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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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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 | |
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0.00 | 0.00% | 237.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
Equity Special Situations Limited ("ESS" or "Company" or "the Group") Unaudited Interim Results for the Six Months Ended 30 June 2008 Equity Special Situations Limited, (AIM:EQS) the strategic investment company, announces its unaudited results for the six month period ended 30 June 2008. Background As has been well documented over the course of the last year, stock market conditions, particularly with regard to available finance for quoted smaller cap companies, have never been so difficult. The AIM All-Share index has fallen more than 40 per cent. in the last 12 months and the FTSE Small Cap index has fallen by more than a third over the same period. What we are witnessing is any bad news being issued by small companies being severely punished and any good news not being duly rewarded, with the share prices of those companies being only maintained, at best. Against this challenging backdrop, we're pleased to announce our six month results, during which the aggregate value of our investment portfolio has fallen by less than 3 per cent. from £51.4 million at 31 December 2007 to £50.0 million at 30 June 2008. Investment Strategy Our investment strategy remains that of trying to achieve long term capital growth for shareholders through the purchase, holding and sale of significant minority stakes in companies and investment funds. We aim to exploit special situations and seek out ideas and companies which we believe will provide a material uplift in valuation to the investment price of ESS. We often combine an initial investment into a company with the provision of management and administrative support. Over the last couple of years, we have focussed on the financial services sector and have built up significant holdings in companies operating in the area of wealth management, alternative assets, private banking, corporate and trustee services and fund management. Investee Companies As at 30 June 2008, ESS held investments in 17 companies, up from 14 at the beginning of the period, 13 of which were in publicly quoted companies and four of which were in unquoted companies. ESS also continues to hold one rental property via its wholly owned subsidiary, ESS Property Investments Limited. 13 of the investments are in companies operating in, or related to, financial services. Important investment additions during the period include new holdings in Bramdean Alternatives, the quoted fund of funds, and Conister Financial Group ("CFG"), the offshore private banking group. ESS and CFG began discussions in early 2008 to explore ways to broaden the investment platforms of each business and to seek out potential synergies between the two parties. This culminated in ESS and CFG taking a 9.9 per cent. shareholding in each other in June 2008. Since then, we have begun to introduce a number of business opportunities to each other, particularly as many of the clients of the companies within ESS's portfolio service a large number of high net worth individuals, many of whom could become clients of CFG. At the period end, ESS's largest investment by value remains Syndicate Asset Management plc ("SAM"), which represented 63 per cent. of the Group's investments (2007: 66 per cent.) at the period end. Other notable holdings besides SAM and CFG include STM Group plc, which represents 9 per cent. (2007: 10 per cent.) of the Group's investments and Noble Investments (UK) plc which accounts for 5 per cent. (2007: 6 per cent.). ESS remains committed to supporting those companies in which it has significant holdings and is pleased to report that the underlying businesses of each of the key investments are trading well and in line with their own managements' expectations. Financial Review Although we are pleased that the value of our investment portfolio has fallen by only 3 per cent. during the six month period from £51.4 million to £50.0 million, we nevertheless recorded a net loss on financial assets of £6.7 million (2007: £3.5 million gain). The principal contributing factor to this is ESS's exposure to SAM's share price which, after a strong performance during the second half of 2007, fell back during the first half of 2008. As a consequence, almost £4.0 million of ESS's total loss was due to SAM. Other factors include the general reduction in liquidity in small cap stocks which has, in turn, widened the available spreads and ultimately led to the drifting of a number of share prices during the period in the absence of any company newsflow. However I'm pleased to report that, since the period end, and following the recent reporting season in August and September, the share prices of our biggest investee companies have, on the whole, performed relatively well on the back of some good operational news. Expenses of £0.5 million were in line with the same period last year (2007: £0.5 million), although financing costs were materially higher at £1.2 million (2007: £0.7 million), reflecting the higher levels of borrowings when compared to the same period last year. The overall loss for the period was £8.3 million (2007: £2.3 million profit), resulting in a loss per share of 49.83 pence (2007: 16.36 pence profit). Cash balances of £4.3 million remain similar to those at the beginning of the period (£4.5 million) and we have reduced our borrowings by more than £6.1 million during the period from £31.7 million at 31 December 2007 to £25.6 million at 30 June 2008. Net assets at the period end were £31.1 million. During the period, we successfully raised more than £8.6 million (before expenses) in two placings through the issue of, in aggregate, 4,423,007 new ordinary shares of 1 pence each ("Ordinary Shares"). We warmly welcome our new shareholders to the Group. The effect of the loss for the year and the additional shares issued during the period has resulted in a NAV of 150.96 pence at the period end, down 20 per cent. from 190.02 pence at the beginning of the year and similar to the 151.99 pence achieved at the same time last year. Current trading and outlook Since the period end, it has become clear that, as expected, there are significant synergies between ESS and CFG and, as a consequence, ESS has extended its strategic relationship with CFG through each party increasing its shareholding in the other. In early September, ESS issued a further 2,206,090 Ordinary Shares to CFG in return for ESS receiving new shares in CFG. As a result, ESS currently holds 19.9 per cent. of CFG and both parties are working closely in order to extract some significant value for the respective shareholders in the future. We anticipate that the difficult stock market conditions for smaller companies will remain for the foreseeable future; however, we are pleased to report that our current unaudited NAV has improved since the period end and we would anticipate further increases during the remainder of the year. We therefore remain cautiously optimistic about the future. Peter Griffin Director CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2008 For the six month period For the six month period For the year ended ended 30 June 2008 ended 30 June 2007 31 December 2007 (unaudited) (unaudited) (audited) Note Revenue Capital Total Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ £ £ £ INCOME Rental income 3,503 - 33,503 - - - 20,120 - 20,120 Interest income 29,471 - 29,471 41,771 - 41,771 138,845 - 138,845 Dividends receivable 31,611 31,611 - - - 63,664 63,664 Net (loss)/gains on financial assets at fair value through profit or loss - (6,702,057) (6,702,057) - 3,485,908 3,485,908 10,914,924 10,914,924 Unrealised gain on foreign exchange 13,396 - 13,396 - - - - - - TOTAL NET INCOME 107,981 (6,702,057) (6,594,076) 41,771 3,485,908 3,527,679 222,629 10,914,924 11,137,553 EXPENSES Administration fees 85,775 - 85,775 60,176 - 60,176 127,551 - 127,551 Professional fees 126,344 - 126,344 146,953 - 146,953 147,037 9,959 156,996 Consultancy fees - 223,751 223,751 - 294,515 294,515 - 1,300,375 1,300,375 Audit fee 8,000 - 8,000 3,750 - 3,750 16,550 - 16,550 Commissions 47,559 - 47,559 19,894 - 19,894 79,883 - 79,883 Registration and regulatory expenses 8,010 - 8,010 6,935 - 6,935 47,270 - 47,270 Other operating expenses 4,998 - 4,998 8,711 - 8,711 5,935 - 5,935 TOTAL OPERATING EXPENSES 280,686 223,751 504,437 246,419 294,515 540,934 424,226 1,310,334 1,734,560 OPERATING (LOSS)/PROFIT (172,705) (6,925,808) (7,098,513) (204,648) 3,191,393 2,986,745 (201,597) 9,604,590 9,402,993 Finance costs (1,172,122) - (1,172,122) (668,550) - (668,550) (1,900,457) - (1,900,457) (LOSS)/PROFIT BEFORE TAX (1,344,827) (6,925,808) (8,270,635) (873,198) 3,191,393 2,318,195 (2,102,054) 9,604,590 7,502,536 Taxation - - - - - - - - - (LOSS)/PROFIT AFTER TAX (1,344,827) (6,925,808) (8,270,635) (873,198) 3,191,393 2,318,195 (2,102,054) 9,604,590 7,502,536 Basic earnings per share (pence per share) 2 (49.83) 16.36 52.96 All items in the above statement derive from continuing operations. All income is attributable to the equity holders of the parent company. There are no minority interests. CONSOLIDATED BALANCE SHEET 30 JUNE 2008 30 June 2008 30 June 2007 31 December 2007 Note (unaudited) (unaudited) (audited) ASSETS Non-current assets Investment Property 338,673 - 286,168 Financial assets at fair value through profit or loss 49,651,044 40,322,990 51,159,648 Total non-current assets 49,989,717 40,322,990 51,445,816 Current assets Cash and cash equivalents 4,268,508 6,940,685 4,453,469 Loans receivable 2,549,658 455,645 2,774,622 Other debtors and receivables - - 105,958 6,818,166 7,396,330 7,334,049 TOTAL ASSETS 56,807,883 47,719,320 58,779,865 CURRENT LIABILITIES Loans and overdrafts 11,336,689 1,270,918 10,615,837 Liabilities under investment contracts 14,225,350 24,870,502 21,127,678 Other creditors and accruals 97,140 44,091 115,108 TOTAL LIABILITIES 25,659,179 26,185,511 31,858,623 NET ASSETS 31,148,704 21,533,809 26,921,242 EQUITY Share capital 4 206,334 141,676 141,676 Share premium account 20,578,903 8,145,464 8,145,464 Capital reserve - Realised (2,714,361) (497,285) (2,311,790) - Unrealised 17,042,049 15,357,376 23,565,286 Share option reserve 242,676 39,584 242,676 Retained earnings (4,206,897) (1,653,006) (2,862,070) TOTAL EQUITY £31,148,704 £21,533,809 £26,921,242 Net asset value per share (pence per share) 3 150.96 151.99 190.02 APPROVED BY THE BOARD OF DIRECTORS P F Griffin M T Cahill Director Director CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2008 Capital Capital Share Share Share reserve - reserve - option Retained capital premium realised unrealised reserve earnings Total £ £ £ £ £ £ £ As at 1 January 2008 141,676 8,145,464 (2,311,790) 23,565,286 242,676 (2,862,070) 26,921,242 Profit/(loss) for the year - - (402,571) (6,523,237) - (1,344,827) (8,270,635) Total recognised income and expenses for the period - - (402,571) (6,523,237) - (1,344,827) (8,270,635) - Issue of new shares 64,658 13,013,439 - - - - 13,078,097 Share Issue cost - (580,000) - - - - (580,000) As at 30 June 2008 206,334 20,578,903 (2,714,361) 17,042,049 242,676 (4,206,897) 31,148,704 For the period ended 30 June 2007 Capital Capital Share Share Share reserve - reserve - option Retained capital premium realised unrealised reserve earnings Total £ £ £ £ £ £ £ As at 1 January 2007 141,676 8,145,464 (454,423) 12,103,329 19,792 (760,016) 19,195,822 Profit/(loss) for the year - - (42,862) 3,254,047 - (892,990) 2,318,195 Total recognised income and expenses for the period - - (42,862) 3,254,047 - (892,990) 2,318,195 - Share based payments - - - - 19,792 - 19,792 As at 30 June 2007 141,676 8,145,464 (497,285) 15,357,376 39,584 (1,653,006) 21,533,809 For the year ended 31 December 2007 Capital Capital Share Share Share reserve - reserve - option Retained capital premium realised unrealised reserve earnings Total £ £ £ £ £ £ £ As at 1 January 2007 141,676 8,145,464 (454,423) 12,103,329 19,792 (760,016) 19,195,822 Profit/(loss) for the year - - (1,822,306) 11,426,896 - (2,102,054) 7,502,536 Total recognised income and expenses for the year - - (1,822,306) 11,426,896 - (2,102,054) 7,502,536 Transfer to realised reserves on disposal of investments - - (35,061) 35,061 - - - Share based payments - - - - 222,884 - 222,884 As at 31 December 2007 141,676 8,145,464 (2,311,790) 23,565,286 242,676 (2,862,070) 26,921,242 INTERIM CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2008 Six month Six month period ended period ended Year ended 30 June 2008 30 June 2007 31 December 2007 (unaudited) (unaudited) (audited) Net cash outflow from operating activities (1,480,588) (1,522,369) (3,214,623) Investing activities: Purchase of securities (7,087,702) (13,469,876) (35,994,453) Purchase of investment property - - (286,168) Proceeds from disposals of listed securities 1,841,744 1,789,835 20,522,500 Loans receivable repaid 224,964 - - Loans receivable advanced - (123,771) (1,208,729) Net cash outflow from financial investment (5,020,994) (11,803,812) (16,966,850) Financing: Loans payable received 720,852 - 16,301,997 Short term financing received - 15,089,540 2,233,892 Loans payable repaid (6,902,328) (350,315) - Short term financing repaid - (571,412) - Issue of own shares 12,498,097 - - Net cash inflow from financing 6,316,621 14,167,813 18,535,889 (Decrease)/increase in cash resources for the year/period £(184,961) £841,632 (1,645,584) Net decrease in cash and cash equivalents (184,961) 841,632 (1,645,584) - Cash and cash equivalents at 1 January 2008 4,453,469 6,099,053 6,099,053 Cash and cash equivalents at 30 June 2008 £4,268,508 £6,940,685 £4,453,469 NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2008 1. ACCOUNTING POLICIES (a) CONVENTION These unaudited interim financial statements have adopted the same accounting policies, presentation and methods of computation as the last audited financial statements which were prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"), interpretations issued by the International Financial Reporting Interpretations Committee of the IASB ("IFRIC") and applicable legal and regulatory requirements of Guernsey Law. 2. EARNINGS PER SHARE The calculation of basic and diluted earnings per share is as follows; 30 June 2008 30 June 2007 31 December 2007 Earnings Earnings for the purpose of basic and diluted earnings per share being net profit attributable to equity holders of the parent (8,270,635) 2,318,195 7,502,536 Number of shares Weighted average number of ordinary shares for the 16,597,184 14,167,604 14,167,604 purposes of basic earnings per share Effect of dilutive potential of share options - - 8,427 Weighted average number of ordinary shares for the purposes of diluted earnings per share 16,597,184 14,167,604 14,176,031 3. NET ASSET VALUE PER SHARE The calculation of net asset value is based on the consolidated net assets of £31,148,704 and on the ordinary shares in issue of 20,633,386 at the balance sheet date. 4. SHARE CAPITAL 30 June 2008 30 June 2007 31 December 2007 Authorised 50,000,000 ordinary shares of £0.01 each £500,000 £500,000 £500,000 Allotted and fully paid: Brought forward 141,676 141,676 141,676 Issue of new shares during period/year 64,658 - - 20,633,386 (30 June and 31 December 2007: 14,167,604 ordinary shares of £0.01 each £ 206,334 £ 141,676 £ 141,676 The Company has one class of ordinary shares which carry no right to fixed income. On 22 February 2008 the Company issued 2,307,693 new ordinary shares of 1 pence each at a premium of 194 pence per share, raising proceeds of approximately £4.5 million. The shares issued rank pari-passu with the existing shares in issue. On 21 April 2008 the Company issued 2,115,384 new ordinary shares of 1 pence each at a premium of 194 pence per share, raising proceeds of approximately £4.1 million. The shares issued rank pari-passu with the existing shares in issue. On 23 June 2008 the Company agreed to acquire a 9.9% interest in Conister Financial Group plc, for a consideration of approximately £4.5 million. This consideration was satisfied by the issue of 2,042,705 new ordinary shares of 1 pence each in the Company at a premium of 217 pence per share. The shares issued rank pari-passu with the existing shares in issue. 5. EVENTS AFTER THE BALANCE SHEET DATE On 1 July 2008, David Pinckney stepped down as chairman of the ESS Advisory Panel. On 8th September 2008 the Company acquired 7,101,798 new ordinary shares in Conister Financial Group Plc ("CFG")("the Investment"), through the issue to CFG of 2,206,090 new shares at 235p per share, ranking pari passu with existing shares. The report is available to view and download from the Company's website at www.equityspecialsituations.com Further information: Equity Special Situations Limited Peter Griffin +44 (0)1481 751000 Jonathan Freeman +44 (0)1600 750432 Evolution Securities Limited Jeremy Ellis/Chris Clarke +44 (0)20 7071 4300 GTH Communications Toby Hall/Christian Pickel +44 (0)20 7153 8035 END
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