REG - Kelso Group Holdings - Full-year results for 12 months ended 31 Dec 2023
30/04/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240430:nRSd4947Ma&default-theme=true
RNS Number : 4947M Kelso Group Holdings PLC 30 April 2024
30 April 2024
Kelso Group Holdings Plc
("Kelso" or the "Company")
Full-year audited results for the twelve months ended 31 December 2023
Kelso, the main market listed acquisition vehicle, is pleased to announce its
first full year audited results for the twelve month period ended 31 December
2023 ("FY23").
Highlights
· Strong first full year results, raising gross proceeds of £3.0m at
2.0p in February 2023, £3.0m at 2.5p in June 2023 and post the year-end in
January 2024, £1.9m at 3.0p
· Investment gain of £2.6m (realised: £1.2m, unrealised: £1.4m)
· IRR of 55%, exceeding 25% target
· Year-end portfolio of £8.1m across four investments, including cash:
THG (52.5%), NCC (20.6%), Angling Direct (12.3%) and TheWorks (11.6%)
· Profit before tax of £2.0m (FY22: loss of £290k)
· Experienced Board established, focused on unlocking trapped value in
the UK stock market
John Goold, CEO of Kelso, said:
"We are pleased to deliver Kelso's first set of financial results,
highlighting the successful implementation of its strategy to assist UK listed
companies unlock their true value. Kelso's Board is committed to the success
of the Company and continues to actively review new investment opportunities.
We would like to thank all shareholders for their support and remain excited
about the long-term future growth of Kelso."
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)
About Kelso
Kelso was established in November 2022 to identify, engage and unlock trapped
value in the UK stock market. Kelso's strategy is to invest in situations
where there is an anomaly between the intrinsic value and prospects of a
company and its stock market valuation. Kelso will, in particular, look for
situations where it believes the sum of the parts of a business is greater
than the current value.
Chairman's statement
It has been an encouraging first full year for Kelso. We have established an
experienced team and delivered a good return for investors as we continue to
build our brand and track record. Whilst the initial progress is pleasing, we
have a long way to go to meet our significant ambition.
The UK market remains full of opportunity for an active and focussed investor
like Kelso. UK valuations remain extremely low relative to other markets. Our
efforts to unlock shareholder value through supportive activism will, I hope,
reward investors with attractive investment returns over the medium term.
We are comfortable that our strategies for achieving strong returns in our
four core investments are well thought out following significant due
diligence, planning and our ongoing involvement. I hope during the course of
2024 investors will see the full benefits of the Kelso model. Boards of listed
companies in the UK have become increasingly inundated with bureaucracy,
sometimes at the expense of shareholder value, whilst privately owned
businesses are able to focus significantly more on shareholder value. Kelso
aims to bridge that divide by bringing those best practices from the private
equity arena into the public markets. Finally, I have been extremely impressed
by the quality of research on the investment proposals brought to the board
and also by the constructive engagement and challenge by the NEDs to the
Executive Directors.
During 2024, I hope Kelso will make further significant advances to create a
sustainable and robust business for the long term.
We are grateful to all our shareholders for their support.
Sir N. Knowles, Chairman
CEO's statement
In our first full year, we have successfully assembled an experienced team
with a deep knowledge of the UK small and mid cap market. The Directors own
20.5% of Kelso having participated in each funding round, investing nearly
£2m, and so are highly aligned with shareholders.
During the year, we initiated our portfolio with strategic stakes in THG Plc
('THG'), NCC Group Plc ('NCC'), TheWorks.co.uk Plc ('TheWorks') and Angling
Direct Plc ('Angling Direct'). We identified these investments as deep value
opportunities, each presenting substantial potential for growth and
shareholder accretion. As at the year end, our total investments were valued
at £8.12m before raising additional funds in January 2024 of £1.88m, the
maximum we could raise without the need for a prospectus.
Our investment strategy is centred on active and supportive engagement with
our portfolio companies and their management to help them significantly
enhance their market value.
The opportunity in the UK small and mid cap space remains significant as
detailed in a recent article in the Financial Times which highlighted UK
stocks as being 'staggeringly cheap'. The analysis showed that stocks on the
MSCI UK index were 47% cheaper than those on the US equivalent.
Review of 2023
Financial performance
The investment gain on our investment portfolio in our first year to 31
December 2023 was £2.58m, equating to an investment IRR of 54.6%, of which
£1.15m was realised and £1.43m was unrealised. Kelso made a profit pre-tax
and pre MIP provision of £2.14m. The profit pre-tax, post MIP, was £2.03m.
The provision for the MIP was £108k, which will vest after three years and
crystalise from year 3 to year 5 from inception, payable in Kelso shares. It
will reverse if the valuation of the investment portfolio falls prior to
payment. The net asset value per share at the end of 2023 was 2.4p before the
most recent fund raise in January 2024 at 3.0p.
In the year to 31 December 2023, the Board expenses have been kept to a
minimum, the Directors have drawn no salaries and there have been no property
costs. Our principal costs have been fund raising, listing, legal, accountancy
and audit fees.
During the year Kelso bought back 4.55m shares for cancellation at an average
price of 2.0p. Kelso will seek a renewed authority to buy back shares for
cancellation at the 2024 General Meeting.
Investments
As at 31 December 2023, Kelso had 4 core investments of £7.9m and net cash of
£0.24m totalling £8.1m, of which investment in THG represented £4.3m (52.5%
of the portfolio), NCC £1.7m (20.6%), Angling Direct £1.0m (12.3%) and
TheWorks £0.9m (11.6%), net cash £0.2m (3.0%).
THG
THG has three divisions: Beauty, Nutrition and e commerce fulfilment with
revenues to 31 December 2023 of £2.2bn with continuing adjusted EBITDA of
£120m. Consensus EBITDA to 31 December 2024 (source: company website) is
£151m with the market capitalisation being c.£900m as at 31 March 2024.
Within Beauty, it has three businesses: multi branded beauty and make up
portals including Lookfantastic.com with 8.5m active customers selling multi
branded products, an in-house and third-party manufacturing business and a
number of owned beauty brands. THG also has the largest Direct to Consumer
Nutrition business in the world selling an array of nutritional products
mostly under the brand MyProtein. Finally, within e-commerce fulfilment,
Ingenuity acts for in house and third party brands globally through a network
of logistics facilities. THG was floated in 2020 with a market capitalisation
of £5.4bn. Its value peaked in 2021 at almost 800p giving a market
capitalisation of c.£8bn. On IPO and post listing THG raised c.£1.7bn.
In January 2023, Kelso initially bought 5m shares in THG at 55p, subsequently
increasing this exposure to 8m shares, maintaining an average in price at
around 61p. In the second half of the year, as we began to diversify our
portfolio, we sold shares generating a realised gain of £0.9m. THG's share
price at the end of 2023 was 85p resulting in a further unrealised gain for
the year of £1.2m. Subsequent to Kelso's year end, THG's share price fell
back to 60p at which point we bought a further 1m shares at 60p to give us
6.0m ordinary shares in total.
Kelso's investment thesis is that the valuation of the sum of the parts of THG
is significantly greater than the market capitalisation. During 2023, we made
several statements supporting this view urging management to demonstrate this
value. The independent city broker Peel Hunt released an investment research
note on 22 March 2024 in which it set a price target of 141p but referred to a
potential value of 280p based on a sum of the parts.
We believe that each of either the Beauty or Nutrition division is worth at
least the current market capitalisation. We hope during 2024 that THG will
demonstrate this value through a strategic or corporate transaction relating
to at least one of its three businesses. Separately, we believe that one of
the most impactful and positive actions THG can implement is to move its
listing on the LSE from the standard list to the premium index. THG currently
has very few passive indexed holders and most UK active fund managers do not
have to consider an investment in THG as it is not in their performance
benchmark of the premium index. We hope that this change of index happens in
2024 either naturally through the FCA changes or that THG is proactive and
makes the change of listing itself.
As at 31 March 2024, our holding was 6.0m shares with an average in price of
61p, valued at £4.1m, which represented 46.4% of our portfolio.
On 10 April 2024, THG released its audited results for FY 2023 showing a
material improvement in EBITDA and confirming the positive trading momentum in
Q4 had continued into Q1, with particular strength in the Beauty division. On
23 April 2024, THG announced their Q1 statement showing overall revenue growth
of 4.5%, with a notable performance from Beauty of 11.1%.
NCC
NCC is a global leader in software escrow services with 57% of the Fortune 500
as clients and has a fast growing cybersecurity business. The company serves a
global client base of over 14,000 companies and had a market capitalisation as
at 31 March 2024 of £383m. The board suspended a strategic review of the
escrow business in 2023. Under new management, significant strides have been
made towards improving profitability and streamlining operations and Kelso's
belief is that the potential value of these two businesses significantly
exceeds the current market capitalisation.
Kelso bought its initial holding in October 2023 and at the year-end held 1.3m
shares at an average cost of 109p. NCC's share price appreciated to 129p by 31
December 2023, thus delivering an unrealised gain of £262k. Following Kelso's
fundraise in January 2024, we increased our investment in NCC purchasing
additional shares to bring our total holding to 1.5m shares. We remain
extremely pleased with the progress at NCC and continue to see significant
potential for further value creation.
NCC released its interim results in January 2024, which were reassuring, being
in line with expectations, and reported that its strategy was transforming the
business at pace. We are also pleased that the company has arranged two
capital markets briefings in the first half of this year for its two main
operating divisions. Management is focussed on maximising shareholder value
and appear to be executing the right strategy to achieve this.
As at 31 March 2024, our holding was 1.5m shares, with an average cost price
of 110.5p, valued at £1.9m, which represented 21.0% of the portfolio.
TheWorks.co.uk
TheWorks is the UK's leading family friendly retailer of value gifts, arts and
craft, toys, books and stationery products with a portfolio of 12 proprietary
brands. It operates a chain of over 500 retail stores based in the UK and
Ireland and reported revenue in the year to 30 April 2023 of £280m with
EBITDA of £9.0m. Its market capitalisation at the year-end was c.£15.0m.
As at 31 December 2023, Kelso's investment in TheWorks comprised 3.4m shares,
purchased at an average price of 33.5p. The shares were valued at 27.6p by
year end due to a reduction in expected profits for the year, resulting in an
unrecognised loss of £205k for our holding. Subsequent to the year end,
following Kelso's fund raise, we increased our holding to 3.7m shares,
representing 6% of TheWorks, resulting in an improved average purchase price
of 31.0p.
On 14 February 2024, John Goold and Mark Kirkland were appointed to the board
of directors of TheWorks. John and Mark do not sit on any committees but
instead focus purely on shareholder value. Kelso is paid a fee of £50,000 a
year by TheWorks for the services of John and Mark. This initiative reflects
our proactive approach to governance and investment management, aiming to
significantly enhance shareholder returns through strategic oversight and
guidance.
Kelso believes that The Works can return to previous historic EBITDA margins
of over 5% and maintain its revenue of approaching £300m. As at 31 March 2024
its market capitalisation remains at c.£15.0m.
As at 31 March 2024, our holding was 3.7m shares, with an average in price of
32.6p, valued at £1.0m, which represented 10.9% of the portfolio.
Angling Direct
Angling Direct was founded in 1986 and is the UK's largest fishing tackle
retailer. The business sells a broad range of own brand and third-party
fishing tackle through a network of 46 retail stores and its own website with
a revenue split of 55/45. Its retail outlets are typically out of town and
between 3,000 and 5,000 square feet in size. Angling Direct also operates one
store in Europe alongside a warehouse.
Angling Direct listed on AIM in 2018 with a market capitalisation of £27m,
supported by revenues of £21m and EBITDA of c.£1m. On IPO and subsequently,
the company has raised more than £32m, enabling expansion to 47 outlets.
Despite the fact that revenue has grown over four-fold to an expected £94m in
the current year to 31 January 2025, with EBITDA growing over three-fold to an
estimated £3.2m, its market capitalisation remains at a similar level to that
at the time of the IPO. At the 31 March 2024, the market capitalisation is
£28m and the business has net cash of £16m reported as at January 2024.
Kelso owned 2.3m shares in Angling Direct at the year-end which it bought at
an average price of 35p. At year-end, the shares were priced at 43p thus
producing an unrealised gain of £183k.
In April 2024, Kelso had an encouraging meeting with the chairman of Angling
Direct. We believe that Angling Direct should continue to extend its market
share in the UK by consolidating smaller operators, focussing on improving
gross margins through buying and pricing initiatives, and continuously review
the European expansion cautiously. At the same time, given the strength of its
balance sheet we believe they should consider at least a small buy back of
ordinary shares, to cancel or for the EBT.
As at 31 March 2024, our holding was 2.45m shares, with an average in price of
35p, valued at £0.9m, which represented 9.7% of the portfolio.
Outlook and portfolio as at the 31 March 2024
The Board of Kelso is pleased with its portfolio and its progress in the first
few months of 2024. The UK stock market remains challenging but we hope
initiatives like the new British ISA will help stimulate demand, in particular
for the UK's smaller companies which remain lowly valued. We also believe that
as inflation and interest rates ultimately fall the potential returns from UK
small and mid cap stocks will become more attractive.
As at 31 March 2024, Kelso's portfolio including cash was valued at £8.9m,
consisting of four core investments of £7.9m plus toe hold investments of
£0.5m and net cash of £0.6m, of which investment in THG represented £4.1m
(46.4% of the portfolio), NCC £1.9m (21.0%), TheWorks £1.0m (10.9%) and
Angling Direct £0.9m (9.7%), toe hold investments £0.5m (5.8%), with net
cash of £0.6m (6.2%). The main changes to the portfolio subsequent to the
January 2024 fund raise of £1.9m, are an increase in the THG holding of 1.0m
shares at 60p, an increase in the NCC holding of 200k shares at 122p, a small
increase in TheWorks of 300k shares at 25p and new toe hold investments.
The Board is committed to enhancing its position in the UK market by helping
companies and their investors unlock trapped value. In particular, we aim to
leverage our expertise to ensure that boards are doing everything possible to
maximise shareholder value. We believe that many of the UK's c.50 stocks that
left UK listed markets in 2023 were bought simply because they were
undervalued. The responsibility of public company directors to maximise value
has never been more critical. We believe that the current year will see our
desired minimum return of 25%. Patience as ever will be required but we are
confident that the intrinsic value of our investments will come through during
2024.
Financial Statements for the year ended 31 December 2023
Statement of Profit or Loss
For the year ended 31 December 2023
2023 2022
Note £ £
6 2,577,401 -
Revenue
Gross profit 2,577,401 -
(460,430) (287,857)
Administrative expenses
Profit/(loss) from operations 2,116,971 (287,857)
3,714 -
Finance income
(121,217) (1,467)
Finance expense
31,500 -
Income from fixed assets and dividends
Profit/(loss) before tax 2,030,968 (289,324)
11 (471,436) -
Tax expense
Total comprehensive income 1,559,532 (289,324)
Profit/(loss) for the year attributable to:
1,534,314 (289,324)
Owners of the parent
25,218 -
Non‑controlling interests
1,559,532 (289,324)
Total comprehensive income attributable to:
1,534,314 (289,324)
Owners of the parent
25,218 -
Non‑controlling interests
1,559,532 (289,324)
2023 2022
Note Pence Pence
Earnings per share attributable to the ordinary equity holders of the parent
Profit or loss
12 0.56 (0.61)
Basic
12 0.55 (0.61)
Diluted
Consolidated Statement of Financial Position
as at 31 December 2023
2023 2022
Note £ £
Assets
Non‑current assets
Current assets
14 6,722 9,006
Trade and other receivables
16 240,332 332,971
Cash and cash equivalents
15 7,868,400 -
Current asset investments
8,115,454 341,977
Total assets 8,115,454 341,977
Liabilities
Non‑current liabilities
26 274,913 -
Deferred tax liability
274,913 -
Current liabilities
17 305,527 44,198
Trade and other liabilities
305,527 44,198
Total liabilities 580,440 44,198
Net assets 7,535,014 297,779
Issued capital and reserves attributable to owners of the parent
18 3,129,750 475,250
Share capital
19 3,194,577 320,150
Share premium reserve
19 45,500 -
Capital redemption reserve
19 107,616 -
Other reserves
19 991,193 (497,621)
Retained earnings
7,468,636 297,779
20 66,378 -
Non‑controlling interest
TOTAL EQUITY 7,535,014 297,779
Consolidated Statement of Cash Flows
as at 31 December 2023
2023 2022
Note £ £
Cash flows from operating activities
1,559,532 (289,324)
Profit/(loss) for the year
Adjustments for
471,436 -
Tax charges
(3,714) -
Finance income
121,217 1,467
Finance expense
(1,432,303) -
Unrealised gains on current assets investments
22 107,616 -
Share‑based payment expense
823,784 (287,857)
Movements in working capital:
2,285 38,583
Decrease in trade and other receivables
64,805 7,690
Increase in trade and other payables
Cash generated from operations 890,874 (241,584)
Net cash from/(used in) operating activities 890,874 (241,584)
Cash flows from investing activities
(9,972,293) -
Payments to acquire current assets investments
3,536,196 -
Proceeds on sale of current assets investments
Net cash (used in)/from investing activities (6,436,097) -
Cash flows from financing activities
5,619,927 -
Issue of ordinary shares
41,160 -
Issue of A ordinary shares
(91,000) -
Purchase of ordinary shares for cancellation
(121,217) (1,467)
Finance costs
3,714 -
Dividends paid on shares classified as liabilities
Net cash from/(used in) financing activities 5,452,584 (1,467)
Net decrease in cash and cash equivalents (92,639) (243,051)
332,971 576,022
Cash and cash equivalents at the beginning of year
1
Cash and cash equivalents at the end of the year 240,332 332,971
Consolidated Statement of Changes in Equity
as at 31 December 2023
Share capital Share premium Capital redemption reserve Other reserves Retained earnings Total attributable to equity holders of parent Non‑controlling interest Total equity
£ £ £ £ £ £ £ £
475,250 320,150 - - (208,297) 587,103 - 587,103
At 1 January 2022
Comprehensive income for the year
- - - - (289,324) (289,324) - (289,324)
Loss for the year
- - - - (289,324) (289,324) - (289,324)
Total comprehensive income for the year
Contributions by and distributions to owners
At 31 December 2022 475,250 320,150 - - (497,621) 297,779 -
297,779
At 1 January 2023
475,250 320,150 - - (497,621) 297,779 - 297,779
Comprehensive income for the year
- - - - 1,534,314 1,534,314 25,218 1,559,532
Profit for the year
- - - - 1,534,314 1,534,314 25,218 1,559,532
Total comprehensive income for the year
Contributions by and distributions to owners
2,700,000 2,919,927 - - - 5,619,927 - 5,619,927
Issue of share capital
(45,500) (45,500) 45,500 - (45,500) (91,000) - (91,000)
Shares cancelled during the year
- - - 107,616 - 107,616 - 107,616
Share based payments
2,654,500 2,874,427 45,500 107,616 (45,500) 5,636,543 - -
Total contributions by and distributions to owners
At 31 December 2023
3,129,750 3,194,5777 45,500 107,616 991,193 7,468,636 25,218 7,493,854
Company Statement of Changes in Equity
as at 31 December 2023
Share capital Share premium Capital redemption reserve Retained earnings Total equity
475,250 - (497,621) 297,779
At 1 January 2023 320,150
Comprehensive income for the year
- - - (25,160) (25,160)
Profit for the year
- - - (25,160) (25,160)
Total comprehensive income for the year
Contributions by and distributions to owners
2,700,000 2,919,927 - - 5,619,927
Issue of share capital
(45,500) (45,500) 45,500 (45,500) (45,500)
Purchase of own shares
2,654,500 2,874,427 45,500 (45,500) 5,528,927
Total contributions by and distributions to owners
At 31 December 2023
3,129,750 3,194,577 45,500 (568,281) 5,801,546
Notes to the Financial Statements
For the year ended 31 December 2023
1. Reporting entity
Kelso Group Holdings PLC (the 'Company') is a public limited company
incorporated in the United Kingdom. The Company's registered office is at
Eastcastle House, 27 28 Eastcastle Street, London, United Kingdom, W1W 8DH.
These consolidated financial statements comprise the Company and its
subsidiary (collectively the 'Group' and individually 'Group companies'). The
principal activity of the parent company is that of a holding company and the
principal of Kelso Ltd is that of an investment company.
2. Basis of preparation
The Group's consolidated and the Company's individual financial statements
have been prepared in accordance with International Financial Reporting
Standards, International Accounting Standards and Interpretations as adopted
by the UK (collectively IFRSs). They were authorised for issue by the
Company's board of directors on 26 April 2024.
Details of the Group's accounting policies, including changes during the year,
are included in note 4.
The Company has taken advantage of the exemption available under section 408
of the Companies Act 2006 and elected not to present its own Statement of
comprehensive income in these financial statements.
In preparing these financial statements, management has made judgements,
estimates and assumptions that affect the application of the Group accounting
policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to estimates are recognised prospectively.
The areas where judgements and estimates have been made in preparing the
consolidated financial statements and their effects are disclosed in note 5.
2.1 Basis of measurement
The financial statements have been prepared on the historical cost basis
except for the following items, which are measured on an alternative basis on
each reporting date.
Items Measurement basis
Current assets investments Fair value
Level 1 relates to quoted prices in active markets for an identical asset. The
fair value of financial investments traded in active markets is based on
quoted market prices at the balance sheet date. A market is regarded as active
if quoted prices are readily and regularly available. and those prices
represent actual and regularly occurring market transactions on an arm's
length basis. The quoted market price used for financial assets held is the
quoted price at the balance sheet date.
2.2 Changes in accounting policies
i) New standards, interpretations and amendments effective from 1 January 2023
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice
Statement 2
The amendments aim to help entities provide accounting policy disclosures that
are more useful by replacing the requirement for entities to disclose their
'significant accounting policies' with a requirement to disclose 'material
accounting policy information` and adding guidance on how entities apply the
concept of materiality in making decisions about accounting policy
disclosures.
Definition of Accounting Policies - Amendments to IAS 8
The amendments clarify the distinction between changes in accounting estimates
and changes in accounting policies and the correction of errors. Also, they
clarify how entities use measurement techniques and inputs to develop
accounting estimates.
International Tax Reform - Pillar Two Model Rules - Amendments to IAS 12
In May 2023, the Board issued amendments to IAS 12, which introduce a
mandatory exception in IAS 12 from recognising and disclosing deferred tax
assets and liabilities related to Pillar Two income taxes.
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - Amendments to IAS 12.
The amendments clarify that where payments that settle a liability are
deductible for tax purposes, it is a matter of judgement (having considered
the applicable tax law) whether such deductions are attributable for tax
purposes to the liability recognised in the financial statements (and interest
expense) or to the related asset component (and interest expense). This
judgement is important in determining whether any temporary differences exist
on initial recognition of the asset and liability.
There are no new standards which have had a material impact in the annual
financial statements for the year ended 31 December 2023.
ii) New standards, interpretations and amendments not yet effective
The following standards and interpretations to published standards are not yet
effective:
New standard or interpretation EU Endorsement status Mandatory effective date (period beginning)
Amendment to IFRS 16 - Leases on sale and leaseback Endorsed 1 January 2024
Classification of Liabilities as Current or Non-current and Non-current Endorsed 1 January 2024
Liabilities with Covenants - Amendment to IAS 1
Disclosures: Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7 Not yet endorsed 1 January 2024
Lack of exchangeability - Amendments to IAS 21 Endorsed 1 January 2025
Sale or Contribution of Assets between an Investor and its Associate or Joint Deferred Retrospective application permitted
Venture - Amendments to IFRS 10 and IAS 28
The directors anticipate that the adoption of these Standards in future
periods will not have an impact on the results and net assets of the Company,
however, it is too early to quantify this.
The directors anticipate that the adoption of other Standards and
interpretations that are not yet effective in future periods will only have an
impact on the presentation in the financial statements of the Company.
3. Functional and presentation currency
These consolidated financial statements are presented in British pound
sterling, which is the Company's functional currency. All amounts have been
rounded to the nearest pound, unless otherwise indicated.
4. Material accounting policies
4.1 Cash and cash equivalents
Cash comprises cash in hand and deposits with financial institutions repayable
without penalty on notice of not more than 24 hours. Cash equivalents are
highly liquid investments that mature in no more than three months from the
date of acquisition and that are readily convertible to known amounts of cash
with insignificant risk of change in value.
4.1 Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities (including structured entities) controlled by the
Company and its subsidiaries. Control is achieved when the Company:
· has power over the investee;
· is exposed, or has rights, to variable returns from its
involvement with the investee; and
· has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control listed above.
When the Company has less than a majority of the voting rights of an investee,
it has power over the investee when the voting rights are sufficient to give
it the practical ability to direct the relevant activities of the investee
unilaterally. The Company considers all relevant facts and circumstances in
assessing whether or not the Company's voting rights in an investee are
sufficient to give it power, including:
· the size of the Company's holding of voting rights relative to
the size and dispersion of holdings of the other vote holders;
· potential voting rights held by the Company, other vote holders
or other parties;
· rights arising from other contractual arrangements; and
· any additional facts and circumstances that indicate that the
Company has, or does not have, the current ability to direct the relevant
activities at this time that decisions need to be made, including voting
patterns at previous shareholders' meetings.
Consolidation of a subsidiary begins when the Company obtains control over the
subsidiary and ceases when the Company loses control of the subsidiary.
Specifically, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated statement of profit or loss
and other comprehensive income from the date the Company gains control until
the date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed
to the owners of the Company and to the non-controlling interests. Total
comprehensive income of subsidiaries is attributed to the owners of the
Company and to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with the Group's
accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are eliminated in full
on consolidation.
Changes in the Group's ownership interests in subsidiaries that do not result
in the Group losing control over the subsidiaries are accounted for as equity
transactions. The carrying amounts of the Group's interests and the
non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiaries. Any difference between the amount by
which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and attributed
to owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is recognised in
profit or loss and its calculated as the difference between (i) the aggregate
of the fair value of the consideration received and the fair value of any
retained interest and (ii) the previous carrying amount of the assets
(including goodwill), and liabilities of the subsidiary and any
non-controlling interests. All amounts previously recognised in other
comprehensive income in relation to that subsidiary are accounted for as if
the Group had directly disposed of the related assets or liabilities of the
subsidiary (i.e. reclassified to profit or loss or transferred to another
category of equity as specified/permitted by applicable IFRSs). The fair value
of any investment retained in the former subsidiary at the date when control
is lost is regarded as the fair value on initial recognition for subsequent
account under IAS 39, when applicable, the cost on initial recognition of an
investment in an associate or a joint venture.
4.3 Revenue
Revenue consists of gains made on investment in listed companies shares.
Investment income recognised in net income for fair value investments consists
of realised gains and losses resulting from the disposal of, and unrealised
gains or losses resulting from the holding of trading investments. Income from
current assets investments consists of dividends receivable.
Realised gains and losses are recognised on the disposal of the trading
investments.
Unrealised gains and losses are measured based on the fair value of the
consideration received or receivable. Unrealised gains and losses are
recognised in the statement of profit and loss to the extent that it is
probable that the economic benefits or costs can be reliably measured and will
flow to the Company.
4.4 Dividend and interest income
Dividend income from investments is recognised when the shareholder's right to
receive payment has been established (provided that it is probable that the
economic benefits will flow to the Group and the amount of revenue can be
measured reliably).
Interest income form a financial asset is recognised when it is possible that
the economic benefits will flow to the Group and the amount of income can be
measured reliably. Interest income is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate applicable, which
is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset's net carrying amount on
initial recognition.
4.5 Financial instruments
Financial assets and financial liabilities are recognised when a Group entity
becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised immediately in
profit or loss.
4.6 Financial assets
All regular way purchases or sales of financial assets are recognised and
derecognised on a trade date basis. Regular way purchases or sales are
purchases or sales of financial assets that require delivery of assets within
the time frame established by regulation or convention in the marketplace.
All recognised financial assets are subsequently measured in their entirety at
either amortised cost or fair value, depending on the classification of the
financial assets.
4.7 Investments
The Group holds equity investments which are classified as trading, based on
the Group's intent to sell the security at the right price.
Trading securities are those investments which are purchased principally for
the purpose of selling them in the near term. Trading securities are carried
at fair value on the consolidated statements of financial condition with
changes in fair value recorded in the consolidated statements of income during
the period of the change.
4.8 Non-controlling interests
The Group attributes total comprehensive income or loss of subsidiaries
between the owners of the parent and the non-controlling interests based on
their respective ownership interests.
The Group includes one subsidiary, Kelso Ltd, with non-controlling interests
arising in 2023. The non-controlling interests, including the share options
represented 1.62% of the total shareholding. No dividends were paid in the
year.
4.9 Share options
The A Shares issued by Kelso Ltd represent equity settled share-based payment
arrangements under which the Group receives services as a consideration for
the additional rights attached to these equity shares, over and above their
nominal price.
Equity settled share-based payments to certain of the Directors and others
providing similar services are measured at the fair value of the equity
instruments at the grant date. The fair value is expensed, with a
corresponding increase in equity, on a straight-line basis from the grant date
to the expected exercise date. Where the equity instruments granted are
considered to vest immediately, the services are deemed to have been received
in full, with a corresponding expense and increase in equity recognised at
grant date.
The dilutive effect of outstanding share-based payments is reflected as share
dilution in the computation of diluted EPS.
5. Accounting estimates and judgements
5.1 Judgement
When preparing the 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.
Management Incentive Plan
The Group provides for the compensation to management arising from the
Management Incentive Plan as estimated by reference to the share price
performance and dividends in the year. The compensation is attached to rights
Kelso Limited will have the right to convert the compensation entitlement in
Kelso Ltd A shares into ordinary shares in Kelso Group Holdings Plc in years
3, 4 and 5. Management has applied judgement in forcasting the future growth
of the Group and its investments.
The directors believe that there were no other significant judgements required
with regard to the application of the Company's accounting policies in
preparing these financial statements.
5.2 Estimates and assumptions
The valuation of the investment portfolio is determined in accordance with the
Group's valuation principles. All listed investments are measured at fair
value and based on active market prices. Unrealised holding gains and losses
are recognised in other comprehensive income. On sale, net gains and losses
previously accumulated in other comprehensive income are transferred to
retained earnings. Deferred tax provision is made on the unrealised gain at
the year-end on the assumption that the gain will be realised and the Group
will continue to be profitable.
Estimates included within these financial statements relates to the Management
Incentive Plan (MIP). The directors believe that the performance and market
condition of the MIP will be met and a return hurdle between 8% and 15% p.a
will be achieved by year 3. The directors believe that none of these estimates
carry a significant estimation uncertainty, nor do they bear a significant
risk of causing material adjustments to the carrying amounts of assets and
liabilities within the foreseeable future.
6. Revenue
The following is an analysis of the Group's revenue for the year from
continuing operations:
2023 2022
£ £
1,145,098 -
Realised gains on investments
1,432,303 -
Unrealised gains on investments
2,577,401 -
7. Finance income and expense
Recognised in profit or loss
2023 2022
£ £
Finance income
Interest on:
‑ Bank deposits 3,714 -
Total interest income arising from financial assets measured at amortised cost
or FVOCI 3,714 -
31,500 -
Dividends received ‑ listed investments
Total finance income
35,214 -
Finance expense
121,217 -
Interest on Contract for Difference
- 1,467
Other interest payable
Total finance expense
121,217 1,467
Net finance expense recognised in profit or loss
(86,003) (1,467)
8. Expenses by nature
2023 2022
£ £
291,613 -
Professional fees
121,217 -
Interest on Contract for Difference
107,616 -
Share based payments costs
9. Auditor's remuneration
During the year, the Group obtained the following services from the Group's
auditor and its associates:
2023 2022
£ £
23,500 10,000
Fees payable for the audit of the Group's financial statements
10. Employee benefit expenses
Group and company
2023 2022
£ £
Employee benefit expenses (including directors) comprise:
Management Incentive Plan 107,616 -
107,616 -
Key management personnel compensation
Key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the Group, including
the directors of the Company and the Financial Controller of the Company.
2023 2022
£ £
Management Incentive Plan 107,616 -
107,616 -
11. Tax expense
11.1 Income tax recognised in profit and loss
2023 2022
£ £
Current tax
196,523 -
Current tax on profits for the year
196,523 -
Total current tax
Deferred tax expense
274,913 -
Origination and reversal of timing differences
Total deferred tax expense 274,913 -
471,436 -
The reasons for the difference between the actual tax charge for the year and
the standard rate of corporation tax in the United Kingdom applied to profits
for the year are as follows:
2023 2022
£ £
Profit/(loss) for the year 1,559,532 (289,324)
471,436 -
Income tax expense (including income tax on associate, joint venture and
discontinued operations)
Profit/(loss) before income taxes 2,030,968 (289,324)
507,742 (54,972)
Tax using the Company's domestic tax rate of 25% (2022:19%)
37,454 16,720
Expenses not deductible for tax purposes, other than goodwill, amortisation
and impairment
(8,801) -
Non‑taxable income less expenses not deductible for tax purposes, other than
goodwill and impairment
- 38,252
Dividends from UK companies
(56,259) -
Unrelieved tax losses carried forward
Marginal relief
(8,700) -
Total tax expense
471,436 -
Changes in tax rates and factors affecting the future tax charges
As from the 1 April 2023, the UK tax rate on profits above £50,000 p.a.
increased from 19% to 25% p.a with marginal relief available for profits in
between £50,000 and £250,000. In 2022, the Group had accumulated tax losses
of approximately £255,000 which was carried forward.
12. Earnings per share
(i) Basic earnings per share
2023 2022
Pence Pence
From continuing operations attributable to the ordinary equity holders of the 0.56 (0.61)
Company
Total basic earnings per share attributable to the ordinary equity holders of 0.56 (0.61)
the Company
(ii) Diluted earnings per share
2023 2022
Pence Pence
From continuing operations attributable to the ordinary equity holders of the 0.55 (0.61)
Company
Total basic earnings per share attributable to the ordinary equity holders of 0.55 (0.61)
the Company
(iii) Reconciliation of earnings used in calculating earnings per share
2023 2022
£ £
Profit/(loss) attributable to the ordinary equity holders of the Company used
in calculating basic earnings per share:
From continuing operations 1,534,314 (289,324)
1,534,314 (289,324)
Profit/(loss) from continuing operations attributable to the ordinary equity
holders of the Company:
Used in calculating basic earnings per share 1,534,314 (289,324)
Used in calculating diluted earnings per share 1,534,314 (289,324)
Profit/(loss) attributable to the ordinary equity holders of the Company used 1,534,314 (289,324)
in calculating diluted earnings per share
iv) Weighted average number of shares used as the denominator
2023 2022
Number Number
280,343,904 47,525,000
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
5,144,418 -
Options
285,488,322 47,525,000
Weighted average number of ordinary shares and potential ordinary shares used
as the denominator in calculating diluted earnings per share
On the 16 January 2024, Kelso Group Holdings Plc placed 62,594,999 shares
bringing the total number of shares in issue to 375,569,999.
13. Other non-current investments
Company
2023 2022
£ £
2,974,998 -
Investments in subsidiary companies
2,974,998 -
The company holds 100% of ordinary shares and voting rights in Kelso Ltd. The
registered office of Kelso Ltd is at Eastcastle House, 27 28 Eastcastle
Street, London, United Kingdom, W1W 8DH. The principal activity of Kelso Ltd
is that of an investment company.
14. Trade and other receivables
Group
2023 2022
£ £
6,722 5,697
Prepayments and accrued income
- 3,309
Other receivables
Total current portion 6,722 9,006
15. Current asset investments
Group
Listed investments
2023 2022
£ £
Additions 9,972,293 -
(3,536,196) -
Disposals
1,432,303 -
Fair value movement
7,868,400 -
16. Notes supporting statements of cash flows
Group
2023 2022
£ £
240,332 332,971
Cash at bank available on demand
Cash and cash equivalents in the statement of financial position
240,332 332,971
17. Trade and other payables
Group
2023 2022
£ £
40,678 -
Trade payables
12,743 12,743
Other payables ‑ tax and social security payments
- 9,173
Other payables
55,583 22,282
Accruals
109,004 44,198
Total financial liabilities, excluding loans and borrowings, classified as
financial liabilities measured at amortised cost
196,523 -
Corporation tax
Total trade and other payables 305,527 44,198
18. Share capital
Authorised
2023 2023 2022 2022
Number £ Number £
Shares treated as equity 317,525,000 3,175,250 150,000,000 1,500,000
Ordinary shares of £0.01 each
317,525,000 3,175,250 150,000,000 1,500,000
Issued and fully paid
2023 2023 2022 2022
Number £ Number £
Ordinary shares of £0.01 each
At 1 January 47,525,000 475,250 47,525,000 475,250
Shares issued 270,000,000 2,700,000 - -
Shares cancelled (4,550,000) (45,500) - -
As at 31 December 2023 312,975,000 3,129,750 47,525,000 475,250
On 24 January 2023, the Kelso Group Holdings PLC issued 150,000,000 ordinary
shares for cash for a value of £3,000,000 and on 24 March 2023 the Kelso
Group Holdings PLC issued an additional 120,000,000 ordinary shares for cash
for a value of £3,000,000. 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 represents one vote at the
shareholders' meeting.
During the year the year, Kelso Group Holdings PLC cancelled 4,550,000 of its
own shares for £91,000.
19. Reserves
Share premium
This reserve records the amount above the nominal value received for shares
sold, net of transaction costs.
Capital redemption reserve
The Capital redemption reserve is a non distributable reserve which represents
the nominal value of its own shares bought back by the Group.
Other reserves
Other reserves consists of the assessed value of share based payments for
services received which is yet to be converted into share options. Any amounts
in relation to share options that expire or are not exercised will be
transferred to distributable reserves.
Retained earnings
This balance represents the cumulative profit and loss made by the Group, net
of distributions to owners.
20. Non-controlling interests
2023 2022
£ £
25,218 -
Share of profit for the year
41,160 -
Non-controlling interests
66,378
-
21. Financial instruments - fair values and risk management
19.1 Financial risk management objectives
The Group only deals in basic financial instruments. In the current period the
Group's financial instruments comprise cash and cash equivalents and accruals
which arise directly from its operations. All financial assets and liabilities
are recognised at amortised cost. The Group does not use financial instruments
for speculative purposes.
Portfolio risk
The group invested in listed shares in the period. In doing so, the group's
portfolio of investment is exposed to market fluctuations. Management closely
monitors the market price of their investments to minimise adverse risk and
are monitoring the stock market for opportunities to diversify and reduce the
portfolio risk.
Contract For Differences risk
The group 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. All CFDs' were repaid before the
year end.
Financial Risk Factors
The Group's activities expose it to mainly liquidity risk. The Group's overall
risk management program focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the Company's financial
performance.
Liquidity Risk
The Group has to date financed its operations from cash reserves funded from
share issues, Management's objectives are now to manage liquid assets in the
short term through closely monitoring costs and raising funds through the
issue of shares.
The Group has no borrowing facilities that require repayment and therefore has
no interest rate risk exposure.
Capital Management Risk
The capital structure of the Group consists of debt, cash and cash equivalents
and equity attributable to holders of the parent, comprising issued share
capital and retained earnings. Consistent with others in the industry, the
Group reviews the gearing ratio to monitor the capital. This ratio is
calculated as the net debt divided by total capital. Net debt is calculated as
total borrowings less cash and cash equivalents. Total capital is calculated
as equity (including capital, reserves and retained earnings). This gearing
ratio will be considered in the wider macroeconomic environment.
Fair Values
Management have assessed that the fair values of cash and short-term deposits
and accruals approximate to their carrying amounts due to the short-term
maturities of these instruments.
22. Share based payments
20.1 Employee share option plan of the Group
Details of the employee share option of the Group
During the year, the board set up a management incentive plan ("MIP") in the
company's newly formed subsidiary, Kelso Ltd. The MIP is focussed on aligning
the participants with shareholders and investment returns. The principal terms
are as follows:
The MIP is linked to total shareholder return (share price performance plus
dividends). Participants of the MIP will hold A shares in Kelso Ltd.
Kelso Limited will have the right to convert to shares in Kelso Group Holdings
Plc, the value to be calculated as follows:
· Subject to achieving a return hurdle for Kelso shareholders of 8%
p.a., an entitlement to 15% of the value created
· Subject to achieving a return hurdle for Kelso shareholders of
15% p.a., an entitlement of 20% of the value created
· For returns between these hurdle rates, an entitlement of between
15% and 20% of value created calculated on a straight line
· Standard good/bad leaver provision
· MIP shares may vest a third each on the third, fourth and fifth
anniversaries. 50% of MIP shares, once converted into Kelso shares, will be
locked up for one year.
The MIP currently includes 6 participants who are entitled to a share of the
MIP based on the share price performance at the end of the vesting period of 5
years. The exercise period is on the third, fourth and fifth anniversary.
Employee services are measured indirectly with reference to the fair value of
the equity instruments granted and has been done by applying the modified
grant date method. The grant date fair value of the equity instruments has
been determined at the grant date on 14 April 2023 at 3.00p per share based on
the market value at that date, with no downward adjustment value expected.
The Board has estimated that the performance and market condition will be met
with an estimated growth of 11.51% p.a. The participants were entitled to
16.28% of the value created of £4,605,051 over the vesting period of 5 years.
In accordance to the modified grant date method, this would entitle the
participants to 2,682,352 share options at 31 December 2023, at the grant date
price of 3.00p with a value of £107,616. This was recognised in equity in the
accounts.
23. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on consolidation and are
not disclosed in this note. Details of transactions between the Group and
other related parties are disclosed below.
A Management Incentive Plan ("MIP") has been established, at a cost to the
participants of £41,160, in exchange for A shares in Kelso Ltd.
There are no personnel considered to be key management other than the
directors who received no remuneration other than compensation under the MIP
during the year.
In 2022, J C Green a shareholder, charged the Group £49,000 for consultancy
and fundraising services. All invoices were paid before the year end. There
was no such transaction in the year.
24. Control
There is no controlling party of the Group.
25. Events after the reporting date
Group
As mentioned in the Chairman's report, the Group completed a fund raise of
£1.88m net of expenses from an issue of ordinary shares in January 2024.
26. Deferred tax
Group Group Company Company
2023 2022 2023 2022
Number £ Number £
At the beginning of the year (274,913) - 56,259 -
- - - -
Arising in the year
(274,913) - 56,259 -
At end of year
Group Company
2023 2022
£ £
Tax losses 56,259 56,259
Unrealised investment gains (358,076)
26,904 -
Management Incentive plan
(274,913) 56,259
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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EANLNASSLEFARecent news on Kelso group
See all newsREG - Kelso Group Holdings - Confirmation of Accounts and Notice of AGM
AnnouncementREG - Kelso Group Holdings - Posting of Annual Report and Notice of AGM
AnnouncementREG - Kelso Group Holdings - Further investment in NCC Group Plc
AnnouncementREG - Kelso Group Holdings - Full-year results for 12 months ended 31 Dec 2023
AnnouncementREG - Kelso Group Holdings - Notice of Results
Announcement