MARECHALE CAPITAL PLC

Earnings Release • Aug 24, 2020

National Storage Mechanism | Additional information

RNS Number : 8899W

Marechale Capital PLC

24 August 2020

24 August 2020

Marechale Capital plc

("Marechale" or the "Company")

Consolidated Financial Statements for the year ended 30 April 2020

Marechale is pleased to announce its final results for the year ended 30 April 2020.

Chairman's statement

Marechale Capital is an established corporate finance firm providing strategic, M&A and advisory services primarily to hospitality and renewable companies in the UK and Europe.  Marechale also finances earlier stage and growth capital companies from its family office, private investor and private equity relationships.

A year ago we took the difficult decision to significantly reduce our cost base in order to deliver an annual profit and we were on-track to doing so before the Covid lockdown stopped most commercial activity, and specifically investments. Traditionally we earn a significant proportion of our annual revenues in the last quarter, much of it tax driven growth investments, which affected our March and April revenues, and meant that we missed our target. Our business, which is predominantly hospitality advisory and growth finance has since been affected by the coronavirus.

Marechale's revenues for the year of £477,000 (2019: £512,000) were slightly down on last year, but because of lower third-party commissions, we delivered a higher Gross Profit of £422,000 (2019: £400,000).

Administrative expenses were reduced to £447,000 from £688,000 in 2019.

Whilst the Company was not profitable for the year as hoped, the business delivered an operating loss of £25,000, significantly better than the £288,000 loss in 2019.

Investments in two client companies realised gains of £19,350 which were offset by the need to write off £20,850 for an investment now in liquidation, producing a net overall loss of £1,500 compared to £22,000 of gains in 2019.

The Company has raised equity and debt funding for a number of new and existing clients. This included funding for the telecommunications business Fast2fibre and raising capital for The Forest Road Brewing Company for their new brewery. Funding for existing clients include leading gastropub group Brewhouse & Kitchen, and the craft spirits distiller Oslo Distillery to finance their further development and product launch into the United States. Additionally, the Company has completed advisory work for a wide range of consumer brand, hospitality and renewable energy businesses.

In accordance with IFRS9 Equity Investments and Warrants are valued at 'fair value', typically at a price that reflects their last funding round, and underlying movement in fair value is reflected through the Profit and Loss Account. Given our Investments and Warrants are held, broadly speaking, in the Renewables and in the Hospitality sectors, where under Lockdown the former continued to trade but the latter were closed, with potential well publicised difficulties to re-open, the Board was forced to consider re-valuing the latter at 30 April 2020, rather than two months earlier in healthier times. The Board determined to make a 50% 'Covid 19' downward fair value adjustment of £11,000 (2019: 'non Covid' of £30,000) against all our Hospitality Investments and Warrants in the sincere hope that these may be recovered this time next year.

The net effect is a loss for the year before tax of £37,500 compared to a £298,000 loss in 2019.

The balance sheet value has reduced during the year to £159,000 (2019: £179,000) which is more fully explained in the Statement of Changes in Equity.

Finally, it will come as no surprise that current trading is very challenging as there is concern and lack of confidence in the Hospitality sector, nonetheless the Directors are confident that markets will recover. While there is increasing optimism that the worst of Covid is over, there is significant uncertainty as to the timing and extent of any recovery.

Mark Warde-Norbury

Chairman

21 August 2020

For further information please contact:

Marechale Capital Mark Warde-Norbury / Patrick Booth-Clibborn	Tel: +44 (0)20 7628 5582
Cenkos Securities Katy Birkin	Tel: +44 (0)20 7397 8900

Consolidated Income Statement
Year ended					30 April	30 April
				Notes	2020	2019
					£	£
Revenue				3	476,743	511,691
Cost of sales					(54,587)	(111,323)
Gross profit					422,156	400,368
Administrative expenses				4	(447,063)	(688,171)
Operating loss					(24,907)	(287,803)
Finance expense					(251)	(149)
Other losses					(12,372)	(8,357)
Net loss in respect of associate					-	(1,708)
Loss before tax					(37,530)	(298,017)
Taxation					-	-
Loss for the year					(37,530)	(298,017)
Loss per share				5	Pence	Pence
	- Basic				(0.07)	(0.52)
	- Diluted				(0.07)	(0.52)

Consolidated Statement of Comprehensive Income
Loss for the year					(37,530)	(298,017)
Total recognised comprehensive loss
(all attributable to owners of the parent)					(37,530)	(298,017)

Consolidated Balance Sheet
As at						30 April	30 April
						2020	2019
					Notes	£	£
Current assets
Investment in associate						-	12,330
Equity investments at fair value through profit and loss						52,036	75,479
Warrants at fair value through profit and loss						881	1,550
Trade and other receivables						61,990	105,206
Cash and cash equivalents						157,232	148,600
Total current assets						272,139	343,165
Total assets						272,139	343,165
Current liabilities
Trade and other payables						(113,517)	(164,028)
Total current liabilities						(113,517)	(164,028)
Net assets						158,622	179,137
Equity
Capital and reserves attributable to equity shareholders
Share capital					6	461,449	461,449
Reserve for own shares						(50,254)	(50,254)
Reserve for share based payments						28,953	11,939
Retained losses						(281,527)	(243,997)
						158,622	179,137

Statement of Changes in Equity
			Share capital	Reserve for fair value	Reserve for own shares	Reserve for share based payments	Retained earnings
			£	£	£	£	£
Balance at 30 April 2018			461,449	81,826	(50,254)	-	(27,806)
Total comprehensive income
Loss for the financial period			-	-	-	11,939	(298,017)
Transfer to P&L Reserves per IFRS#9			-	(81,826)	-	-	81,826
Total comprehensive income			-	(81,826)	-	11,939	(216,191)
Balance at 30 April 2019			461,449	-	(50,254)	11,939	(243,997)
Total comprehensive income
Loss for the financial period			-	-	-	17,014	(37,530)
Rounding							(1)
Total comprehensive income			-	-	-	17,014	(37,531)
Balance at 30 April 2020			461,449	-	(50,254)	28,953	(281,528)

Consolidated Cash Flow Statement
Year ended						30 April	30 April
						2020	2019
						£	£
Net cash from operating activities
Loss before tax						(37,530)	(298,017)
Provision for/(reversal of) share based payments						17,014	11,939
Reverse losses on fair value investment through profit and loss						10,880	30,100
Reverse losses/(gains) on disposal of investments						1492	(21,743)
Reverse provision for losses in Associate Company						-	1,708
Reverse net interest expense						251	149
Operating cash flows before movements in working capital						(7,893)	(275,865)
Movement in working capital
Decrease in receivables						43,216	95,969
Increase/(decrease) in payables						(50,511)	42,684
						(7,295)	138,653
Cash flow from operating activities						(15,188)	(137,212)
Investment activities
Interest received						45	46
Expenditure on equity investments						(7,601)	(12,700)
Proceeds from sale of equity investments through  profit and loss						31,672	103,483
Proceeds from sale of warrants through profit and loss						-	76,838
Cash flow from investing activities						24,116	(167,667)
Financing
Interest paid						(296)	(195)
Cash flow from financing activities						(296)	(195)
Net increase/(decrease) in cash and cash equivalents						8,632	30,260
Cash and cash equivalents at start of the financial year						148,600	118,340
Cash and cash equivalents at end of the financial year						157,232	148,600
Increase/(decrease) in cash and cash equivalents						8,632	30,260

Notes to the financial statements

Year ended 30 April 2020

1. General information

Marechale Capital plc is a company registered in England and Wales under the Companies Act 2006. The Group's principal activities are the provision of advice and broking services to companies. The financial statements are presented in pounds sterling, the currency of the primary economic environment in which the Group operates.

The Group's registered office and principal place of business is 46 New Broad Street, London, EC2M 1JH.  The Company's registered number is 03515836.

2. Basis of preparation

a. Going concern

In establishing the applicability of the going concern basis, the Directors have made enquiries as to the financial resources of the Group. The Company does not benefit from reliable repetitive income, and instead relies on deal-driven transactions whose timing is very difficult to predict accurately. Whilst the Directors are confident that they will generate enough income on an annual basis in order to continue as a going concern, they have 'alternative strategies' in place, e.g. informal arrangements with creditors and/or the ability to sell both Equity investments and/or Warrants should the need arise to overcome any potential short-term cash flow shortage. In order to preserve cash during Covid, as with many other businesses, the Company has benefitted from both the formal arrangement with HMRC whereby payment of monthly PAYE/NI has been deferred to post lockdown restrictions, and through the Company's existing bankers, Barclays, via HMG backed guarantees. On 6 July 2020 the Company drew down in full a £50,000 'Bounce Back Loan' not repayable until July 2021 over 5 years in 60 monthly instalments of £833. Under the terms of the loan, no repayments or interest is payable for the first year, with an applicable interest rate of 2.5% thereafter and there

Furthermore the Company benefitted from the HMRC Furlough Scheme relating to those staff who were unable to work during lockdown.

The short-term market response to the effect of Covid, has on the one hand, been to temporarily suspend investors' activity , but on the other, to encourage pre-investment corporate finance activity by clients in the anticipation of post-Covid opportunities. While there is increasing optimism that the worst of Covid is over, there is significant uncertainty as to the timing and extent of any recovery.

Whilst the Directors recognise that there is significant material uncertainty around going concern as a result of the current economic uncertainty and 2020 trading results, the accounts have still been prepared on a going concern basis, which is supported by confidence over the ability to raise sufficient funds through the issue of further equity should the need arise.

b. Basis of accounting

These financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union, IFRS Interpretations Committee ('IFRS IC') interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements have been prepared on the historical cost basis as modified by the valuation of certain financial instruments.

3. Business and geographical segments

The directors consider that there is only one activity undertaken by the Group, that of corporate finance advisory. All of this activity was undertaken in the United Kingdom.

					2020	2019
					£	£
Broking commissions and fees earned from corporate finance					476,743	511,691

4. Administrative expenses

					2020	2019
					£	£
Administrative expenses					430,047	636,432
Termination of Director's contract					-	39,800
Share based payments					17,014	11,939
					447,063	688,171

5. Earnings per share

							Earnings	Earnings
							2020	2019
							£	£
Based on a loss of							(37,529)	(298,017)
							No. shares	No. shares
Weighted average number of Ordinary Shares in issue for the purpose of basic earnings per share							57,681,151	57,681,151
Weighted average number of Ordinary Shares in issue for the purpose of diluted earnings per share							57,681,151	57,681,151

6. Share capital

Issued at 30 April 2019 and 2020, Ordinary Shares of 0.8p			461,449

Options (number/weighted average exercise price ('WAEP'))

	Options (number)	WAEP (p)
Outstanding and exercisable at 1 May 2018	-	-
Granted within the period	5,768,115	1.12p
Outstanding and exercisable at 30 April 2019	5,768,115	1.12p
Granted within the period	-	-
Outstanding and exercisable at 30 April 2020	5,768,115	1.12p

The options granted in 2019 generated a cost of £17,014 (2019: £11,939).

7. Other matters and Market Abuse Regulation (MAR) Disclosure

The financial information for the year ended 30 April 2020 set out in this announcement does not constitute statutory financial statements, as defined in section 434 of the Companies Act 2006, but is based on the statutory financial statements for the year then ended. The auditors have issued an unqualified opinion on these financial statements; their report included the following statement:

Material uncertainty relating to Going concern

We draw attention to the Going Concern section of the Significant Accounting Policies of the Group financial statements which explains that the Group has unpredictable revenue due to the nature of Corporate Finance advisory and the reliance upon deal-driven transactions. The impact of Covid-19 and Government restrictions to reduce the spread of the pandemic has had a significant impact on the wider economy and specifically the hospitality and leisure sector which is one of the Group's main sector specialisms. Should the Group not be able to generate sufficient revenue to meet its operating costs it will generate losses as was the case during the years ended 30 April 2020 and 2019. Should losses continue to be generated at a similar levels without additional capital being raised from the shareholders then the company will likely breach its capital resources requirement with the FCA and not be able to meet its liabilities as they fall due for the foreseeable future.

Whilst the Directors believe sufficient revenues will be generated or additional capital provided by the shareholders these conditions along with other matters discussed in note 2 to the financial statements indicate the existence of a material uncertainty which may cast significant doubt over the Group's and Parent Company's ability to continue as a going concern.

Our opinion is not modified in respect of this matter.

Emphasis of matter - valuation of investments

In forming our opinion on the financial statements, which is not modified, we have considered the fair value adjustment made by the directors on the investments held. As discussed in Note 12, a downward fair value adjustment of 50% against the Hospitality investments and warrants was made to the total of £11,000. This is an estimate based on the Directors' assessment of the impact of COVID-19 on the industry and the resulting valuations.

Our opinion is not qualified in respect of this matter.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us 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 Group 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.

Copies of the Company's full audited Annual Report and Financial Statements for the year ended 30 April 2020 will be delivered to the Registrar of Companies and sent to shareholders in due course, and will be available on the Company's website: www.marechalecapital.com.

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

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