ECP Eight Capital Partners Plc

02 July 2024

Eight Capital Partners plc

("ECP", "Eight Capital" or "the Company")

Annual Report and Financial Statements

For the year ended 31 December 2023

Eight Capital Partners plc (AQSE: ECP), the financial services operating company that aims to grow revenue through businesses engaged in "Fintech" operations including in the digital banking and lending sectors, announces is pleased to announce its final results for the year ended 31 December 2023. An extract from the  Company's audited report and accounts can be found below. The complete annual report and accounts  will shortly be available from the Company's website and will be sent to all shareholders.

A separate announcement providing details of the 2023 Annual General Meeting will be made in the next days.

Following publication of these results, the Company's shares will be restored to trading on the AQSE Growth Market shortly.

The Directors of the Company accept responsibility for the content of this announcement.

For further information, please visit www.eight.capital or contact:

This announcement contains inside information for the purposes of the UK Market Abuse Regulation and the Directors of the Company are responsible for the release of this announcement.

About Eight Capital Partners:

Eight Capital partners plc is a financial services operating company that aims to grow revenue through businesses engaged in "Fintech" operations including in the digital banking and lending sectors.

ECP seeks to grow its group revenue in these high growth fintech sub-sectors, which it expects to also increase in value, such that they generate an attractive rate of return for shareholders, predominantly through capital appreciation.

www.eight.capital

Eight Capital Partners operates two subsidiary businesses:

Epsion Capital:

Epsion Capital is an independent corporate advisory firm based in London with an extensive experience in UK and European capital markets. The team of senior and experienced ECM and M&A professionals is specialised across multiple markets, sectors and geographies and it prides itself on a commercial approach that allows the clients to achieve their growth ambitions. www.epsioncapital.com

Innovative Finance:

Innovative Finance is a corporate finance advisory business that develops mergers and acquisitions and financing solutions across multiple sectors, primarily in Europe, with access to international transactions. It focuses on investments in Europe which are linked to technological developments in the financial services industry. www.innovfinance.com

Dear Shareholder,

This is the report on Eight Capital Partners Plc (the Group or ECP) financial results for the year ended 31 December 2023 and on a number of corporate developments that have occurred during the year and since the year end.

Vision

2023 was an important year for Eight Capital. Having successfully transitioned into a financial services group in July 2021, it completed a reorganisation of its debt, converting the major part into equity and thereby strengthening its Balance Sheet considerably. It has a clear strategy in place for the transformation of the business in terms of its size, market value and influence within the fintech sector of financial services.

ECP's strategy centres around digital lending and other services to SMEs.  The over-riding theme is that there is an inadequate provision of SME lending at reasonable pricing compared to high and increasing demand.  The Company intends to create a pan-European (including the UK) SME digital lending platform with a banking licence, with the aim of establishing itself as a top-three SME working capital solutions and service provider in each of its core markets.  It is working to achieve this through the acquisition of a growing digital SME lender and the acquisition and process integration of a NeoBank.  Together this would form an integrated capital sourcing, product manufacturing and distribution machine.  This may happen through minority or majority investments.

There are successful examples of fast growing digital lending fintech businesses that own banks in the B2C lending space, such as Klarna.  ECP's plan is to deliver a similar business model into the B2B arena in the medium term.

The Company believes that SMEs continue to be under served by the traditional financial services sector and are sometimes overlooked by larger funding institutions, or, when managed through a traditional banking process, are perceived as difficult to underwrite and therefore expensive to fund.  There are significant benefits for SMEs using fintech systems and innovatively structured capital solutions to better access capital, either for direct investment or to assist with their working capital management.

ECP's objective is to own and integrate product manufacturing and distribution through a fintech digital lender with capital origination and management through a NeoBank to deliver to B2B customers faster, cheaper and more efficient capital solutions through the use of technology.

The Company has reviewed a number of opportunities in the last 12 months including starting due diligence on three specific acquisitions.  One of these, a fintech operator, has been rejected by the Company and one of the two others, a European NeoBank, remains a potential acquisition.  The pipeline is strong following fintech market changes over the last 24 months which have reduced pricing and increased availability.

Given the size of the potential opportunity and need to move quickly once an agreement has been made by the Company to acquire a business, ECP has started discussions with its current and a series of potential new shareholders and funding partners relating to raising acquisition equity and debt finance.

2023 Results

Through its two subsidiaries, the Group recorded revenues for the year under review of £602,000 (2022: £895,000).  This income was further supplemented by ECP itself providing management services to certain investees and thereby recovering £40,000 (2022: £84,000) of overhead costs. Finance income less finance expenses was a net surplus of £264,000 (2022: surplus £1,979,000).

The Company together with its advisors has reviewed its investment holdings and expects to recover much of the value associated with them.  However, given the environment of higher inflation, higher interest rates as well as geopolitical uncertainty that are resulting in economic commercial headwinds, as well as the perceived instability of some of its debtors, the Company has applied fair value adjustments and impairment charges where necessary.  The net movement in fair value of both realised and unrealised gains and losses on investments at fair value was a loss of £14,562,000 (2022: £2,638,000 gain) comprising £14,010,000 of unrealised fair value loss for the year in relation to the 1AF2 bond (explained further below), and £552,000 in relation to other investments.  An impairment of other receivables of £554k held at amortised cost was recognised (2022: £nil).

Expenses for the year increased to £2,019,000 from £1,119,000 in 2022 mainly due to higher levels of external corporate finance and due diligence activity relating to the execution of the strategy, and foreign exchange losses; and the Group result for the year was a loss before taxation of £18,946,000 (2022: profit before tax of £4,638,000).

Subsidiary activities

Epsion Capital Ltd ("Epsion"), our wholly owned UK Corporate Finance subsidiary, derived its income primarily from advising on M&A transactions generating £174,000 intra group revenue.  Innovative Finance S.r.l ("InnFin") our wholly owned Italian Corporate Finance subsidiary also generated advisory fees totalling circa £596,000 in the year (2022: £630,000). At the end of 2023, it was decided to merge the activities of Epsion and InnFin under the Epsion umbrella through a transfer of activities and subsequent closing of the Italian subsidiary.  This is expected to deliver both operating efficiencies and cost savings.  Activities have now consolidated under Epsion, and the Italian entity has started its solvent liquidation. During the year management assessed the value of the combined Epsion and InnFin business and a goodwill impairment loss of £2,717k (2022: £1,150k) was recognised.

Update on key asset:  1AF2 Bond repayment 2024

During 2021, the Company invested €40 million into a bond issued by 1AF2 Ltd, yielding 2.5% per annum with a repayment date of 22 July 2024.  In the current year, the Discounted Cash Flow ("DCF") valuation methodology has been based on cash flows available from the underlying security package of listed securities which has valued the bond at £13.5m.  This has been used as the fair value at year end. The bond remains live until 22 July 2024 which is its natural expiry date and the Company understands that the liquidation of the security package is not the issuer's intended method of repayment of the bond.  However, based on management's judgement and estimates at year end, given the proximity of the bond's expiry date, and based on conversations with the issuer which are ongoing, the Company has used the market valuation of the public assets held in the security package as the basis for the 1AF2 bond valuation in these accounts, a fair value loss of £14.0m in the year.  In the year the Company received a number of coupon interest payments in the form of listed shares as per the bond agreement.

Changes in Management Team

During the year under review, the Group has seen a number of changes to its Senior team. 

In February 2023, Luciano Maranzana was appointed as Group CEO having been Managing Director of Innovative Finance since August 2022.

Mr Maranzana has over 30 years of experience, primarily in real estate asset management where he has held several leading positions such as Managing Director, in Italy and Spain for UK property group, Hammerson plc and as Fund Manager at Pirelli Real Estate Sgr. where he was responsible for a quoted real estate fund, launching, structuring and managing the property portfolio, investor relations and liquidity investments / divestments.  Mr Maranzana was Managing Director of Valore Reale Sgr Spa, a closed-end real estate fund management company with 20 funds underwritten and fully invested with combined assets under management of more than £1.8 billion and Director of Negentropy Capital Partners Italia, a London-based alternative investment management and advisory company focused on opportunistic credit and real estate assets.

Also in February 2023, Gemma Godfrey was appointed to the board as an independent non executive director. Ms Godfrey is an experienced non executive director and independent consultant, having founded two digital businesses.  As a former founder and CEO of an FCA regulated digital investing business that was acquired by a global insurer, she went on to launch a digital media service on behalf of News UK.

Dominic White

Chairman

02 July 2024

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2023

Consolidated Statement of Financial Position

As at 31 December 2023

The financial statements were approved and authorised for issue by the board of directors on 2 July 2024 and were signed on its behalf by:

The notes form part of these financial statements.