TIDMKLSO
RNS Number : 8978N
Kelso Group Holdings PLC
28 September 2023
Kelso Group Holdings Plc ("Kelso" or the "Company")
A highly concentrated investor in UK small and mid-cap listed
companies. Driving value enhancement through active engagement
Interim results for the six months ended 30 June 2023
Kelso, the main market listed investment company, is pleased to
announce its consolidated unaudited interim results for the six
months ended 30 June 2023.
Highlights
-- Raised GBP6.0 million in two placings of GBP3.0 million each at 2.0p and 2.5p
-- NAV/share increased by 267% to 2.2p as at 30 June 2023 (0.6p 31 December 2022)
-- Significant net investment of GBP5.0 million at an average
cost of 63.1p, in THG plc ("THG"), resulting in a gross realised
and unrealised gain on investments of GBP1.76 million, a return of
c.35%
-- Net profit, after expenses and accrued tax and MIP costs, of GBP1.0 million
-- Post period end:
o sale of 1.5 million THG shares at a price of 105p, leading to
a gross profit of cGBP0.6 million, as we broaden the portfolio
o investment in TheWorks.co.uk plc ("TheWorks") of 2.9 million
shares at an average price of 33.4p. Current price is c.37.25p
Chairman's statement, Sir Nigel Knowles
I am delighted to have been appointed as Chairman to Kelso in
January this year, with David Charters' appointment as a
Non-Executive Director following soon after. I share the ambition
of the executive directors to build Kelso into a sizeable
investment vehicle operating in the listed UK small/mid cap arena
and firmly believe that there is a significant opportunity for
Kelso to achieve outsized returns by investing in a highly focussed
and select number of undervalued companies, creating value through
active engagement. The team applies a robust and rigorous approach
to analysis and due diligence to arrive at these high conviction
investments. With this concentrated focus, the team is able to
commit significant resource, working alongside key stakeholders, to
drive actions that enhance shareholder value.
The UK market, especially at the smaller end, has many examples
of extreme value. On any number of valuation metrics, the UK small
cap market trades at a significant discount to the US, the Rest of
the World, or even the UK large cap market, yet growth rates and
returns outperform over the longer term. I believe our latest
investment in TheWorks, at 1.2x EV/EBITDA (excluding IFRS 16 lease
liabilities), clearly demonstrates that, as we target annualised
returns of at least 25%, but aim for significantly in excess of
that. Furthermore, due to the UK value discrepancy, particularly
pronounced at the smaller end of the market, many quality UK
companies are the targets of private equity or corporate takeovers.
Kelso's aim is to capitalise on these opportunities.
In the medium term, we aim to grow our investment business which
is prepared to work actively with portfolio companies to help them
create value for their shareholders, by both challenging but also
supporting their strategies.
I would like to thank all our shareholders, many of whom are
successful business managers and founders. We really value
shareholder support, and I would like to thank them for this and
for the many investment ideas received to date.
Chief Executive Review, John Goold
I am pleased to report on Kelso's first interim results for the
six months to 30 June 2023. In this period, we announced an
expansion of the Board, completed two placings totalling GBP6.0
million, achieved a first half profit, net of accrued tax and
performance fees, of GBP1.0 million and increased our NAV/share
from 0.6p to 2.2p.
Our H1 profit and loss account shows a gross gain on investment
of GBP1.76 million of which GBP1.47 million was unrealised and
GBP0.29 million was realised. Following the post period end
disposal of 1.5 million THG shares at 105p we now hold 6.5 million
shares in THG, valued at the period end price of 81.5p. As we
release these interim results, we note that THG's share price is
c.76.2p (versus our average in price of 63.1p including financing),
however, as mentioned in a number of our previous announcements, we
are confident that the underlying inherent value will in time be
reflected in the share price.
The major cost relates to staff costs of GBP244k which is
entirely a non-cash provision for the long-term management
incentive plan, details of which have been outlined previously. The
MIP is aligned with shareholders and obviously if the value of our
investments, and ultimately shareholder returns, reduce then this
provision would reduce. The scheme crystallises 3-5 years after
inception and is fully paid in Kelso shares rather than cash. For
the period, the Directors received no salary and there were no
property costs; the board holds 21% of the share capital of Kelso.
The other costs of audit and accountancy of GBP61k, professional
costs of GBP59k and GBP37k of administrative costs are for the
ongoing running of the business which we continue to keep to a
minimum.
We made our inaugural investment in THG during the period,
holding 8.0 million shares at an average cost of 63.1p with a
mixture of cash and CFDs. We announced our investment thesis for
THG, highlighting the significant value, based on a sum of the
parts, that is, in our view, clearly inherent within the business.
We also set out in a public statement what we felt THG needed to do
to realise the value lost to shareholders since IPO. THG's share
price has certainly shown significant volatility, rising and
sinking over c.30-50% twice during the period. After our purchases
at an average price of 63.1p, the shares rallied to almost 120p
following an approach from Apollo, fell back to a low of 57p when
the approach was rejected, rallied again to a peak of 92p as
shareholders anticipated strong interim results and subsequently
fell to 67p (after 30 June 2023), when THG's interim results did
not fulfil hopes of or articulate their investment strategy. We
believe that management need to manage communications around the
high-level strategy and future structure of the business and hence
reduce such volatility, and work towards a break-up of the group
alongside a move to the Premium Index of the Official List. We are
supportive of the Board's improvements around governance and
believe reduction in the price of whey will lead to a much more
positive H2 trading position.
Post period end, we trimmed our position in THG as we look for
new investments and broaden the portfolio, by selling 1.5 million
shares at 105p generating a realised gain of c.GBP0.6 million being
a cash return on these shares of c.67%. Furthermore, we made our
second investment, in TheWorks, now holding 2.9 million shares at
an average price of 33.0p. TheWorks is the UK's leading family
friendly retailer of value gifts, arts and crafts, toys and books
with 12 of its own brands (c.25%-30% of revenue) through 525 retail
outlets. TheWorks was floated in July 2018 at a value of GBP100
million and a share price of 160p. Broker forecasts, for the year
to 30 April 2024, are for revenue of GBP294 million, EBITDA of
GBP10 million and net cash of GBP10 million (both on a pre-IFRS 16
basis). We invested at a market cap of 22.3 million, a valuation of
1.2x EV/EBITDA. We are supportive of the Board and their strategy
but believe that, on such a low valuation, the company should be
buying back their shares rather than paying dividends. Accordingly,
we have voted against the proposed final dividend at the company's
AGM on 4 October 2023 and will encourage the company to pursue a
buy back strategy. We voted in favour of all the other
resolutions.
Kelso will only invest in a handful of investments at this stage
of our development. With our second investment now announced, we
are building our third investment and aim to start investing in a
further company shortly. Although there is value at the smaller end
of the market, finding liquidity is often not straight forward and
there is a dearth of sellers which bodes well for future price
movements. Value opportunities with significant potential capital
growth, especially with some positive activist engagement, remain
plentiful. The Kelso team is working well together, and we are
receiving an increased number of investment ideas from our
shareholders, UK institutions and market contacts.
I would like to reiterate our Chairman's words of gratitude to
those many shareholders who have supported us and backed Kelso at
this early stage. We continue to welcome investment ideas for
situations where we can enable change in UK listed companies to
unlock trapped value.
Responsibility statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
(b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
Principal Risks and Uncertainties
The principal risks and uncertainties affecting the business
activities of the Company remain those detailed in the Annual
Report and Accounts 2022, a copy of which is available on the
Company website at www.kelsoplc.com.
Additional principal risks and uncertainties arising since the
year end are listed below:
Portfolio risk
The Company invested in listed shares in the period. In doing
so, the group's investments are not diversified and is exposed to
market fluctuations. Management closely monitors the market price
of their investment to minimise adverse risk and are monitoring the
stock market for opportunities to diversify the portfolio.
Contract For Differences risk
The Company invested in Contract For Differences (CFD) in the
period. Management is experienced in CFD trading and have chosen a
highly respected CFD provider to minimise counterparty risks or
delays.
The Board considers that these remain a current reflection of
the risks and uncertainties facing the business for the remaining
six months of the financial year.
For further information please contact:
Kelso Group Holdings plc +44 (0) 75 4033 3933
John Goold, Chief Executive Officer
Mark Kirkland, Chief Financial Officer
Jamie Brooke, Chief Investment Officer
Zeus (Broker) +44 (0) 20 3829 5000
Nick Cowles, Ed Beddows (Investment
Banking)
Ben Robertson (Corporate Broking)
Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2023 (Unaudited)
Note 6 months ended 6 months 12 months
30 June 2023 ended ended 31
30 June December
2022 2022
(unaudited) (unaudited) (audited)
GBP GBP GBP
Revenue
Gains on investments 5 1,760,358 - -
Administrative expenses
Staff costs (relating to
MIP) 13 (243,671) - -
Audit and accountancy fees (61,116) (10,750) (24,163)
Professional costs (59,398) (25,391) (159,972)
Other administrative expenses (36,938) (20,819) (103,722)
--------------- ------------ ----------
Profit /(Loss) from operations 1,359,235 (56,960) (287,857)
Finance expenses (63,447) - (1,467)
--------------- ------------ ----------
Profit /(Loss) before taxation 1,295,788 (56,960) (289,324)
Income tax (259,625) - -
--------------- ------------ ----------
Profit /(Loss) for the period 1,036,163 (56,960) (289,324)
Basic and diluted gain/(loss)
per share (pence) 6 0.33 (0.12) (0.61)
Basic and diluted earnings /(Loss)
per share from continuing operations
(pence) 0.33 (0.12) (0.61)
Consolidated Balance Sheet
As at 30 June 2023 (Unaudited)
As at As at As at
30 June 30 June 31 December
2023 2022 2022
Note (unaudited) (unaudited) (audited)
GBP GBP GBP
Assets
Current
Investments 9 6,520,000 - -
Trade and other receivables 8,497 92,441 9,006
Cash and cash equivalents 3,080,953 439,922 332,971
------------ ------------ ------------
Total assets 9,609,450 532,363 341,977
Liabilities
Current
Trade and other payables 10 (198,028) (2,220) (44,198)
Non-current
Other payables 11 (2,156,768) - -
Deferred tax liabilities (259,625) - -
Total liabilities (2,614,421) (2,220) (44,198)
Net assets 6,995,029 530,143 297,779
Equity
Share capital 12 3,175,250 475,250 475,250
Share Premium Reserve 3,240,077 320,150 320,150
Retained Profit/ (Loss) 538,542 (265,257) (497,621)
------------ ------------ ------------
Equity attributable to
owners of the Group 6,953,869 530,143 297,779
Non-controlling interest 13 41,160 - -
------------ ------------ ------------
Total equity 6,995,029 530,143 297,779
------------ ------------ ------------
Net asset value per share 2.2p 1.1p 0.6p
------------ ------------ ------------
Consolidated Changes in Equity
As at 30 June 2023 (Unaudited)
Share Share Retained Total NCI Total
Capital Premium Earnings attributable Equity
to owners
of parent
GBP GBP GBP GBP GBP GBP
At 1 January 2022 475,250 320,150 (208,297) 587,103 - 587,103
Comprehensive income
for the period
Loss for the period - - (56,960) (56,960) - (56,960)
---------- ---------- ---------- -------------- ------- ----------
Total comprehensive
income for the period - - (56,960) (56,960) - (56,960)
---------- ---------- ---------- -------------- ------- ----------
At 30 June 2022 475,250 320,150 (265,257) 530,143 - 530,143
Comprehensive income
for the period
Loss for the period - - (232,364) (232,364) - (232,364)
---------- ---------- ---------- -------------- ------- ----------
Total comprehensive
income for the period - - (232,364) (232,364) - (232,364)
---------- ---------- ---------- -------------- ------- ----------
At 31 December 2022 475,250 320,150 (497,621) 297,779 - 297,779
Comprehensive income
for the period
Profit for the period - - 1,036,163 1,036,163 - 1,036,163
---------- ---------- ---------- -------------- ------- ----------
Total comprehensive
income for the period - - 1,036,163 1,036,163 - 1,036,163
Transaction with
owners
Issue of Share Capital 2,700,000 2,919,927 - 5,619,927 41,160 5,661,087
---------- ---------- ---------- -------------- ------- ----------
Total transactions
with owners 2,700,000 2,919,927 - 5,619,927 41,160 5,661,087
---------- ---------- ---------- -------------- ------- ----------
At 30 June 2023 3,175,250 3,240,077 538,542 6,953,869 41,160 6,995,029
---------- ---------- ---------- -------------- ------- ----------
Consolidated Statement of Cash
Flows
As at 30 June 2023 (Unaudited) As at As at As at
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
GBP GBP GBP
Cash flows from operating activities
Profit/(Loss) for the period 1,036,163 (56,960) (289,324)
Unrealised gain on investments (1,472,133) - -
Realised gain on investment (288,225) - -
Increase in MIP provision 243,671 - -
Corporation/deferred tax 259,625 - -
Finance expenses paid 63,447 - 1,467
------------ ------------ ---------------------------------
(157,452) (56,960) (287,857)
Movement in working capital:
Decrease/(increase) in trade and
other receivables (2,800) (44,852) 38,583
Increase/ (Decrease) in trade and
other payables 157,140 (34,288) 7,690
------------ ------------ ---------------------------------
Cash generated from operations (3,112) (136,100) (241,584)
Net cash used in operating activities (3,112) (136,100) (241,584)
------------ ------------ ---------------------------------
Financing activities
Acquisition of investments (4,361,074) - -
Disposal of investments 1,514,528 - -
Issue of shares 5,619,927 - -
Issue of shares - non-controlling
interest 41,160 - -
Finance costs (63,447) - (1,467)
Net cash used in financing activities 2,751,094 - (1,467)
------------ ------------ ---------------------------------
Net cash (decrease)/increase in
cash and cash equivalents 2,747,982 (136,100) (243,051)
Cash and cash equivalents at the
beginning of period 332,971 576,022 576,022
Cash and cash equivalents at the
end of the period 3,080,953 439,922 332,971
============ ============ =================================
Notes to the interim results
1. Basis of preparation
Kelso Group Holdings Plc is a public limited company
incorporated in the United Kingdom under the Companies Act 2006
(registration number:11504186). The Company's ordinary shares are
admitted to trading on the main market of the London Stock
Exchange.
These interim financial statements for the six months ended 30
June 2023 should be read in conjunction with the financial
statements for the year ended 31 December 2022, which have been
prepared in accordance with International Financial Reporting
Standards ("IFRSs") as applied in accordance with the provisions of
the Companies Act 2006. The interim report and accounts do not
include all the information and disclosures required in the annual
financial statements.
2. Significant accounting policies
The interim report and accounts have been prepared in accordance
with IAS34 (Interim Financial Statements) and on the basis of the
accounting policies, presentation and methods of computation as set
out in the Company's December 2022 Annual Report and Accounts,
except for those that relate to new standards and interpretations
effective for the first time for periods beginning on (or after) 1
January 2023 and will be adopted in the 2023 annual financial
statements.
The financial information is presented in Pounds Sterling,
rounded to the nearest pound and has been prepared under the
historical cost convention.
The interim report and accounts do not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. These interim financial statements were approved by the Board
of Directors on 27 September 2023. The results for the six months
to 30 June 2023 and the comparative results for the six months to
30 June 2022 are unaudited. The figures for the year ended 31
December 2022 are extracted from the audited statutory accounts of
the Company for that period.
3. New accounting standards adopted at 1 January 2023
There are no significant pronouncements which have become
effective from 1 January 2023 that have a significant impact on the
Group's interim condensed consolidated financial statements.
4. Estimates and judgements
When preparing the Interim Financial Statements, management
undertakes a number of judgements, estimates and assumptions about
recognition and measurement of assets, liabilities, income and
expenses. The actual results may differ from the judgements,
estimates and assumptions made by management, and will seldom equal
the estimated results.
The judgements, estimates and assumptions applied in the Interim
Financial Statements, including the key sources of estimation
uncertainty, were the same as those applied in the Group's last
annual financial statements for the year ended 31 December
2022.
5. Revenue
Revenue represents realised and unrealised gains on
investments.
6 months 6 months 12 months
ended ended ended 31
December
2022
30 June 30 June (Audited)
2023 2022
(Unaudited) (Unaudited)
Realised gains 288,225 - -
Unrealised gains 1,472,133 - -
-------------- -------------- ------------
Total gains 1,760,358 - -
-------------- -------------- ------------
Realised gains were due to a switch in the THG holding from the
cash account to the CFD account.
6. Profit/(Loss) per share
Basic Profit/l(Loss) per share is calculated by dividing the
Profit/(Loss) attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the
period. There are currently no share options in issue.
6 months 6 months 12 months
ended ended ended 31
30 June 30 June December
2023 2022 2022
(unaudited) (unaudited) (audited)
Profit/(loss) from operations GBP 1,036,163 (56,960) (289,324)
Weighted average number of
shares 317,525,000 47,525,000 47,525,000
Basic and Diluted profit/(loss)
per share Pence 0.33 (0.12) (0.61)
============ ============ ===========
7. Taxation
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the reporting date. These
have been applied on both realised and unrealised profits.
Deferred tax is measured using tax rates and laws that have been
enacted or substantively enacted by the reporting date that are
expected to apply to the reversal of the timing difference.
Deferred tax liability has been provided in line with reported
profits in current reporting period net of past tax losses.
8. Events after the reporting period
After the period end, the Company disposed of 1.5 million THG
shares realising a profit of c.GBP0.6 million, a c.67% uplift, and
purchased 2.8 million shares in TheWorks at an average price of
33.4p, representing 4.7% of total issued share capital.
9. Investments
Fully paid Shares Total
shares acquired
under CFD
Additions 2,744,069 3,530,102 6,274,171
Disposal (1,226,304) - (1,226,304)
Fair value adjustments 736,525 735,608 1,472,133
-------------------- ------------------ -------------------
2,254,290 4,265,710 6,520,000
-------------------- ------------------ -------------------
10. Current liabilities 30 June 30 June 31 December
2023 2022 2022
Trade creditors 163,810 - 9,173
Other taxes and social security 29,440 - 12,743
Other creditors 4,778 2,220 22,282
-------- -------- ------------
198,028 2,220 44,198
-------- -------- ------------
11. Non-current liabilities 30 June 30 June 31 December
2023 2022 2022
Investment funding 1,913,097 - -
Other creditors 243,671 - -
Deferred tax 259,625 - -
---------- -------- ------------
2,416,393 - -
---------- -------- ------------
At 30 June 2023, the market value of investments under CFD was
GBP4,265,710, with leverage of GBP1,913,097. The equity value
of the CFD account was GBP2,352,613 with cash held in the margin
account of GBP2,005,000. Shares held under the CFD agreement
are secured by way of first fixed charge on all instruments and
related rights, including cash held in the linked share dealing
account.
12. Share capital
On 24 January 2023, the Company issued 150,000,000 ordinary shares
for cash for a value of GBP3,000,000 and on 24 March 2023 the
Company issued an additional 120,000,000 ordinary shares for
cash for a value of GBP3,000,000. The total number of ordinary
shares in issue at 30 June 2023 was 317,525,000. All the shares
have the same right to receive dividends and the repayment of
capital and each share represents one vote at the shareholders'
meeting on Kelso Group Holdings Plc.
13. Related Party Transactions
As stated in the Company's financial statements at 31 December
2022, a Management Incentive Plan ("MIP") has been established,
at a cost to the participants of GBP41,160, in exchange for A
shares in Kelso Ltd and based on the results for the six months
to 30 June 2023, a provision in relation to the MIP of GBP243,671
was made for the period.
Other than the shares relating to the MIP, Kelso Ltd is a wholly
owned subsidiary of Kelso Group Holdings Plc and acts as the
main trading entity of the Group.
14. Distribution of Interim Reports
A copy of the interim report will be available shortly on the
Group's website ( www.kelsoplc.com )
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END
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September 28, 2023 02:00 ET (06:00 GMT)
Kelso (LSE:KLSO)
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