TIDMSTRL
RNS Number : 9756K
Stirling Industries PLC
03 September 2019
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014.
THIS ANNOUNCEMENT, INCLUDING INFORMATION CONTAINED HEREIN, IS
RESTRICTED AND IS NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE,
DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED
STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATES OF
THE UNITED STATES AND THE DISTRICT OF COLUMBIA) (COLLECTIVELY, THE
"UNITED STATES"), CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH
AFRICA OR IN OR INTO ANY OTHER JURISDICTION IN WHICH SUCH
PUBLICATION, DISTRIBUTION OR RELEASE WOULD BE PROHIBITED BY ANY
APPLICABLE LAW.
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT
AND DOES NOT CONSTITUTE, CONTAIN OR FORM PART OF AN OFFER TO SELL
OR ISSUE OR A SOLICITATION TO BUY, SUBSCRIBE FOR OR OTHERWISE
ACQUIRE, ANY SECURITIES IN THE UNITED STATES, CANADA, AUSTRALIA,
JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN
WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
Stirling Industries plc
("Stirling" or the "Company")
Results for the period 13 February 2018 to 31 March 2019
Notice of Annual General Meeting ("AGM")
Stirling Industries plc, (AIM: STRL.L), the specialist
industrial investment business, today announces its results for the
period from 13 February 2018 to 31 March 2019, together with
details of its forthcoming Annual General Meeting.
Highlights
-- Successful listing on the AIM market of the London Stock
Exchange, raising GBP8.9 million and creating a platform to
'Acquire, Develop and Sell' industrial businesses offering
attractive upside potential
-- Extensive review of potential acquisition targets undertaken
during the period, focused on industrial businesses where Stirling
can create significant shareholder value through implementation of
strategic, operational and performance enhancements
-- As announced separately, the Company is at an advanced stage
of negotiations on its first acquisition and Stirling is now
seeking the necessary equity funding to enable it to execute
definitive legal documentation with respect to the transaction.
This proposed transaction is subject to approval by shareholders at
a General Meeting, amongst other conditions
-- The management team continues to identify further acquisition
opportunities which meet the Company's strict investment
criteria
Robin Williams, Chairman of Stirling Industries, said:
"During the period, we have reviewed a significant number of
acquisition opportunities operating across the UK, European and US
markets, in all cases focusing on industrial businesses with strong
fundamentals that are not fulfilling their true potential."
"The marketplace for the kind of assets we are targeting remains
competitive with a limited number of high-quality opportunities
available. The business for which we are in advanced negotiations
is an excellent example and we are excited by the opportunities
which lie ahead both for this potential investment and for the
Stirling vehicle."
"Whilst no one in the industrials sector can escape the volatile
geopolitical and macroeconomic environment in which businesses are
operating, we remain confident in the ability of well-run
businesses with the right, targeted strategy, to continue growing
and creating shareholder value."
Results for period 13 February 2018 to 31 March 2019
The consolidated report and audited financial statements of the
Stirling Industries plc group for the period from incorporation on
13 February 2018 to 31 March 2019 are set out below.
Notice of Annual General Meeting
Notice of the Annual General Meeting of the Company is being
posted to shareholders today. The Annual General Meeting is to be
held on 30 September 2019 at 12:30 pm in the offices of Ashurst
LLP, (London Fruit & Wool Exchange, 1 Duval Square, London E1
6PW).
Other
This announcement contains inside information for the purposes
of the Market Abuse Regulation (EU) NO. 596/2014. Upon the
publication of this announcement, this inside information is now
considered to be in the public domain. The person responsible for
arranging for the release of this announcement on behalf of
Stirling is Simon Thomas, Chief Operating Officer and Company
Secretary of Stirling.
For more information contact:
Stirling Industries plc
Blair Illingworth, Chief Executive
c/o Montfort Communications +44 (0)78 1234 5205
Montfort Communications - Financial
communications
Olly Scott +44 (0)78 1234 5205
Numis Securities - Nominated Adviser
and Broker
Luke Bordewich
Ben Stoop +44 (0)20 7260 1000
Numis Securities Limited is authorised and regulated by the
Financial Conduct Authority, is acting only for the Company in
connection with the matters described in this announcement and is
not acting for or advising any other person, or treating any other
person as its client, in relation thereto and will not be
responsible for providing the regulatory protection afforded to its
clients or advice to any other person in relation to the matters
contained herein.
About Stirling
Stirling has been established to offer a differentiated
management and ownership approach for industrial businesses where
the strategic and operational expertise of its team combines with
that of the portfolio company's management to drive and enable
improvements that create long-term shareholder value.
The Company focuses on acquiring businesses with strong
fundamentals and enterprise values between GBP100 million and
GBP750 million. Transactions will be financed through a combination
of new equity and prudent leverage, with the Company's target debt
to be no more than 2.5x the Company's EBITDA.
Stirling's approach begins with the belief that many companies
have the potential to achieve material operational enhancement and
margin improvement. Stirling's value add is to ensure operating
assets have the right strategy, the right focused leadership,
empowered and incentivised management teams and the appropriate
capital investment to support growth.
The Company's leadership team has significant experience of
identifying the key value drivers of a given business, implementing
change strategies across a diverse range of industries and
delivering significant operational value creation.
The following contains the text of the consolidated report and
audited financial statements of the Stirling Industries plc group
for the period from incorporation on 13 February 2018 to 31 March
2019.
Strategic report
The Directors are pleased to present to the shareholders the
consolidated report and audited financial statements of the Group
for the period from incorporation on 13 February 2018 to 31 March
2019.
Acquisition strategy
Stirling was established to acquire controlling stakes in quoted
or unquoted industrial businesses or companies, which the Directors
believe have the potential for strategic, operational and / or
performance improvement, in accordance with Stirling's investment
policy.
Having acquired an asset, Stirling's team will work with the
business' management to implement Stirling's development programme,
focusing the business on the right strategies to deliver a step
change in value, with a commitment to take the necessary actions to
achieve its aims. Stirling believes in empowering and incentivising
management teams to realise their and the business' full potential
and aims to invest in the sustainable profitable growth of its
operating assets, creating value for shareholders.
During the period since our inception the Stirling management
team has been focused and engaged in the review of a number of
assets with good market fundamentals that meet our investment
criteria. Following a disciplined process, Stirling is at an
advanced stage of negotiation regarding the potential acquisition
of its first operating asset. Stirling is now seeking the necessary
equity funding to enable it to execute definitive legal
documentation with respect to the proposed transaction. Once
executed, completion of the proposed transaction will be
conditional on shareholder approval at a General Meeting. Stirling
expects to be able to update the market in the days leading up to
its AGM to be held on 30th September 2019.
The Directors believe the proposed acquisition fits well with
the Group's investment policy and presents an excellent opportunity
for the Group and its shareholders.
In accordance with the AIM Rules for Companies, if the Company
has not made an acquisition or has not substantially implemented
its investment policy within 18 months of admission to AIM, which
occurred on 6 March 2018, the Company is required to seek
shareholder approval for its investment policy at the next annual
general meeting of the Company and at each subsequent annual
general meeting until such time as there has been an acquisition or
the investment policy has been substantially implemented (such a
resolution being referred to in these financial statements as a
"Continuation Vote").
The dependency on shareholder approval for the first
acquisition, and otherwise for the continuation of the Company
itself, constitutes a material uncertainty that may cast
significant doubt on the company's ability to continue as a going
concern and therefore to continue realising its assets and
discharging its liabilities in the normal course of business.
Investment policy
The Company looks to achieve its investment strategy by taking
an active approach to investments made within the following
parameters:
-- Geographic focus: Initially the Company's principal focus is
investing in businesses based in or operating principally in the
United Kingdom, Europe or North America. The Company may in the
future consider investing globally, including in emerging
markets.
-- Sector focus: The Company is focused on the industrials
sector.
-- Target companies: The Company targets companies with good
market fundamentals in their specific segment which fit into the
stated geographic and asset criteria guidelines and where the
Directors believe there is the potential for material strategic,
operational and / or performance improvement.
-- Types of investment and control of investments: It is
anticipated that the Company will acquire and control one or more
businesses or companies on a long term basis. The Board may issue
New Ordinary Shares as acquisition consideration to vendors of
assets, as appropriate, and the Board would expect such New
Ordinary Shares to represent a non-controlling or minority
shareholding in Stirling at that point in time.
-- Investment size: Initial funds raised pursuant to the Placing
in 2018 are being and will be used for the purposes of funding
operational expenses and to undertake due diligence on potential
target acquisitions. It is envisaged that the Company's first
acquisition will be in the region of an enterprise value of circa
GBP100 million to GBP750 million and that Stirling will have full
ownership or a controlling stake in a business.
-- Nature of returns: It is anticipated that returns to
shareholders will be delivered through a combination of an
appreciation in the Company's share price; if appropriate, regular
annual dividends paid out of retained earnings (following
completion of an acquisition); and return of cash to shareholders
following any disposal of assets or businesses.
Results
The Group's loss after taxation for the period from
incorporation to 31 March 2019 was GBP4,330,741. In the period to
31 March 2019, the Group recorded no revenue and incurred
GBP4,347,265 of administrative and operating expenses, of which
GBP2,927,323 related to costs involved in the pursuit of investment
opportunities. At the period end Stirling held a cash balance of
GBP4,003,555.
Dividends
It is the Board's policy that, prior to making the first
acquisition, no dividends will be paid. Following the first
acquisition, subject to the availability of distributable reserves,
dividends will be paid to shareholders when the Directors believe
it is appropriate and prudent to do so. However, the main focus of
the Group will be on delivering capital growth for
shareholders.
Outlook
Subject to successfully financing and receiving shareholder
approval for the first acquisition, the Directors will focus on a
range of key development initiatives to leverage the combination of
the target's potential and the strength and experience of the
Stirling leadership team to deliver material value creation for
shareholders.
These initiatives will be a combination of growth and margin
improvement initiatives. In parallel, the Board will continue to
focus on seeking additional opportunities for generating
shareholder returns in the medium and long-term beyond the first
acquisition.
Blair Illingworth
Chief Executive
2 September 2019
Principal risks and uncertainties facing the business
1. Risks relating to the company's future business and potential
structure
The Company is a holding company with no trading history
The Company has not, since incorporation, carried on any trading
activities. Accordingly, as at the date of this document, the
Company has no meaningful operational or financial data upon which
prospective investors may base an evaluation of the Company, its
strategy or its prospect. The value of any investment in the
Company is, therefore, wholly dependent upon the successful
implementation of the investment policy described in the Strategic
Report. As such, the Company is subject to all of the risks and
uncertainties associated with any newly established business
enterprise including the risk that the Company will not achieve its
investment objectives and that the value of an investment in the
Company could decline and may result in the loss of capital
invested. The past performance of companies, assets or funds
managed by the Directors, or persons affiliated with them, in other
ventures in a similar sector or otherwise, is not necessarily a
guide to the future business, results of operations, financial
condition or prospects of the Company. Investors will be relying on
the ability of the Company and the Directors to identify potential
acquisition targets, evaluate their merits, conduct diligence and
negotiations.
The Company may be unable to identify appropriate or complete
acquisitions
Although the Company has identified and is in advanced stages of
negotiation for a potential acquisition, the acquisition, if legal
documentation is executed, will be subject to shareholder approval.
There can be no assurance that the Company will be able to conclude
agreements with any target business and/or shareholders in the
future and failure to do so could result in the loss of an
investor's investment. In addition, the Company may not be able to
raise the additional funds required to acquire any target
business.
In accordance with the AIM Rules for Companies, if the Company
has not made an acquisition or has not substantially implemented
its investment policy within 18 months of admission to AIM, which
occurred on 6 March 2018, the Company is required to put a
Continuation Vote to its shareholders.
Given that the acquisition, if it proceeds, will not have
completed before 6 September 2019, the Company will not have made
an acquisition within 18 months after admission of its shares to
AIM and the Company is therefore required to put a Continuation
Vote to its shareholders at the Annual General Meeting. If, by that
date, the definitive legal documentation has not yet been signed,
either (i) if the Continuation Vote is passed, the Directors will
formulate a proposal for investors to subscribe for new equity to
allow the Company to continue in fulfilment of its objectives for
at least the next 12 months from the date of approval of these
financial statements or (ii) if the Continuation Vote is not
passed, the Directors will formulate a proposal for shareholders to
vote for either an amendment to the investment policy or a proposal
to return funds to shareholders.
In the event of a decision to return funds to shareholders,
there can be no assurance as to the particular amount or value of
the remaining assets at such future time of any such distribution
either as a result of costs from an unsuccessful acquisition or
from other factors, including disputes or legal claims which the
Company is required to pay out, the cost of the liquidation event
and dissolution process, applicable tax liabilities or amounts due
to third party creditors. Upon distribution of assets on a
liquidation event, such costs and expenses will result in investors
receiving less than the initial subscription price and investors
who acquired Ordinary Shares after Admission potentially receiving
less than they invested.
The Company may face significant competition for acquisition
opportunities
There may be significant competition in some or all of the
acquisition opportunities that the Company may explore. Such
competition may for example come from strategic buyers, sovereign
wealth funds, special purpose acquisition companies and public and
private investment funds, many of which are well established and
have extensive experience in identifying and completing
acquisitions. A number of these competitors may possess greater
technical, financial, human and other resources than the Company.
The Company cannot assure investors that it will be successful
against such competition. Such competition may cause the Company to
be unsuccessful in executing an acquisition or may result in a
successful acquisition being made at a significantly higher price
than would otherwise have been the case which could materially
adversely impact the business, financial condition, result of
operations and prospects of the Company.
Material facts or circumstances may not be revealed in the
Company's due diligence of prospective investments, exposing the
Company to unknown risks
Prior to making or proposing any investment, the Company intends
to undertake due diligence on potential acquisition targets to a
level considered reasonable and appropriate by the Company on a
case by case basis. However, these efforts may not reveal all facts
or circumstances that would have a material adverse effect upon the
value of the investment. In undertaking due diligence, the Company
will need to utilise its own resources and may elect to rely upon
third parties to conduct certain aspects of the due diligence
process. Further, the Company may not have the ability to review
all documents relating to the target company and assets. Any due
diligence process involves subjective analysis and there can be no
assurance that due diligence will reveal all material issues
related to a potential investment. Any failure to reveal all
material facts or circumstances relating to a potential investment
may have a material adverse effect on the business, financial
condition, results of operations and prospects of the Company.
Assumptions made about the future performance of the Company may
fall below expectations
The Board may decide to make certain investments on the basis of
assumptions it believes to be correct on the company's ability to
improve future performance of the acquired company. Certain
assumptions made in relation to the revenue potential or the costs
may turn out to be incorrect, resulting in performance and
shareholder returns falling short of expectations.
The Company may require additional funding which may result in
the dilution of Shareholders' interests
The proceeds obtained from any future equity raise will be
insufficient to fund in full suitable acquisitions and/or
investments identified by the Board. Accordingly, the Company
intends to seek additional sources of financing (equity and/or
debt) to implement its strategy. There can be no assurance that the
Company will be able to raise those funds, whether on acceptable
terms or at all.
The Company may seek debt financing to fund part of any future
acquisition. The incurrence by the Company of substantial
indebtedness in connection with an acquisition could result in:
a) default and foreclosure on the Company's assets, if its cash
flow from operations were insufficient to pay its debt obligations
as they become due; or
b) an inability to obtain additional financing, if any
indebtedness incurred contains covenants restricting its ability to
incur additional indebtedness.
An inability to obtain debt financing may have a material
adverse effect on the business, financial condition, results of
operations and prospects of the Company. If such financing is
obtained the Company's ability to raise further finance and its
ability to operate its business may be subject to restrictions.
The occurrence of any or a combination of these, or other,
factors could decrease shareholders' proportional ownership
interests in the Company or have a material adverse effect on its
financial condition and results of operations.
The companies or businesses in which the Company invests may
also have borrowings. Although such facilities may increase
investment returns, they also create greater potential for loss.
This includes the risk that the borrower will be unable to service
the interest repayments, or comply with other requirements,
rendering the debt repayable, and the risk that available capital
will be insufficient to meet required repayments. There is also the
risk that existing borrowings will not be able to be refinanced or
that the terms of such refinancing will not be as favourable as the
terms of existing borrowings. A number of factors (including
changes in interest rates, conditions in the banking market and
general economic conditions), all of which are beyond the Company's
control, may make it difficult for the Company to obtain new
financing on attractive terms or at all, which could have a
material adverse effect on the business, financial condition,
results of operations and prospects of the Company.
The Company may become exposed to risks relating to future
gearing
Whilst the Directors are committed to maintaining a prudent and
conservative capital structure for the Group, the Company, either
directly or through subsidiaries, may be geared through borrowings,
which would typically be secured on its investments. If the costs
of the Group's borrowings exceed the return on the Group's assets,
the borrowings may have a negative effect on the Group's
performance. If the Group cannot generate adequate cash flows to
meet any debt service obligations, it may suffer a partial or total
loss of its capital. In the event that the Group enters into a bank
facility agreement with one or more banks, such agreement(s) may
contain financial covenants. The agreement(s) may require that in
the event that any such financial covenant is breached or if any
other covenant is breached the Group may be required to repay the
borrowings in whole or in part. In such circumstances, the Group
may be required to sell, in a limited time, some or all of its
assets, potentially in circumstances where there has been a
downturn in values in the sector generally, such that the
realisation proceeds do not reflect the Group's valuation of the
assets.
The Company may be unable to successfully implement its
investment policy
The Company's level of profit will be reliant upon the
performance of the assets acquired and the investment policy. The
success of the investment policy depends on the Directors' ability
to identify investments in accordance with the Company's investment
objectives and to interpret market data correctly. No assurance can
be given that the strategy to be used will be successful under all
or any market conditions or that the Company will be able to
generate positive returns for shareholders. If the investment
policy is not successfully implemented, this could adversely impact
the business, development, financial condition, results of
operations and prospects of the Company.
Changes in the investment policy may occur
The Company's investment policy may be modified and altered from
time with any material change being made with the approval of
shareholders, so it is possible that the approaches adopted to
achieve the Company's investment objectives in the future may be
different from those the Directors currently expect to use. Any
such change could adversely impact the business, development,
financial condition, results of operations and prospects of the
Company.
The Company may be unable to refocus and improve the operating
and financial performance of an acquired business
The success of the Company's acquisitions may depend in part on
the Company's ability to implement the necessary technological,
strategic, operational and financial change programmes in order to
transform the acquired business and improve its financial
performance. Implementing change programmes within an acquired
business may require significant modifications, including changes
to hardware and other business assets, operating and financial
processes and technology, software, business systems, management
techniques and personnel, including senior management. There is no
certainty that the Company will be able to successfully implement
such change programmes within a reasonable timescale and cost, and
any inability to do so could have a material adverse impact on the
Company's performance and prospects.
The Company will be highly dependent on the expertise of the
Directors
The Company will be highly dependent on the expertise and
continued service of the Directors and other senior employees. The
experience and commercial relationships of Blair Illingworth,
Joanne Curin and Simon Thomas in particular are expected to provide
the Company with a competitive edge. However, any one of the
Directors could give notice to terminate their employment
agreements at any time and their loss may have an adverse effect on
the Company's business.
In addition, there is a risk that the Company will not be able
to recruit executives of sufficient expertise or experience to
maximise any opportunities that present themselves, or that
recruiting and retaining those executives is more costly or takes
longer than expected. The failure to attract and retain those
individuals may adversely affect the Company's operations.
The Company could incur costs for transactions that may
ultimately be unsuccessful
There is a risk that the Company may incur further substantial
legal, financial and advisory expenses arising from unsuccessful
transactions which may include public offer and transaction
documentation, legal, accounting and other due diligence which
could have a material adverse effect on the business, financial
condition, results of operations and prospects of the Company.
Once an acquisition is completed, the Company will be a holding
company whose principal source of operating cash will be income
received from the business it has acquired
Once an acquisition is completed, the Company may be dependent
on the income generated by the acquired business to meet the
Company's expenses, operating cash requirements and any debt costs.
The amount of distributions and dividends, if any, which may be
paid from any operating subsidiary to the Company will depend on
many factors, including such subsidiary's results of operations and
financial condition, limits on dividends under applicable law, its
constitutional documents, documents governing any indebtedness of
the Company, and other factors which may be outside the control of
the Company. If the acquired business is unable to generate
sufficient cash flow, the Company may be unable to pay its expenses
or make distributions and pay dividends on the Ordinary Shares.
Shareholders' interests will be diluted as a result of the
conversion of Incentive Shares issued under the LTIP
If the performance criteria set out in the Company's articles of
association relating to the Incentive Shares that are issued
pursuant to awards granted under the LTIP are met, and the Board
elects not to pay a dividend on the Incentive Shares (in whole or
in part) but instead determines that the Incentive Shares should
convert into Ordinary Shares in accordance with the rights set out
in the articles of association, the existing Shareholders'
interests in the Company will be diluted. A summary of the LTIP and
the rights attaching to the Incentive Shares, as well as a summary
of the performance criteria attaching to such shares, as outlined
in note 4 of these financial statements.
The Company may be exposed to interest rate risk
Changes in interest rates can affect the Group's profitability
by affecting the spread between, among other things, the income on
its assets and the expense of any interest-bearing liabilities it
has, the value of any interest earning assets and its ability to
make an acquisition. In the event of a rising interest rate
environment and/or economic downturn, loan defaults may increase
and result in credit losses that may be expected to affect the
Group's operating results adversely. Interest rates are highly
sensitive to many factors, including governmental, monetary and tax
policies, domestic and international economic and political
considerations, fiscal deficits, trade surpluses or deficits,
regulatory requirements and other factors beyond the control of the
Group.
The Group may finance its activities with both fixed and
floating rate debt. With respect to any floating rate debt, the
Group's performance may be affected adversely if it fails to limit
the effects of changes in interest rates on its operations by
employing an effective hedging strategy, including engaging in
interest rate swaps, caps, floors or other interest rate contracts,
or buying and selling interest rate futures or options on such
futures. There can, however, be no assurance that such arrangements
will be entered into or be available at all times when the Group
wishes to use them or that they will be sufficient to cover the
risk. The Group may be exposed to the credit risk of any relevant
counterparty with respect to relevant payments under derivative
instruments it enters into pursuant to any hedging strategy and any
of those factors may affect the Group's operating results
adversely.
The Company may make disposals at a loss
Although the Company intends to hold any acquired companies or
businesses, together being a single target business, on a long term
basis, the Company may make investments that it cannot realise
through trade sale or flotation at an acceptable price. Some
investments may be lost through insolvency. Any of these
circumstances could have a negative impact on the profitability and
value of the Company.
The Company may be exposed to foreign investment and exchange
risks
The Company's functional and presentational currency is pounds
sterling. As a result, the Company's consolidated financial
statements will carry the Company's assets in pounds sterling. Any
business the Company acquires may denominate its financial
information, conduct operations or make sales in currencies other
than pounds sterling. When consolidating a business that has
functional currencies other than pounds sterling, the Company will
be required to translate, inter alia, the balance sheet and
operational results of such business into pounds sterling. As a
result, changes in exchange rates between pounds sterling and other
currencies could lead to significant changes in the Company's
reported financial results from period to period. Among the factors
that may affect currency values are trade balances, levels of
short-term interest rates, differences in relative values of
similar assets in different currencies, long-term opportunities for
investment and capital appreciation and political or regulatory
developments. Although the Company may seek to manage its foreign
exchange exposure, including by active use of hedging and
derivative instruments, there is no assurance that such
arrangements will be entered into or available at reasonable cost
at all times when the Company wishes to use them or that they will
be sufficient to cover the risk and this may have a negative impact
on the profitability and value of the Company. Alternatively, the
Company may consider changing its reporting currency in the future
to a currency other than pounds sterling if the first acquisition
or any bolt-on acquisition makes it practical to do so.
The Company will be subject to restrictions in offering its
Ordinary Shares as consideration for an acquisition in certain
jurisdictions and may have to provide alternative consideration,
which may have an adverse effect on its operations
The Company may offer its Ordinary Shares or other securities as
part of the consideration to fund, or in connection with, an
acquisition. However, certain jurisdictions may restrict the
Company's use of its Ordinary Shares or other securities for this
purpose, which could result in the Company needing to use
alternative sources of consideration. Such restrictions may limit
the Company's available acquisition opportunities or make certain
acquisitions more costly which may have an adverse effect on its
operations.
The Company may be unable to transfer to another venue following
the first acquisition
Following completion of the first acquisition, the Directors may
seek to transfer from the Company's admission on AIM to a Standard
Listing or a Premium Listing on the Official List of the Financial
Conduct Authority or to a listing on another listing venue, based
on the track record of the company or business it acquires, subject
to fulfilling the relevant eligibility criteria at the time. There
can be no guarantee that the Company will meet such eligibility
criteria or that a transfer to a Standard Listing or a Premium
Listing or a listing on another listing venue will be achieved. For
example, such eligibility criteria may not be met, due to the
circumstances and internal control systems of the acquired business
or if the Company acquires less than a controlling interest in the
target. In addition there may be a delay, which could be
significant, between the completion of the first acquisition and
the date upon which the Company is able to seek or achieve a
Standard Listing, a Premium Listing or a listing on another listing
venue.
If the Company does not seek or achieve a transfer to Standard
Listing, a Premium Listing or a listing on another listing venue,
the Company will need to meet the eligibility criteria for
re-admission to AIM following the first acquisition. A change of or
failure to change listing venue may have an adverse effect on the
valuation of the Ordinary Shares. Alternatively, in addition to, or
in lieu of seeking a Standard Listing or Premium Listing, the
Company may determine to seek a listing on another stock exchange,
which may not have standards of corporate governance comparable to
those required by AIM, or a Standard or Premium Listing, or which
Shareholders may otherwise consider to be less attractive or
convenient.
Completion of the Company's first acquisition is expected to
require compliance with the AIM Rules for reverse takeovers
As the Company is an investing company, it is likely that the
Company's financial resources will be invested in just one or a
small number of projects or investments. Either route may trigger a
Reverse Takeover under the AIM Rules for Companies which will be
subject to prior Shareholder approval and re-admission to AIM or
another listing venue for the enlarged entity.
Shareholders should note that where a transaction is considered
to be a Reverse Takeover for the purposes of the AIM Rules for
Companies and the Shareholders approve any such transaction,
trading on AIM in the Ordinary Shares will be cancelled and
re-admission to AIM or another listing venue will be required to be
sought in the same manner as any other applicant applying for
admission of its securities for the first time. Trading in the
Ordinary Shares will normally be suspended following the
announcement of any such transaction until the Company has
published a re-admission document in respect of the Company. The
Company's shares have been suspended following the making of the
announcement earlier today that the Company is in advanced
discussions regarding a potential acquisition.
Lock-in arrangements
Blair Illingworth, Joanne Curin, Simon Thomas, Robin Williams
and Christopher Dowling have each agreed, conditional on Admission;
(i) not to dispose of any interest in Ordinary Shares until 12
March 2019; and (ii) for a period of six months following such
date, except in certain limited circumstances, not to dispose of
any interest in Ordinary Shares without the written consent of the
Company or Numis. Although there is no present intention or
arrangement to do so, any of such persons may, unless further
lock-in arrangements are entered into in connection with an
acquisition that constitutes a reverse takeover for the purposes of
the AIM Rules for Companies, following the expiry of this aggregate
18-month lock-in period, sell their Ordinary Shares without
restriction. The market price of Ordinary Shares could decline
significantly as a result of any sales of Ordinary Shares by any of
such persons following expiry of the lock-in period (or
otherwise).
2. Risks relating to legislation and regulations
Legislative and regulatory risks
Any investment is subject to changes in regulation and
legislation. As the direction and impact of changes in regulations
can be unpredictable, there is a risk that regulatory developments
will not bring about positive changes and opportunities, or that
the costs associated with those changes and opportunities will be
significant. In particular, there is a risk that regulatory change
will bring about a significant downturn in the prospects of one or
more acquired businesses, rather than presenting a positive
opportunity.
Taxation
There can be no certainty that the current taxation regime in
England and Wales or overseas jurisdictions in which the Company
may operate in the future will remain in force or that the current
levels of corporation taxation will remain unchanged. Any change in
the tax status of the Company or to applicable tax legislation may
have a material adverse effect on the financial position of the
Company.
Suitability for investment
As an investment vehicle incorporated in England and Wales, the
Company may only be marketed to, and is only suitable as an
investment for, sophisticated investors with an understanding of
the risks inherent in investment and an ability to accept the
potential total loss of all capital invested in the Company.
3. General risks
The United Kingdom's exit from the European Union could affect
the Company
On 29 March 2017, the United Kingdom formally notified the
European Council of its intention to exit the European Union
pursuant to Article 50 of the Treaty of Lisbon ("Brexit"). On 10
April 2019, the EU and the UK agreed to delay Brexit to 31 October
2019.
Brexit could have significant effect on the Group, particularly
to the extent it seeks to acquire businesses with a significant
presence in the European Union. Until the UK officially exits the
European Union, European Union laws and regulations will continue
to apply, and changes to the application of these laws and
regulations are unlikely to occur during negotiations. The
continued delay in agreeing the nature and timing of Brexit and the
associated uncertainty and unpredictability concerning the UK's
legal, political and economic relationship with Europe after the UK
exits the European Union may continue to be a source of instability
in the international markets, create significant currency
fluctuations, and/or otherwise adversely affect trading agreements
or similar cross-border cooperation arrangements (whether economic,
tax, fiscal, legal, regulatory or otherwise) for the foreseeable
future, including beyond the date of the UK's withdrawal from the
European Union. The extent of the effect of such uncertainties and
unpredictability would depend in part on the nature of the
arrangements that are put in place between the United Kingdom and
the European Union following Brexit and the extent to which the
United Kingdom continues to apply laws that are based on European
Union legislation. As such, it is not possible to state the effect
that Brexit would have on the Group. It could also potentially make
it more difficult for the Group, to operate a business in the EU as
a result of any increase in tariffs and/or more burdensome
regulations being imposed on UK companies and/or foreign exchange
controls imposed on the transfer of funds from the European Union
to the UK. While an orderly exit would allow the Group to more
effectively address the potential consequences of any changes,
discussions regarding a withdrawal agreement between the UK and the
EU are ongoing. If agreement is not reached by 31 October 2019 and
the UK and the EU decide not to extend the date for Brexit, the
Group may become immediately impacted by the foregoing effects.
Any of the foregoing could restrict the Company's ability to pay
dividends and may have a material adverse effect on the Group's
future prospects and financial condition.
The general economic climate may be adverse for the Company
The Company may acquire or make investments in companies and
businesses that are susceptible to economic recessions or
downturns. During periods of adverse economic conditions, the
markets in which the Company operates may decline, thereby
potentially decreasing revenues and causing financial losses,
difficulties in obtaining access to, and fulfilling commitments in
respect of, financing, and increased funding costs. In addition,
during periods of adverse economic conditions, the Company may have
difficulty accessing financial markets, which could make it more
difficult or impossible for the Company to obtain funding for
additional investments and negatively affect the Company's net
asset value and operating results. Accordingly, adverse economic
conditions could adversely impact the business, development,
financial condition, results of operations and prospects of the
Company.
There is also a risk that new economic, legal, social and tax
policies may be introduced in certain countries under new national
and regional administrations, including the United States, which
could potentially have an adverse impact on the trading conditions
for the Company.
Approved by the Board on 2 September 2019.
Report of the Directors
for the Period 13 February 2018 to 31 March 2019
The Directors present their report with the financial statements
of the Company and its subsidiary (the "Group") for the period from
13 February 2018 to 31 March 2019.
Incorporation
The Company was incorporated on 13 February 2018.
Directors
The Directors who have held office during the period from 13
February 2018 to the date of this report are as follows:
Ms J E Curin - appointed 13 February 2018
Mr C B Dowling - appointed 22 February 2018
Mr S F Thomas - appointed 13 February 2018
Mr R G W Williams - appointed 22 February 2018
Mr R B Illingworth - appointed 13 February 2018
All the Directors who are eligible offer themselves for election
at the forthcoming first Annual General Meeting.
Status and activities
The Group was established to acquire controlling stakes in
quoted or unquoted businesses or companies, identifying industrial
businesses where it can implement strategic, operational and / or
performance improvements to unlock their future potential. During
the year to 31 March 2019, the Directors have identified and are at
an advanced stage of negotiations for a proposed first acquisition.
That proposed acquisition would be subject to approval by the
shareholders of the Group.
Results and dividends
For the period to 31 March 2019, the Group's loss was
GBP4,330,741, of which GBP2,927,323 relates to transaction costs in
respect of potential opportunities.
It is the Board's policy that, prior to making the first
acquisition, no dividends will be paid. Following the first
acquisition, subject to the availability of distributable reserves,
dividends will be paid to shareholders when the Directors believe
it is appropriate and prudent to do so. Accumulated losses for the
period of GBP4,330,741 have been transferred to reserves.
Future developments
The Directors continue to identify further acquisition
opportunities which meet the requirements of the Group investment
policy.
Share capital
Details of shares issued by the Company during the period are
set out in Note 16 to the financial statements.
Conflicts of interest
Under the articles of association of the Company and in
accordance with the provisions of the Companies Act 2006, a
Director must avoid a situation where he has, or can have, a direct
or indirect interest that conflicts, or possibly may conflict with
the Company's interests. However, the Directors may authorise
conflicts and potential conflicts, as they deem appropriate. As a
safeguard, only Directors who have no interest in the matter being
considered will be able to take the relevant decision, and the
Directors will be able to impose limits or conditions when giving
authorisation if they think this is appropriate. During the
financial period from 13 February 2018 to 31 March 2019, the
directors have authorised no such conflicts or potential
conflicts.
Directors' interests in shares
Directors' interests in the shares of the Company, including
family interests, were as follows:
Incentive shares Ordinary shares
--------------------- ----------------- ----------------
Blair Illingworth 4,000 250,001
Simon Thomas 2,000 100,000
Joanne Curin 2,000 96,000
Christopher Dowling 400 100,000
Robin Williams 800 50,000
Directors' remuneration
Details for remuneration for each Director are provided in Note
4 to the financial statements.
Substantial shareholdings
Shareholder Shareholding, (%)
------------------------------------- ------------------
Union Bancaire Privee, UBP SA 11.20
City Financial 11.20
Ruffer 8.96
Killik, stockbrokers 8.92
Investec Asset Management 8.40
AXA Framlington Investment Managers 8.40
Directors 6.67
Investec Wealth & Investment 6.10
SW Mitchell Capital 5.60
Fund Partners 3.36
Independent auditors
The Directors have reason to believe that KPMG LLP conducted an
effective audit. The Directors have provided the auditors with full
access to all of the books and records of the Company. KPMG has
expressed its willingness to continue to act as auditors to the
Company and a resolution for its re-appointment will be proposed at
the forthcoming Annual General Meeting.
Corporate governance
The Directors recognise the importance of sound corporate
governance commensurate with the size of the Company and the
interests of the Shareholders. As a company traded on AIM, the
Company has adopted the Quoted Companies Alliance (QCA) Corporate
Governance Code, as amended from time to time, and will seek to
comply with premium listed company norms to the extent appropriate
for the size and nature of the Company. The QCA Code identifies ten
corporate governance principles that AIM companies should follow.
Details of how the Company follows these ten principles are set out
below.
Principle 1 - Establish a strategy and business model which
promote long-term value for the shareholders
The Company's strategy and business model are developed by the
Chief Executive and his team and approved by the Board. The
management team, led by the Chief Executive, is responsible for
implementing the strategy and managing the business of the
Company.
The Company's investment strategy is to acquire companies or
businesses which the Directors believe have the potential for
strategic, operational, and performance improvement so as to create
shareholder value. The Directors intend to follow an "acquire,
develop, sell" strategy raising equity and debt finance to fund the
acquisitions of given companies or businesses, developing the
acquired business(es) through proactive strategic and operational
management, (including capital investment and/or bolt-on
acquisitions) and after period of time exiting the business(es),
(either as whole or their constituent parts) and returning the
proceeds from the disposal(s) to Shareholders. The Directors
believe that in the current environment the Company will be able to
identify appropriate acquisition opportunities.
Principle 2 - Seek to understand and meet shareholder needs and
expectations
The Company seeks to maintain a dialogue with its shareholders
in order to communicate the Company's strategy and results and to
understand the needs and expectations of its shareholder base.
The Board is aware of the need to protect the interests of its
shareholders.
Beyond the Annual General Meeting, the Chief Executive and the
CFO are available to all significant shareholders after the release
of the half year and full year results. The Chairman is available
to major shareholders as they wish and to all shareholders within
the bounds of reasonableness as to time commitment and the
permitted extent of disclosure for an AIM quoted plc.
Principle 3 - Take into account wider stakeholder and social
responsibilities and their implications for long-term success
The Company is aware of its corporate responsibilities to its
stakeholders, including staff, suppliers, customers and the wider
society. The Company intends to take into account feedback received
from stakeholders, following the making of its first acquisition,
by making amendments to its business plans and operations as
appropriate.
The environmental impact of the Company's activities will be
carefully considered and the maintenance of high environmental
standards will be a key priority.
As an AIM listed company with a relatively small head office
function, the Company is also reliant on its legal and professional
advisors for updates to requirements of social responsibility
legislation, such as the Social Media Policy recommended to be in
place at all AIM listed companies.
Principle 4 - Embed effective risk management, considering both
opportunities and threats, throughout the organisation
The Board has overall responsibility for the systems of risk
management and internal control and for reviewing their
effectiveness. The internal controls are designed to manage rather
than eliminate risk and provide reasonable but not absolute
assurance against material misstatement or loss.
The Board has established Audit and Remuneration Committees, a
summary of each of which is set out below.
The Company has requested its external auditors to provide
feedback on the state of its internal controls.
The Company maintains appropriate insurance cover in respect of
actions taken against the Directors, as well as against material
loss or claims against the Company. The insurance cover in place
will be reviewed on a periodic basis.
Principle 5 - Maintain the Board as a well-functioning, balanced
team led by the Chairman
The Board currently comprises two Non-executive Directors and
three Executive Directors. All of the Directors are subject to
election by shareholders at the first Annual General Meeting after
their appointment to the Board and will continue to seek
re-election at least once every three years.
The Board is responsible to the shareholders for the proper
management of the Company and meets at least five times a year to
set the strategy of the Company and review the operational and
financial performance of the Company.
The Board considers itself sufficiently independent. The QCA
Code suggests that a board should have at least two independent
Non-executive Directors. The Board have considered each
Non-executive Director's length of service and interests in the
share capital of the Company and consider that Mr Williams and Mr
Dowling are independent. Whilst the Company is guided by the
provisions of the QCA Code in respect of the independence of
directors, it gives regard to the overall effectiveness and
independence of the contribution made by directors to the Board in
considering their independence and does not consider a director's
period of service in isolation to determine this independence.
In light of the proposed acquisition, the Company has considered
the Board composition, including whether to appoint one or more
additional non-executive directors at the time it makes the
acquisition, having regard to the expected size of the acquisition
and what would be an appropriate size for the Board following the
acquisition, in each case assuming the acquisition proceeds.
Consequently, the Board intends to appoint a further independent
non-executive director following completion of the acquisition, if
it proceeds.
The Executive Directors work full time for the Company. The two
Non-executive Directors are required to dedicate appropriate time,
varying from four days (or equivalent) per month for the Chairman
and two to three days (or equivalent) per month for the other
Non-executive Director, to the Company.
The Company has put in place Audit and Remuneration committees.
A summary of the terms of reference for each committee is set out
under principle nine below.
During the period from the date on which the Company's ordinary
shares were admitted to trading on AIM in March 2018 and 31 March
2019 there were seven Board meetings attended by all members of the
Board.
Principle 6 - Ensure that between them the Directors have the
necessary up-to-date experience, skills and capabilities
Directors who have been appointed to the Board have been chosen
because of the skills and experience they offer and their personal
qualities and capabilities.
The Board will regularly review the composition of the Board to
ensure that it has the necessary breadth and depth of skills to
support the ongoing strategy of the Company.
The Chairman and the Company Secretary will ensure each
Director's skillset is kept up to date. During the course of the
year, the Directors have received and will continue to receive
updates from the Company Secretary in relation to corporate
governance matters. Each Director takes responsibility for
maintaining his or her own skill set, which includes roles and
experience with other boards and organisations as well as formal
training and seminars.
Non-executive Directors have a contractual right to receive
external advice, at the Company's expense, when necessary.
Principle 7 - Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement
The Non-executive Directors will monitor the personal and
corporate performance of the Chief Executive, including asking the
Company's senior management, auditors, and other advisors to report
on his performance.
The Board intends to undertake an executive salary benchmarking
exercise following completion of the acquisition, should it
proceed, for the purpose of determining what shall constitute a
competitive market salary rate and pension contribution for the
Executive Directors having regard to peer companies in a similar
market and the skills and experience of the Executive Directors and
the duties and roles to be undertaken by them. The fees payable to
the Non-executive Directors will also be reviewed at the same
time.
The Directors believe that the Company's remuneration policies
should be set to promote long-term value creation through
transparent alignment with the agreed corporate strategy and that
such policies should support performance, encourage the underlying
sustainable financial health of the business and promote sound risk
management for the success of the Company and to the benefit of all
its stakeholders. The Directors believe that this is in line with
best practice and that this review will be carried out following
completion of the acquisition, should it proceed, to ensure that
the remuneration structure is appropriate for the specific business
of the Group as it will be enlarged following such acquisition.
The Board intends to implement a process for evaluation of its
own performance, its committees and individual directors, including
the Chairman. The Board will create a set of an evaluation criteria
and intends to commence an annual evaluation process during the
course of the current financial year. The Board also intends to
review the structure of its committees following completion of the
acquisition, should it proceed, for the purposes of determining
whether to implement a formal nomination committee to, amongst
other matters, lead the process for Director appointments and
re-appointment and overseeing the Board evaluation process and
succession planning. These matters are currently considered by the
Board as a whole.
Principle 8 - Promote a corporate culture that is based on
ethical values and behaviours
The Company has been set up to offer a differentiated management
and ownership approach for industrial businesses where the
strategic and operational expertise of its team combines with that
of the company's management to drive and enable improvements that
create long-term shareholder value.
The Company is focused on principled performance, and
transparent reporting from the businesses to the Board, and from
the Board to the shareholders and advisors through regular
meetings, presentations, the annual report and at the Annual
General Meeting.
The Company's approach begins with the belief that many
companies have the potential to achieve material margin improvement
and operational growth. By focusing on providing the right
leadership, empowering and incentivising management teams and
investing intelligently, businesses can sustainably grow strong
businesses with sound fundamentals, creating value for
shareholders.
Senior management are encouraged to take personal responsibility
for achieving the Company's objectives and to act with openness,
integrity and trust. Staff are encouraged to ask for help, admit to
their mistakes and put things right. The Company does not operate a
blame culture. The Non-executive Directors are encouraged to have
open dialogues with senior management about their opinions and
concerns.
The Company intends to recruit and screen employees based on
integrity, as well as competence. Employees will be well-treated
when they leave or retire.
Principle 9 - Maintain governance structures and processes that
are fit for purpose and support good decision-making by the
Board
The Board has overall responsibility for the strategic direction
and performance of the Company. The Executive Directors have
day-to-day responsibility for the operation of the Company's
businesses and implementing the strategy of the Board.
The Board meets at least five times per year. The Board is
provided with detailed financial reports of the Company's financial
performance on a regular monthly basis with more frequent updates
if required. Detailed written reports are provided one week prior
to the Company's Board meetings. Written recommendations from the
Executive Director are delivered in a timely manner with supporting
documentation, supplemented as required by reports from external
professional advisers so that the Board can constructively
challenge recommendations before making decisions.
The Chief Executive Officer and the Chairman are the primary
points of contact for the shareholders and are available to answer
queries over the phone or via email from shareholders throughout
the year.
The Company has Audit and Remuneration Committees. The Chairman
is a member of the Audit Committee and chairs the Remuneration
Committee. Mr Dowling is a member and chairman of the Audit
Committee and a member of the Remuneration Committee. Formal terms
of reference have been agreed for both Board committees. The
responsibilities of each of these have been summarised below.
Audit Committee
Once the company has made its first acquisition it will:
-- meet at least three times a year and otherwise as required,
with the external auditor in attendance.
-- monitor the integrity of the financial statements of the
Company and review and challenge where necessary the application of
significant accounting policies.
-- review any other statements requiring Board approval which
contain financial information.
-- keep under review the Company's internal financial controls
systems that identify, assess, manage and monitor financial risks
and other internal control and risk management systems.
-- review the adequacy and security of the Company's
arrangements for its employees and contractors to raise concerns,
in confidence, about possible wrongdoing in financial reporting or
other matters.
-- consider annually whether the Company should have an internal
audit function.
-- consider and make recommendations to the Board, to be put to
shareholders for approval at the Annual General Meeting, in
relation to the appointment, re-appointment and removal of the
Company's external auditor.
-- report formally to the Board on its proceedings after each
meeting on all matters within its duties and responsibilities and
formally report to the Board on how it has discharged its
responsibilities.
The Chairman of the committee will attend the Annual General
Meeting.
Remuneration Committee
Have responsibility for devising the remuneration policy for all
Executive Directors and the Chairman. Once the company has made its
first acquisition, it will:
-- recommend and monitor the level and structure of remuneration
for senior management.
-- review the on-going appropriateness and relevance of the
remuneration policy.
-- report to the Board on its proceedings after each meeting on
all matters within its duties and responsibilities and make
recommendations to the Board.
-- ensure that appropriate provisions regarding disclosure of
remuneration information are fulfilled and produce a report of the
Company's remuneration policy and practices for inclusion in the
Company's annual report.
The Chairman of the committee will attend the Annual General
Meeting.
Principle 10 - Communicate how the Company is governed and is
performing by maintaining a dialogue with shareholders and other
relevant stakeholders
Beyond the Annual General Meeting, the Chief Executive and the
CFO are available to all significant shareholders after the release
of the half year and full year results. The Chairman is available
to major shareholders as they wish and to all shareholders within
the bounds of reasonableness as to time commitment and the
permitted extent of disclosure for an AIM quoted plc.
The Chief Executive and the Chairman are the primary points of
contact for the shareholders and are available to answer queries
over the phone or via email from shareholders throughout the
year.
There is a strong focus on transparent reporting in the half
year interim results and annual report, including the challenges
faced by the Company both in the reporting periods and in the
future.
The website of the Company will be regularly updated. Once
available, the Company's financial reports and annual reports will
be located under the "Financial Results and Reports" section of the
Company's website. Notices of the General Meetings of the Company
will be located under the "AGM and General Meetings" section of the
Company's website.
The results of voting on all resolutions at future general
meetings will be posted to the Company's website on a timely basis,
including any actions to be taken as a result of resolutions of
which votes against have been received by a significant proportion
of votes.
The Company intends to include a remuneration committee report
and audit committee report in its next annual report.
Audit Committee
The Audit Committee is responsible for assisting the Board's
oversight of the integrity of the financial statements and other
financial reporting, the independence and performance of the
auditors, the regulation and risk profile of the Group and the
review and approval of any related party transactions. The Audit
Committee may hold private sessions with management and the
external auditor without management present.
The Audit Committee is chaired by Christopher Dowling and its
other member is Robin Williams.
Remuneration Committee
The Remuneration Committee shall be responsible for considering
all material elements of remuneration policy, the remuneration and
incentivisation of Executive Directors and senior management and to
make recommendations to the Board on the framework for executive
remuneration and its cost. The role of the Remuneration Committee
is to keep under review the Company's remuneration policies to
ensure that the Company attracts, retains and motivates the most
qualified talent who will contribute to the long-term success of
the Company.
The Remuneration Committee is chaired by Robin Williams and its
other member is Christopher Dowling.
Share dealing
The Company has adopted, with effect from admission of its
shares to AIM, a share dealing policy regulating trading and
confidentiality of inside information for the Directors and other
persons discharging managerial responsibilities (and their persons
closely associated) which contains provisions appropriate for a
company whose shares are admitted to trading on AIM (particularly
relating to dealing during closed periods which will be in line
with the EU Market Abuse Regulation (No. 596/2014)). The Company
takes reasonable steps to ensure compliance by the Directors and
any relevant employees with the terms of that share dealing policy.
The Directors believe that the share dealing policy adopted by the
Board is appropriate for a company quoted on AIM. The Board
complies with Rule 21 of the AIM Rules for Companies relating to
directors' dealings and takes reasonable steps to ensure compliance
by the Company's "applicable employees" (as defined in the AIM
Rules for Companies).
Relations with shareholders
The Directors are always available for communication with
shareholders and all shareholders have the opportunity, and are
encouraged, to attend and vote at the Annual General Meetings of
the Company during which the Board will be available to discuss
issues affecting the Company. The Board stays informed of
shareholders' views via regular meetings and other communications
they may have with shareholders.
Statement of going concern
The financial statements of Stirling Industries plc group and
company have been prepared on a going concern basis.
As discussed in the strategic report, the Directors of Stirling
Industries plc are in advanced discussions concerning the Company's
first acquisition, and are seeking the necessary equity funding to
enable them to execute definitive legal documentation with respect
to the acquisition. The Company expects to be able to update the
market in the days leading up to the AGM to be held on 30 September
2019.
As part of the due diligence process for the acquisition, the
Directors have prepared detailed forecast models covering the
period to 31 December 2021. In the event that the equity and debt
necessary for the acquisition to proceed are raised and the
acquisition completes, based on these forecasts for the Group, the
Directors consider that the Group will have sufficient resources to
continue as a going concern for the period covered by those
forecasts.
In the event that the necessary funding is confirmed and
definitive legal documentation is signed, the acquisition will be
subject to the approval of the Company's shareholders at a general
meeting.
In accordance with the AIM Rules for Companies, if the Company
has not made an acquisition or has not substantially implemented
its Investment Policy within 18 months of admission to the AIM
market, which occurred on 6 March 2018, the Company is required to
seek shareholder approval for its Investment Policy at the next
Annual General Meeting of the Company and at each subsequent Annual
General Meeting until such time as there has been an acquisition or
the Investment Policy has been substantially implemented (such a
resolution being referred to hereafter as a 'Continuation
Vote').
Given that the acquisition, if it proceeds, will not have
completed before 6 September 2019, the Company will not have made
an acquisition within 18 months after admission of its shares to
the AIM market and the Company is therefore required to put a
Continuation Vote to its shareholders at the Annual General Meeting
to be held on the 30 September 2019. If, by that date, the
definitive legal documentation has not yet been signed, either i)
if the Continuation Vote is passed, the Directors will formulate a
proposal for investors to subscribe for new equity to allow the
Company to continue in fulfilment of its objectives for at least
the next 12 months from the date of approval of these financial
statements or ii) if the Continuation Vote is not passed, the
Directors will formulate a proposal for shareholders to vote for
either an amendment to the Investment Policy or a proposal to
return funds to shareholders.
In the event that the proposed acquisition does not complete,
the Directors have confirmed that, assuming no material additional
due diligence costs that may be required on new potential
acquisitions, sufficient cash resources exist to meet the running
costs of the Group and its financial obligations as they fall due
for a period of 12 months from the date of signing these financial
statements. However, in the event that the proposed acquisition is
not signed but the Investment Policy is approved, then in order to
undertake significant due diligence on new investment
opportunities, the Group would require additional equity funding to
pursue its current Investment Policy.
As set out above, the Group's continuation is dependent on
shareholder approval, whether to make an acquisition or to continue
to seek other opportunities. The reliance on shareholder approval
constitutes a material uncertainty that may cast significant doubt
on the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that would
result from the basis of preparation being inappropriate.
Internal control
The Board is responsible for establishing and maintaining the
Company's system of internal control and reviewing its
effectiveness. Internal control systems are designed to meet the
particular needs of the Company and the particular risks to which
it is exposed. The procedures are designed to manage rather than
eliminate risk and by their nature can only provide reasonable but
not absolute assurance against material misstatement or loss.
The Board has reviewed the Company's risk management and control
systems and believes that the controls are satisfactory given the
nature and size of the Company.
Financial risk profile
The Company's financial instruments comprise mainly of cash and
various items such as payables and receivables that arise directly
from the Company's operations. Details of the risks relevant to the
Group are included in the notes to the financial statements on page
15.
Political donations
The Group did not make any political donations or incur any
political expenditure during the year period.
Statement as to disclosure of information to auditors
So far as the Directors are aware, there is no relevant audit
information (as defined by Section 418 of the Companies Act 2006)
of which the Group's auditors are unaware, and each Director has
taken all the steps that he or she ought to have taken as a
Director in order to make himself or herself aware of any relevant
audit information and to establish that the Group's auditors are
aware of that information.
Auditors
The auditors, KPMG LLP, will be proposed for re-appointment at
the forthcoming Annual General Meeting.
Directors' indemnities
As permitted by the Articles of Association, the Directors have
the benefit of an indemnity which is a qualifying third party
indemnity provision as defined by Section 234 of the Companies Act
2006. The indemnity was in force throughout the last financial year
and is currently in force. The Company also purchased and
maintained throughout the financial year Directors' and Officers'
liability insurance in respect of itself and its Directors.
This confirmation is given and should be interpreted in
accordance with the provisions of s418 of the Companies Act
2006.
On behalf of the Board:
J E Curin
Director
2 September 2019
Statement of Directors' responsibilities
The directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under the AIM
Rules for Companies of the London Stock Exchange they are required
to prepare the Group financial statements in accordance with
International Financial Reporting Standards as adopted by the EU
(IFRSs as adopted by the EU) and applicable law and they have
elected to prepare the parent Company financial statements on the
same basis.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent Company and of
their profit or loss for that period. In preparing each of the
Group and parent Company financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable, relevant
and reliable;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the EU;
-- assess the Group and parent Company's ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
-- use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the parent Company and enable them
to ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report and a Directors'
Report that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Independent auditor's report to the members of Stirling
Industries plc
1. Our opinion is unmodified
We have audited the financial statements of Stirling Industries
PLC ("the Group") for the period from incorporation to 31 March
2019 which comprise the Consolidated statement of profit and loss
and other comprehensive income, Consolidated statement of financial
position, Consolidated statement of changes in equity, Consolidated
statement of cash flows, Company's statement of financial position,
Company's statement of changes in equity, Company's statement of
cash flows, and the related notes, including the accounting
policies in note 2.
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the parent Company's affairs as at 31
March 2019 and of the Group's loss for the period then ended;
-- the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
-- the parent Company's financial statements have been properly
prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the provisions of the Companies Act
2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
Overview
------------------------------- -------------------------
Materiality: GBP210,000
Group financial statements as 4.8% of loss before tax
a whole
Coverage 100% of loss before tax
Material uncertainty Going Concern
2. Material uncertainty related to going concern
Material Uncertainty The risk Our response
---------------------------- ----------------------------- ---------------------------------------------------------
Going concern Disclosure quality Assessing transparency
We draw attention Our procedures included:
to note 2 to the financial Group and parent Company * Assessing the completeness and accuracy of the
statements which indicates There is little judgement matters covered in the going concern disclosure by
that the Group's involved in the directors' critically assessing the disclosures in respect of
continuation conclusion that the going concern within the financial statements, wit
is dependent on shareholder risks and circumstances h
approval, whether described in note respect to our knowledge of the relevant facts and
to make an acquisition 2 to the financial circumstances developed during our audit work.
or to continue to statements represent
seek other opportunities. a material uncertainty
over the ability of
The reliance on shareholder the Group and Company
approval constitutes to continue as a going
a material uncertainty concern for a period
that may cast significant of at least a year
doubt on the group's from the date of approval
and the parent company's of the financial statements.
ability to continue
as a going concern. However, clear and
full disclosure of
Our opinion is not the facts and the
modified in respect directors' rationale
of this matter for the use of the
going concern basis
of preparation, including
that there is a related
material uncertainty,
is a key financial
statement disclosure
and so was the focus
of our audit in this
area. Auditing standards
require that to be
reported as a key
audit matter.
3. Other key Audit Matters: including our assessment of risks of
material misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. Except for the matter
described in the Material Uncertainty Related to Going Concern
section, we have determined that there are no other key audit
matters to communicate in our report.
4. Our application of materiality and an overview of the scope
of our audit
Materiality for the Group financial statements as a whole was
set at GBP210,000, determined with reference to a benchmark of
Group's loss before tax of GBP4,330,741, of which it represents
4.8%.
Materiality for the parent company financial statements as a
whole was set at GBP200,000, determined with reference to a
benchmark of loss before tax, of which it represents 4.6%.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding GBP10,000, in
addition to other identified misstatements that warranted reporting
on qualitative grounds.
The Group team performed the audit of the Group as if it was a
single aggregated set of financial information. The audit was
performed using the materiality levels set out above and was all
performed at the group's head office in London.
5. We have nothing to report on the other information in the
Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Strategic report and directors' report
Based solely on our work on the other information:
-- we have not identified material misstatements in the
strategic report and the directors' report;
-- in our opinion the information given in those reports for the
financial period is consistent with the financial statements;
and
-- in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
6. We have nothing to report on the other matters on which we
are required to report by exception
Under the Companies Act 2006, we are required to report to you
if, in our opinion:
-- adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent Company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by
law are not made; or
-- we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out above, the
directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Group and parent Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
8. The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members, as a body,
for our audit work, for this report, or for the opinions we have
formed.
Lynton Richmond (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
2 September 2019
Consolidated statement of profit or loss
for the Period 13 February 2018 to 31 March 2019
Notes Period 13 Feb
18 to 31 Mar
19
GBP
------------------------------------------- ------ --------------
CONTINUING OPERATIONS
Revenue -
Administrative expenses (2,165,285)
Other operating expenses (2,181,980)
OPERATING LOSS (4,347,265)
Finance income 5 16,524
LOSS BEFORE INCOME TAX 6 (4,330,741)
--------------
Income tax 8 -
LOSS FOR THE PERIOD (4,330,741)
--------------
Earnings per share expressed in pence per
share: 10
Basic (48.49)
Diluted (48.49)
All profits and losses arise from continuing activities.
There were no items of other comprehensive income in the
period.
Consolidated statement of financial position
As at 31 March 2019
Notes 31 Mar 19
GBP
------------------------------- ------ ------------
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 11 19,923
Investments 12 -
------------
19,923
------------
CURRENT ASSETS
Trade and other receivables 13 518,167
Cash and cash equivalents 14 4,003,555
------------
4,521,722
------------
TOTAL ASSETS 4,541,645
------------
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 16 89,310
Share premium 17 8,326,835
Retained earnings 17 (4,330,741)
TOTAL EQUITY 4,085,404
------------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 18 456,241
TOTAL LIABILITIES 456,241
------------
TOTAL EQUITY AND LIABILITIES 4,541,645
------------
Company statement of financial position
As at 31 March 2019
Notes 31 Mar 19
GBP
------------------------------- ------ ------------
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 11 19,923
Investments 12 1
------------
19,924
------------
CURRENT ASSETS
Trade and other receivables 13 519,432
Cash and cash equivalents 14 4,003,269
------------
4,522,701
------------
TOTAL ASSETS 4,542,625
------------
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 16 89,310
Share premium 17 8,326,835
Retained earnings 17 (4,328,263)
TOTAL EQUITY 4,087,882
------------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 18 454,743
TOTAL LIABILITIES 454,743
------------
TOTAL EQUITY AND LIABILITIES 4,542,625
------------
Consolidated statement of changes in equity
for the Period 13 February 2018 to 31 March 2019
Called up Share premium Retained Total equity
share capital earnings
GBP GBP GBP GBP
------------------------ --------------- -------------- ------------ -------------
Changes in equity
Issue of share capital 89,310 8,326,835 - 8,416,145
Total comprehensive
income - - (4,330,741) (4,330,741)
Balance at 31 March
2019 89,310 8,326,835 (4,330,741) 4,085,404
--------------- -------------- ------------ -------------
Company statement of changes in equity
for the Period 13 February 2018 to 31 March 2019
Called up Share premium Retained Total equity
share capital earnings
GBP GBP GBP GBP
------------------------ --------------- -------------- ------------ -------------
Changes in equity
Issue of share capital 89,310 8,326,835 - 8,416,145
Total comprehensive
income - - (4,328,263) (4,328,263)
Balance at 31 March
2019 89,310 8,326,835 (4,328,263) 4,087,882
--------------- -------------- ------------ -------------
Consolidated statement of cash flows
for the Period 13 February 2018 to 31 March 2019
Group Notes Period 13 Feb
18 to 31 Mar
19
GBP
-------------------------------------------- ------ --------------
Loss before income tax (4,330,741)
Depreciation charges 5,137
Finance income (16,524)
--------------
(4,342,128)
Increase in trade and other receivables (518,167)
Increase in trade and other payables 456,241
Cash absorbed by operations (4,404,054)
--------------
Cash flows from investing activities
Purchase of tangible fixed assets (25,060)
Interest received 16,524
Net cash from investing activities (8,536)
--------------
Cash flows from financing activities
Share issue 8,416,145
Net cash from financing activities 8,416,145
--------------
Increase in cash and cash equivalents 4,003,555
Cash and cash equivalents at beginning -
of period
Cash and cash equivalents at end of period 14 4,003,555
--------------
Company Notes Period 13 Feb
18 to 31 Mar
19
GBP
-------------------------------------------- ------ --------------
Loss before income tax (4,328,263)
Depreciation charges 5,137
Finance income (16,524)
--------------
(4,339,650)
Increase in trade and other receivables (518,167)
Increase in trade and other payables 454,742
Cash absorbed by operations (4,403,075)
--------------
Cash flows from investing activities
Purchase of tangible fixed assets (25,060)
Purchase of fixed asset investments (1)
Intercompany Loan (1,265)
Interest received 16,524
Net cash from investing activities (9,802)
--------------
Cash flows from financing activities
Amount introduced by directors 1
Share issue 8,416,145
Net cash from financing activities 8,416,146
--------------
Increase in cash and cash equivalents 4,003,269
Cash and cash equivalents at beginning -
of period
Cash and cash equivalents at end of period 14 4,003,269
--------------
Notes to the consolidated financial statements
for the Period 13 February 2018 to 31 March 2019
1. Statutory information
Stirling Industries plc is a public limited company, limited by
shares, registered in England and Wales. The company's registered
number is 11203731 and registered office address Level 1,
Devonshire House, Mayfair Place, London, England, W1J 8AJ.
2. Accounting policies
Basis of preparation
The financial statements of Stirling Industries plc and the
Group have been prepared in accordance with International Financial
Reporting Standards (IFRS) adopted for use in the European Union
and in accordance with the Companies Act 2006.
The financial statements have been prepared on the historical
cost basis except for certain financial instruments, liabilities
and share-based payment liabilities which are measured at fair
value.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of Stirling Industries plc (the Company) and its
subsidiary undertaking.
Subsidiaries are entities over which the Group has control. All
intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Going concern
The financial statements of Stirling Industries plc group and
company have been prepared on a going concern basis.
As discussed in the strategic report, the Directors of Stirling
Industries plc are in advanced discussions concerning the Company's
first acquisition, and are seeking the necessary equity funding to
enable them to execute definitive legal documentation with respect
to the acquisition. The Company expects to be able to update the
market in the days leading up to the AGM to be held on 30 September
2019.
As part of the due diligence process for the acquisition, the
Directors have prepared detailed forecast models covering the
period to 31 December 2021. In the event that the equity and debt
necessary for the acquisition to proceed are raised and the
acquisition completes, based on these forecasts for the Group, the
Directors consider that the Group will have sufficient resources to
continue as a going concern for the period covered by those
forecasts.
In the event that the necessary funding is confirmed and
definitive legal documentation is signed, the acquisition will be
subject to the approval of the Company's shareholders at a general
meeting.
In accordance with the AIM Rules for Companies, if the Company
has not made an acquisition or has not substantially implemented
its Investment Policy within 18 months of admission to the AIM
market, which occurred on 6 March 2018, the Company is required to
seek shareholder approval for its Investment Policy at the next
Annual General Meeting of the Company and at each subsequent Annual
General Meeting until such time as there has been an acquisition or
the Investment Policy has been substantially implemented (such a
resolution being referred to hereafter as a 'Continuation
Vote').
Given that the acquisition, if it proceeds, will not have
completed before 6 September 2019, the Company will not have made
an acquisition within 18 months after admission of its shares to
the AIM market and the Company is therefore required to put a
Continuation Vote to its shareholders at the Annual General Meeting
to be held on the 30 September 2019. If, by that date, the
definitive legal documentation has not yet been signed, either i)
if the Continuation Vote is passed, the Directors will formulate a
proposal for investors to subscribe for new equity to allow the
Company to continue in fulfilment of its objectives for at least
the next 12 months from the date of approval of these financial
statements or ii) if the Continuation Vote is not passed, the
Directors will formulate a proposal for shareholders to vote for
either an amendment to the Investment Policy or a proposal to
return funds to shareholders.
In the event that the proposed acquisition does not complete,
the Directors have confirmed that, assuming no material additional
due diligence costs that may be required on new potential
acquisitions, sufficient cash resources exist to meet the running
costs of the Group and its financial obligations as they fall due
for a period of 12 months from the date of signing these financial
statements. However, in the event that the proposed acquisition is
not signed but the Investment Policy is approved, then in order to
undertake significant due diligence on new investment
opportunities, the Group would require additional equity funding to
pursue its current Investment Policy.
As set out above, the Group's continuation is dependent on
shareholder approval, whether to make an acquisition or to continue
to seek other opportunities. The reliance on shareholder approval
constitutes a material uncertainty that may cast significant doubt
on the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that would
result from the basis of preparation being inappropriate.
Property, plant and equipment
Depreciation is provided at the following annual rates in order
to write off the cost less estimated residual value of each asset
over its estimated useful life.
Computer Equipment 33.33%
Fixtures & Fittings 33.33%
Financial instruments
A financial instrument is a contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity. Financial assets and liabilities
comprise non-derivative and derivative receivables and
payables.
Classification: Financial assets
The Group classifies financial assets in the following
measurement categories:
-- financial assets subsequently measured at fair value (either
through other comprehensive income or through profit or loss),
and
-- financial assets measured at amortised cost.
The Group has no financial assets subsequently measured at fair
value through other comprehensive income.
Classification depends on the business model used for managing
financial assets and on the characteristics of the contractual cash
flows involved.
All financial assets held by the Group, have contractual cash
flows representing solely the payment of principal and interest.
The Group holds all these assets to collect the contractual cash
flows. These assets are classified as held at amortised cost.
Classification: Financial liabilities
Financial liabilities other than derivatives are classified as
measured at amortised cost. The Group has no derivatives.
Measurement on initial recognition
A financial asset or financial liability is initially measured
at its fair value, plus, in the case of a financial asset or
financial liability not subsequently measured at fair value through
profit or loss, the transaction costs directly attributable to the
acquisition of the asset or issuing of the liability.
Transaction costs of financial assets measured at fair value
through profit or loss are recognised as an expense in the income
statement.
The fair value is defined as the amount for which an asset could
be exchanged, or a liability settled, between knowledgeable,
willing parties in an arm's length transaction.
Subsequent measurement
The subsequent measurement of debt instruments depends on the
classification of the financial asset or liability, described
above.
Financial assets and liabilities measured at amortised cost are
accounted for using the effective interest rate method. Interest
income and expense is reported as financial income and expense.
Gains or losses arising on the derecognition of the financial asset
or liability are recognised directly in profit or loss as other
operating income/expense together with foreign currency gains and
losses.
Impairment
Trade receivables and other receivables are measured and carried
at amortised cost using the effective interest method, less any
impairment.
The carrying amount is reduced by the expected lifetime losses.
No expected credit loss is assumed for VAT receivable balances. The
Group does not hold other financial assets for which an expected
credit loss would be material to record.
Taxation
Taxation, comprised of current and deferred tax, is charged or
credited to the income statement unless it relates to items
recognised in other comprehensive income or directly in equity. In
such cases, the related tax is also recognised in other
comprehensive income or directly in equity.
Current tax liabilities are measured at the amount expected to
be paid, based on tax rates and laws that are enacted or
substantively enacted at the balance sheet date.
Deferred tax is accounted for using the balance sheet liability
method and is calculated using rates of taxation enacted or
substantively enacted at the balance sheet date which are expected
to apply when the asset or liability is settled.
Deferred tax liabilities are generally recognised for all
taxable temporary differences. Deferred tax assets are only
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Deferred tax is not recognised in respect of
investments in subsidiaries and associates where the reversal of
any taxable temporary differences can be controlled and are
unlikely to reverse in the foreseeable future. Deferred tax assets
and liabilities are offset when there is a legally enforceable
right to offset and there is an intention to settle the balances on
a net basis.
Tax provisions are recognised when there is a potential exposure
under changes to International tax legislation.
Foreign currencies
Assets and liabilities in foreign currencies are translated into
sterling at the rates of exchange ruling at the statement of
financial position date. Transactions in foreign currencies are
translated into sterling at the rate of exchange ruling at the date
of transaction. Exchange differences are taken into account in
arriving at the operating result.
Hire purchase and leasing commitments
Rentals paid under operating leases are charged to the income
statement on a straight line basis over the period of the
lease.
Employee benefit costs
The group operates a defined contribution pension scheme.
Contributions payable to the group's pension scheme are charged to
the income statement in the period to which they relate.
Reserves
A description of each of the reserves follows:
Share Premium
This reserve represents the difference between the issue price
and the nominal value of shares at the date of issue, net of
related issue costs.
Retained Earnings
Net revenue profits and losses of the Company which are revenue
in nature are dealt with in this reserve.
Standards issued but not yet effective
At the date of authorisation of these financial statements, the
Group has not applied the following standards that have been issued
but are not yet effective. The Group has not adopted any new or
amended standards early.
IFRS 16 'Leases' will be adopted by the Group for the accounting
period beginning 1 April 2019. The effect of IFRS 16 will be to
recognise a lease liability and related right of use asset for
leases previously treated as operating leases. Total
non-cancellable operating lease commitments at 31 March 2019 were
GBP84,465 and the impact of the standard is not expected to be
material.
Other changes to standards, interpretations and amendments
issued but not yet effective are not expected to have a material
impact on the Group financial statements.
3. Employees and directors
GBP
----------------------- --------
Wages and salaries 846,423
Social security costs 101,449
Other pension costs 1,765
--------
949,637
--------
The average number of employees during the period was as
follows:
Number
------------------------- -------
Executive Directors 3
Non-Executive Directors 2
Staff 2
-------
7
-------
4. Directors remuneration
The emoluments of the individual Directors for the period are
included in wages and salaries and were as follows:
Salary Pension Total
GBP GBP GBP
------------------------- --------- --------- ---------
Executive directors
Blair Illingworth 162,500 - 162,500
Simon Thomas 162,500 - 162,500
Joanne Curin 259,470 739 260,209
--------- --------- ---------
Total 584,470 739 585,209
--------- --------- ---------
Non-executive directors
Christopher Dowling 32,500 - 32,500
Robin Williams 54,166 - 54,166
Total 86,666 - 86,666
--------- --------- ---------
The Executive Directors entered into service agreements with the
Company on 27 February 2018, which took effect on Admission. Under
the terms of these agreements, each Executive Director is paid the
salary which is subject to an annual review by the Company. They
are also eligible to participate in the Stirling Industries plc
Long-Term Incentive Plan and have been issued with Incentive
Shares. Until the Company has completed its first acquisition, the
Executive Directors will not be entitled to a bonus.
Pursuant to letters of appointment dated 28 February 2018, the
Non-executive Directors of the Company were appointed as of 1 March
2018 and on an ongoing basis. Each Non-executive Director is
entitled to an annual fee, including in respect of any service on
any Board committee. They are also eligible to participate in the
Stirling Industries plc Long-Term Incentive Plan and have been
issued with Incentive Shares.
As stated at the time of admission Stirling's Board will, at the
time of making the first acquisition, undertake an executive salary
benchmarking exercise for the purposes of determining what shall
constitute a competitive market salary and pension contribution for
the Executive Directors. This process will be conducted so as to
have specific regard to the following:
i. Peer companies of a similar structure and purpose, in
particular that of companies where the management of multiple
sizeable portfolio businesses is applicable
ii. The roles of the Executive Directors and the additional
duties performed as part of the longer term value creation strategy
of Stirling
iii. The experience of the Executive Directors
Save as disclosed in above, no Director, nor any of his or her
Connected Persons has at the date of this document, any interest,
whether beneficial or non-beneficial, in the share or loan capital
of the Company or any of its subsidiaries or any related financial
product referenced to the Ordinary Shares.
Long-term incentive plan
The Company has put in place incentive arrangements, through the
Stirling Industries plc 2018 Long-Term Incentive Plan, which only
reward participants if shareholder value is created, thereby
aligning the interests of the executive directors with those of the
Shareholders. The LTIP was adopted and approved by the Board on 27
February 2018. Under these arrangements, the Board has created a
class of Incentive Shares to be issued to participants in the LTIP,
which when issued shall have a "commencement date" that will arise
upon the date on which the Company makes its first acquisition and
a "trigger date" which shall be the fourth anniversary of that
date, being the "Performance Period" of the LTIP. The participant
will subscribe for the Incentive Shares at a subscription price
that will be paid in cash and which is equal to the present value
of the shares. The crystallisation of the Incentive Shares shall
occur in one of the following two ways: (1) the Incentive Shares
will convert into Ordinary Shares according to the formula set out
in the rights of the Incentive Shares contained in the Articles; or
(2) the participant will be entitled to the payment of a dividend
which will deliver to the participant value equivalent to the value
of the Ordinary Shares into which the Incentive Shares would (if
the Board has resolved not to pay a dividend) have converted. For
the purposes of this summary, the entitlement to the said
conversion or dividend shall be referred to as "crystallisation"
of, or in respect of, the Incentive Shares. The crystallisation
formula for the Incentive Shares will have a Performance Period of
four years, and will then be followed by a Holding Period of one
year (as further described below), which the Directors believe is
in line with best practice concerning the remuneration of
directors.
The potential reward under the LTIP is 10 per cent. of the
increase in index-adjusted value from and including the
commencement date to (but excluding) the trigger date, absent a
change of control or winding up of the Company.
5. Net finance income
GBP
-------------------------- -------
Finance income
-------
Deposit account interest 16,524
-------
6. Loss before income tax
The loss before income tax is stated after charging:
Notes GBP
--------------------------------------------- ------ ----------
Administrative income
Auditor remuneration 7 932,307
Executive Director's remuneration 4 585,209
Wages 165,761
Social security 91,920
Operating leases 19 88,257
Depreciation - owned assets 5,137
Other administrative expenses 296,694
----------
2,165,285
Advisory fees in connection with Investment
Policy 2,051,973
Non-Executive Director remuneration 4 86,666
Social security 9,529
Other operating expenses 33,812
----------
2,181,980
7. Auditors' remuneration
GBP
----------------------------------------------------- --------
Fees payable to the company's auditors for
the audit of the company's financial statements 23,430
Other services relating to general corporate
advice 33,527
Services relating to corporate finance transactions
entered into or proposed 875,350
--------
932,307
--------
Fees for the audit of the company's financial statements include
an audit fee for Stirling Group Holdings Limited of GBP3,430 which
is borne by and paid for by Stirling Industries plc.
8. Income tax
Analysis of tax expense
No liability to UK corporation tax arose for the period.
Unused tax losses on which no deferred tax has been recognised
as at 31 March 2019 was GBP4,314,796 and the potential tax benefit
will be GBP819,811. Deferred tax assets, including those arising
from temporary differences, are recognised only when it is
considered more likely than not that they will be recovered, which
is dependent on the generation of future assessable income of a
nature and of an amount sufficient to enable the benefits to be
utilised.
9. Loss of parent company
As permitted by Section 408 of the Companies Act 2006, the
income statement of the parent company is not presented as part of
these financial statements. The parent company's loss for the
financial year was (GBP4,328,263).
10. Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated using the weighted
average number of shares adjusted to assume the conversion of all
dilutive potential ordinary shares.
Reconciliations are set out below.
Earnings Weighted Per share
average amount
number of
shares
GBP p
----------------------------------- ------------- ------------ -----------
Basic EPS
Earnings attributable to ordinary
shareholders (4,330,741) 8,931,000 (48.49)
------------- ------------ -----------
Effect of dilutive securities - - -
Diluted EPS
------------- ------------ -----------
Adjusted earnings (4,330,741) 8,931,000 (48.49)
------------- ------------ -----------
11. Property, plant and equipment
Group Fixtures Computer Total
and fittings equipment
GBP GBP GBP
------------------- --------------- ------------ --------
COST
Additions 7,652 17,408 25,060
At 31 March 2019 7,652 17,408 25,060
--------------- ------------ --------
DEPRECIATION
Charge for period 543 4,594 5,137
At 31 March 2019 543 4,594 5,137
--------------- ------------ --------
NET BOOK VALUE
--------------- ------------ --------
At 31 March 2019 7,109 12,814 19,923
--------------- ------------ --------
Company Fixtures Computer Total
and fittings equipment
GBP GBP GBP
------------------- --------------- ------------ --------
COST
Additions 7,652 17,408 25,060
At 31 March 2019 7,652 17,408 25,060
--------------- ------------ --------
DEPRECIATION
Charge for period 543 4,594 5,137
At 31 March 2019 543 4,594 5,137
--------------- ------------ --------
NET BOOK VALUE
--------------- ------------ --------
At 31 March 2019 7,109 12,814 19,923
--------------- ------------ --------
12. Investments
Company Shares in
Group undertakings
GBP
------------------ ---------------------
COST
Additions 1
At 31 March 2019 1
---------------------
NET BOOK VALUE
---------------------
At 31 March 2019 1
---------------------
The group or the company's investments at the Statement of
Financial Position date in the share capital of companies include
the following:
Subsidiary
Stirling Group Holdings Limited
Registered office: Level 1, Devonshire House, Mayfair Place,
London W1J 8AJ
Nature of business: Holding Company
Holding
%
------------------ --------
Class of shares:
Ordinary 100.00
2019
GBP GBP
-------------------------------- -------- ----
Aggregate capital and reserves 1 1
-------- ----
Loss for the period (2,479) -
-------- ----
13. Trade and other receivables
Group Company
GBP GBP
------------------------------------ --------- ---------
Current:
Payments in advance 11,023 11,023
Amounts owed by group undertakings - 1,265
Other debtors 57,500 57,500
VAT 423,661 423,661
Prepayments 25,983 25,983
--------- ---------
518,167 519,432
--------- ---------
14. Cash and cash equivalents
Group Company
GBP GBP
--------------- ----------- -----------
Bank accounts 4,003,555 4,003,269
----------- -----------
15. Financial risk management
The Group is exposed to financial risks through its various
business activities. In particular, changes in interest rates
exchange rates can have an effect on the capital, financial and
revenue situation of the Group. In addition, the Group is subject
to credit risks.
The Group has adopted internal guidelines, which concern risk
control processes and which regulate the use of financial
instruments and thus provide a clear separation of the roles
relating to operational financial activities, their implementation
and accounting, and the auditing of financial instruments. The
guidelines on which the Group's risk management processes are based
are designed to ensure that the risks are identified and analysed
across the Group. They also aim for a suitable limitation and
control of the risks involved, as well as their monitoring.
The Group controls and monitors these risks primarily through
its operational business and financing activities.
Credit Risks
The credit risk describes the risk from an economic loss that
arises because a contracting party fails to fulfil their
contractual payment obligations. The credit risk includes both the
immediate default risk and the risk of credit deterioration,
connected with the risk of the concentration of individual risks.
For the Group, credit and default risks are concentrated in the
financial institutions in which it places cash deposits.
The Group's policy is to place its cash with UK clearing
banks.
Notwithstanding existing collateral, the amount of financial
assets indicates the maximum default risk in the event that
counterparties are unable to meet their contractual payment
obligations. The maximum credit default risk amounted to
GBP4,521,722 at the balance sheet date, of which GBP4,003,555 was
cash on deposit at banks. The VAT debtor was GBP423,661, and
remaining financial assets were GBP57,500.
Liquidity Risks
Liquidity risk is defined as the risk that a company may not be
able to fulfil its financial obligations. The Group manages its
liquidity by maintaining cash and cash equivalents sufficient to
meet its expected cash requirements to implement its investment
policy. In the event that there is a risk that the cash required to
follow the investment policy is greater than the Group's liquid
resources, the Group would seek confirmation of the continuation of
the policy and the raising of further financing at a shareholder
general meeting.
At 31 March 2019, the Group has cash on deposit of
GBP4,003,555.
Market Risks
Interest Rate Risks
Interest rate risks exist due to potential changes in market
interest rates and can lead to a change in the fair value of
fixed-interest bearing instruments, and to fluctuations in interest
payment for variable interest rate financial instruments.
The Group is exposed to interest rate risk on cash held on
deposit at banks. Interest income for the period to 31 March 2019
was GBP16,524. These accounts are maintained for liquidity rather
than investment, and the interest rate risk is not considered
material to the Group.
Currency Risks
The Group operates in the UK, incurs expenses predominantly in
sterling, and holds cash in sterling. The Group incurs some
expenditure in foreign currency when the investment policy requires
services to be obtained overseas. The foreign exchange risk on
these costs is not considered material to the Group.
16. Called up share capital
Allotted and issued:
Number Class Nominal value GBP
---------- --------- -------------- -------
8,931,000 Ordinary GBP0.01 89,310
8,931,000 Ordinary shares of GBP0.01 each were allotted at a
premium of GBP0.99 per share during the period.
17. Reserves
Group Retained Share premium Total
earnings
GBP GBP GBP
------------------------ ------------- --------------- -------------
Deficit for the period (4,330,741) - (4,330,741)
Cash share issue - 8,326,835 8,326,835
At 31 March 2019 (4,330,741) 8,326,835 3,996,094
------------- --------------- -------------
Company Retained Share premium Total
earnings
GBP GBP GBP
------------------------ ------------- --------------- -------------
Deficit for the period (4,328,263) - (4,328,263)
Cash share issue - 8,326,835 8,326,835
At 31 March 2019 (4,328,263) 8,326,835 3,998,572
------------- --------------- -------------
18. Trade and other payables
Group Company
GBP GBP
--------------------------------- --------- ---------
Current:
Trade creditors 202,128 202,129
Social security and other taxes 37,561 37,561
Pension 457 457
Other creditors 12,936 12,936
Incentive Shares 18,400 18,400
Accrued expenses 184,759 183,259
Directors' loan accounts - 1
--------- ---------
456,241 454,743
--------- ---------
19. Leasing agreements
Minimum lease payments fall due as follows:
Company Non- cancellable operating
leases
GBP
----------------- ----------------------------
Within one year 84,465
20. Contingent liabilities
At the year end the group has contingent liabilities of
GBP329,100 for advisory costs. These are contingent on the
completion of an acquisition.
21. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
Members of the Board of Directors are deemed to be key
management personnel. Key management personnel compensation for the
financial year is the same as the Director remuneration set out in
note 4 to the accounts.
There were no other transactions or balances with related
parties in the period.
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
FR FLLLBKKFFBBF
(END) Dow Jones Newswires
September 03, 2019 02:00 ET (06:00 GMT)
Grafico Azioni Stirling Industries (LSE:STRL)
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Grafico Azioni Stirling Industries (LSE:STRL)
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