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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Epic Recon | LSE:ERN | London | Ordinary Share | GB0033524850 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 51.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:2994G
EPIC Reconstruction PLC
24 October 2007
COMPANY ANNOUNCEMENT
24th October 2007
EPIC Reconstruction plc
Statement of Interim Results as at 31 July 2007
Further to its release on 19 October 2007 of a PDF version of its Interim Report
and Unaudited Financial Statements for the period ended 31 July 2007, EPIC
Reconstruction Plc, submits below a text version of the Interim Report and
Unaudited Financial Statements. A full formatted version of the Interim Report
and Unaudited Financial Statements remains available on EPIC Reconstruction
Plc's website at www.epicreconstructionplc.com.
Highlights of the period are:
- Total gross income of GBP1.0m, and Net Revenue Profit for the period of
GBP0.5m.
- Provisions have been made against certain investments of #1.6m primarily
relating to losses previously reported on Abbseal as a post balance sheet
event as at 31 January 2007.
- Net asset value per share as at the 31 July 2007 was down from 65.01p at 31
January 2007 to 61.19p.
- The Board has decided to focus on preserving cash balances at the half year by
not declaring an interim dividend and will review dividend payments at the
year end.
Please see below for the full Interim Report and Unaudited Financial Statements
EPIC RECONSTRUCTION PLC
Chairman's Statement
At the interim stage, EPIC Reconstruction Plc ("the Company" or "ER") had gross
income of #964k. This translated to a net revenue profit for the Company of
#513k. Regrettably, there were also capital losses of #1,660k, giving a total
loss for the period of #1,147k, including losses previously reported on Abbseal
as a post balance sheet event as at 31 January 2007. Net asset value per share
as at the 31 July 2007 for the Company was down from 65.01p at 31 January 2007
to 61.19p. The Board has decided to focus on preserving cash balances at the
half year by not declaring an interim dividend and will review dividend payments
at the year end.
The gross income from the period was generated through income yielding
instruments in the portfolio companies, most notably Past Times. Except through
re-financings and scheduled repayment of capital from portfolio companies the
expectation is that these instruments will remain in place providing the Company
with healthy revenue streams for the rest of the financial year. The majority of
the capital losses sustained were as a result of the final demise of Abbseal.
The remainder of the current portfolio continues to perform in line with
expectations. Past Times continues to perform well with positive like-for-like
sales and further improvements being driven through the business by the new CEO,
Mike Taylor. The business is on track to make a profit in the current year.
The current economic environment and perceived or real credit crunch for
consumers and companies is being watched with acute interest by the Company. The
Company's exposure to consumer facing businesses such as Past Times and Dolcis
makes any weakening in consumer confidence due to higher interest rates and the
impact on property prices of particular concern. However elsewhere in the
economy the end to cheap credit could bring fresh and interesting opportunities
for the Company as overleveraged and cyclical businesses are forced to seek more
radical redress to funding and operational problems.
The Company is seeking to exit a number of its smaller investments and continues
to identify potential bolt-on opportunities for the remainder of the portfolio.
This strategy will be the main focus for the remainder of the year whilst new
acquisitions will continue to be reviewed. The Company's focus on value creation
is predominantly from within the existing portfolio. I look forward to reporting
on the Company's performance at year end.
Geoffrey Vero
Investment Advisor's Report
In the six month period to 31 July 2007, the Investment Advisor has continued to
focus on creating value from within the portfolio.
The current portfolio is expected to continue to yield a good return to
shareholders as the Investment Advisor investigates a number of bolt-on
opportunities which should return capital to the Company and grow revenues and
strengthen market positions. Re-financings continue to be arranged, in
particular where the turnaround has largely been affected and the results are
showing in the company's financial results. The Investment Advisor also
continues to explore opportunities for adding value to portfolio companies
through revenue enhancing and cost saving initiatives as well as support in
identifying appropriate management to optimise performance. The Investment
Advisor continues to develop relationships with various lenders to ensure
portfolio companies have access to financing on optimal terms.
The Investment Advisor believes that the potential to create value within this
space remains significant, and the economic cycle continues to create a wide
range of investment opportunities. As such the Investment Advisor is actively
engaged in communicating the Company's investment strategy within the industry.
The Investment Advisor is strengthening its existing network and developing new
relationships with advisors and managers who can provide deal flow and the
necessary expertise in acquiring and turning around distressed assets.
The Portfolio
Autocue (2005)
Autocue is a manufacturer of prompting equipment for the media industry, as well
as the developer and provider of a range of software for a similar customer
base. The business went into administration early in 2005 due to significant
historic leverage raised to expand the software side of the business, a strategy
which subsequently proved to be a mistake. The Company teamed up with another
private equity provider to buy the business out of administration, employing a
new management team who have looked to restructure the business fundamentally,
through the removal of a number of unnecessary excess costs, and a realignment
of the business to its core prompter (rather than software) sales. The Company
has a #0.775m overlend exposure to Autocue, yielding 15% per annum. The last
twelve months has seen the development of Qnxt, a prompter which management are
confident is significantly ahead of all competition. Qnxt has recently been
launched and the performance of the business is expected to improve further over
the next period.
Dolcis (2006)
Dolcis, a high street shoe retailer, was bought out of Alexon Group plc during
December 2006 with John Kinnaird, a retail entrepreneur. The key turnaround
strategies to be employed initially are to improve buying, reduce stock levels,
extend credit and dispose of loss making stores and significant progress on
these has taken place within the first six months of ownership. The management
are now focusing on the product offering and the store format to increase
awareness and improve footfall. First roll-out of new stores are due to take
place in Q4 2007. Dolcis repaid #1.05m of the original #1.7m investment in March
2007 though further funding may be advanced in the future. The remaining balance
yields 9% per annum.
Investment Advisor's Report
Kemutec (2005)
Kemutec is a manufacturer of mixing and sifting equipment for the chemical,
pharmaceutical and food industries, with annual sales of circa #10m. The
business has repaid all of the initial loan from ER and further balances were
lent to assist with working capital due to the growth in the business. The
Company has #0.64m in overlend and acquisition finance yielding 15% per annum.
Demand from the US and the Continent remains strong and the business is now
looking to develop its presence further in new sectors and markets. Both
Management and the Investment Advisor continue to seek strategic acquisitions to
supplement the organic growth.
Morada Home Limited (2005)
The Company backed Stuart Taylor to buy the Morada Home business out of
administration with a secured debt instrument of #0.75m yielding 15% per annum.
The division was based originally on contracts with the Ministry of Defence
("MoD"), which comprised around two thirds of the division's turnover, to supply
curtains and blinds for MoD living accommodation. Further orders are expected
following the suspension of the MOD spending moratorium in the April of this
year. The business also supplies local authorities and educational
establishments, including a two year contract with Lancashire Purchasing Agency.
In the retail sector, the business supplies custom-made and ready-made
furnishings to a number of independent and national customers, including Paul
Simon and Dunelm. Morada has had a stable initial period. The order book is now
growing and sales are forecast to improve over the coming period.
Past Times (2005)
Past Times is a niche retailer of historically inspired jewellery, gifts, books
and house-wares. Past Times was acquired in December 2005 from the
administrators of Retail Variations plc, with Will Hobhouse, formerly of Tie
Rack and Whittards of Chelsea brought in as Chairman. The Company has committed
up to #8.9m at a 15% yield per annum. The secured debt instrument is currently
#7.75m. Past Times has undergone a major restructuring process, with the number
of stores reduced, the head office cost base reduced, and the product range has
been improved. The business is now experiencing the benefits of these
improvements. The recruitment of a new CEO, Mike Taylor, has also boosted
prospects as he has started to drive through further improvements capitalising
on the now stable core business. Like-for-like sales have increased
year-on-year, and the business is forecast to be profitable in the current year
of trading.
EPIC Specialist Investments Limited
Investment Advisor to
EPIC Reconstruction Plc
Unaudited Consolidated Statement of Operations
For the period from 1 February 2007 to 31 July 2007
Unaudited Unaudited Audited
1 February 1 February 1 February
2007 to 2006 to 2006 to
31 July 2007 31 July 2006 31 January
2007
Revenue Capital Total Total Total
Notes # # # # #
Income:
Rental income - - - - 766
Interest 859,194 - 859,194 1,204,047 2,007,270
Commission income 105,099 - 105,099 344,276 587,772
-------- --------- -------- --------- ---------
Total income 964,293 - 964,293 1,548,323 2,595,808
-------- --------- -------- --------- ---------
Expenses:
Investment advisor's fees (121,229) - (121,229) (176,293) (345,518)
Administration fees (9,912) - (9,912) (21,371) (57,923)
Directors' fees (37,917) - (37,917) (97,064) (86,538)
Directors and Officers' insurance (11,500) - (11,500) (15,175) (22,479)
Professional fees (139,399) - (139,399) (219,150) (327,946)
Crest service provision (2,500) - (2,500) (2,500) (1,749)
Printing and advertising expenses 6,635 - 6,635 (7,325) (20,524)
Board meeting and travel expenses (3,626) - (3,626) (15,790) (19,207)
Auditors' remuneration (23,498) - (23,498) (32,118) (40,266)
Interest and other charges (3,989) - (3,989) (76,515) (48,669)
Irrecoverable VAT (46,712) - (46,712) - (105,858)
Sundry expenses (24,826) - (24,826) (65,318) (12,064)
Stock exchange fees (2,582) - (2,582) (2,090) (8,511)
Advisor and broker fees (15,000) - (15,000) (15,000) (36,633)
Rental expenses - - - (37,349) (13,449)
Bad debts (15,128) - (15,128) - (76,082)
-------- --------- -------- --------- ---------
Total expenses (451,183) - (451,183) (783,058) (1,223,416)
-------- --------- -------- --------- ---------
Net investment income 513,110 - 513,110 765,265 1,372,392
Gains on investments
Net realised gains - - - 131,400 201,236
Unrealised gains on investments - - - - 3,770,000
Impairment of loan portfolio - (341,847) (341,847) - (5,802,965)
Commitments under guarantee - (1,318,535) (1,318,535) (2,759,885) (7,413,794)
-------- --------- --------- --------- ---------
Loss for the period
before taxation 513,110 (1,660,382) (1,147,272) (1,863,220) (7,873,131)
Taxation (7) - (7) - (22,642)
-------- --------- --------- --------- ---------
Loss for the period after taxation 513,103 (1,660,382) (1,147,279) (1,863,220) (7,895,773)
======== ========= ========= ========= =========
7 Basic and diluted loss
per ordinary share (pence) 1.71p (5.53p) (3.82p) (6.21p) (26.32p)
======== ========= ========= ========= =========
The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS.
The supplementary revenue return and capital return columns are both prepared under Board approved guidelines in
relation to the allocation between revenue and capital. All items in the above statement derive from continuing
operations.
Unaudited Consolidated Statement of Assets and Liabilities
as at 31 July 2007
Unaudited Unaudited Audited
31 July 2007 31 July 2006 31 January
2007
Notes # # #
4 Non-current assets
Investment property 587,647 587,647 587,647
3,4 Financial assets 14,434,367 13,863,500 12,808,500
----------- ------------ -------------
15,022,014 14,451,147 13,396,147
----------- ------------ -------------
Current assets
Accrued interest and other receivables 974,928 558,479 511,101
Cash and cash equivalents 1,919,058 3,780,688 2,831,477
Committed cash balances 1,956,065 8,797,000 8,319,035
----------- ------------ -------------
4,850,051 13,136,167 11,661,613
----------- ------------ -------------
Current liabilities
Accrued expenses and sundry accruals (78,379) (150,809) (103,701)
Tax liability - (568,508) -
Guarantee payable - - (250,000)
Provision for call under guarantee (924,270) - (4,653,909)
----------- ------------ -------------
(1,002,649) (719,317) (5,007,610)
----------- ------------ -------------
Net current assets 3,847,402 12,416,850 6,654,003
----------- ------------ -------------
Creditors: amounts falling due in more than one year
10 Bank loan (512,519) (566,268) (545,974)
----------- ------------ -------------
Net assets 18,356,897 26,301,729 19,504,176
=========== ============ =============
Represented by:
5 Share capital 300,000 300,000 300,000
6 Share premium 27,850,479 27,850,479 27,850,479
Capital reserve (10,905,659) (2,948,239) (9,245,277)
Revenue reserve 1,112,077 1,099,489 598,974
----------- ------------ -------------
18,356,897 26,301,729 19,504,176
=========== ============ =============
8 Net asset value per share (pence) 61.19p 87.67p 65.01p
=========== ============ =============
Unaudited Consolidated Statement of Changes in Net Assets
For the period from 1 February 2007 to 31 July 2007
Unaudited Unaudited Audited
6 months ended 31 July 2007 6 months Year ended
Share Share Capital Revenue ended 31 31 January
Capital Premium Reserve Reserve Total July 2006 2007
# # # # # # #
Net assets at
start of
period/year 300,000 27,850,479 (9,245,277) 598,974 19,504,176 29,574,949 29,574,949
(Loss)/profit
for the period
/year after
taxation - - (1,660,382) 513,103 (1,147,279) (1,863,220) (7,895,773)
Dividends paid - - - - - (1,410,000) (2,175,000)
-------- --------- --------- -------- --------- --------- ---------
Net assets at
end of period
/year 300,000 27,850,479 (10,905,659) 1,112,077 8,356,897 26,301,729 19,504,176
======== ========= ========== ======== ======== ========= =========
Unaudited Consolidated Statement of Cash Flows
For the period from 1 February 2007 to 31 July 2007
Unaudited Unaudited Audited
1 February 1 February 2006 1 February 2006
2007 to to to
31 July 2007 31 July 2006 31 January 2007
# # #
Operating activities
Rental income - - 18,614
Interest 326,314 870,047 1,762,652
Dividend received - 2,638 -
Commission income 175,255 420,716 672,969
Expenses paid (487,547) (987,444) (1,447,311)
---------- ---------- ----------
Net cash (outflow)/inflow
from operating activities 14,022 305,957 1,006,924
Taxation paid 432 (5,882) (590,049)
---------- ---------- ----------
Net cash flows from
operating activities 14,454 300,075 416,875
---------- ---------- ----------
Investing activities
Purchase of investments
and investment property - (8,739,155) (20,000)
Sale of investments
and investment property - 93,885 1,088,836
Loan advances (3,050,183) - (17,771,390)
Loan repayments 1,095,816 - 6,892,595
Payments called under
the guarantee (5,311,521) (3,202,885) (3,202,885)
Transfer from
committed cash 6,362,970 8,111,829 8,995,801
---------- ---------- ----------
Net cash flows from
investing activities (902,918) (3,736,326) (4,017,043)
---------- ---------- ----------
Financing activities
Dividends paid - (1,410,000) (2,175,000)
Proceeds from
borrowings 9,500 - -
Part payment of loan (33,455) - (20,294)
---------- ---------- ----------
Net cash flows from financing
activities (23,955) (1,410,000) (2,195,294)
---------- ---------- ----------
Decrease in cash and cash
equivalents (912,419) (4,846,251) (5,795,462)
Cash and cash equivalents at
start of period/year 2,831,477 8,626,939 8,626,939
---------- ---------- ----------
Cash and cash equivalents at
end of period/year 1,919,058 3,780,688 2,831,477
========== ========== ==========
Notes to the Interim Financial Statements
1. Operations
The Company was incorporated with limited liability in the Isle of Man with the
registered number 108834C on 25 July 2003. The Company's ordinary shares are
listed on the Alternative Investment Market ("AIM"), a market of the London
Stock Exchange Plc. The Company raised #30m by the placing of ordinary shares at
100 pence per share.
The Company has four wholly owned subsidiaries - EPIC Structured Finance
Limited, a company incorporated on 21 August 2003 in the Isle of Man; EPIC
Reconstruction Property Limited, a company incorporated on 11 October 2004 in
England and Wales; EPIC Reconstruction Property Company II Limited, a company
incorporated on 30 December 2004 in England and Wales and EPIC Reconstruction
Property Company (Isle of Man) Limited, a company incorporated on 29 September
2005 in the Isle of Man.
The principal activity of the Company and its subsidiaries (together "the
Group") is to arrange financing for businesses emerging from distressed
situations. The Group may make loans and where appropriate introduce third party
finance, which advances loans to the portfolio companies. The Investment Advisor
looks to set realistic repayment schedules, but does not view a portfolio
company not repaying on time and in full as 'underperforming' though in all
cases the Investment Advisor reserves the right to exercise step in rights. In
addition to the repayment of debt instruments, the Group will often arrange
additional preference share structures and take significant equity stakes so as
to create shareholder value. It is the performance on the combination of all
securities that determines the Group's view of each investment.
2. Accounting Policies
Basis of Preparation
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year ended
31 January 2007. The financial information contained in the interim statement
does not constitute accounts under Isle of Man Law.
The condensed set of interim financial statements has been prepared using
accounting policies consistent with International Financial Reporting Standards
(IFRSs) and in accordance with IAS 34 'Interim Financial Reporting' except for
the non-consolidation of certain companies.
Change in accounting policies
In the current financial year, the group will adopt International Financial
Reporting Standard 7 'Financial instruments: Disclosures' (IFRS 7) for the first
time. As IFRS 7 is a disclosure standard, there is no impact of that change in
accounting policy on the Interim Report and Accounts. Full details of the change
will be disclosed in our annual report for the year ended 31 January 2008.
The total column of this statement represents the Group's Income Statement,
prepared in accordance with IFRS. The supplementary revenue return and capital
return columns are both prepared under Board approved guidelines in relation to
the allocation between revenue and capital. All items in the above statement
derive from continuing operations.
2. Accounting Policies
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business and geographic area being arranging financing for businesses
emerging from distressed situations in the United Kingdom.
3. Financial Assets
Under a credit risk participation agreement signed with Eurosales, a division of
RBS, a third party finance company, the Group is committed to fund a minimum of
70% and a maximum of 100% (depending on the nature of loan and amount of
security) of the credit losses for loans arranged by the Group and funded by
Eurosales. Provision is made for any loans which are considered impaired and
hence the commitment to fund the related credit losses will be called. As at 31
July 2007 provisions of #924,270 have been established against the loans, (31
January 2007: #4,653,909). Total calls under the agreement in the period,
charged to the statement of operations amounted to #1,318,535 (31 January 2007:
#7,413,794).
Under the terms of the credit risk participation agreement, the Group must
retain a minimum amount in a security account, which is charged in favour of
Eurosales, to support the Group's commitment under the agreement. As at 31 July
2007, #1,956,065 (31 January 2007: #8,319,035) of the term deposit was charged
in favour of Eurosales.
4. Non-current assets
31 July 2007 31 July 2006 31 January
2007
# # #
------------------------------------ ----------- ----------- ------------
Investment property 587,647 587,647 587,647
Financial assets:
Secured loans 10,664,367 13,813,500 9,038,500
Unquoted equity investments 3,770,000 50,000 3,770,000
------------------------------------ ----------- ----------- ------------
15,022,014 14,451,147 13,396,147
==================================== =========== =========== ============
5. Share Capital
Number #
Authorised
Ordinary shares of 1p each 50,000,000 500,000
Called up, alloted and fully paid
Ordinary shares of 1p each 30,000,000 300,000
6. Share Premium
The share premium arose on the issue of the ordinary shares and represents the
difference between the price at which the shares were issued (100p) and the par
value (1p). Issue expenses amounting to #1,849,521 were written off against the
share premium account.
7. Basic and Diluted Loss Per Share
Basic and diluted loss per share is calculated by dividing the loss for the
period attributable to ordinary shareholders of #1,147,279 (31 January 2007:
#7,895,773) by the weighted average number of shares outstanding during the
period of 30,000,000 (31 January 2007: 30,000,000).
8. Net asset value per share (pence)
The net asset value per share is based on the net assets as at the period end of
#18,356,897 (31 January 2007: #19,504,176) divided by 30,000,000 shares in issue
at the end of the period.
9. Dividends paid and proposed
Under the terms of the Company's prospectus, it is the policy of the Company to
distribute substantially all of its distributable profits each year.
At a meeting of the Board of Directors, having taken legal advice to ensure
compliance with the applicable regulations, it was agreed to amend the Company's
dividend distribution policy with effect from 1 February 2006. Dividends are now
declared from available revenue reserves rather than from the total return of
the Company.
A final dividend of #597,000 (1.99 pence per share) based on the results for the
year ended 31 January 2007 is payable to shareholders. The ex-dividend date for
this dividend is 12 December 2007 and the payment date is 31 December 2007. This
dividend has not been included as a liability in these interim financial
statements.
10. Bank Loan
31 July 2007 31 July 2006 31 January 2007
# # #
----------- ----------- ------------
Mortgage loan 512,519 566,268 545,974
=========== =========== ============
The mortgage bank loan bears interest of 9.10% and is secured on investment
property valued in the financial statements at #587,647. The term currently
outstanding on the loan is 21 years and 11 months.
-ends-
Enquiries:
Numis Securities Charles Farquhar
+44 (0) 20 7260 1233
EPIC Private Equity LLP Giles Brand
+44 (0) 20 7553 2341
IoMA Philip Scales
+44 (0) 1624 681 250
Cardew Group Richard Spiegelberg
+44 (0) 20 7930 0777
This information is provided by RNS
The company news service from the London Stock Exchange
END
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