TIDMECAP
RNS Number : 4274O
Elephant Capital PLC
28 May 2015
For Immediate Release 28 May 2015
ELEPHANT CAPITAL PLC
INTERIM RESULTS FOR Six months ended 28 February 2015
Elephant Capital plc (AIM: ECAP), the India focused private
equity company, announces its results the six months ended 28
February 2015.
Key Points:
-- Net asset value per share of 36p as at 28 February 2015 (31 August 2014: 35p)
-- Post 28 February 2015:
- Remaining holding in Nitco Limited sold for GBP 0.16 million.
- 5,000,000 ordinary shares bought back for aggregate consideration of GBP 1.0 million.
Commenting, Chairman Vikram Lall, said: "We continue our efforts
to dispose of our remaining unlisted investments in the interests
of shareholders, and are conscious of the depletion of NAV arising
from the ongoing operating costs of the Company. Further
significant returns of capital are dependent on further investment
realisations."
Copies of the Interim Report will be available for download from
Elephant Capital's website at www.elephantcapital.com shortly.
For further information please contact:
+44 (0) 7739
Vikram Lall, Chairman 800 223
Gaurav Burman +44 (0) 20 7389
Elephant Capital plc 1770
Sue Inglis
Cantor Fitzgerald Europe (Nominated +44 (0) 20 7894
Adviser & Broker) 8016
Chairman's Statement
Results and portfolio changes
As at 28 February 2015, Net Asset Value ("NAV") was GBP 7.26
million or 36p per share, compared to GBP 7.10 million or 35p per
share as at 31 August 2014. The increase in NAV reflects a GBP 0.25
million increase in the valuation of the unlisted investment
portfolio (including an exchange gain of GBP 0.24 million), a GBP
0.08 million increase in the listed investment portfolio (including
an exchange gain of GBP 0.02 million) and the excess of expenses
over income of GBP 0.17 million.
No new investments were made during the period. Since the period
end there was a disposal of the remaining listed investment, which
is detailed below.
Unlisted investment portfolio
Air Works India (Engineering) Private Limited ("Air Works") has
been performing satisfactorily and exhibited operational strength
during the period. It has been valued at GBP 3.33 million based on
an independent third party valuation compared to GBP 3.05 million
at 31 August 2014.
Amar Chitra Katha Private Limited ("ACK") has not performed in
line with its budget. Accordingly, its valuation in INR terms
decreased marginally based on an independent third party valuation
However, in GBP terms its valuation increased to GBP 1.25 million
at 28 February 2015, compared to GBP 1.2 million at 31 August 2014,
due to favourable exchange rate movements.
The investment in Global Cricket Venture Limited ("GCV") has
been valued at GBP 0.38 million based on the estimated net asset
value of GCV as attributable to Elephant Capital's shareholding as
at 28 February 2015 compared to GBP 0.47 million at 31 August
2014.
Full details of the Company's unlisted investments are included
in the Investment Manager's review.
Listed investment portfolio
Post 28 February 2015, Elephant Capital sold its remaining
holding in Nitco Limited ("Nitco") for GBP 0.16 million.
Return of capital
In March 2015, 5,000,000 ordinary shares were successfully
tendered for cancellation at a price of 20p per share. Following
the cancellation of these shares, 15,117,057 ordinary shares remain
in issue.
Board changes
Vincent Campbell has been appointed as director and company
secretary in the place of Elizabeth Tansell who resigned with
effect from 7 May 2015. The Board would like to thank Elizabeth
Tansell for her significant contribution during her tenure as a
director and company secretary.
Auditor's review of half yearly report
In order to save costs the Board has dispensed with the
auditor's review of the Company's half yearly report.
Strategy
We continue our efforts to dispose of our remaining unlisted
investments in the interests of shareholders, and are conscious of
the depletion of NAV arising from the ongoing operating costs of
the Company. Further significant returns of capital are dependent
on further investment realisations.
Vikram Lall
27 May 2015
Investment Manager's Review
Introduction
Elephant Capital plc ("Elephant Capital" or the "Company") holds
its investments in businesses that are established or operating
primarily in India through its Mauritian-based special purpose
vehicles ("SPVs") Tusk Investments 1 Limited and Tusk Investments 2
Limited (individually the "SPV", collectively the "SPVs").
The SPVs are managed by Elephant Capital LLP (the "Investment
Manager"), a limited liability partnership which in turn is advised
by Elephant India Advisors Private Limited, of which the senior
executives in India are all members.
Investment strategy
The Company was established to execute a value-based strategy in
both public and private businesses. As previously announced,
Elephant Capital will not make any new investments and has adopted
a policy of actively managing and realising its current portfolio
and returning surplus cash to its shareholders.
Investment activity
During the six months period to 28 February 2015, the Investment
Manager made no new investments. The focus was on managing the
existing portfolio and trying to create liquidity to return cash to
shareholders.
Post the period end, Elephant Capital sold its remaining holding
in Nitco for GBP 0.16 million. The sale of Nitco resulted in a
realised loss of GBP 0.41 million (being the excess of original
cost of GBP 0.57 million over the sale proceeds of GBP 0.16
million).
The Investment Manager continues to focus on helping GCV pursue
its claims for the alleged wrongful termination of its agreement by
the Board of Control for Cricket in India ("BCCI"). Further, GCV
continues to be plagued by various other legal actions and is
involved in litigation with various parties in the UK and the US.
While this litigation continues there is no visibility on an
exit.
Given this activity Elephant Capital now holds only four
unlisted investments: Air Works, ACK, GCV and Obopay, the last of
which has no value. The Investment Manager is focused on finding
ways to realise Air Works and ACK over the medium term as these
businesses mature. No further investments in any of these companies
are envisaged.
Portfolio review
Air Works India (Engineering) Private Limited
Air Works is one of the leading independent providers of
Aviation Maintenance, Repair and Overhaul (MRO) services in India,
Aircraft Paint and Refinishing in Europe and Aircraft Management
Services in Dubai. Founded in 1951, Air Works has successfully
transformed itself from a family run business focused on providing
maintenance services to business aircraft into a professionally
managed organisation providing a full suite of services to
customers across Aircraft Management, Business and General Aviation
MRO, Aircraft Paint and Refinishing, Commercial Aviation MRO,
Avionics and Parts Distribution. It is India's largest and only
EASA Certified Business Aviation MRO company.
The company has been performing satisfactorily. On a
consolidated basis, Air Works had a profitable closing to its
financial year FY2015 with revenue of approximately USD 105 million
and an EBITDA of around USD 12 million. The revenue for FY2015 was
lower than the previous year by circa 5% due to the impact on
pricing and volumes of increased competition in the repainting
market in Europe. However, the EBITDA on the consolidated basis has
shown an improvement from 10% last year to circa 12% in FY2015 on
account of improving operating efficiencies.
The company successfully completed a rights issue in April 2015
(Elephant Capital did not participate in the rights issue). The
rights issue raised USD 7.72 million at a pre-money valuation of
USD 125 million (the pre-money value at which Company originally
invested in May 2011 was USD 50 million). Air Works has also
negotiated circa USD 37 million of debt funding from its banking
partners. This capital will be used to repay some existing loans
and the rest will be earmarked for funding the acquisition targets
in the pipeline referred to below.
Air Works has also been evaluating various acquisition
opportunities to fuel the company's growth via inorganic expansion
and has identified targets in Aviation Auditing, Valuation, and
Advisory services, and is in advanced stages of negotiating the
deals.
Amar Chitra Katha Private Limited
ACK is one of the leading children's media companies in India,
with a catalogue of over 750 print and digital products and 25
major (and 50+ minor) proprietary characters with India-wide
recognition. ACK's origins are in children's books and comics,
including "Amar Chitra Katha", the number one children's comic book
series dating back to 1967. Other key brands include Tinkle, the
number one English magazine for children. ACK has also entered into
a licensing arrangement with the National Geographic Society, US
for publishing their magazines in India.
ACK missed its revenue target in the year FY2015 by about 33%,
with full year revenue of INR 599 million vs. the management target
of INR 889 million, and FY2014 revenue of INR 694 million. Overall
gross margin of the business improved by 400 bps over FY2014, but
this increase was more than offset by 14% year on year revenue
decline and 5% increase in fixed costs leading to an increase in
EBITDA loss to INR 37.8 million, vs. previous year loss of INR 8.2
million and budget forecast of profit of INR 13.7 million. ACK's
management attributes much of this to lack of working capital in
the business, which, according to their estimates, has been
responsible for a loss of circa INR 70 million of topline. ACK's
management has been working on measures to optimise costs, and on
the divestment of non-core businesses such as Brainwave and Karadi
Tales. It has also been working on optimising the revenue mix
towards higher margin businesses, as a result of which the core
publishing business and advertisement sales revenue contribution
has grown to 53% of total sales (46% in FY2014), while the share of
IBH Books and Magazines Distributors has declined to circa 40%.
In keeping pace with changing media consumption habits, and the
increasing share of digital media, the company launched mobile apps
across multiple platforms allowing consumers to purchase and access
ACK products on their devices. The launch of digital titles
increase the focus on online sales as digital media in India is
expected to grow exponentially over the next 20 years.
Elephant Capital invested GBP 3.2 million in ACK in a primary
transaction in June 2010. In April 2011, it announced a further
investment of GBP 0.9 million in a second funding round, led by
Future Consumer Enterprise Limited ("FCEL") (previously known as
Future Ventures India Limited). Elephant Capital's stake in ACK was
22% post this investment. ACK subsequently bought back 70,457 of
its own shares representing 15% of existing paid up capital of the
company, at the purchase price FCEL and Elephant Capital paid in
the second round. Neither Elephant Capital nor its co-investors
participated in this buy-back and hence Elephant Capital's
shareholding in the business increased to 26%. In the rights issue
conducted in ACK's last financial year, Elephant Capital declined
the opportunity to invest because the Company is in the process of
returning capital to its shareholders. Its holding in ACK therefore
declined to 20%.
Global Cricket Ventures Limited, Mauritius
In November 2009, Elephant Capital announced an investment of
GBP 5.95 million in a primary transaction in GCV, a
cricket-focused, digital media and broadcasting company. At the
time of its investment, GCV was the exclusive licensee of key
internet and mobile rights to the Indian Premier League ("IPL") and
key internet rights to the Champion's League Twenty20 ("CLT20")
cricket tournaments.
In mid-2010, the BCCI announced that it would be rescinding its
global media contracts with World Sports Group ("WSG") from whom
GCV sub-licensed many of its own cricket-related rights. Further,
WSG terminated GCV's contractual rights relating to the IPL. This
obviously dealt a fatal blow to the business prospects of GCV, as
GCV lost its key rights (which were re-awarded to other parties).
As a result of WSG's termination, GCV entered into active
discussions to settle liabilities towards its own sub-licensees and
has made significant progress on such settlements.
GCV views the BCCI's termination of its contractual rights to be
wrongful and has commenced an arbitration process with the BCCI in
order to reach a resolution of the current situation.
GCV has been plagued by litigation on several fronts. This
unfortunately continues with GCV embroiled in litigation in both
the US and the UK. The Investment Manager has been working through
this and aiding GCV and hopes that these matters can be brought to
a resolution over the next 12 months.
The investment has been valued at GBP 0.38 million based on the
Investment Manager's best estimate of the net asset value of GCV
attributable to the Company's shareholding in GCV.
As at 28 February 2015, the portfolio was as follows:
Valuation
28 February Gain/(loss)
Listed/ Cost 2015 over cost
Company Sector unlisted GBP'000 GBP'000 GBP'000
-------------------------------------------- ----------------------- ---------- -------- ------------ -----------
Air Works India (Engineering) Private
Limited Aviation Unlisted 2,922 3,336 414
Amar Chitra Katha Private Limited Media Unlisted 4,085 1,255 (2,830)
Global Cricket Ventures Limited Media Unlisted 5,949 382 (5,567)
Obopay Inc. Mobile banking service Unlisted 1,239 - (1,239)
Nitco Limited Building materials Listed 569 180 (389)
-------------------------------------------- ----------------------- ---------- -------- ------------ -----------
Total 14,764 5,153 (9,611)
--------------------------------------------------------------------------------- -------- ------------ -----------
The valuations of the above are in accordance with International
Financial Reporting Standards and International Private Equity and
Venture Capital Association guidelines. All investments are held at
fair value through profit or loss and are recognised at the
transaction date on initial recognition.
Realisations
1.05 million shares of Nitco Limited have been sold during the
period for GBP 0.25 million.
Principles of valuations of investments
Principles of valuation of unlisted investments
Investments are stated at amounts considered by the Directors to
be a reasonable assessment of their fair value, where fair value is
the amount at which an asset could be exchanged between
knowledgeable, willing parties in an arm's length transaction.
All investments are valued according to one of the following
bases:
-- Cost (less any provision required)
-- Earnings multiple
-- Price of recent transaction
-- Discounted cash flows or earnings (of underlying businesses)
-- Net assets
-- Sale price
Investments are valued at cost for a limited period after the
date of acquisition. Thereafter, investments are valued on one of
the other bases described above and the earnings multiple basis of
valuation will be used unless this is inappropriate, as in the case
of certain asset-based businesses.
Under the discounted cash flow technique the projected cash
flows from business operations are discounted at the "Weighted
Average Cost of Capital" to the providers of capital to the
business. The sum of the discounted value of such free cash flows
is the value of the business.
When valuing on an earnings multiple basis, EBITDA or net profit
of the current year will normally be used. Such profits will be
multiplied by an appropriate and reasonable earnings multiple
(EBITDA multiple or net profit multiple, as the case may be). This
is normally related to comparable quoted companies, with
adjustments made for points of difference between the comparator
and the company being valued, in particular for risks, size,
illiquidity, earnings growth prospects and surplus assets or excess
liabilities.
Where a company has incurred losses, or if comparable quoted
companies are not primarily valued on an earnings basis, then the
valuation may be calculated with regard to the underlying net
assets and any other relevant information, such as the pricing for
subsequent recent investments by a third party in a new financing
round that is actively being sought, then any offers from potential
purchasers would be relevant in assessing the valuation of an
investment and are taken into account in arriving at the
valuation.
Where appropriate, a marketability discount (as reflected in the
earnings' multiple) may be applied to the investment valuation,
based on the likely timing of an exit, the influence over that
exit, the risk of achieving conditions precedent to that exit and
general market conditions.
In arriving at the value of an investment, the percentage
ownership is calculated after taking into account any dilution
through outstanding warrants, options and performance-related
mechanisms.
Principles of valuation of listed investments
Investments are valued at bid-market price or the conventions of
the market on which they are quoted.
Valuation review procedures
Valuations are initially prepared by the Investment Manager with
the help of an independent third party valuer. These valuations are
then reviewed and approved by the Directors.
Events after the reporting date
Subsequent to the period end, the Group sold its remaining
holding in Nitco for GBP 0.16 million.
Further details on events after the reporting date are disclosed
in the note 14 to the financial statements.
Gaurav Burman
On behalf of Elephant Capital LLP
27 May 2015
Unaudited condensed consolidated statement of profit or loss and
other comprehensive income
Audited
Unaudited Unaudited twelve
six months six months months
ended ended ended
28 February 28 February 31 August
2015 2014 2014
Notes GBP'000 GBP'000 GBP'000
Revenue
Investment and other
income 34 85 117
Net profit on financial
assets at fair value
through profit or
loss 7 333 480 508
Other income
Net foreign exchange
gain 30 - -
------------ ------------ ----------
397 565 625
Expenses
Management fees 8 (110) (108) (212)
Other expenses (125) (246) (432)
Profit/(loss) before
finance costs and
tax 162 211 (19)
------------ ------------ ----------
Finance costs (2) (2) (3)
Profit/(loss) before
tax 160 209 (22)
------------ ------------ ----------
Income tax expense - - -
Profit/(loss) after
tax 160 209 (22)
Other comprehensive
income for the period/year - - -
------------ ------------ ----------
Total comprehensive
profit/(loss) for
the period/year 160 209 (22)
------------ ------------ ----------
Profit/(loss) and
total comprehensive
profit/(loss) attributable
to:
Owners of the parent 160 209 (22)
Profit/(loss) per
share - (basic and
diluted) 9 0.8p 0.8p (0.1p)
(The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.)
Unaudited condensed consolidated statement of financial
position
Unaudited Unaudited Audited
as at as at as at
28 February 2015 28 February 2014 31 August 2014
Notes GBP'000 GBP'000 GBP'000
ASSETS
Non-current
Financial assets at fair value through profit or loss 10 4,973 4,815 4,718
----------------- ----------------- ---------------
4,973 4,815 4,718
Current
Financial assets at fair value through profit or loss 10 180 990 354
Receivables 10 16 -
Prepayments 25 26 27
Cash and cash equivalents 2,142 2,693 2,100
----------------- ----------------- ---------------
2,357 3,725 2,481
Total assets 7,330 8,540 7,199
----------------- ----------------- ---------------
Current liabilities
Payables 66 205 95
----------------- ----------------- ---------------
66 205 95
Net assets 7,264 8,335 7,104
----------------- ----------------- ---------------
EQUITY
Share capital 201 246 201
Share premium 20,752 20,752 20,752
Distributable capital reserve 16,507 17,462 16,507
Unrealised investment revaluation reserve (8,372) (10,221) (9,205)
Accumulated losses (21,824) (19,904) (21,151)
----------------- ----------------- ---------------
Total attributable to the owners of the parent 7,264 8,335 7,104
----------------- ----------------- ---------------
Total equity 7,264 8,335 7,104
----------------- ----------------- ---------------
Net asset value per share 9 GBP0.36 GBP0.34 GBP0.35
(The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.)
Unaudited condensed company statement of financial position
Unaudited Unaudited Audited
as at as at as at
28 February 28 February 31 August
2015 2014 2014
Notes GBP'000 GBP'000 GBP'000
ASSETS
Non-current
Investments in subsidiaries 829 2,367 771
Loans to subsidiaries 11 5,351 5,355 5,150
------------ ------------ ----------
6,180 7,722 5,921
Current
Loan to subsidiaries 11 - - -
Receivables 1 - 1
Prepayments 17 16 21
Cash and cash equivalents 1,108 725 1,205
------------ ------------ ----------
1,126 741 1,227
Total assets 7,306 8,463 7,148
------------ ------------ ----------
Current liabilities
Payables 46 134 51
------------ ------------ ----------
46 134 51
Net assets 7,260 8,329 7,097
------------ ------------ ----------
EQUITY
Share capital 201 246 201
Share premium 20,752 20,752 20,752
Distributable capital
reserve 16,507 17,462 16,507
Accumulated losses (30,200) (30,131) (30,363)
------------ ------------ ----------
Equity attributable
to owners of the Company 7,260 8,329 7,097
------------ ------------ ----------
(The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.)
Unaudited condensed consolidated statement of cash flows
Unaudited
six months Unaudited Audited
ended six months ended twelve months ended
28 February 2015 28 February 2014 31 August 2014
GBP'000 GBP'000 GBP'000
(A) Operating activities:
Profit/(loss) before tax 160 209 (22)
Adjustments for:
Interest income (3) (2) (4)
Net unrealised (profit)/losses on investments (282) (133) 10
Profit on sale of investments (51) (347) (518)
Net changes in working capital:
Increase in receivables and prepayments (8) (15) -
(Decrease)/increase in payables (29) 82 (28)
----------------- ----------------- --------------------
Net cash used in operating activities (213) (206) (562)
(B) Investing activities:
Proceeds from sale of investments 252 1,425 2,186
Interest received 3 2 4
----------------- ----------------- --------------------
Net cash generated by investing activities 255 1,427 2,190
(C) Financing activities:
Shares bought back for cancellation - - (1,000)
----------------- ----------------- --------------------
Net cash used in financing activities - - (1,000)
Net increase in cash and cash equivalents 42 1,221 628
----------------- ----------------- --------------------
Cash and cash equivalents at beginning of period/year 2,100 1,472 1,472
----------------- ----------------- --------------------
Cash and cash equivalents at end of period/year 2,142 2,693 2,100
----------------- ----------------- --------------------
(The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.)
Unaudited condensed consolidated statement of changes in
equity
Unrealised
investment
Distrib-utable revaluation Accum-ulated Total
Share capital Share premium capital reserve reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unaudited
Balance as at 1
September 2014 201 20,752 16,507 (9,205) (21,151) 7,104
------------- ------------- ------------------ ------------------ ------------------ --------
Transactions with
owners - - - - - -
------------- ------------- ------------------ ------------------ ------------------ --------
Net unrealised
gain reserve
transfer - - - 282 (282) -
Transfer of
accumulated
realised loss on
investments sold - - - 551 (551) -
Profit for the
period - - - - 160 160
------------- ------------- ------------------ ------------------ ------------------ --------
Total
comprehensive
income for the
period - - - 833 (673) 160
------------- ------------- ------------------ ------------------ ------------------ --------
Balance as at 28
February 2015 201 20,752 16,507 (8,372) (21,824) 7,264
------------- ------------- ------------------ ------------------ ------------------ --------
Unaudited
Balance as at 1
September 2013 246 20,752 17,462 (12,408) (17,926) 8,126
------------- ------------- ------------------ ------------------ ------------------ --------
Transactions with
owners - - - - - -
------------- ------------- ------------------ ------------------ ------------------ --------
Net unrealised
gain reserve
transfer - - - 133 (133) -
Transfer of
accumulated
realised loss on
investments sold - - - 2,054 (2,054) -
Profit for the
period - - - - 209 209
------------- ------------- ------------------ ------------------ ------------------ --------
Total
comprehensive
income for the
period - - - 2,187 (1,978) 209
------------- ------------- ------------------ ------------------ ------------------ --------
Balance as at 28
February 2014 246 20,752 17,462 (10,221) (19,904) 8,335
------------- ------------- ------------------ ------------------ ------------------ --------
Audited
Balance as at 1
September 2013 246 20,752 17,462 (12,408) (17,926) 8,126
------------- ------------- ------------------ ------------------ ------------------ --------
Shares bought back
for cancellation (45) - (955) - - (1,000)
------------- ------------- ------------------ ------------------ ------------------ --------
Transactions with
owners (45) - (955) - - (1,000)
------------- ------------- ------------------ ------------------ ------------------ --------
Net unrealised
loss reserve
transfer - - - (10) 10 -
Transfer of
accumulated
realised loss on
investments sold - - - 3,213 (3,213) -
Loss for the year - - - - (22) (22)
------------- ------------- ------------------ ------------------ ------------------ --------
Total
comprehensive
loss for the year - - - 3,203 (3,225) (22)
------------- ------------- ------------------ ------------------ ------------------ --------
Balance as at 31
August 2014 201 20,752 16,507 (9,205) (21,151) 7,104
------------- ------------- ------------------ ------------------ ------------------ --------
(The accompanying notes are an integral part of these unaudited
condensed consolidated interim financial statements.)
Notes to unaudited condensed consolidated interim financial
statements
1. Introduction
Elephant Capital plc (the "Company" or "Elephant Capital") is a
public limited company incorporated in the Isle of Man on 16 May
2006 and its shares are traded on AIM, a market of the London Stock
Exchange. Its registered office is at Clinch's House, Lord Street,
Douglas, Isle of Man, IM99 1RZ.
The "Group" represents the Company and its subsidiaries. The
unaudited condensed consolidated interim financial statements
comprise the condensed financial information of the Group and the
condensed Company statements of financial position. The Company's
business consists of investing through the Group in businesses that
have operations primarily in India and generating returns for its
shareholders.
2. General information
The financial information for the six months ended 28 February
2015 and comparative period for the six months ended 28 February
2014 do not constitute statutory accounts as referred to in section
9 of the Companies Act 1982.
The unaudited condensed consolidated interim financial
statements are presented in pounds sterling (GBP), which is also
the functional currency of the Company and other companies in the
Group.
The unaudited condensed consolidated interim financial
statements of the Group for the six months ended 28 February 2015
(including comparatives) were approved and authorised for issue by
the Board of Directors on 27 May 2015.
3. Basis of preparation
The unaudited condensed consolidated interim financial
statements (herein referred to as "interim financial statements")
for the six months period ended 28 February 2015 are prepared in
accordance with IAS 34 - Interim Financial Reporting as adopted by
the European Union.
The consolidated and Company financial statements have been
presented on a going concern basis The comparative figures for the
year ended 31 August 2014 are taken from the full statutory
accounts. The annual financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union. The comparative figures for the
six months ended 28 February 2014 are taken from the half yearly
unaudited consolidated condensed financial statements for that
period. The accounting policies have been applied consistently
throughout the Group for the preparation of consolidated financial
statements.
4. Significant accounting policies
The interim financial statements have been prepared in
accordance with the accounting policies adopted in the Group's most
recent annual financial statements for the year ended 31 August
2014 except for the application of the following standard with
effect from 1 September 2014:
(i) Amendments to IFRS 10, IFRS 12 and IAS 27, 'Investment entities'.
(ii) Amendments to IAS 32, 'Offsetting financial assets and financial liabilities'.
(iii) IAS 36, 'Recoverable amount disclosures for non-financial assets - Amendments to IAS 36'.
The effect of applying these standards is described below:
Amendments to IFRS 10, IFRS 12 and IAS 27, 'Investment
entities'
The investment entities amendments provide an exception to the
consolidation requirement for entities that meet the definition of
an investment entity.
The key amendments include:
-- 'Investment entity' is defined in IFRS 10.
-- An entity must meet all three elements of the definition and
consider whether it has four typical characteristics, in order to
qualify as an investment entity.
-- An investment entity accounts for its investments in
subsidiaries at fair value through profit or loss in accordance
with IFRS 9 (or IAS 39, as applicable), except for investments in
subsidiaries that provide services that relate to the investment
entity's investment activities, which must be consolidated.
-- For venture capital organisations, mutual funds, unit trusts
and others that do not qualify as investment entities, the existing
option in IAS 28 to measure investments in associates and joint
ventures at fair value through profit or loss is retained.
Management has reviewed its current assessments in accordance
with the above amendments and has concluded that there is no effect
on the classification (as subsidiaries or otherwise) of any of the
Group's investees held during the period or comparative periods
covered by these financial statements.
Amendments to IAS 32, 'Offsetting financial assets and financial
liabilities'
The amendments clarify that rights of set-off must not only be
legally enforceable in the normal course of business, but must also
be enforceable in the event of default and the event of bankruptcy
or insolvency of all of the counterparties to the contract,
including the reporting entity itself. The amendments also clarify
that rights of set-off must not be contingent on a future
event.
The amendments have been applied retrospectively in accordance
with their transitional provisions. As the Group does not currently
present any of its financial assets and financial liabilities on a
net basis using the provisions of IAS 32, these amendments had no
material effect.
IAS 36, 'Recoverable amount disclosures for non-financial
assets-Amendments to IAS 36'
These amendments clarify that an entity is required to disclose
the recoverable amount of an asset (or cash generating unit)
whenever an impairment loss has been recognised or reversed in the
period. In addition, they introduce several new disclosures
required to be made when the recoverable amount of impaired assets
is based on fair value less costs of disposal, including:
-- additional information about fair value measurement including
the applicable level of the fair value hierarchy, and a description
of any valuation techniques used and key assumptions made; and
-- the discount rates used if fair value less costs of disposal
is measured using a present value technique.
Management has noted that, in current year, no impairment loss
has been recognised or reversed on any non- financial asset in
terms of IAS 36, hence this amendment does not have any impact on
these financial statements.
5. Estimates
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 August 2014.
6. Segmental information
The Directors have considered the provisions of IFRS 8 in
relation to segment reporting and concluded that the Group's
activities form a single segment under the standard. From a
geographical perspective, the Group's substantial investments are
mostly focused in India. Equally, in relation to business
segmentation, the Group's investments are predominantly in the
small and mid-cap businesses and it is considered that, the risks
and rewards are not materially different whether the investments
are listed or unlisted. However, an analysis of the investments
between listed and unlisted investments is provided in note 10.
7. Net profit on financial assets at fair value through profit or loss
Six months Six months
ended ended Twelve months ended
28 February 2015 28 February 2014 31 August 2014
GBP'000 GBP'000 GBP'000
Financial assets designated as fair value through profit or
loss
Unrealised gains on investments 370 308 281
Unrealised losses on investments (88) (175) (291)
Realised gains on investment 51 347 518
----------------- ----------------- -------------------
Total 333 480 508
----------------- ----------------- -------------------
8. Management fee
Under the terms of the "Management agreement", the amount of
management fee payable from Tusk Investments 1 Limited and Tusk
Investments 2 Limited to Elephant 2 Limited (the "Manager") has
been fixed at GBP 160 thousand per annum. In addition the Manager
is entitled to recover certain expenses.
The management fee of GBP 110 thousand (28 February 2014: GBP
108 thousand) disclosed in the consolidated statement of profit or
loss and other comprehensive income includes the management fee of
GBP 80 thousand (28 February 2014: GBP 81 thousand) and GBP 30
thousand (28 February 2014: 27 thousand) in respect of service fee
of GBP 31 thousand (28 February 2014: GBP 31 thousand) received by
the Manager from an investee company, which is included in
"Investment and other income".
9. Profit/(loss) and net asset value per share
Twelve
Six months Six months months
ended ended ended
28 February 28 February 31 August
2015 2014 2014
Profit/(loss) attributable
to ordinary shareholders GBP159,783 GBP208,946 GBP(22,885)
Issued ordinary shares-beginning
of period/year 20,117,057 24,662,511 24,662,511
Buy-back of shares - - (4,545,454)
------------ ------------ ------------
Issued ordinary shares
outstanding at the
end of period/year 20,117,057 24,662,511 20,117,057
------------ ------------ ------------
Weighted average number
of shares outstanding 20,117,057 24,662,511 24,064,753
Profit/(loss) per
share (basic and diluted) 0.8p 0.8p (0.1p)
Net asset value per
share (statutory) GBP0.36 GBP0.34 GBP0.35
Net asset value per
share (statutory)
is based on the statutory
net assets as at period/year
end GBP7,263,805 GBP8,335,852 GBP7,104,022
There were no options in issue to dilute the earnings per
share.
10. Financial assets at fair value through profit or loss
The Group has invested in a portfolio of listed and unlisted
securities of businesses operating primarily in India.
Details of the Group's investments are set out below:
28 February 28 February
2015 2014 31 August 2014
Non-current Current Total Non-current Current Total Non-current Current Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Listed
investments:
Balance
brought
forward - 354 354 - 1,875 1,875 - 1,875 1,875
Disposal - (201) (201) - (1,078) (1,078) - (1,668) (1,668)
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
- 153 153 - 797 797 - 207 207
Unrealised
gain - 27 27 - 193 193 - 147 147
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
(A) - 180 180 - 990 990 - 354 354
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
Unlisted
investments:
Balance
brought
forward 4,718 - 4,718 4,875 - 4,875 4,875 - 4,875
Disposal - - - - - - - - -
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
4,718 - 4,718 4,875 - 4,875 4,875 - 4,875
Unrealised
gain/(loss) 255 - 255 (60) - (60) (157) - (157)
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
(B) 4,973 - 4,973 4,815 - 4,815 4,718 - 4,718
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
Total
investments
(A+B) 4,973 180 5,153 4,815 990 5,805 4,718 354 5,072
----------- -------- -------- ----------- -------- -------- ----------- -------- --------
11. Loans to subsidiaries (company statement of financial position)
Loans to subsidiaries in the standalone financial statements of
the Company comprise the following:
As At As At As at
28 February 2015 28 February 2014 31 August 2014
GBP'000 GBP'000 GBP'000
Non-current
Elephant Capital LP*
Opening balance 14,000 14,000 14,000
----------------- ----------------- ---------------
14,000 14,000 14,000
Less: Provision for impairment ** (8,649) (8,645) (8,850)
----------------- ----------------- ---------------
(A) 5,351 5,355 5,150
----------------- ----------------- ---------------
Current
Elephant Capital LP*
Opening balance 4,996 4,996 4,996
----------------- ----------------- ---------------
4,996 4,996 4,996
Less: Provision for impairment** (4,996) (4,996) (4,996)
----------------- ----------------- ---------------
(B) - - -
----------------- ----------------- ---------------
Total (A+B) 5,351 5,355 5,150
----------------- ----------------- ---------------
*Loan of GBP 18,996 thousand was given by Elephant Capital plc
to Elephant Capital LP in order to provide further funds to Tusk
Investments 1 Limited and Tusk Investments 2 Limited for making
investments in certain investee companies in accordance with the
investment strategy of the Group. Further the loan classified as
non-current has not been discounted to its present value, as the
repayment period is not determinable.
**An impairment analysis of loans to subsidiaries was carried
out by the Company as of 28 February 2015 and, consequently, a
reversal of an impairment loss of GBP 201 thousand was recorded on
account of the increase in the value of investments made through
group subsidiaries since 31 August 2014.
12. Fair value measurement of financial instruments
IAS 34 requires that interim financial statements include
certain of the disclosures about fair value of financial
instruments set out in IFRS 13- 'Fair Value Measurement'. These
disclosures include the classification of fair values within a
three-level hierarchy. The three levels are defined based on the
observability of significant inputs to the measurement, as
follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable input).
The following table shows the Levels within the hierarchy of
financial assets and liabilities measured at fair value at 28
February 2015:
Level 1 Level 2 Level 3 Total
28 February 2015 GBP'000 GBP'000 GBP'000 GBP'000
Assets
Listed securities 180 - - 180
Unlisted securities - - 4,973 4,973
-------- -------- -------- --------
Total 180 - 4,973 5,153
Liabilities - - - -
-------- -------- -------- --------
Net fair value 180 - 4,973 5,153
-------- -------- -------- --------
Level 1 Level 2 Level 3 Total
28 February 2014 GBP'000 GBP'000 GBP'000 GBP'000
Assets
Listed securities 990 - - 990
Unlisted securities - - 4,815 4,815
-------- -------- -------- --------
Total 990 - 4,815 5,805
Liabilities - - - -
-------- -------- -------- --------
Net fair value 990 - 4,815 5,805
-------- -------- -------- --------
Level 1 Level 2 Level 3 Total
31 August 2014 GBP'000 GBP'000 GBP'000 GBP'000
Assets
Listed securities 354 - - 354
Unlisted securities - - 4,718 4,718
-------- -------- -------- --------
Total 354 - 4,718 5,072
Liabilities - - - -
-------- -------- -------- --------
Net fair value 354 - 4,718 5,072
-------- -------- -------- --------
Measurement of fair value
The Investment Manager performs valuations of financial items
for financial reporting purposes, including Level 3 fair values, in
consultation with third party valuation specialists for complex
valuations. The methods and valuation techniques used for the
purpose of measuring fair values are given below:
(i) Listed securities:
The quoted investment is denominated in Indian rupees and is
publicly traded on the NSE and BSE in India and the value of such
quoted investment has been determined using the closing bid market
prices on the NSE as at the reporting date.
(ii) Unlisted securities:
The fair value of the unquoted investments has been determined
using appropriate methodology in accordance with International
Private Equity and Venture Capital Valuation Guidelines and
guidance provided in IAS 39.
(a) Global Cricket Ventures ("GCV") - As at 28 February 2015,
the Group held a 45.56% equity stake in Global Cricket Ventures
Limited (Mauritius) which had been acquired for GBP 5,949 thousand.
The value of this investment as at 28 February 2015 has been
determined on the basis of best estimate of net assets of GCV
attributable to Elephant Capital's shareholding.
(b) Obopay - Pursuant to the execution of an Agreement and Plan
of Merger of OBP Investments, OBP Investments, Inc., the
stakeholders representative with Obopay Inc. (Obopay), the capital
stock of Obopay (except series G Preferred stock) issued and
outstanding immediately (including Elephant Capital's holding in
series C and Series D preferred stock) prior to the merger was
cancelled and extinguished without any conversion thereof and no
payment or distribution was made. Therefore the holding of Elephant
Capital in Series C and D preferred stock was valued at nil as at
31 August 2014 and the same basis of valuation has been followed
for 28 February 2015.
(c) Amar Chitra Katha ("ACK") - As at 28 February 2015, the
Group held a 20.06% equity stake in Amar Chitra Katha (P) Ltd. at a
total cost of GBP 4,085 thousand. The investment has been valued
based on the "discounted cash flows of the projected future
earnings of underlying businesses". The key assumptions used in the
valuation of the investment as at 28 February 2015 are as
follows:
Weighted average cost of capital 14.48%
Long term growth rate 6.00%
Discount for lack of marketability 15.00%
(d) Air Works - As of 28 February 2015, the Group held an
aggregate 4.45% (fully diluted basis) stake in Air Works India
(Engineering) Private Ltd. at a total cost of GBP 2,922 thousand.
The investment has been valued based on the "discounted cash flows
of the projected future earnings of the underlying business". The
key assumptions used in the valuation of the investment as at 28
February 2015 are as follows:
Weighted average cost of capital 15.84%
Long term growth rate 5.00%
Discount for lack of marketability 15.00%
There have been no transfers between Levels 1 and 3 during the
reporting period. Further, there have been no transfers into Level
3 during the current reporting period.
The financial instruments within Level 3 can be reconciled from
beginning to ending balances as follows:
Six months Six months Year
ended ended ended
28 February 2015 28 February 2014 31 August 2014
Particulars GBP'000 GBP'000 GBP'000
Opening balance 4,718 4,875 4,875
Unrealised profit/(loss) 255 (60) (157)
----------------- ----------------- ---------------
Closing balance 4,973 4,815 4,718
----------------- ----------------- ---------------
Profit/(loss) on fair valuation are shown under the heading 'Net
profit/(loss) on financial assets at fair value through profit or
loss'.
For the investments, Amar Chitra Katha and Air Works which are
valued using the discounted cash flow methodology and are
classified as Level 3 at the reporting date, the Company adjusted
the discount rate and growth rate assumptions within a range of
reasonably possible alternatives. The extent of the adjustment
varied according to the characteristics of each security. For
results of the sensitivity analysis refers to the table below:
Six months Six months Year
ended ended ended
28 February 2015 28 February 2014 31 August 2014
Particulars GBP'000 GBP'000 GBP'000
Change by +50 basis points
Weighted average cost of capital (333) (260) (247)
Long-term growth rate 326 252 230
Change by -50 basis points
Weighted average cost of capital 367 290 274
Long-term growth rate (296) (227) (207)
Besides the above there are other unobservable inputs for cash
flow projections. Significant increases/(decreases) in any of those
inputs in isolation would result in a significantly lower/(higher)
fair value measurement.
For the remaining investments classified as Level 3, due to the
absence of any reasonably possible alternative assumptions for
these investments, a sensitivity analysis has not been
performed.
13. Related party transactions
(i) Related parties
(a) Key Management Personnel ("KMP")
Names of Directors
Vikram Lall
Francis Anthony Hancock
Elizabeth Tansell (Date of resignation: 7 May 2015)
Vincent Campbell (Date of appointment: 7 May 2015)
(b) Entities controlled by KMP with whom transactions have taken place during the period/year:
Elephant Capital LLP
Chamberlain Fund Services Limited (novated to SMP Fund Services
Limited on 29 November 2013)
Elephant India Finance Private Limited
Elephant India Limited
(c) Associates with whom transactions have taken place during the period/year;
Global Cricket Ventures Limited ("GCV")
(ii) The transactions with related parties and balances as at
the period/year-end are summarised below:
(a) Key Management Personnel ("KMP")
Compensation paid to the Company's Board of Directors comprises
of fees only and there are no post-employment benefits payable to
any of the Directors of the Company.
The following amounts were paid on account of Directors' fees
during each of the period/years reported:
Nature of
transaction Amount Outstanding payable balance (unsecured)
Six Months Six Months Twelve Months
ended ended ended As at 28 As at 28 As at 31 August
2015 2014 2014 February 2015 February 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Directors' fees 31 50 81 (10) (35) (10)
(b) Transactions made during the period/year with related
parties other than those with key managerial personnel are as
follows:
Nature Amount Debit/(credit)
of transaction balance(unsecured)
Six Six As at As at
Months Months Year 28 28 As at
ended ended ended February February 31 August
2015 2014 2014 2015 2014 2014
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(i) Management
fees*:
* Paid to Elephant Capital LLP 110 82 82 10 - -
* Paid to Elephant India Limited - 26 130 - - -
* Received from Elephant India Finance Private Limited - 51 51 - 16 -
(ii) Other transactions:
* Registrar and administration charges paid to
Chamberlain Fund Services Limited - 3 3 - - -
* Service fee from GCV 31 31 61 (11) (10) (10)
* Paid to Elephant Capital LLP - 51 51 - (16) -
*Payments to Elephant Capital LLP and Elephant India Limited are
paid out of the management fee.
14. Events after the reporting date
(i) In March 2015, 5,000,000 ordinary shares were bought-back
for cancellation at a price of 20p per share. Following the
cancellation of these shares, there are 15,117,057 ordinary shares
in issue.
(ii) Nitco Limited ("Nitco") - In March 2015, the Group sold 792
thousand shares of Nitco for an aggregate consideration of GBP 163
thousand. The sale resulted in an overall loss of GBP 406 thousand
(being the excess of original cost of GBP 569 thousand over the
sale proceeds of GBP 163 thousand).
The amount of loss after the reporting date is GBP 17 thousand
(being the shortage of sale proceeds of GBP 163 thousand over the
fair value of GBP 180 thousand as on 28 February 2015). Subsequent
to disposal, the Group's aggregate holding in Nitco is Nil.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGUBAAUPAGQM
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