportion
shares held of ordinary
Nature of Country of directly by shares held
Subsidiary business incorporation parent by the Group
------------------- ----------------- ---------------- ------------- --------------
Incentive
WHJ Limited vehicle Jersey 100% 100%
Wilmcote Group
Limited Dormant company England 0% 100%
WCH Group Limited Dormant company England 0% 100%
There are no restrictions on the Company's ability to access or
use the assets and settle the liabilities of the Company's
subsidiaries.
The registered office of WHJ Limited is One Waverley Place,
Union Street, St Helier, Jersey, JE1 1AX. The registered office of
Wilmcote Group Limited and WCH Group Limited is 11 Buckingham
Street, London, WC2N 6DF.
12. TRADE AND OTHER RECEIVABLES
As at
30 June 2018
GBP'000
Amounts receivable within one year:
Prepayments 33
Other receivables 59
VAT receivable 275
-------------
367
=============
Other receivables are all current.
There is no material difference between the book value and the
fair value of the receivables. Receivables are considered to be
past due once they have passed their contracted due date.
13. CASH AND CASH EQUIVALENTS
As at
30 June 2018
GBP'000
Cash and cash equivalents
Cash at bank 19,473
--------------
19,473
==============
Credit risk is managed on a group basis. Credit risk arises from
cash and cash equivalents and deposits with banks and financial
institutions. For banks and financial institutions, only
independently rated parties with a minimum short-term credit rating
of P-1, as issued by Moody's, are accepted. The utilisation of
credit limits is regularly monitored.
14. TRADE AND OTHER PAYABLES
As at
30 June 2018
GBP'000
Amounts falling due within one year:
Trade payables 1,059
Accruals 7,213
A1 share liability 112
-------------
8,384
=============
There is no material difference between the book value and the
fair value of the trade and other payables.
15. STATED CAPITAL
As at
30 June 2018
GBP'000
Authorised
Unlimited ordinary shares of no par value
Issued and fully paid
20,833,336 ordinary shares of no par value 24,370
24,370
=============
On incorporation 2 ordinary shares of no par value were issued
at GBP1.20 per share for aggregate consideration of GBP2.40. On 21
March 2017 a further 8,333,334 ordinary shares of no par value were
issued at GBP1.20 for an aggregate consideration of GBP10,000,001.
Following the Company's admission to AIM on 17 August 2017 a
further 12,500,000 ordinary shares of no par value were issued at
GBP1.20 for an aggregate consideration of GBP15,000,000. GBP630,427
of costs directly attributable to the August 2017 share issue have
been taken against stated capital.
The holders of ordinary shares are entitled to receive dividends
as declared and are entitled to one vote per ordinary share at
meetings of the Company.
16. RESERVES
The following describes the nature and purpose of each reserve
within shareholders' equity:
Accumulated losses
Cumulative losses recognised in the Group income statement.
Share based payment reserve
The share based payment reserve is the cumulative amount
recognised in relation to the equity settled share based payment
scheme as further described in note 18.
17. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
The Group has the following categories of financial instruments
as at the period ended 30 June 2018:
As at 30
June 2018
GBP'000
Loans and receivables
Cash and cash equivalents 19,473
Other receivables 59
-----------
19,532
===========
Financial liabilities measured at amortised cost
Trade and other payables 8,384
-----------
8,384
===========
All financial instruments are classified as current assets and
current liabilities. There are no non-current financial instruments
as at 30 June 2018.
The fair value and book value of the financial assets and
liabilities are equal.
The Group has exposure to the following risks from its use of
financial instruments:
-- Market risk;
-- Liquidity risk; and
-- Credit risk
This note presents information about the Group's exposure to
each of the above risks and the Group's
objectives, policies and processes for measuring and managing
these risks.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, to
set appropriate risk limits and controls and to monitor risks
and adherence limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the
Group's activities.
Treasury activities are managed on a Group basis under policies
and procedures approved and monitored by the Board. These are
designed to reduce the financial risks faced by the Group which
primarily relate to movements in interest rates.
Market risk
The Group's activities primarily expose it to the risk of
changes in interest rates due to the significant cash
balance currently held; however any change in interest rates
will not have a material effect on the Group. The
Group's operations are predominately in GBP, its functional
currency and accordingly minimal translation exposures arise in
trade receivables or trade payables.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The
Group's approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the
Group's reputation.
The Group currently meets all liabilities from cash reserves.
The Group's liability for operating expenses is
monitored on an ongoing basis to ensure cash resources are
adequate to meet liabilities as they fall due.
Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by
failing to discharge an obligation. The main credit risk relates
to the cash held with financial institutions. The
Company manages its exposure to credit risk associated with its
cash deposits by selecting counterparties with
a high credit rating with which to carry out these transactions.
The counterparty for these transactions is Barclays Bank plc, which
holds a short-term credit rating of P-1, as issued by Moody's. The
Company's maximum exposure to credit risk is the carrying value of
the cash on the balance sheet.
Capital management
The Board's policy is to maintain a strong capital base so as to
maintain creditor and market confidence and to
sustain future development of the business. There were no
changes in the Group's approach to capital
management during the period.
18. SHARE-BASED PAYMENTS
Implementation of the Group share scheme - Participation
Shares
Arrangements have been put in place to create incentives for
those who are expected to make key contributions to the success of
the Group. Success depends upon the sourcing of attractive
investment opportunities, effective execution of transactions, and
the subsequent integration and optimisation of target businesses.
Accordingly, an incentive scheme has been created to reward the key
contributors for the creation of value, once all investors have
received a preferential level of return. In order to make these
arrangements most efficient, they are based around a subscription
for shares in WHJL by the Executive Founders and other key
contributors through the "Participation Shares". Adrian Whitfield
and Marwyn Long Term Incentive LP ("MLTI"), in which James
Corsellis and Mark Brangstrup Watts are beneficially interested,
are defined as the 'Executive Founders'. In addition, Participation
Shares have been issued to Chris Carlisle, the Company's Corporate
Development Director, and a potential CFO of the Company were the
acquisition of a specific target company to have completed.
On being offered, the Company will purchase the Participation
Shares either for cash or for the issue of new ordinary shares at
its discretion, with the expectation being that new shares will be
issued. The valuation of the Participation Shares is discussed
below. The Participation Shares may only be sold on this basis if
both the growth and at least one of the vesting conditions have
been satisfied. If the growth condition has not been satisfied on
or before the fifth anniversary of a Platform Acquisition (or such
later date as WHJL and the holders of 90 per cent. of the ordinary
shares, A1 Shares and A2 Shares in WHJL agree) the Participation
Shares must be sold to the Company or, at its election, redeemed by
WHJL and in both cases at a price per Participation Share equal to
its subscription price unless and to the extent that the
remuneration committee (once established) determines otherwise.
Participation Shares
During the period, 500 A1 Shares were issued to Adrian
Whitfield, 100 A1 Shares to Chris Carlisle, 100 A1 Shares to a
potential CFO and 500 A2 Shares to MLTI (collectively, the "Old
Participation Shares"), which have been accounted for in accordance
with IFRS 2 "Share-based Payment" as equity-settled share-based
payment awards. The A1 Shares issued to the potential CFO have a
value of GBP1 per share on vesting unless he commences his
employment as CFO of the Company on or prior to 30 September 2018.
As he has not yet been appointed CFO, no expense has been
recognised in the current period in respect of these A1 Shares.
On 21 August 2018, the 700 A1 Shares issued in aggregate were
bought back by the Group and subsequently cancelled. On 4 September
2018, 500 new A1 Shares were issued to Adrian Whitfield and 100 new
A1 Shares were issued to Chris Carlisle (collectively, the "New
Participation Shares"), which have been treated as replacement
awards under IFRS 2.
Grant date
The date at which the entity and another party agree to a
share-based payment arrangement, for accounting purposes, is the
grant date. As the New Participation Shares are treated as
replacement awards for the Old Participation Shares under IFRS2,
the grant date for the New Participation Shares is the same as the
equivalent Old Participation Shares. The grant date for the
Participation Shares was:
Participant Grant date
Adrian Whitfield 21 March 2017
(A1)
-------------------------------
Chris Carlisle 3 August 2017
(A1)
-------------------------------
Potential CFO (A1) 19 March 2018 (cancelled on 21
August 2018)
-------------------------------
MLTI (A2) 21 March 2017
-------------------------------
Growth Condition
The growth condition is that the compound annual growth of the
Company's equity value must be at least 10 per cent. per annum. The
growth condition takes into account new shares issued, dividends
and capital returned to shareholders.
Service Conditions
Adrian Whitfield and Chris Carlisle have agreed that if they
cease to be involved with the Company before it completes its
Platform Acquisition, before the second anniversary of the Platform
Acquisition due to resignation, or at any time due to termination
for gross misconduct, fraud, or criminal acts then all of their A1
Shares will be forfeited. If they cease to be involved with the
Company other than as described above, they will remain entitled to
such of their A1 Shares as have vested.
Vesting Conditions and Vesting Period
Both the Old Participation Shares and the New Participation
Shares are subject to certain vesting conditions, at least one of
which must be (and continue to be) satisfied in order for a holder
of Participation Shares to exercise his, her or its redemption
rights and which ends on the fifth anniversary of the date of the
Platform Acquisition or such later date as is agreed between the
Company and the holders of at least 90 per cent. of the ordinary
shares in WHJL, A1 Shares and A2 Shares.
The vesting conditions are as follows:
(i) it is later than the third anniversary of the Platform Acquisition;
(ii) a sale of all or a material part of the business of WHJL;
(iii) a sale of all of the issued ordinary shares of WHJL or a merger of WHJL;
(iv) a winding up of WHJL; or
(v) a sale, merger or change of control of the Company.
The Participation Shares are subject to a three year vesting
period and will lapse after five years. The vesting period
commences from the date of the Platform Acquisition.
Value
Subject to the provisions detailed above, the Participation
Shares can be sold to, or redeemed by, the Company for an aggregate
value equivalent to 15 per cent. (of which A1 Shares as a class are
entitled 10 per cent. and A2 Shares 5 per cent.) of the excess in
the market value of the Company over and above its aggregate paid
up share capital, allowing for any dividends and other capital
movements.
Holding of Participation Shares
Participation Shares have been created and shares have been
allocated and issued as shown in the table below.
Number
of Participation Fair value
Nominal Issue Price Shares at grant
price date
Adrian Whitfield (A1) GBP1 GBP72.32 500 GBP205,465
Chris Carlisle (A1) GBP1 GBP185.97 100 GBP105,668
Potential CFO (A1) (cancelled GBP1 GBP570.00 100 GBP285,861
on xx August 2018)
Marwyn Long Term Incentive GBP1 GBP72.32 500 GBP205,465
LP (A2)
------------------ ----------------
1,200 GBP802,459
================== ================
No Participation Shares were exercisable at 30 June 2018.
Valuation of Participation Shares
The fair value of the Participation Shares granted under the
scheme has been calculated using a Monte Carlo model. The fair
value uses an ungeared volatility of 25 per cent. and is based on a
weighted average share price over the vesting period. An expected
term input of four years has been used, being the midpoint of the
period of time between the date on which an acquisition is expected
to take place and the start and end of the redemption period. The
Participation Shares are subject to a growth condition, which is a
market performance condition, and as such has been taken into
consideration in determining their fair value. The risk free rate
is taken from zero-coupon UK Government bonds with a redemption
period in line with the expected term. The model incorporates a
range of probabilities for the likelihood of an acquisition being
made of a given size.
Expense related to Participation Shares
GBP79,283 has been recognised in the Consolidated Statement of
Comprehensive Income in the period and in a share-based payment
reserve within the Consolidated Balance Sheet as at the period end
in relation to the A1 Participation Shares, together with a
liability of GBP111,757.
GBP169,305 has been recognised in the Consolidated Statement of
Comprehensive Income in the period in relation to the A2
Participation Shares, with GBP205,465 recognised in a share-based
payment reserve within the Consolidated Balance Sheet as at the
period end. As the A2 Participation Shares do not have any service
conditions, their fair value on grant date was recognised
immediately as an expense.
19. RELATED PARTY TRANSACTIONS
The AIM Rules define a related party as any (i) director of the
Company or its subsidiary, (ii) a substantial shareholder, being
any shareholders holding at least 10 per cent. of a share class or
(iii) an associate of those parties identified in (i) or (ii).
James Corsellis and Mark Brangstrup Watts are the managing
partners of the Marwyn Group. Funds managed by Marwyn Asset
Management Limited of which James Corsellis and Mark Brangstrup
Watts are both non-executive directors and in which they are the
ultimate beneficial owners, hold 60.4 per cent. of the Company's
issued ordinary shares.
James Corsellis and Mark Brangstrup Watts have a beneficial
interest in the A2 Shares as described in note 18.
James Corsellis and Mark Brangstrup Watts are the managing
partners of Marwyn Capital LLP which provides corporate finance
advice and various office and finance support services to the
Company. During the period
Marwyn Capital LLP charged GBP933,871 (excluding VAT) in respect
of services supplied, GBP17,564 (excluding VAT) for James
Corsellis' and Mark Brangstrup Watts' directors' fees and GBP8,768
in respect of expenses incurred on behalf of the Group. Marwyn
Capital LLP was owed an amount of GBP70,711 at the balance sheet
date.
James Corsellis and Mark Brangstrup Watts are the ultimate
beneficial owners of Axio Capital Solutions Limited which provides
financial and accounting services, transactional support, company
secretarial, and administrative services to the Company. During the
period Axio Capital Solutions Limited charged GBP301,081 in respect
of services supplied and GBP25,418 in respect of expenses incurred
on behalf of the Group. Axio Capital Solution Limited was owed an
amount of GBP24,475 at the balance sheet date.
James Corsellis and Mark Brangstrup Watts are the ultimate
beneficial owners of Marwyn Partners Limited and Marwyn Investment
Management LLP which both incurred costs on behalf of the Group
which they recharged. During the period Marwyn Partners Limited
charged GBP86,186 in respect of recharged costs, of which GBP5,831
was outstanding at 30 June 2018 and Marwyn Investment Management
LLP charged GBP271,754 in respect of recharged costs, of which
GBP27,759 was outstanding at 30 June 2018.
Compensation of key management personnel is included in note 6.
Holdings of A1 and A2 Shares are detailed in note 18.
20. COMMITMENTS AND CONTINGENT LIABILITIES
There were no commitments or contingent liabilities outstanding
at 30 June 2018 which would require disclosure or adjustment in
these financial statements.
21. AUDITORS' REMUNERATION
In the period to 30 June 2018, the Group's auditor,
PricewaterhouseCoopers LLP, has charged GBP1,374,266 for non-audit
services to the Group. The audit fees of the Group's auditor for
the period ended 30 June 2018 amount to GBP27,500.
22. POST BALANCE SHEET EVENTS
On August 21 2018, the 700 A1 Shares issued by WHJL were bought
back by the Group and subsequently cancelled. On 4 September 2018,
500 new A1 Shares were issued to Adrian Whitfield and 100 new A1
Shares were issued to Chris Carlisle. Please refer to note 18 for
further details.
RISKS
Risks applicable to investing in the Company
An investment in the ordinary shares involves a high degree of
risk. No assurance can be given that shareholders will realise a
profit or will avoid loss on their investment. The Board has
identified the following risks which it considers to be the most
significant for investors in the Company. The risks referred to
below do not purport to be exhaustive and are not set out in any
particular order of priority. If any of the following events
identified below occur, the Company's business, financial
condition, capital resources, results and/or future operations and
prospects could be materially adversely affected. In that case, the
market price of the ordinary shares could decline and investors may
lose part or all of their investment. Additional risks and
uncertainties not currently known to the Board or which the Board
currently deem immaterial may also have an adverse effect on the
Company's business. In particular, the Company's performance may be
affected by changes in the market and/or economic conditions and in
legal, regulatory and tax requirements.
Market and competition risks
-- The Company has a limited operating history
The Company was incorporated on 17 March 2017. The Company has
limited Financial Statements and/or historical financial data. The
Company is therefore subject to all of the risks and uncertainties
associated with any new business enterprise including the risk that
the Company will not achieve its investment objectives and that the
value of an investment in the Company could decline and may result
in the total loss of all capital invested. The past performance of
companies, assets or funds managed by the Directors, or persons
affiliated with them, in other ventures, is not necessarily a guide
to the future business, results of operations, financial condition
or prospects of the Company.
-- Industry-specific risks
It is anticipated that the Company will invest in businesses
with a particular focus on the downstream and specialty chemicals
sector within the UK, Europe and North America.
The performance of this sector may be cyclical in nature, with
some correlation to gross domestic product and, specifically,
levels of demand within targeted end-markets. As a result, the
identified sector may be affected by changes in general economic
activity levels which are beyond the Company's control but which
may have a material adverse effect on the Company's financial
condition and prospects.
In addition, the political risks associated with operating
across a broad number of jurisdictions and markets could affect the
Company's ability to manage or retain interests in its business
activities and could have a material adverse effect on the
profitability of its business following a Platform Acquisition.
-- Chemical manufacturing and environment
The manufacture, storage and transportation of specialty
chemicals is inherently dangerous and any incidents relating to the
hazards, including but not limited to, explosions and fires,
chemical spills or other discharges of toxic substances which the
Group faces may adversely impact its productivity, financial
condition, results of operations and reputation. In addition, the
occurrence of one of these risks may result in personal injury and
loss of life, damage to property and contamination of the
environment, which may result in a suspension of operations and the
imposition of civil or criminal penalties, including governmental
fines.
The production and use of hazardous materials will be subject to
extensive environmental and health and safety laws and regulations
at both the national and local level in the relevant jurisdictions.
Many of these laws and regulations have become more stringent over
time and the costs of compliance with these requirements may
increase, including costs associated with any necessary capital
investments. Compliance with environmental and health and safety
laws generally increases the costs of transportation and storage of
raw materials and finished products, as well as the costs of
storage and disposal of wastesCompetitive pressures risks
The markets in which the Company and its proposed acquisition
targets will operate are highly competitive with significant
competition from large international producers and smaller regional
competitors. The Group may lose market share to other producers of
chemicals or to other products that can be substituted for the
products of the Group. Increased competition and unanticipated
actions by competitors or customers, which could arise as a result
of, among other things, unforeseen changes in the competitive
landscape due to the introduction of disruptive technologies, could
lead to an adverse effect on results and hinder the Company's
growth potential.
-- New entrants to the market risks
The Company will always be at risk that new entrants to the
market are able to procure, by way of acquisition or licence,
downstream and specialty chemicals business. Any new entrant in
this space could have a disruptive effect on the Company and its
ability to implement its investment strategy and deliver
significant value for shareholders. If any new entrant was able to
establish a foothold in the market, this could have a corresponding
negative effect on the financial prospects of the Company.
-- Product price changes risks
Following completion of a Platform Acquisition, the purchase
price of products distributed by the Company could fluctuate,
thereby potentially affecting the results of operations. There
could be significant increases in the cost of specific raw
materials, leading to a diminution in margins if substitute
products cannot be sourced from elsewhere.
In addition, a period of commodity price deflation may lead to
reductions in the price and value of the Company's products where
sales prices are indexed or if competitors reduced their selling
prices. If this was to occur, the Company's revenue and, as a
result, its profits, could be reduced and the value of inventory
held in stock may not be fully recoverable.
Key management risks
The Company is highly dependent on the expertise and continued
service of the Directors and other senior employees. The experience
and commercial relationships of Adrian Whitfield in particular
should help provide the Company with a competitive edge. However,
any one of the Directors or senior management could give notice to
terminate their employment agreements at any time and their loss
may have an adverse effect on the Company's business.
In addition, there is a risk that the Company will not be able
to recruit executives of sufficient expertise or experience to
maximise any opportunities that present themselves, or that
recruiting and retaining those executives is more costly or takes
longer than expected. The failure to attract and retain those
individuals may adversely affect the Company's operations.
Investment risks
-- Acquisition of targets
Although the Company has identified a number of potential
investment opportunities, it is not currently in formal or
exclusive discussions with any asset vendors. The Company's future
success is dependent upon its ability to not only identify
opportunities but also to execute successful acquisitions and/or
investments. There can be no assurance that the Company will be
able to conclude agreements with any target business and/or
shareholders in the future and failure to do so could result in the
loss of an investor's investment. In addition, the Company may not
be able to raise the additional funds required to acquire any
target business and fund its working capital requirements.
-- Competition for acquisition opportunities
There may be significant competition in some or all of the
acquisition opportunities that the Company may explore. Such
competition may for example come from strategic buyers, sovereign
wealth funds, special purpose acquisition companies and public and
private investment funds, many of which are well established and
have extensive experience in identifying and completing
acquisitions. A number of these competitors may possess greater
technical, financial, human and other resources than the
Company.
-- Disposals
The Company may make investments that it cannot realise through
trade sale or flotation at an acceptable price. Some investments
may be lost through insolvency. Any of these circumstances could
have a negative impact on the profitability and value of the
Company.
-- Unsuccessful transaction costs
There is a risk that the Company may incur substantial legal,
financial and advisory expenses arising from unsuccessful
transactions which may include transaction documentation, legal,
accounting and other due diligence. The Company may need to raise
additional funds in order to continue to pursue its investment
strategy if its operating and unsuccessful transaction costs reduce
its cash balance below that required to prosecute a platform
acquisition in accordance with its investment strategy.
-- Total voting control not acquired
Although the Company intends to acquire total voting control of
any target company or business, it may also consider acquiring a
controlling interest constituting less than total voting control or
less than the entire equity interest of that target company or
business if such opportunity is considered attractive or where the
Company expects to acquire sufficient influence to implement its
strategy. In such circumstances, the remaining ownership interest
will be held by third parties and the Company's decision-making
authority may be limited.
-- Timing of investments
As detailed above, the Company cannot accurately predict how
long it will actually take to deploy the capital available to it or
whether it will be able to do so at all. Any significant delay or
inability to find a suitable acquisition may have a material
adverse effect on the business, financial condition, results of
operations and prospects of the Company.
Pursuant to the AIM Rules for Companies, if the Company has not
substantially implemented its investment policy within 18 months of
admission, the investment policy will be subject to approval by
shareholders at the next annual general meeting of the Company and
annually thereafter.
-- Success of investment policy not guaranteed
The Company's level of profit will be reliant upon the
performance of the assets acquired and the investment policy. The
success of the investment policy depends on the Directors' ability
to identify investments in accordance with the Company's investment
objectives and to interpret market data correctly. No assurance can
be given that the strategy to be used will be successful under all
or any market conditions or that the Company will be able to
generate positive returns for shareholders.
-- Change in investment policy
The investment policy may be modified and altered from time to
time with the approval of shareholders, so it is possible that the
approaches adopted to achieve the Company's investment objectives
in the future may be different from those the Directors currently
expect to use. Any such change may have a material adverse effect
on the business, financial condition, results of operations and
prospects of the Company.
-- Material facts or circumstances not revealed in the due diligence process
Prior to making or proposing any investment, the Company will
undertake legal, financial and commercial due diligence on
potential investments to a level considered reasonable and
appropriate by the Company on a case by case basis. However, these
efforts may not reveal all material facts or circumstances that
would have a material adverse effect upon the value of the
investment.
In undertaking due diligence, the Company will need to utilise
its own resources and may be required to rely upon third parties to
conduct certain aspects of the due diligence process. Further, the
Company may not have the ability to review all documents relating
to a target company and assets. Any due diligence process involves
subjective analysis and there can be no assurance that due
diligence will reveal all material issues related to a potential
investment. Any failure to reveal all material facts or
circumstances relating to a potential investment may have a
material adverse effect on the business, financial condition,
results of operations and prospects of the Company.
Financial risks
When a suitable Platform Acquisition or bolt-on acquisition is
identified, it is possible that the Company will need to raise
further capital to fund such an acquisition and / or facilitate the
development of such acquisition. There is no guarantee that the
Company will be able to raise such capital and this may prejudice
the Company's ability to make and develop such acquisitions. This
inability to raise further capital may have a material adverse
effect on the business, financial condition, results of operations
and prospects of the Company.
Risks relating to the Ordinary Shares and their trading on
AIM
-- Conflicts of interest with significant shareholders
Currently, approximately 80 per cent. of the Company's issued
share capital is held by two shareholders. Such shareholders will
as a result be able to exercise sufficient control over the
Company's corporate actions so as not to require the approval of
the Company's other shareholders. The interests of such significant
shareholders may conflict with those of other holders of ordinary
shares.
-- Controlling shareholder
Marwyn Asset Management Limited controls 60.44 per cent. of the
issued ordinary shares of the Company.
As a result, MVI II LP will be able to exercise significant
influence to pass or veto matters requiring shareholder approval,
including future issues of ordinary shares and the election of
directors and to veto or seek to approve fundamental changes of
business. This concentration of ownership may have the effect of
delaying, deferring, deterring or preventing a change in control,
depriving shareholders of the opportunity to receive a premium for
their ordinary shares as part of a sale of the Company. The
interests of MVI II LP may not necessarily be aligned with those of
the other shareholders. Accordingly, MVI II LP could influence the
Company's business in a manner that may not be in the interests of
other shareholders.
-- Limited trading history
Since the ordinary shares were only recently listed, their
market value is uncertain. The market price of the ordinary shares
may be volatile and may go down as well as up and investors may
therefore be unable to recover the value of their original
investment. The Company's operating results and prospects from time
to time may be below the expectations of market analysts and
investors. Additionally, stock market conditions may affect the
ordinary shares regardless of the performance of the Company. Stock
market conditions are affected by many factors, such as general
economic outlook, movements in or outlook on interest rates and
inflation rates, currency fluctuations, commodity prices, changes
in investor sentiment towards particular market sectors and the
demand and supply of capital.
Accordingly, the market price of the ordinary shares may not
reflect the underlying value of the Company's net assets and the
price at which investors may dispose of their ordinary shares at
any point in time may be influenced by a number of factors, only
some of which may pertain to the Company while others may be
outside the Company's control.
-- Further issues of ordinary shares could dilute the interests of existing Shareholders
The Company intends to issue additional ordinary shares in
subsequent public offerings or private placements to fund
acquisitions or as consideration for acquisitions. As Jersey law
does not grant shareholders the benefit of pre-emption rights in
relation to a further issue of ordinary shares, pre-emption rights
have been included in the Company's Articles. However, it is
possible that existing shareholders may not always be offered the
right or opportunity to participate in such future share issues,
which may dilute the existing shareholders' interests in the
Company.
-- Investing company status
The Company is currently considered to be an investing company
for the purposes of the AIM Rules. As a result, it may benefit from
certain partial carve-outs to the AIM Rules, such as those in
relation to the classification of reverse takeovers. Were the
Company to lose investing company status for any reason, such
carve-outs would cease to apply. It is anticipated that any
acquisition will be considered to be a reverse takeover under the
AIM Rules.
-- Trading on AIM
An investment in shares traded on AIM is generally perceived to
involve a higher degree of risk and to be less liquid than an
investment in shares listed on the Official List. AIM has been in
existence since June 1995 but its future success, and the liquidity
of the market for the ordinary shares, cannot be guaranteed.
Consequently, it may be more difficult for an investor to sell his
or her ordinary shares than it would be if the ordinary shares were
listed on the Official List, and he or she may receive less than
the amount paid. In addition, there can be no guarantee that the
Company will always maintain a quotation on AIM. If it fails to
retain such a quotation, investors may decide to sell their
Ordinary Shares, which could have an adverse impact on the price of
the ordinary shares. If in the future the Company decides to
maintain a quotation on another exchange in addition to AIM, the
level of liquidity of shares traded on AIM may decline if
shareholders choose to trade on that market rather than on AIM.
-- Value and liquidity of the ordinary shares
It may be difficult for an investor to realise his or her
investment. The shares of publicly traded companies can have
limited liquidity and their share prices can be highly volatile.
The price at which the ordinary shares will be traded and the price
at which investors may realise their investment will be influenced
by a large number of factors, some specific to the Company and its
operations and others which may affect companies operating within a
particular sector or quoted companies generally. A relatively small
movement in the value of an investment or the amount of income
derived from it may result in a disproportionately large movement,
unfavourable as well as favourable, in the value of the ordinary
shares or the amount of income received in respect thereof.
Investors should be aware that the value of the ordinary shares
could go down as well as up, and investors may therefore not
recover their original investment. Furthermore, the market price of
the ordinary shares may not reflect the underlying value of the
Company's net assets.
Risks relating to legislation and regulations
-- Legislative and regulatory risks
Any investment is subject to changes in regulation and
legislation. As the direction and impact of changes in regulations
can be unpredictable, there is a risk that regulatory developments
will not bring about positive changes and opportunities, or that
the costs associated with those changes and opportunities will be
significant. In particular, there is a risk that regulatory change
will bring about a significant downturn in the prospects of one or
more acquired businesses, rather than presenting a positive
opportunity.
-- Taxation
There can be no certainty that the current taxation regime in
England and Wales or overseas jurisdictions within which the
Company may operate will remain in force or that the current levels
of corporation taxation will remain unchanged.
Any change in the tax status or tax legislation may have a
material adverse effect on the financial position of the Company.
Investors should be aware however, that investment in the Company
by way of subscription for ordinary shares may not be treated as a
"qualifying holding" for the purposes of the venture capital trust
rules (as set out in Part 6 Chapter 4 of the UK Income Tax Act
2007) because the Company may not fulfil the requirements imposed
upon it which need to be met in order for the ordinary shares to
have qualifying holding status. Investors should also note that the
venture capital trust legislation contains numerous complex
conditions for a holding of ordinary shares to be a qualifying
holding, several of which must be satisfied by the investing
venture capital trust itself. The Company is not responsible for
the satisfaction of such conditions.
-- Suitability
As an investment vehicle incorporated in Jersey, the Company may
only be marketed to, and is only suitable as an investment for,
sophisticated investors with an understanding of the risks inherent
in investment in emerging market jurisdictions and an ability to
accept the potential total loss of all capital invested in the
Company.
ADVISORS
Nominated Adviser and Joint Broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London, EC4M 7LT
Registrar
Link Registrars (Jersey) Limited
12 Castle Street
St Helier, Jersey, JE2 3RT
Joint Broker
Macquarie Capital (Europe) Limited
Ropemaker Place
28 Ropemaker Street
London, EC2Y 9HD
Company Secretary and Administrator
Axio Capital Solutions Limited
One Waverley Place
Union Street
St Helier, Jersey, JE1 1AX
Principal Bankers
Barclays Bank plc
39/41 Broad Street
St Helier, Jersey, JE4 8PV
Solicitors to the Company (as to English law)
Covington & Burling LLP
265 Strand
London, WC2R 1BH
Solicitors to the Company (as to Jersey law)
Ogier
44 Esplanade
St Helier, Jersey, JE4 9WG
Independent Auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London, WC2N 6RH
Public Relations Adviser
Teneo Blue Rubicon
5(th) Floor, 6 More London Place
London, SE1 2DA
Corporate Finance Adviser
Marwyn Capital LLP
11 Buckingham Street
London, WC2N 6DF
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.
END
FR UBRWRWRAKUAR
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