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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Equity Special | LSE:EQS | London | Ordinary Share | GB00B02GPB12 | 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% | 237.50 | 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:6096J
Equity Special Situations Limited
28 September 2006
EQUITY SPECIAL SITUATIONS LIMITED
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2006
Equity Special Situations Limited ("ESS" or "the Company"), the AIM traded
strategic investment company, is pleased to announce its unaudited results for
the six month period to 30 June 2006. Additional information is also provided
for the period up to 26 September 2006.
Highlights
* Reported NAV of 141.35 pence as at 30 June 2006, (136.46 pence when
including the effects of the recent adoption of FRS 26)
* Investments currently held in eleven companies of which eight are quoted
investments
* Continued strong progress during the period from key investee companies,
particularly Syndicate Asset Management plc ("SAM")
* Increased focus on financial services sector in EU, demonstrated by eight
of the investments being in that sector
* A healthy pipeline of new investment proposals is in place, including
further consolidation plays in the financial services sector
* Formation of new Advisory Panel
* Raised #5.0 million of new funds via a Placing at 133 pence per share in
March 2006
Peter Griffin, a Director of ESS, commented:
"Our overall aim with ESS is to identify and invest in exciting investment
opportunities. Most investments are actively managed in their early stages with
the intention that they will become independent and self supporting over time.
This investment strategy has been proven with the success of SAM and we
anticipate will be shortly repeated across other sub-sectors within the
financial services sector. We are very excited both by the investments now held
by ESS and by a number of potential investment opportunities that we are
currently working on. I hope to provide further updates on our progress with
these opportunities in due course."
-ends-
For further information:
Peter Griffin, +44 (0) 1481 751000
Director, Equity Special Situations Limited
Alasdair Robinson, +44 (0) 1312 259677
Director, Noble & Company Limited
EQUITY SPECIAL SITUATIONS LIMITED
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2006
Directors Review
We are delighted to present this interim report to shareholders. The following
pages show the financial performance of the Company for the six month period to
30 June 2006. In addition we have included some information for the period up
to 26 September 2006.
In the Company's Annual Report and Accounts for the 12 months ended 31 December
2005 released earlier this year, we commented that a majority of the most
interesting investment opportunities that we had reviewed during that year and
the majority of the companies that ESS had actually invested in were themselves
operating in the financial services sector within the EU.
During the course of this year we have continued to focus on financial services
as a core sector of interest for the Company and are pleased to report that now
two thirds of the portfolio of investments are in companies within this sector.
In particular, we are beginning to build a strong track record around the
success generated from the creation and subsequent IPO of Syndicate Asset
Management plc ("SAM") in September 2005.
On 31 December 2005 our Net Asset Value ("NAV") per share was 149.59 pence.
During the course of the period under review, the NAV fluctuated between
approximately 141 pence and 150 pence, dependent on the daily movements of the
share prices of the quoted investee companies. On 18 July 2006, we announced
that the NAV as at 30 June 2006 was 141.35 pence. However, we have decided for
the purposes of this interim report to adopt the transitional provisions of the
new Financial Reporting Standards 26 ("FRS 26"), the effect of which is to
marginally reduce the reported NAV through valuing underlying investments at the
bid price rather than at the mid price. Accordingly, the effect on the NAVs
following adoption of FRS 26 is to reduce the previously reported 31 December
2005 value to 144.16 pence (from 149.59 pence) and the 30 June 2006 to 136.47
pence (from 142.35 pence). The NAV as at 26 September 2006 stands at 136.87
pence.
Investments
Our investment strategy is to achieve long term capital growth for shareholders
through the purchase, holding and sale of minority stakes in companies and
investment funds. We aim to exploit special situations and seek out ideas and
companies which will provide a material uplift in valuation to an investment
made by ESS. We often combine an initial investment into a company with
management and infrastructure assistance, particularly when we are helping in
the creation of a new company that is pursuing, for example, a consolidation
strategy. A good example of this strategy, and the rewards that can be
generated from it, is SAM. This was originally an idea that was developed and
supported by ESS. That idea turned into a business plan and was then formalised
by the creation of a wholly owned subsidiary company in March 2005. ESS
provided the initial funding for SAM and continued to provide its directors and
consultants to SAM in order to generate the necessary momentum for the project.
SAM successfully floated on to AIM in September 2005 and has since raised
approximately #42.5 million in new monies from third party investors and has
made five acquisitions since its IPO. ESS is now a passive long term 20 per
cent. shareholder in SAM.
Another good example of this strategy is with Avarae Global Coins plc
("Avarae"), a strategic investment company which intends to achieve long term
capital growth through the purchase, holding and resale of rare and antique
coins. ESS was the cornerstone investor in Avarae when it was admitted to
trading on AIM on 24 May 2006 and currently holds 24.5 per cent. of Avarae.
As at 26 September 2006, ESS held investments in 11 companies, eight of which
are trading on AIM and three of which are unquoted. The largest holding by value
remains SAM, which as at 26 September 2006 represented approximately 79 per
cent. of the Company's NAV. However, we believe that, in terms of the number of
investee companies and the cost of these investments, the balance of our
portfolio is broad yet focussed. We are also promoting interaction between
investee companies so allowing such companies to begin to benefit from the
synergies that arise from operating within the same financial services sector.
We believe that our strategy to actively assist companies in their early stages,
until such time as they become self sustaining, has allowed us to better ensure
that these companies reach their potential. In addition, we are able to assist
the management of these companies through providing them comfort in the fact
that we are, in most cases, a stable and long term shareholder in our investee
companies.
Financial Review
The first half of the current financial year was principally used to consolidate
the investments made during the previous year and to research and review new
sub-sectors within the financial services arena with a view to more
consolidation opportunities.
Accordingly, there were no material valuation uplifts in the portfolio during
the period under review to match that of the previous financial year when the
flotation of SAM in particular resulted in gains on investments being more than
#13.0 million. However, during the first half we did increase the net realised
gains to #365,543 from #10,067 in the same period last year. Net unrealised
losses for the period were #862,311 compared to a gain of #118,912 for the first
half of 2005.
Total expenditure for the year was on budget at just over #200,000, a
significant uplift on that reported in the same period in 2005, but only a small
increase from that reported in the second half of 2005. As the business has
grown strongly over the last 12 months, we have had to put in place the
necessary infrastructure and consultancy teams to ensure that we have the
appropriate information available to make our investment decisions.
Funding
During the period, the Company raised #5.0 million through the issue of
3,739,716 new ordinary shares of 1 pence each ("Ordinary Shares") at 133.7 pence
each. We are delighted to have been able to broaden our shareholder base in
this way and warmly welcome our new shareholders to the group.
We announced in our annual report for the twelve months to 31 December 2005 that
we were reviewing the amount of debt that was appropriate for ESS to take on,
given the asset base of the Company. We concluded that the increase in the
amount of debt should be gradual but that it should be increased in order
provide leverage to the existing assets of the Company. The total debt taken on
by ESS as at 31 December 2005 was #70,000 and this has increased over the last
six months to a total of #1,223,809. We believe that the asset base of the
Company, which is currently approximately #20 million, means that this debt
level is very manageable. We will continue to monitor and control the debt
taken on by the Company in order to ensure that increases in debt will not
jeopardise the success of the Company. We expect that we will gradually
increase the total amount of debt over the next few months in order to finance
additional planned investments.
New Advisory Panel
Following our flotation just over two years ago, we had initially appointed an
Investment Advisory Panel to make recommendations to the Board on particular
investment opportunities. However, as the portfolio of investments made by the
Company has grown over time, it became clear that there were a number of
elements of an investment decision where the Board felt we needed some
additional guidance.
Accordingly, shortly after the half year end, we decided to broaden the scope of
the Investment Advisory Panel, such that, we invited David Pinckney, the current
Chairman of SAM, to consider forming a new replacement Advisory Panel which
would have the task of not only making investment recommendations to the Board,
but also providing advice to the Board on such matters as debt finance,
corporate finance and fund management. I am therefore delighted to announce
that David has recently accepted this invitation. The new ESS Advisory Panel
will report directly to the Board. It is intended that, as the Chairman of the
new ESS Advisory Panel, David will be the ever present permanent member of the
Panel and he will bring in the necessary experience and knowledge on a case by
case basis as required when making recommendations to the Board. It is intended
that those additional contributors to the Advisory Panel may be remunerated by
the Company by way of an award of share options over Ordinary Shares in order to
preserve the Company's cash reserves for investment purposes.
Outlook
We continue to receive a variety of high quality potential investments that meet
with ESS's investment criteria and to work hard on a number of projects. We are
therefore very excited about the future for ESS for both our existing
investments and our future potential investments.
Peter Griffin
Michael Cahill
28 September 2006
STATEMENT OF TOTAL RETURN
FOR THE SIX MONTHS ENDED 30 JUNE 2006
For the six For the six month period For the year ended
month period ended 30 June 2005 31 December 2005
ended 30 June 2006
(unaudited) (unaudited) (audited)
Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
# # # # # # # # #
GAINS ON INVESTMENTS
Net realised
gains - 365,543 365,543 - 10,067 10,067 - 4,372 4,372
Net unrealised
(losses)/gains - (862,311) (862,311) - 118,912 118,912 - 13,029,490 13,029,490
___________________ _____________ ________________ _______ _________________ __________
- (496,768) (496,768) - 128,979 128,979 - 13,033,862 13,033,862
___________________ _____________ ________________ _______ _________________ __________
INCOME
Bank interest 296 - 296 - - - 1,899 - 1,899
Loan interest
receivable - - - 1,534 - 1,534 - - -
___________________ _____________ ________________ _______ _________________ __________
296 - 296 1,534 - 1,534 1,899 - 1,899
___________________ _____________ ________________ _______ _________________ __________
EXPENDITURE
Directors' fees - - - 2,000 - 2,000 2,000 - 2,000
Administration
fees 26,640 - 26,640 - 28,567 28,567 47,944 - 47,944
Professional
fees 27,949 22,500 50,449 33,879 - 33,879 58,031 30,862 88,893
-
Consultancy
fees - 102,064 102,064 - 39,683 39,683 - 125,692 125,692
Audit fee 1,000 - 1,000 2,500 - 2,500 3,000 - 3,000
Registrar and
regulatory
expenses 12,023 - 12,023 - - - - - -
Sundry expenses 1,350 - 1,350 - - - 3,510 - 3,510
Loan interest
payable 875 - 875 4,525 - 4,525 4,525 9,050 13,575
Safe custody
charges 4,666 - 4,666 - - - 770 770 1,540
Bank charges and
interest 3,700 - 3,700 994 - 994 1,202 - 1,202
___________________ _____________ ________________ _______ _________________ __________
Loss/(profit)
on exchange - - - 534 - 534 535 - 535
___________________ _____________ ________________ _______ _________________ __________
78,203 124,564 202,767 44,432 68,250 112,682 121,517 166,374 287,891
NET RETURN ON
ORDINARY
ACTIVITIES FOR THE
FINANCIAL YEAR/PERIOD AFTER
TAXATION (77,907) (621,332) (699,239) (42,898) 60,729 17,831 (119,618)12,867,488 12,747,870
=================== ========= ================ ======= =================== ==========
Earnings per share
- basic 6 (0.62) (4.91) p (5.53) p (0.48p) 0.68 p 0.20 p (1.25p) 134.88 p 133.63 p
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued during the
period.
A reconciliation of movements in shareholders' funds is set out in note 10 to the financial
statements.
The notes form an integral part of these financial
statements.
BALANCE SHEET
30 JUNE 2006
Note 30 June 2006 30 June 2005 31 December 2005
(unaudited) (unaudited) (audited)
FIXED ASSETS
Quoted
investments 4 20,181,979 1,714,737 15,369,796
Unquoted
investments 5 537,703 147,500 287,703
--------- -------- ---------
20,719,682 1,862,237 15,657,499
CURRENT ASSETS
Cash at bank
and broker 42,312 339,004 44,231
Sundry debtors - - -
Loan receivable - - -
-------- -------- --------
42,312 339,004 44,231
-------- --------
CREDITORS - AMOUNTS FALLING
DUE WITHIN ONE YEAR
Bank overdraft - - 44
Loans and
other current
borrowings 1,223,809 - 70,000
Sundry
creditors 74,394 22,000 32,586
-------- -------- --------
1,298,203 22,000 102,630
-------- -------- --------
NET CURRENT
(LIABILITIES)/
ASSETS (1,255,891) 317,004 (58,399)
--------- -------- ---------
TOTAL ASSETS
LESS CURRENT
LIABILITIES 19,463,791 2,179,241 15,599,100
CREDITORS - AMOUNTS FALLING
DUE AFTER ONE YEAR
Loans payable (130,000) - -
---------
-------- ---------
TOTAL ASSETS
LESS TOTAL
LIABILITIES # 19,333,791 # 2,179,241 # 15,599,100
========= ======== =========
CAPITAL AND RESERVES
CALLED UP
SHARE CAPITAL 8 141,676 98,839 104,279
SHARE PREMIUM
ACCOUNT 8,145,464 2,508,301 3,182,861
CAPITAL RESERVE
REALISED 9 (125,467) (278,142) (366,446)
UNREALISED 9 11,638,981 162,479 13,067,362
REVENUE RESERVE 9 (466,863) (312,236) (388,956)
--------- -------- ---------
SHAREHOLDERS'
FUNDS 10 # 19,333,791 # 2,179,241 # 15,599,100
========= ======== =========
Net asset
value per
share 7 & 12 136.46 p 22.05 p 149.59 p
The notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2006
1. SIGNIFICANT NEW FINANCIAL REPORTING STANDARDS
FRS 26 requires that listed investments are valued at bid price, whereas previously,
listed investments were valued at middle market price. The Company has applied the
transitional provisions of FRS 26 and has not restated the comparative figures for this
change in accounting policy. Had the entity restated the comparative figures the
investments held at 31 December 2005 would have been valued on a bid basis which would
have resulted in the reported total assets at that date being reduced by #566,070.
In accordance with the transitional provisions of FRS 26 the adjustments between the
value of investments at the prior balance sheet date and the opening balance sheet at the
start of this financial period has been treated as an adjustment against the company's
opening reserves - see note 9.
2. ACCOUNTING POLICIES
(a) CONVENTION
The financial statements have been prepared under the historical cost convention,
modified to include the revaluation of investments and in accordance with applicable
accounting standards and with the Statement of Recommended Practice "Financial Statements
of Investment Trust Companies" issued by The Association of Investment Trust Companies in
January 2005. The principal accounting policies which the directors have adopted within
that convention are set out below.
(b) INCOME
Dividends receivable from quoted equity investments are recognised on the ex-dividend
date. Dividends receivable from equity investments where no ex-dividend date is quoted
are recognised when the company's right to receive payment is established. Interest
receivable on cash deposits is accounted for on an accruals basis.
(c) FOREIGN CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies other than sterling have been
translated into sterling at the rates of exchange ruling at the balance sheet date.
Transactions during the period have been translated at the rates of exchange ruling at
the date of the transaction.
(d) VALUATION OF INVESTMENTS
Quoted investments are valued at bid price. Unquoted investments are valued by the Board
according to the valuation principles of the British Venture Capital Association and
accordingly are stated at the value of their latest third party funding. Where no third
party funding has taken place, they are valued at cost.
Realised gains or losses on the disposal of investments are taken to the capital reserve
- realised. Unrealised gains or losses on revaluation of investments are taken to the
capital reserve - unrealised.
(e) EXPENDITURE
All expenses are accounted for on an accruals basis. Expenses are charged through the
Statement of Total Return except where the expense is incidental to the acquisition or
disposal of an investment in which case the expense is added to the cost of the
investment or deducted from the sale proceeds.
Expenses that are directly attributable to the management of investments are allocated
directly to capital in the Statement of Total Return. With the Directors' long term
target for returns on investments being entirely from capital gains there is no
requirement to apportion these expenses between revenue and capital.
3. TAXATION
The company has been granted exempt status under the Income Tax (Exempt Bodies) (Guernsey) Ordinance
1989, and is therefore subject to the payment of an annual fee which is currently #600.
4. QUOTED INVESTMENTS 30 June 30 June 31 December
2006 2005 2005
At cost # 8,542,998 # 1,552,258 # 2,302,434
At market value # 20,181,979 # 1,714,737 # 15,369,796
5. UNQUOTED INVESTMENTS 30 June 30 June 31 December
2006 2005 2005
At cost # 537,703 # - # 287,703
At market value # 537,703 # - # 287,703
6. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the return on ordinary activities after tax
for the year and on 12,638,659 shares being the weighted average number of shares in issue during the
six month period.
7. NET ASSET VALUE PER SHARE
The calculation of net asset value is based on the net assets of #19,333,791 and on the ordinary
shares in issue of 14,167,604 at the balance sheet date.
8. CALLED UP SHARE CAPITAL 30 June 30 June 2005 31 December 2005
2006
Authorised
50,000,000 ordinary shares of #0.01 each # 500,000 # 500,000 # 500,000
Allotted and fully paid
14,167,604 ordinary shares of #0.01 each # 141,676 # 98,839 # 104,279
9. RESERVES Capital Capital Revenue
Reserve Reserve Reserve Total
- Realised - Unrealised
Balance at 1 January 2005 (366,446) 13,067,362 (388,956) 12,311,960
Impact of implementation of FRS 26 (note 1) - (566,070) - (566,070)
Revised reserves at 1 January 2006 (366,446) 12,501,292 (388,956) 11,745,890
Net return for the financial period - - (77,907) (77,907)
Net realised gains 240,979 - - 240,979
Net unrealised gains - (862,311) - (862,311)
Balance at 30 June 2006 (125,467) 11,638,981 (466,863) 11,046,651
10. RECONCILIATION OF MOVEMENTS IN
SHAREHOLDERS' FUNDS 30 June 2006 30 June 2005 31 December 2005
Net return for the financial period/year (699,239) 17,831 12,757,690
New share capital subscribed (net of commissions) 5,000,000 657,140 1,337,140
Impact of implementation of FRS 26 (note 1) (566,070) - -
Net addition to shareholders' funds 3,734,691 674,971 14,094,830
Opening shareholders' funds 15,599,100 1,504,270 1,504,270
Closing shareholders' funds # 19,333,791 # 2,179,241 15,599,100
11. FINANCIAL INSTRUMENTS
(i) Management of risk
The Company's financial assets and liabilities comprise:
- Equity shares that are held in accordance with the Company's investment objective as
set out in the Director's Statement
- Cash and short term debtors and creditors that arise directly from the Company's
operations.
The main risks arising from the Company's financial instruments are due to fluctuations in market
prices, foreign exchange rates and interest rates. The Board regularly reviews and agrees policies
for managing each of these risks and they are summarised below. These policies have remained constant
throughout the period under review.
Market price risk
Market price risk arises mainly from uncertainty about the future prices of financial instruments
used in the Company's operations. It represents the potential loss the Company might suffer through
holding market positions in the face of price movements and movements in exchange rates. It is the
Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce risk
arising from factors specific to a particular country or sector. The allocation of assets to
international markets and stock selection are other factors which act to reduce market price risk.
The Company's advisors monitor market prices throughout the year and report to the Board, which meets
regularly to consider investment strategy.
Foreign currency risk
The Company's total return and net assets can be significantly affected by fluctuations in foreign
currency exchange rates because a portion of the Company's assets and revenue are denominated in
currencies other than sterling.
Liquidity risk
The Company's assets comprise mainly readily realisable securities which can be sold at meet funding
commitments of necessary.
Credit risk
The Company places funds with authorised deposit takers from time to time and is therefore
potentially at risk from the failure of any such institution of which it is a creditor. The company
expects to place any deposits on a short term basis and where possible with more than one institution
to reduce its credit risk.
(ii) Interest rate risk of financial assets and liabilities
The majority of the Company's financial assets are equity shares and other investments which neither
pay interest nor have a stated maturity date.
(iii) Currency exposure
A portion of the financial assets of the company are denominated in currencies other than sterling
with the effect that the net assets and total return can be significantly affected by currency
movements.
Currency Quoted Cash at Total
investments bank
USD # 240,203 - # 240,203
Euro # - 38 # 38
(iv) Fair values of financial assets
All of the financial assets of the Company are held at fair value, as shown in notes 4
and 5.
12. REPORTED NET ASSET VALUE (NAV)
The NAV reported to the market shortly after 30 June 2006 was 141.35p. These financial statements
are based on the company's unaudited records, and reflect all known debtors and creditors as accrued
at the balance sheet date. Net assets at the balance sheet date have also been valued at bid price,
in accordance with FRS 26, whereas the NAV reported to the market shortly after 30 June 2006
reflected mid market values. Accordingly, these accruals and the difference in accounting procedures
are the reason for the difference in the estimated NAV previously reported, and the NAV stated in
these unaudited financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EAPNPADEKEEE
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