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Riverfort Global Opportunities PLC

RiverFort Global Opp - Final Results

RNS Number : 7341D
RiverFort Global Opportunities PLC
28 June 2019
 

 

 

For immediate release                                                                                                                                    28 June 2019

 

RiverFort Global Opportunities plc ("RiverFort Global" or the "Company")

Final results for the year to 31 December 2018

RiverFort Global Opportunities plc, the investment company listed on AIM, is pleased to announce its audited final results for the year ended 31 December 2018 (extracts from which are set out below) and that the financial statements will shortly be posted to shareholders and made available on the website www.riverfortglobalopportunities.com

Highlights for 2018

·      Successful transition of Company and adoption of expanded investing policy

·      RiverFort Global Capital Limited appointed as investment adviser

·      Over £6 million in new equity raised to deploy in new investment opportunities

·      Significant improvement in operating results compared to 2017

·      Over £500,000 of investment income generated from RiverFort-arranged investments

·      Around £3 million held in debt and equity-linked debt investments at the period end, with £5.5 million deployed to date.

·      Substantial cash balance available for further investment.

·      Company's name changed to RiverFort Global Opportunities plc.

For more information please contact:

RiverFort Global Opportunities plc


+44 20 3984 9191

Phillip Haydn-Slater, Non-Executive Chairman






Nominated Adviser


+44 20 7628 3396

Beaumont Cornish



Roland Cornish/Felicity Geidt






Joint Broker


+44 20 7186 9950

Shard Capital Partners LLP



Damon Heath/ Erik Woolgar






Joint Broker


+44 20 7562 3351

Peterhouse Corporate Finance



Lucy Williams



 

INTRODUCTION

During the year ended 31 December 2018, the Company has continued to operate as an investment company.

 

FINANCIAL

For the year to 31 December 2018, the Company made a loss from continuing operations of £731,192 (2017: loss of £1,135,685). The net asset value of the Company as at 31 December 2018 was £7,254,727 (2017: £2,448,769).

 

The Company's investment portfolio at 31 December 2018 is divided into the following categories:

Category

Cost or valuation (£)

Debt and equity-linked debt investments

2,996,917

Equity investments

546,380

Other

250.418

Cash resources

3,597,734

Total

7,391,449

 

REVIEW OF THE YEAR

2018 has been an extremely busy year for the Company.  During the year, the Board announced that the Company had entered into an arrangement with RiverFort Global Capital Ltd ("RiverFort"), the specialist provider of capital to junior companies whereby the Company would have the opportunity to invest in transactions arranged by RiverFort alongside other co-investors. This arrangement was subsequently approved by shareholders in a general meeting on 8 June 2018.

 

The purpose of this arrangement was to provide greater access to investment opportunities, lower the volatility and risk associated with pure equity investment and drive the development of cash income and returns for the Company.  It also enabled investors to gain access to the RiverFort investment strategy via a publicly listed vehicle.

 

Against this background, during the course of the year, the Company raised almost £6 million in new funds from a range of new investors, both private and institutional, in order to have the capital available to deploy in the opportunities arranged by RiverFort.  By the end of the year, the Company held around £3 million in RiverFort-arranged investments.  At the same time, the Company's equity portfolio has been reduced in order to lower the risk profile of the Company's investment portfolio.

 

As a result of these new investments, along with a focus on a reduction of costs, the Company's results for the year have significantly improved compared to the previous year.

 

Income breakdown

2018

2017


£000

£000

Investment income

513

12

Net loss from financial instruments at FVTPL

(929)

(812)

Total income

(416)

(800)




Administration costs

279

336

Other gains and losses

(35)





Operating profit

(731)

(1,136)

 

Investment income derives principally from the fees and interest income in relation to the RiverFort-arranged investments. The net loss from financial instruments at FVTP represents the impact of valuing the investment portfolio at fair value as described under the new IFRS 9 accounting policy. The principal contributor to this loss during 2018 was the unrealised loss recorded on the investment in Plutus PowerGen plc, held within the Company's existing equity portfolio.  This company's share price decreased by almost 80% during 2018 and, as at the year end, the Company's holding was valued at £213,440.

 

In overall terms, these results clearly validate the Company's focus on building its debt and equity-linked debt portfolio and entering into the investment adviser agreement with RiverFort. Furthermore, these results have been achieved against the background of the Company's available investment funds only being partially invested over this period and with a reduced cost base again for only part of the period.

 

The Company's Board has also been strengthened with the addition of Andrew Nesbitt, a qualified mining engineer, with over 20 years of experience in the natural resources sector and I joined the Board effective 1 January 2019. Towards the end of the year, the Company changed its name to RiverFort Global Opportunities plc and expanded its investing policy to include healthcare and technology.

 

More details of the company's investing activities and investment portfolio are set out in the Strategic Report.

 

OUTLOOK AND STRATEGY

Going forward the Company is continuing to actively invest its capital in new opportunities and, to date, has now invested around £5.5 million in RiverFort-arranged investments. There continues to be strong demand for funding from junior listed companies which can deliver attractive investment returns. The Company still has a substantial cash balance to deploy as a result of the return of principal from its investments, the generation of investment income and its fund-raising activities. It is therefore particularly well placed to continue to build on the results for 2018 and grow its portfolio significantly and rapidly by making investments that can generate income and capital growth whilst offering downside protection.  We firmly believe that 2019 will be another positive year for the Company.

 

 

Philip Haydn-Slater

Chairman

27 June 2019

 

REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS

 

Introduction

The Company is an investment company listed on AIM.  It is principally focused on investing in junior listed companies.  During the year, the Board announced that the Company had entered into an arrangement with RiverFort Global Capital Ltd ("RiverFort"), the specialist provider of capital to junior companies whereby the Company would have the opportunity to invest in transactions arranged by RiverFort alongside other co-investors.  Returns are principally generated through a combination of fees, interest and other equity linked or performance-based instruments. These transactions generally take the form of debt or equity-linked debt investments and will enable the Company to de-risk its overall investment portfolio and to generate regular cash income.

 

Debt and equity linked portfolio

 

During the year, the Company has been focused on building up this portfolio and as at the year end the value of these investments amounted to £2,996,917.  This portfolio principally comprised investments in the following companies:

 

Company




Jubilee Metals Group plc

AIM listed

Amur Minerals plc

AIM listed

EQTEC PLC

AIM listed

Lions Bay Capital Inc

TSXV listed

Linkwood Holdings Limited

Private

Artemis Resources Limited

ASX listed

Oil and gas company

AIM listed

Mining company

AIM listed

Mining company

AIM listed

Technology company

AIM listed

Healthcare company

AIM listed

 

These investments principally generate income in the form of fees and interest.  Investments are either made directly or by way of participation certificates in RiverFort Global Opportunities PCC Limited, a Gibraltar based fund advised by RiverFort.  These certificates are reference linked financial instruments that provide similar economic benefits to the holder as if they were co-investing directly in the underlying investment.  Whilst there is no direct security into the underlying investment, the holder will benefit from the enforcement of any such security.

 

Often as part of the Company's investment, the investee company will issue warrants.  The value of the warrants attributable to the Company's investments are calculate using the Black-Scholes option pricing model and the resulting figure discounted by 75% to reflect the level of expected return associated with such holdings given their highly volatile nature.

 

Equity portfolio

During the year, the Company has reduced the size of its equity portfolio in order to reduce the overall risk profile of its investment portfolio.  The Company has continued to do this into 2019.  At the year end, the Company's equity portfolio comprised the following:

 

Company

Description

Current value of investment

£000

Plutus PowerGen plc

A power company listed on AIM focused on the development, construction and operation of flexible electricity and gas power generation in the UK

214

Pires Investments plc

An investment company listed on AIM

175

Other

Various small holdings principally in listed companies

157




Total


546

 

Since the year end, the majority of the holdings in the Other category above have been sold. Also, in February 2019, Pires Investments plc raised some additional funds by way of a share placing at a price of 2.4 pence per share.  The Company invested in this fund raising in order to maintain its shareholding at 24.3%.  The current share price of this company is 2.3 pence compared to the company's net asset position of 3.5 pence per share as disclosed by the company at the end of April 2019.

 

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2018

 


2018

2017






Note

£

£

CONTINUING OPERATIONS:




Net loss from financial instruments at FVTPL

4

(929,412)

(811,467)

Investment income

5

512,743

11,934

TOTAL INCOME


(416,669)

(799,533)

Administrative expenses

7

(278,707)

(336,152)

Other gains and losses

6

(35,816)

-

LOSS BEFORE TAXATION


(731,192)

(1,135,685)

Taxation

11

-

-

LOSS FOR THE YEAR AND TOTAL COMPREHENSIVE INCOME


(731,192)

(1,135,685)

EARNINGS PER SHARE

12



Basic and fully diluted loss per share


(0.018p)

(0.112p)

 

STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 DECEMBER 2018

 

 


2018

2017


Note

£

£

NON-CURRENT ASSETS




Financial asset investments

13

1,540,456

2,252,373



1,540,456

2,252,373





CURRENT ASSETS




Financial asset investments

13

2,253,259

-

Trade and other receivables

14

206,107

37,863

Cash and cash equivalents

15

3,597,734

211,795



6,057,100

249,658

TOTAL ASSETS


7,597,556

2,502,031

CURRENT LIABILITIES




Trade and other payables

16

307,013

53,262

Other financial liabilities

17

35,816

-



342,829

53,262

NET ASSETS


7,254,727

2,448,769

EQUITY




Share capital

18

10,042,273

4,269,546

Share premium account

18

3,191,257

3,191,257

Capital redemption reserve

19

27,000

27,000

Share option reserve

19

-

73,150

Retained losses


(6,005,803)

(5,112,184)

TOTAL EQUITY


7,254,727

2,448,769

 

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018

 

 

 

 

 

Share

  capital

Share premium

Other reserves

Retained

losses

Total

equity


£

£

£

£

£







BALANCE AT 1 JANUARY 2017

4,269,546

3,191,257

100,150

(3,976,499)

3,584,454







Loss for the year and total comprehensive expense

-

-

-

(1,135,685)

(1,135,685)







BALANCE AT 31 DECEMBER 2017

4,269,546

3,191,257

100,150

(5,112,184)

2,448,769







Loss for the year and total comprehensive expense

-

-

-

(731,192)

(731,192)

Share option reserve transfer following cancellation of options

-

-

(73,150)

73,150

-

Share issues

5,772,727

77,273

-

-

5,850,000

Share issue expenses

-

(77,273)

-

(235,577)

(312,850)

Transactions with owners

5,772,727

-

-

(235,577)

5,537,150

BALANCE AT 31 DECEMBER 2018

10,042,273

3,191,257

27,000

(6,005,803)

7,254,727


STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 31 DECEMBER 2018


 

2018

 

2017


Note

£

£

CASH FLOWS FROM OPERATING ACTIVITIES




Loss before tax


(731,192)

(1,135,685)

Investment income

5

(512,743)

(11,934)

Net losses on investments

4

929,412

811,467

Unrealised loss on foreign currency contract

17

35,816

-

OPERATING CASH FLOWS BEFORE MOVEMENTS IN WORKING CAPITAL


(278,707)

(336,152)

Decrease/(Increase) in trade and other receivables

14

14,963

(8,721)

Increase in trade and other payables

16

10,805

10,892

NET CASH USED BY OPERATING ACTIVITIES


(252,939)

(333,981)

INVESTING ACTIVITIES




Purchase of investments

13

(3,204,994)

(321,167)

Disposal of investments

13

783,975

206,844

Debt instrument repayments

13

193,211

-

Investment income received


329,536

11,934

NET CASH USED IN INVESTING ACTIVITIES


(1,898,272)

(102,389)

FINANCING ACTIVITIES




Share issues

18

5,850,000

-

Share issue costs

18

(312,850)


NET CASH FROM FINANCING ACTIVITIES


5,537,150

-

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS


3,385,939

(436,370)





Cash and cash equivalents at the beginning of the year


211,795

648,165





CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

15

3,597,734

211,795

 

1

GENERAL INFORMATION


RiverFort Global Opportunities plc is a public limited company incorporated in the United Kingdom.  The shares of the Company are listed on the Alternative Investment Market (AIM). The address of its registered office is Suite 12a, 55 Park Lane, London, W1K 1NA.  The Company's principal activities are described in the Directors' Report.

 

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied throughout all periods presented in the financial statements.

 

As in prior periods, the Company's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFIRC interpretations (IFRS IC) as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS.  The financial statements have been prepared under the historical cost convention, as modified by financial assets and financial liabilities (including derivative instruments) at fair value. The measurement basis is more fully described in the accounting policies below.

 

The financial statements are presented in pounds sterling (£) which is the functional currency of the Company.  The comparative figures are for the year ended 31 December 2017. 

 


GOING CONCERN

 

The Company's assets comprise mainly cash, debt securities and quoted securities.  As at 20 June 2019, the Company had cash resources of £2,036,000 and has prepared cash forecasts to June 2020 that show that the company has sufficient cash resources for the foreseeable future; accordingly, the directors believe that as at the date of this report it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

 


CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

 

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. These estimates and assumptions are based upon management's knowledge and experience of the amounts, events or actions.  Actual results may differ from such estimates. 

 

Estimates and judgements 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.

 

In certain circumstances, where fair value cannot be readily established, the Company is required to make judgements over carrying value impairment, and evaluate the size of any impairment required.

 


FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company holds investments that have been designated as held for trading on initial recognition. Where practicable the Company determines the fair value of these financial instruments that are not quoted (Level 3), using the most recent bid price at which a transaction has been carried out. These techniques are significantly affected by certain key assumptions, such as market liquidity.  Other valuation methodologies such as discounted cash flow analysis assess estimates of future cash flows and it is important to recognise that in that regard, the derived fair value estimates cannot always be substantiated by comparison with independent markets and, in many cases, may not be capable of being realised immediately.

 

The Company also holds unquoted share warrants as level 3 investments.  The fair values of these warrants have been obtained using the Black Scholes valuation model, and applying a 75% discount to allow for the warrants being untraded derivatives and with the underlying securities being traded on junior markets.  This model makes certain assumptions relating to the volatility of the underlying Company's share price which are applied in the calculation of the fair value of the warrants.  The volatility is measured based on the volatility of the share price of the underlying share over the 12 months prior to the issue of the warrants.

 


CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

 

New standards, amendments and interpretations adopted by the Company

 

The company has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2018:

 

•                      IFRS 9 Financial Instruments;

•                      IFRS 15 Revenue from contracts with customers;

•                      Annual improvements 2014-2016 cycle;

 

IMPACT OF ADOPTION OF IFRS 9

 

The classification and measurement requirements of IFRS 9 have been adopted with effect from the date of initial application on 1 January 2018. However, the Company has chosen to take advantage of the option not to restate comparatives. Therefore, the 2017 figures are presented and measured under IAS 39. The following table shows the original measurement categories in accordance with IAS 39 and the new measurement categories under IFRS 9 for the Company's financial assets and financial liabilities as at 1 January 2018:

 


1 January 2018

IAS 39

classification

IAS 39 measurement

IFRS 9 classification

IFRS 9 measurement




£


£


Financial assets






Cash and cash equivalents

Loans and receivables

211,795

Amortised cost

211,795


Financial assets at fair value through profit or loss

Held for trading at fair value through profit or loss

2,252,373

Fair value through profit or loss

2,252,373


Financial liabilities






Payables

Other financial liabilities

22,067

Amortised cost

22,067

 


REVENUE RECOGNITION

 

INVESTMENT INCOME

 

Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income on an ex-dividend basis.

 

Interest on fixed interest debt securities, designated at fair value through profit or loss, is recognised using the effective interest rate method.  Other structured finance fees are recognised on the date of the relevant agreement.

Bank deposit interest is recognised on an accruals basis.

 


FOREIGN CURRENCY TRANSLATION

 

In preparing the financial statements of the Company transactions in currencies other than the Company's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non‑monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.

 

Exchange differences are recognised in profit or loss in the period in which they arise.

 


CURRENT AND DEFERRED TAX

 

Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity. In this case the tax is also recognised directly in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company operates and generates taxable income.  Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.  It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

 

Deferred income taxes are calculated using the liability method on temporary differences.  Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases.  However, deferred tax is not provided on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.  Temporary differences include those associated with shares in subsidiaries and joint ventures and are only not recognised if the Company controls the reversal of the difference and it is not expected for the foreseeable future.  In addition, tax losses available to be carried forward as well as other income tax credits to the Company are assessed for recognition as deferred tax assets.

 

Deferred tax liabilities are provided in full, with no discounting.  Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income.  Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the statement of financial position date. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited to equity in which case the related deferred tax is also charged or credited directly to equity.

 


SEGMENTAL REPORTING

 

The accounting policy for identifying segments is now based on internal management reporting information that is regularly reviewed by the chief operating decision maker, which is identified as the Board of Directors.

 

In identifying its operating segments, management generally follows the Company's service lines which represent the main products and services provided by the Company. The Directors believe that the Company's continuing investment operations comprise one segment.

 


FINANCIAL ASSETS

 

The Company's financial assets comprise investments, cash and cash equivalents and loans and receivables, and are recognised in the Company's statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

 


CLASSIFICATION OF FINANCIAL ASSETS

 

The Company holds financial assets including equities and debt securities. On 1 January 2018, the Company adopted IFRS 9 Financial Instruments (IFRS 9). IFRS 9 replaces the classification and measurement models previously contained in IAS 39 Financial Instruments: Recognition and Measurement. The classification and measurement of financial assets at 31 December 2018 is in accordance with IFRS 9 and the classification and measurement of financial assets at 31 December 2017 is in accordance with IAS 39 as the Group has not restated comparative information.

 

On the initial recognition, the Company classifies financial assets as measured at amortised cost or FVTPL.  A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: 

 

·      It is held within a business model whose objective is to hold assets to collect contractual cash flows; and

·      its contractual terms give rise on specific dates to cash flows that are Solely Payments of Principal and Interest (SPPI).

 

All other financial assets of the Company are measured at FVTPL.

 

BUSINESS MODEL ASSESSMENT

 

In making an assessment of the objective of the business model in which a financial asset is held, the Company considers all of the relevant information on how the business is managed, including:

 

·      the documented investment strategy and the execution of this strategy in practice. This includes whether the investment strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realised cash flows through the sale of the assets;

·      how the performance of the portfolio is evaluated and reported to the Company's management;

·      the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

·      how the investment advisor is compensated e.g. whether compensation is based on the fair value of the assets managed or the contractual cashflows collected

 

IFRS 9 subsection B4.1.1-B4.1.2 stipulates that the objective of the entity's business model is not based on management's intentions with respect to an individual instrument, but rather determined at a higher level of aggregation. The assessment needs to reflect the way that an entity manages its business.

 

The company has determined that it has two business models.

 

·      Held-to-collect business model: this includes cash and cash equivalents, balances due from brokers and other receivables. These financial assets are held to collect contractual cash flows.

·      Other Business model: the includes structured finance products, equity investments, investments in unlisted private equities and derivatives. These financial assets are managed and their performance is evaluated, on a fair value basis with frequent sales taking place in respect to equity holdings.

 

VALUATION OF FINANCIAL ASSET INVESTMENTS

 

Investment transactions are accounted for on a trade date basis.  Assets are de-recognised at the trade date of the disposal. Assets are sold at their fair value, which comprises the proceeds of sale less any transaction cost. The fair value of the financial instruments in the balance sheet is based on the quoted bid price at the balance sheet date, with no deduction for any estimated future selling cost. The valuations in respect of unquoted investments (Level 2 and Level 3 financial assets) are explained in note 13.  Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the consolidated statement of comprehensive income as "Net gains/(losses) on investments". Investments are initially measured at fair value plus incidental acquisition costs. Subsequently, they are measured at fair value. This is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted.

 


CASH AND CASH EQUIVALENTS

 

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. They are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method.

 

 


OTHER RECEIVABLES

 

Other receivables from third parties are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method. 

 

 


IMPAIRMENT OF FINANCIAL ASSETS

 

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

 

A provision for impairment is made when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. Impaired debts are derecognised when they are assessed as uncollectible.

 

 


FINANCIAL LIABILITIES

 

The Company's financial liabilities comprise trade payables.  Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Company becomes a party to the contractual provisions of the instruments.

 

 


TRADE PAYABLES

 

Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method.

 

 


EARNINGS PER SHARE

 

Earnings per share are calculated by dividing the profit or loss for the year after tax by the weighted average number of shares in issue, and is measured in pence per share.

 

 


EQUITY

 

Equity comprises the following:

 

·        "Share capital" represents the nominal value of equity shares.

·        "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

·        "Capital redemption reserve" represents the nominal value of shares repurchased or redeemed by the Company.

·        "Option reserve" represents the cumulative cost of share based payments.

·      "Retained losses" represents retained losses.

 

 

3

SEGMENTAL INFORMATION

 


The Company is organised around business class and the results are reported to the Chief Operating Decision Maker according to this class. There is one continuing class of business, being the investment in junior listed and unlisted companies.

 

Given that there is only one continuing class of business, operating within the UK no further segmental information has been provided.

 

 

4

NET LOSS ON INVESTMENTS



2018

2017



£

£


Net realised (losses)/gains on disposal of investments

(19,764)

92,473


Net movement in fair value of investments

(964,582)

(903,940)


Net foreign exchange gain on investments

54,934

-


Net (loss) on investments

(929,412)

(811,467)

 

5

 

INVESTMENT INCOME



2018

2017



£

£

Structured finance fees

394,869

-


Deposit interest receivable

-

1,871


Other interest receivable

117,874

10,063



512,743

11,934

 

6

OTHER GAINS AND LOSSES



2018

2017



£

£


Unrealised loss on foreign currency contract

(35,816)

-



(35,816)

-

7

LOSS FOR THE YEAR



2018

2017



£

£


Profit for the year has been arrived at after charging:




Wages and salaries

87,612

131,329


Office rent

8,740

27,792


Stock Exchange fees

22,158

11,399


Share registrars' fees

5,101

3,451


Nominated advisor fees

27,400

33,830


Corporate broking fees

24,000

24,000


Audit and tax compliance

27,304

14,100


Other legal and professional fees

49,258

51,935


Other administrative expenses

36,433

38,316


Net foreign exchange translation difference

(9,299)

-


Total administrative expenses as per the statement of comprehensive income

278,707

336,152




AUDITOR'S REMUNERATION


During the year the Company obtained the following services from the Company's auditor:



2018

2017



£

£


Fees payable to the Company's auditor for the audit of the parent company and the Company financial statements

24,000

12,000


Fees payable to the Company's auditor and its associates for other services:




Other services relating to taxation

3,304

2,100



27,304

14,100

8

DIRECTORS' EMOLUMENTS



2018

2017



£

£






Aggregate emoluments

81,667

120,000


Social security costs

5,945

11,329



87,612

131,329








Name of director

Salaries

Benefits

Total

2018

Total

2017



£

£

£

£








N Lee

57,334

-

57,334

84,000


A van Dyke

24,333

-

24,333

36,000


A Nesbitt

-

-

-

-



81,667

-

81,667

120,000

9

EMPLOYEE INFORMATION

 



2018

2017

 



£

£

 





 


Wages and salaries

81,667

120,000

 


Social security costs

5,945

11,329

 



87,612

131,329

 


Average number of persons employed:

 



2018

2017

 



Number

Number

 


Office and management

2

2

 

 


COMPENSATION OF KEY MANAGEMENT PERSONNEL

 


There are no key management personnel other than the Directors of the Company.

 

10

SHARE BASED PAYMENTS


EQUITY-SETTLED SHARE OPTION SCHEME


The Company operates share-based payment arrangements to remunerate directors and key employees in the form of a share option scheme. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

 

On 26 October 2011, Nicholas Lee was granted options to subscribe for 28,000,000 new ordinary shares in the Company at an exercise price of 0.32p per share.  The options are exercisable for a period of ten years from the date of grant, with one third becoming exercisable on the first, second and third anniversaries of the date of grant respectively.

On 13 March 2012, Nicholas Lee was granted options to subscribe for 14,000,000 new ordinary shares in the Company at an exercise price of 0.48p per share.  The options are exercisable for a period of ten years from the date of grant, with one third becoming exercisable on the first, second and third anniversaries of the date of grant respectively.  The fair value of these options was determined using the Black-Scholes option pricing model and was £0.22p per option.

 

All remaining options were cancelled during the year.  The deemed benefit of the options using the Black-Scholes model was fully expensed in previous years so there has been no charge to the profit and loss account in respect of their cancellation in the current year.

 


The significant inputs to the model in respect of the options granted in 2014, 2012 and 2011 were as follows:



2014

2012

2011


Grant date share price

0.26p

0.48p

0.32p


Exercise share price

0.26p

0.48p

0.32p


No. of share options

20,000,000

14,000,000

28,000,000


Risk free rate

2.5%

3%

3%


Expected volatility

50%

40%

40%


Option life

10 years

10 years

10 years


Calculated fair value per share

0.14p

0.22p

0.15p


 

The total share-based payment expense recognised in the income statement for the year ended 31 December 2018 in respect of the share options granted was £Nil (2017:  £Nil).

 


Number of

options at

1 Jan 2018

 

Granted

in the year

 

Exercised

in the year

Cancelled

 in the year

Number of

options at

31 Dec 2018

 

Exercise

price

 

Vesting

Date

 

Expiry

date


9,333,334

-

-

9,333,334

-

0.32p

26.10.2012

26.10.2021


4,666,667

-

-

4,666,667

-

0.48p

13.03.2013

13.03.2022


9,333,333

-

-

9,333,333

-

0.32p

26.10.2013

26.10.2021


4,666,667

-

-

4,666,667

-

0.48p

13.03.2014

13.03.2022


9,333,333

-

-

9,333,333

-

0.32p

26.10.2014

26.10.2021


4,666,667

-

-

4,666,666

-

0.48p

13.03.2015

13.03.2022


42,000,000

-

-

42,000,000

-

0.37p



 

11

INCOME TAX EXPENSE



2018

2017



£

£


Current tax - continuing operations

-

-


The tax on the Company's profit before tax differs from the theoretical amount that would arise using the weighted average rate applicable to profits of the Consolidated entities as follows:



2018

2017



£

£


Profit/(loss) before tax from continuing operations

(731,192)

(1,135,685)


Profit/(loss) before tax multiplied by rate of corporation tax in the UK of 19% (2017: 19.25%)

(138,926)

(218,619)


Expenses not deductible for tax purposes

1,182

2,728


Offset against tax losses brought forward

-

-


Unrelieved tax losses carried forward

137,744

215,891


Total tax

-

-


Unrelieved tax losses of approximately £5,210,000 (2017: £4,485,000) remain available to offset against future taxable trading profits. No deferred tax asset has been recognised in respect of the losses as recoverability is uncertain.

 

 

12

EARNINGS PER SHARE


The basic earnings per share is based on the loss for the year divided by the weighted average number of shares in issue during the year. The weighted average number of ordinary shares for the year assumes that all shares have been included in the computation based on the weighted average number of days since issue.



2018

2017



£

£


loss attributable to equity holders of the Company:




loss from continuing operations

(731,192)

(1,135,685)


loss for the year attributable to equity holders of the Company

(731,192)

(1,135,685)


Weighted average number of ordinary shares in issue for basic and fully diluted earnings*

4,152,597,991

1,016,607,956






EARNINGS/(LOSS) PER SHARE




BASIC AND FULLY DILUTED:




- Basic (loss)/earnings per share from continuing and total operations

(0.018p)

(0.112p)


- Fully diluted (loss)/earnings per share from continuing and total operations

(0.018p)

(0.112p)


*No adjustment to earnings per share for fully diluted earnings has been made as the exercise of options would be anti-dilutive.

 

13

FINANCIAL ASSETS


All financial assets are designated at fair value through profit and loss ("FVTPL")



2018

2017



£

£


At 1 January - fair value

2,252,373

2,949,517


Acquisition of equity investments

-

321,167


Equity investment disposal proceeds

(983,975)

(206,844)


Net (loss)/gain on disposal of investments

(19,764)

92,473


Movement in fair value of investments

(651,836)

(903,940)



596,798

2,252,373


Acquisition of debt securities designated at FVTPL

3,647,940

-


Debt security repayments

(193,211)

-


Movement in fair value of debt securities

(312,746)

-


Net foreign exchange gain on debt securities

54,934

-


At 31 December - fair value

3,793,715

2,252,373



    Current

       Non-current



2018

2017

2018

2017



£

£

£

£


Categorised as:






Level 1 - Quoted investments

-

-

507,880

1,811,625


Level 2 - Unquoted investments

2,253,259

-

943,658

263,513


Level 3 - Unquoted investments

-

-

88,918

177,235



2,253,259

-

1,540,456

2,252,373


The table of investments sets out the fair value measurements using the IFRS 7 fair value hierarchy.  Categorisation within the hierarchy has been determined on the basis of the lowest level of input that is significant to the fair value measurement of the relevant asset as follows:

 

Level 1 - valued using quoted prices in active markets for identical assets.

Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1. 

Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.

 

The valuation techniques used by the company are explained in the accounting policy note, "Investments held for trading".

 


LEVEL 2 FINANCIAL ASSETS

Level 2 financial assets comprise debt securities valued by reference to their principal value, less appropriate allowance where there is a doubt as to whether the principal amount will be fully repaid in accordance with the contractual terms of the obligation.



 




LEVEL 3 FINANCIAL ASSETS

Reconciliation of Level 3 fair value measurement of financial assets



2018

2017



£

£


Brought forward

177,235

392,149


Disposal proceeds

(200,000)

-


Loss on disposals

(100,000)

-


Fair value of share warrants

50,418

-


Movement in fair value

161,265

(214,914)


Carried forward

88,918

177,235


The Company's level 3 investments comprise shares in Eridge Capital Limited ("Eridge") and a number of unquoted share warrants.  The shares in Eridge have been valued in line with the approximate net asset value of Eridge.  The share warrants have been valued using the Black-Scholes valuation model, discounted by 75% to allow for there being no trading market for the warrant instruments and the underlying shares are quoted on the London Stock Exchange's secondary Alternative Investment Market.


In line with the investment strategy adopted by the Company, Nicholas Lee is on the boards of the following investee companies:



           % holding



2018

2017


Pires Investments plc

24.6%

24.8%


Eridge Capital Limited (resigned 30 June 2018)

7.7%

7.7%

 

 

14

TRADE AND OTHER RECEIVABLES



2018

2017



£

£


Other receivables

17,528

20,816


Prepayments and accrued income

188,579

17,047


206,107

37,863

The Directors consider that the carrying amount of other receivables is approximately equal to their fair value.

 

 

15

CASH AND CASH EQUIVALENTS



2018

2017



£

£


3,597,734

211,795

The Directors consider the carrying amount of cash and cash equivalents approximates to their fair value. 

 



 

16

TRADE AND OTHER PAYABLES



2018

2017



£

£


Trade payables

21,989

22,067


Other payables

242,946

-


Accrued expenses

42,078

31,195


307,013

53,262

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

 

 



 

17

OTHER FINANCIAL LIABILITIES



2018

2017



£

£


Liability in respect of foreign exchange contract

35,816

-



35,816

-

On 1 November 2018 the Company entered into a forward contract for the sale and purchase of USD 2,900,000 for settlement on 31 January 2019.  At 31 December 2018 the potential liability on the contract was £35,816.

 

 

18

SHARE CAPITAL




Number of shares

Share capital

Share

Deferred

Ordinary

Deferred

Ordinary

premium





£

£

£


ISSUED AND FULLY PAID:







At 1 January 2017:







Deferred shares of 9.9p each

32,857,956


3,252,938




Ordinary shares of 0.1p each


1,016,607,956


1,016,608

3,191,257


At 1 January and 31 December 2017

32,857,956

1,016,607,956

3,252,938

1,016,608

3,191,257


Issue of shares (see note below)


5,772,727,270


5,772,727

-


At 31 December 2018

32,857,956

6,789,335,226

 

3,252,938

6,789,335

3,191,257

 

The deferred shares have restricted rights such that they have no economic value.

 

Share issues in year

 

On 18 January 2018, 772,727,270 new ordinary shares of 0.1p were issued for cash at 0.11p each as a result of a placing, raising £850,000 before expenses which totalled £85,000.

 

On 26 June 2018, 4,500,000,000 new ordinary shares of 0.1p were issued for cash at 0.1p each as a result of a placing, raising £4,500,000 before expenses which totalled £199,850.

 

On 31 October 2018, 500,000,000 new ordinary shares of 0.1p were issued for cash at 0.1p each as a result of a placing, raising £500,000 before expenses of £28,000.

 

19

OTHER RESERVES



Capital redemption reserve

Share

 option reserve

Total

Other reserves



£

£

£


Balance at 1 January 2017 and 31 December 2017

27,000

73,150

100,150


Transfer to Profit and Loss account on cancellation of options

-

(73,150)

(73,150)


Balance at 31 December 2018

27,000

-

27,000

 

 

20

RISK MANAGEMENT OBJECTIVES AND POLICIES

 

 

 

The Company is exposed to a variety of financial risks which result from both its operating and investing activities.  The Company's risk management is coordinated by the Board of Directors and focuses on actively securing the Company's short to medium term cash flows by minimising the exposure to financial markets.

 

The main risks the Company is exposed to through its financial instruments are credit risk, foreign currency risk, liquidity risk, market price risk and operational risk.

 

CAPITAL RISK MANAGEMENT

 

The Company's objectives when managing capital are:

 

·      to safeguard the Company's ability to continue as a going concern, so that it continues to provide returns and benefits for shareholders;

·      to support the Company's growth; and

·      to provide capital for the purpose of strengthening the Company's risk management capability.

 

The Company actively and regularly reviews and manages its capital structure to ensure an optimal capital structure and equity holder returns, taking into consideration the future capital requirements of the Company and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities.  Management regards total equity as capital and reserves, for capital management purposes. The Company is not subject to externally imposed capital requirements.

 

CREDIT RISK

 

The Company's financial instruments that are subject to credit risk are cash and cash equivalents and loans and receivables.  The credit risk for cash and cash equivalents is considered negligible since the counterparties are reputable financial institutions.  The credit risk for loans and receivables is mainly in respect of short term loans, made on market terms, which are monitored regularly by the Board.

 

The Company's maximum exposure to credit risk is £3,615,262 (2017: £232,611) comprising cash and cash equivalents and loans and receivables.

 

The ageing profile of trade and other receivables was:



2018

2017



Total book value

Total book value



£

£


Current

17,528

20,816


Overdue for less than one year

-

-



17,528

20,816

 


LIQUIDITY RISK

 

Liquidity risk arises from the possibility that the Company might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Company manages this risk through maintaining a positive cash balance and controlling expenses and commitments.  The Directors are confident that adequate resources exist to finance current operations.

 


FOREIGN CURRENCY RISK

 

The Company invests in financial instruments and enters into transactions that are denominated in currencies other than its functional currency, primarily in US dollars (USD). Consequently, the Company is exposed to the risk that the exchange rate of its currency relative to other foreign currencies may change in manner that has an adverse effect on the fair value of the future cashflows of the Company's financial assets denominated in currencies other than the GBP.

 

The Company's policy is to use derivatives to manage its exposure to foreign currency risk. The instruments used are foreign currency forward contracts. The Company does not apply hedge accounting.

 

The carrying amounts of the Company's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:



Liabilities


Assets



31 Dec 2018

31 Dec 2017


31 Dec 2018

31 Dec 2017



£

£


£

£


US Dollars

*2,272,730

-


3,301,087

-



2,272,730

-


3,301,087

-


*This amount is in respect of a forward contract to be settled on 31 January 2019.

 

The following table details the Company's sensitivity to a 5 per cent increase and decrease in GBP against the US Dollar. 5 per cent is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible change in the GBP/USD rate. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 5 per cent change in the GBP/USD rate. A positive number below indicates an increase in profit and other equity where GBP weakens 5 per cent against the relevant currency. For a 5 per cent strengthening of GBP against the relevant currency, there would be a comparable impact on the profit and other equity, and the balances below would be negative.





US Dollars






31 Dec 2018

31 Dec 2017






£

£


Profit and loss




51,418

-






51,418

-


INTEREST RATE RISK

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The risk is mitigated by the Company only entering into fixed rate interest agreements, therefore detailed analysis of interest rate risk is not disclosed.

 


MARKET PRICE RISK

 

The Company's exposure to market price risk mainly arises from potential movements in the fair value of its investments.  The Company manages this price risk within its long-term investment strategy to manage a diversified exposure to the market.  If each of the Company's equity investments were to experience a rise or fall of 10% in their fair value, this would result in the Company's net asset value and statement of comprehensive income increasing or decreasing by £80,000 (2017:  £225,000).

 

Exposure to market price risk also arises in respect of the Company's investments in debt securities which are mainly denominated in US Dollars.

 

The Company's strategy for the management of market risk is driven by the Company's investment objective, which is focused on deploying its capital in investments that provide both income and downside protection. It is expected that the Company will deliver returns to shareholders through a combination of capital growth and dividend income.

The Company's market risk is managed on a continuous basis by the Investment Advisor in accordance with the policies and procedures in place. The Company's market positions are monitored on a quarterly basis by the board of directors.

 


OPERATIONAL RISK

 

Operational Risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes, technology and infrastructure supporting the Company's activities with financial instruments, either internally within the Company or externally at the Company's service providers such as cash custodians/brokers, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of investment management behaviour.

 

The Company's objective is to manage operational risk so as to balance the limiting of financial losses and damage to its reputation with achieving its investment objective of generating returns to shareholders.

 

The primary responsibility for the development and implementation of controls over the operational risk rests with the board of directors. This responsibility is supported by the development of overall standards for the management of operational risk, which encompasses the controls and processes over the investment, finance and financial reporting functions internally and the establishment of service levels with various service providers, in the following areas:

-       Appropriate segregation of duties between various functions, roles and responsibilities;

-       Reconciliation and monitoring of transactions

-       Compliance with regulatory and other legal requirements;

 

The directors' assessment of the adequacy of the controls and processes at the service providers with respect to operational risk is carried out via ad hoc discussions with the service providers. Substantially all the of the assets of the Company are held by Barclays Bank UK, Shard Capital Brokers, Monex Europe. The bankruptcy or insolvency of the Company's cash custodian/brokers may cause the Company's rights with respect to the securities or cash and cash equivalents held by cash custodian/ broker to be limited. The board of directors' monitors capital adequacy and reviews other publicly available information of its cash custodian/broker on a quarterly basis.

 

21

FINANCIAL INSTRUMENTS


The Company uses financial instruments, other than derivatives, comprising cash to provide funding for the Company's operations.


CATEGORIES OF FINANCIAL INSTRUMENTS


The IFRS 9 categories of financial asset included in the statement of financial position and the headings in which they are included are as follows:



2018

2017



£

£


FINANCIAL ASSETS:




Cash and cash equivalents

3,597,734

211,795


Financial assets at amortised cost

17,528

20,816


Financial assets at fair value through profit or loss

3,793,715

2,252,373


FINANCIAL LIABILITIES AT AMORTISED COST:




The IFRS 9 categories of financial liabilities included in the statement of financial position and the headings in which they are included are as follows:



2018

2017



£

£


Trade and other payables

264,935

22,067


Liability under foreign currency exchange contract

35,816

-

 

22

RELATED PARTY TRANSACTIONS


The compensation payable to Key Management personnel comprised £81,667 (2017: £120,000) paid by the Company to the Directors in respect of services to the Company.  Full details of the compensation for each Director are provided in Note 7.

 

Nicholas Lee's directorships of companies in which Riverfort Global Opportunities plc has an investment are detailed in Note 13.

 

23

Contingent LIABILITIES AND CAPITAL COMMITMENTS

There were no contingent liabilities or capital commitments at 31 December 2018 or 31 December 2017.

 

24

POST YEAR END EVENTS


 

There were no material post year-end events.

 

 

25

ULTIMATE CONTROLLING PARTY


The Directors do not consider there to be a single ultimate controlling party.

 

Note to the announcement:

 

In accordance with section 435 of the Companies Act 2006, the directors advise that the financial information set out in this announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2018 or 2017, but is derived from these financial statements. The financial statements for the year ended 31 December 2017 have been delivered to the Registrar of Companies. The financial statements for the year ended 31 December 2018 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and will be forwarded to the Registrar of Companies following the Company's Annual General Meeting. The Auditors have reported on these financial statements; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

 

 


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
 
 
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