Stranger Holdings plc / Index: LSE / Epic: STHP / Sector: Investment

2 October 2020

Stranger Holdings plc ('Stranger' or 'the Company')

Final Results

Stranger Holdings plc, the London listed investment company is pleased to announce its results for the period ended 31 March 2020.

STRATEGIC REPORT

Principal activity and fair review of the business

For the year from 1 April 2019 to 31 March 2020, the Company's results included the running costs of the Company, reverse takeover costs and listing fees on the London Stock Exchange standard segment together with provisions in connection with the aborted acquisition of Alchemy.

Chairman's Report

Stranger Holdings PLC ("the Company") is an investment company with the original primary objective of undertaking a single acquisition of a target company, business or asset in the industrial or service sector to which end it announced non-binding Heads of Terms to acquire the Recyclus Group ("Recyclus") via a reverse takeover transaction as described below.

Results for the period

In the interims results for the six months to 30 September 2019 of the company, we had reported that we had progressed well with the proposed acquisition of two companies holding technology mineral assets including cobalt, nickel and associated metals. One is a UK company with assets located in south eastern Cameroon, Africa, and one is a US company with assets in Idaho, United States. 

The primary focus of the intended enlarged group is to develop a subsidiary of the cobalt assets, namely the Recyclus Group. This is a very exciting business with excellent growth prospects involved in the clean recycling of tyres and batteries in the UK. Their aim is to build a global leading circular economy within the tyre and battery sectors, making the world a better place for future generations.

Recyclus is structured as an ESG compliant, ethical, green business, for the clean recycling of tyres and batteries in the UK. There is an opportunity to leverage next generation recycling technologies for current and nearby market commercialisation. By using technologies that are now beyond proof-of-concept to create circular economies, increase efficiencies and reduce the carbon footprints within these recycling industries. 

Recyclus is partnering with existing, permitted, cash generative businesses within the UK. Recyclus will not only provide funding for these businesses for expansion, but also add operational value by leveraging industry knowledge to increase contracted supply and offtake for the plants. 

2020 will see Environmental Agency (EA)/Governmental regulatory clampdowns on the export of waste and waste storage in the UK, especially post Brexit, leading to an increased requirement for ethical, clean, waste recycling. Recyclus will support the Governmental, regulatory, economic and social agendas for a cleaner and better environment to live using a scalable business model to maximise the margins of upcycled materials in both batteries and tyres. Lead-Acid battery recycling industry is a major polluter, spent batteries are thrown into smelters. Opportunity to use hydrometallurgical process to reduce carbon footprint by 85%, cut slag by >90% and recycle the plastics as well as the lead. 

The market opportunity is substantial:

Global outlook:

·    Tyre recycling globally $77 billion by 2025 with a CAGR of 4.2% (1)

·    Battery recycling globally $21 billion by 2025 with a CAGR of 10.4% (2)

Europe & UK outlook:

·    Tyre recycling market in the UK is valued at £800 million with a fragmented market of approximately 380 suppliers (3)

·    In Europe, the battery (lead and li-ion) recycling profit pool could amount to $1,4 billion in 2030 assuming 1.7 million tonnes being recycled (4)

The three key gaps that Recyclus are aiming to address:

·    No national capability in the UK currently

·    Current activity requires transportation to Europe to recycle lead batteries

·    Fragmented tyre recycling market in the UK

·    No 100% recyclable Li-ion battery solution

These three criteria ideally position Recyclus to lead the market by building the first UK based end-to-end tyre and battery solution. Enclosed below are a number of articles which we consider relevant:

·    https://global-recycling.info/archives/2892

·    https://www.grandviewresearch.com/press-release/global-battery-recycling-market

·    https://www.ibisworld.com/united-kingdom/market-research-reports/tyre-rubber-recycling-industry/

·     https://www.rolandberger.com/nl/Point-of-View/Battery-recycling-is-a-key-market-of-the-future-Is-it-also-an-opportunity-for.html

The sale and purchase agreements have been drafted and work is advanced on the prospectus and the fund raising for the proposed Reverse Take-Over. The Acquisitions are subject, inter alia, to the completion of due diligence, documentation and compliance with all regulatory requirements, including the Listing and Prospectus Rules and, as required, the Takeover Code. The Company will, in due course, be making an application for the enlarged Company to have its Ordinary Shares admitted to the Official List and to trading on the main market for listed securities of the London Stock Exchange.

We have to date received in excess of £1,500,000 under the Audley Funding Facility. The loan facility with Dover Harcourt Plc ("Dover") was entered into on 31 October 2017, which provides the company access to a 5-year loan of up to £20 million. The facility is conditional on Dover issuing bonds on the Frankfurt stock exchange. The Company is actively marketing the bonds to retail investors and a copy of the revised teaser for the bond may be viewed on the Company's website. Interest is charged at 7.75% per annum on the nominal value of the bonds issued. The company also received a government guaranteed Bounce Back Loan of £50,000 on 13 May 2020.

The future

The directors look forward with confidence to a bright future for the combined group and we very much look forward to working with the directors of HCS. We would like thank our shareholders very much for their continued patience during the process of this reverse takeover until completion of this acquisition.

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2020

Since there is no other comprehensive loss, the loss for the period is the same as the total comprehensive loss for the period attributable to the owners of the Company.

STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2020

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2020

At the year end the Company had undrawn borrowings of £nil (2019: £nil) as part of a loan facility. The facility is discussed in greater detail in note 14.

STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020

Share capital is the amount subscribed for shares at nominal value.

Share premium represents amounts subscribed for share capital in excess of nominal value.
Accumulated deficit represent the cumulative loss of the company attributable to equity shareholders.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2020

1       General information           

Stranger Holdings PLC ('the Company') is an investment company incorporated in the United Kingdom. The address of the registered office is disclosed on the company information page at the front of the annual report. The Company is limited by shares and was incorporated and registered in England on 22 October 2015 as a private limited company and re-registered as a public limited company on 14 November 2016.

2       Accounting policies              

2.1   Basis of Accounting

This financial information has been prepared in accordance with International Financial Reporting Standards (IFRS), including IFRIC interpretations issued by the International Accounting Standards Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below. 

These policies have been consistently applied. 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3. The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Although these estimates are based on management's experience and knowledge of current events and actions, actual results may ultimately differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

a)    Going concern

These financial statements have been prepared on the assumption that the Company is a going concern. When assessing the foreseeable future, the Directors have looked at a period of at least twelve months from the date of approval of this report. The forecast cash-flow requirements of the business are contingent upon the ability of the Company to attract investors in the bonds issued by Dover to extend the credit facility to the Company and the continued support of the directors.

After making enquiries, the Directors firmly believe that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

b)    New and amended standards adopted by the company

There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning that would be expected to have a material impact on the Company. The new IFRSs adopted during the year are as follows:

·    IFRS 16 - Leases

·    IAS 19 - Employee Benefits (amendment)

IFRS 16 Leases is effective for periods beginning on or after 1 January 2019 and therefore being adopted for the first time in these financial statements. Under IFRS 16, lessees may elect not to recognise assets and liabilities for leases with a lease term of 12 months or less. The Company's office premises are on a rolling one month contract so the Company has taken the IFRS 16 scope exemption and have chosen to recognise the lease payments in profit and loss on a straight-line basis over the lease term.

c)    Standards, interpretations and amendments to published standards that are not yet effective

IFRS 16 Leases is effective for periods beginning on or after 1 January 2019 and therefore being adopted for the first time in these financial statements. Under IFRS 16, lessees may elect not to recognise assets and liabilities for leases with a lease term of 12 months or less. The Company's office premises are on a rolling one month contract so the Group has taken the IFRS 16 scope exemption and have chosen to recognise the lease payments in profit and loss on a straight-line basis over the lease term.

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial period beginning 1 December 2019 and have not been early adopted. The Directors anticipate that the adoption of these standard and the interpretations in future periods will have no material impact on the financial statements of the Group.

The new standards include:

IFRS 3                           Business Combinations1

IFRS 17                         Insurance Contracts2

IAS 1                             Presentation of Financial Statements1

IAS 8                             Accounting Policies, Changes in Accounting Estimates and Errors1

1 Effective for annual periods beginning on or after 1 January 2020

2 Effective for annual periods beginning on or after 1 January 2021

2.2   Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions. In the opinion of the director, the Company has one class of business, being that of an investment company. The Company's primary reporting format is determined by the geographical segment according to the location of its establishments. There is currently only one geographic reporting segment, which is the UK. All costs are derived from the single segment.

2.3   Financial assets and liabilities

The Company classifies its financial assets at fair value through profit or loss or as loans and receivables and classifies its financial liabilities and other financial liabilities. Management determines the classification of it's investments at initial recognition, A financial asset or liability is measured initially at fair value. At inception transaction costs that are directly attributable to the acquisition or issue, for an item not at fair value through profit or loss, is added to the fair value of the financial asset and deducted from the fair value of the financial liabilities.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determined payments that are not quoted on an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the receivable. Loans are recognised when funds are advanced to the recipient. Loan sand receivables are carried at amortised cost using the effective interest method (see below).

Other financial liabilities

Are non-derivative financial liabilities with fixed or determined payments. Other financial liabilities are recognised when cash is received from a depositor. Other financial liabilities are carried at amortised cost using the effective interest method. The fair value of the other liabilities repayable on demand is assumed to be the amount payable on demand at the statement of financial position date.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Company has transferred substantially all the risks and rewards of ownership. In transactions in which the Company neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and retains control over the asset, the Company continues to recognise the asset to the extent of it's continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset. There have not been any instances where assets have only been partly derecognised. The Company derecognises a financial liability when it's contractual obligations are discharged, cancelled or expired.

Amortised cost measurement

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal payments, plus or minus the cumulative amortisation using the effective interest method of any differences between the initial amount recognised and maturity amount, minus any reduction to impairment.

Fair value measurement

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction on the measurement date. The fair value of assets and liabilities in active markets are based on current bid and offer prices respectively. If the market is not active the Company establishes fair value by using other financial liabilities appropriate valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same for which market observable prices exist, net of present value and discounted cash flow analysis.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, and other short-term highly liquid investments with original maturities of three months or less.

2.4   Borrowings

         Borrowings are recognised initially as fair value, net of transactions costs incurred.

Borrowings are subsequently carried at amortised cost: any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Fees paid on the establishment of the loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

Borrowing costs

All other borrowing costs are recognised in the profit or loss in the period in which they are incurred.

2.5   Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.6   Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences.

Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current or deferred tax for the year is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

3       Critical accounting estimates and judgments

The company makes certain judgements and estimates which affect the reported amount of assets and liabilities. Critical judgements and the assumptions used in calculating estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

In  the  process  of  applying  the  Company's  accounting  policies,  which  are  described  above,  the  Directors believe  that  that the only  assumption would have a material effect on the amounts recognised in the financial information is the recoverability of the loan with Papillon

4       Financial risk management

The company's activities may expose it to some financial risks. The company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the company's financial performance.

a)  Liquidity and cash flow risk

Liquidity risk is the risk that company will encounter difficulty in meeting obligations associated with financial liabilities. The responsibility for liquidity risks management rest with the Board of Directors, which has established appropriate liquidity risk management framework for the management of the company's short term and long-term funding risks management requirements. The company manages liquidity risks by maintaining adequate reserves by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

b)  Capital risk

The company takes great care to protect its capital investments. Significant due diligence is undertaken prior to making any investment. The investment is closely monitored.

5       Operating loss, expenses by nature and personnel

Included in the premises expenses are £16k (2019: £35k) of lease expenses which are exempt from capitalisation under IFRS16 due to the lease being considered short term.

6       Personnel

The average monthly number of employees during the period was two directors.
 

There were no benefits, emoluments or remuneration payable during the period for key management personnel, except £115,000 (inclusive of VAT) in fees disclosed in Note 5 (2019: £115,000 inclusive of VAT in fees). The fees paid are also detailed in Note 18 as a related party transaction.

The highest paid directors are Charles Tatnall and James Longley with fees of £57,600 each.

7       Taxation

No liability to UK corporation tax arose on ordinary activities for the current period.

The company has estimated excess management expenses of £1,697,000 (2019: £1,604,000) available for carry forward against future trading profits.

The tax losses for the year have resulted in a deferred tax asset of approximately £322,000 (2019: £305,000) which has not been recognised in the financial statements due to the uncertainty of the recoverability of the amount.

8       Earnings per share

In the year, the company issued convertible loan notes with a nominal value of £190,000 which

can be converted into shares at a rate between 0.55p/share and 1.25p/share resulting in potentially dilutive shares of 24,363,636. As the company is loss making these would be considered antidilutive.

9       Capital risk management

The Directors'  objectives  when  managing  capital  are to  safeguard  the  Company's  ability  to continue  as  a  going  concern  in  order  to  provide  returns  for  shareholders  and  benefits  for  other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. At the date of this financial information, the Company had been financed by the introduction of capital. In the future, the  capital  structure  of  the  Company  is  expected  to  consist  of  borrowings  and  equity attributable to equity holders of the Company, comprising issued share capital and reserves.

10     Trade and other receivables

11     Receivables due after one year

Non-current Other receivables relate to the reserve balances of the loan facility, which cannot be

drawn upon until the loan becomes repayable. The loan is further discussed in note 14.

12     Cash and cash equivalents

13     Trade and other payables

14      Borrowings

A number of convertible loan notes have been issued in the year , with a total nominal value of £190,000

Convertible loan notes of £90,000, bear interest at 10% per annum, are convertible at 0.55p per share and can convert at any time, but are fully repayable upon the completion or fall through of the planned reverse take over.

Convertible loan notes of £100,000, are non-interest bearing, are convertible at 0.125p per share and can convert at any time, but are fully repayable upon the completion or fall through of the planned reverse take over.

All non-current borrowings relate to a loan facility provided by Dover Harcourt Plc. The loan is wholly repayable within 5 years and is secured by a fixed and floating charge over all assets held by the Company. The loan bears interest of 7.75% per annum and is paid half yearly in arrears based on the total facility available to the Company.

The finance costs incurred in order to obtain the facility are being amortised on a straight line basis over the life of the loan. The balance above represents the remaining unamortised amount.

15     Share capital

During the period the company had no share transactions.

The ordinary shares have attached to them full voting, dividend and capital distribution (including on winding up) right; they do not confer any rights of redemption.

Both James Longley and Charles Tatnall held 12.5M share warrants with an exercise price of 1.25p per warrant and were exercisable until 13 January 2020, at which point they expired.

16     Accumulated deficit

17   Contingent liabilities

The company has no contingent liabilities in respect of legal claims arising from the ordinary course of business.

18    Directors salaries, fees and Related parties

1)   Salaries paid to Directors

Charles Tatnall                              Nil (2019: £Nil)

James Longley                              Nil (2019: £Nil)

2)   Consultancy fees charged by James Longley Limited (a company controlled by James Longley) of £57,600 (2019: £57,600) of which £nil (2019: £45,000) was outstanding as at the year end. All balances are inclusive of VAT.

3)   Consultancy fees charged by Tatbels Limited (a company controlled by Charles Tatnall) of £57,600 (2019: £57,600) of which £nil (2019: £45,000) was outstanding as at the year end. All balances are inclusive of VAT.

4)    Rent paid of £15,600 (2019: £35,400) for offices occupied by the Company at Adams Row.

The head lease was held by James Longley, which ended in July 2019. A deposit of £3,825 was held by the landlord of James Longley in relation to this property and was returned at the expiry of the lease.

5)    Papillon Holdings Plc (a company under common control) owes £159,613 as at the year end and interest of £30,733. Interest is payable of 5% per month on completion of the reverse takeover or 3 months from agreement. The loan is not secured. No net payment was made post year end.

6)    Fandango Holdings Plc (a company under common control) is owed £161,450 as at the year end and interest of £206,192 as at the year end. Interest of 5% per month increasing to 10% on completion of the reverse take over or 3 months from agreement. The loan is not secured. No net payments were made post year end.

7)    Included within Trade Debtors is a balance of £1,500 receivable (2019: £4,592 payable) relating to Plutus Powergen PLC (a company under common control). This was in relation to a small loan made to Plutus in excess of the amount payable in 2019. The loan does not attract interest and is repayable on demand

19     Capital commitments

There was no capital expenditure contracted for at the end of the reporting period but not yet incurred.

20   Events after the reporting period

The loan facility with Dover Harcourt Plc (see note 14 for further details) has been extended post year end from £1,105,000 as at the year end to £1,357,000 as at 30 August 2020.

21     Ultimate controlling party

The company has no single controlling party.