Craven House Capital plc

("Craven House" or the "Company")

Annual Results for year ended 31 May 2020

CRAVEN HOUSE CAPITAL PLC

       CHAIRMAN'S STATEMENT

       FOR THE YEAR ENDED 31 MAY 2020

Dear Shareholder

I am pleased to provide an introduction to the annual report and financial statements for Craven House Capital Plc for the year ending 31 May 2020. During the period the Company completed a fundamental restructuring of its holdings involving distribution of a dividend in specie to our shareholders, comprising the bulk of Craven's historic investment portfolio, and transfer of intercompany loan accounts and creditors to Craven Industrial Holdings Plc.

As had been communicated repeatedly to shareholders in recent years, the Company's Investment Manager and the Board had, for some time, been evaluating the suitability of the Company's AIM quotation compared with alternative trading venues and other options available. During the period, the Board determined that the AIM market was no longer suitable for its portfolio at the time and presented the restructuring proposal to shareholders at a General Meeting of Craven House on the 22 May 2020. The proposal secured the approval of the overwhelming majority of the Company's shareholders and the restructuring process was completed prior to the year end. The investment portfolio retained by the Company and resulting balance sheet are significantly simplified, focused, more suitable to AIM and, we believe in time, will be better understood by the market.
 

Mark Pajak

Acting Chairman

             CRAVEN HOUSE CAPITAL PLC

             INVESTMENT MANAGER'S REPORT

FOR THE YEAR ENDED 31 MAY 2020

Statement by the Investment Manager

Following the restructuring approved by shareholders on the 22 May 2020, the Company's investment portfolio is significantly simplified and comprises minority shareholdings in five Swedish-managed eCommerce businesses.

The Company's investments are held at fair value in accordance with the IPEVC guidelines. Given the proximity of the acquisition date of the shareholdings in the businesses listed below (March 2020) to the year-end of Craven (May 2020), the original acquisition price of "Price of Recent Investment" has been applied as the valuation methodology. A summary of the Company's investments is as follows with further information provided in notes 8 and 14 below;
 

We are confident that the impact of the COVID-19 pandemic has not impaired the prospects or therefore the valuation of these businesses since the time of acquisition. Their respective strategies, which include the online marketing and distribution of magazines, music and dietary supplements are, in fact, likely to benefit from the shift in consumer behaviour resulting from the pandemic. The development of each business remains at an early stage and we look forward to reporting on material developments within the portfolio as appropriate.
 

Desmond Holdings Ltd
Investment Manager to Craven House Capital Plc

CRAVEN HOUSE CAPITAL PLC

            STRATEGIC REPORT

FOR THE YEAR ENDED 31 MAY 2020

The directors present the Strategic Report of Craven House Capital plc for the year ended 31 May 2020.

Principal activity

Shareholders approved the adoption of a revised Investing Policy during the year. The Investing Policy is primarily to invest in or acquire a portfolio of companies, partnerships, joint ventures, businesses or other assets participating in the e-Commerce sector. The investments or acquisitions may be funded wholly by cash, the issue of new shares or debt, or a mix thereof, as the Board deems appropriate. The Company's equity interest in a proposed investment may range from a minority position to 100% ownership; the proposed investments may be either quoted or unquoted, although will likely be unquoted in the majority of cases. The Company will specifically target investments which the Board believes offer high growth opportunities or steady cash flows and where the exit will be a liquidity event, such as a trade sale or IPO.

Review of the Business in the year 

A comprehensive review of the Company's performance and business activities is included in the Investment Manager's Report above. At a General Meeting of the Company on 22 May 2020, shareholders approved a fundamental restructuring of the Company which was completed prior to the year end. The historic investment portfolio of the Company was distributed to shareholders via a dividend in specie; the majority of the Company's current assets and liabilities were transferred to Craven Industrial Holdings Plc, whose shares were issued to Ordinary Shareholders. Following the distribution of the dividend in specie, the Company's portfolio comprised minority stakes in five e-commerce businesses which were acquired in March 2020. The status of the underlying investments is disclosed in further detail in note 8 and note 14 below.

Position of the Company's business at the end of the year

As a result of the restructuring outlined above, the Company's balance sheet as of May 2020 shows significant movement vs. the prior year. The investment portfolio retained as of year-end, which did not form part of the dividend in specie, was valued at $8m, unchanged from the price of acquisition of these assets in March 2020. Receivables and cash reserves totaled $52,000. Sufficient cash is available to the Company from its subsidiaries and via external loan facilities to ensure it is able to meet its liabilities as they fall due. The majority of the $254,000 in liabilities payable by the Company as of May 2020 were paid post year end. Outside of the board of directors, the Company has no employees and the majority of overhead expenditure continues to comprise regulatory, accounting and audit costs.

Principal risks and uncertainties facing the business

The principal risks to the business include the ability of the Company to successfully execute its Investing Policy and the early / pre-revenue stage of the development of the current portfolio of investments. Description of these risks are further detailed in note 14 below.

Corporate governance

The directors place a high degree of importance on ensuring that high standards of Corporate Governance are maintained and have therefore chosen to apply the framework as provided by the Quoted Companies Alliance Corporate Governance Code for small and medium size companies (2018) (the 'QCA Code'). Further details are available on the Company's website.

             Mr M J Pajak - Director of behalf of the Board           

             Date

             CRAVEN HOUSE CAPITAL PLC

             REPORT OF THE DIRECTORS

FOR THE YEAR ENDED 31 MAY 2020

The directors present their annual report with the audited financial statements of the Company for the year ended 31 May 2020.

DIVIDENDS

On 22 May 2020 at a General Meeting of the Company, shareholders approved the payment of a special dividend in specie to Ordinary Shareholders comprising shares in the Company's subsidiary and principal holding company, Craven Industrial Holdings Plc. Payment of this dividend was completed on 29 May 2020. A fair review of the business and disclosure of the Company's activities and principal risks and uncertainties are included in the Investment Manager's Report and the Strategic Report.

EVENTS SINCE THE END OF THE YEAR

Information relating to events since the end of the year is given in the note 17 to the financial statements.

DIRECTORS

The directors who held office during the year were:

Mr M J Pajak;

Mr B S Bindra; and

Mr C P Morrison.

Directors' remuneration and details of service contracts are given in note 3 to the financial statements.

POLITICAL AND CHARITABLE CONTRIBUTIONS

No charitable or political donations were made during the year.

FINANCIAL RISK MANAGEMENT POLICIES

Information on the use of financial instruments by the Company and its management of financial risk is disclosed in note 14 to the financial statements.

FUTURE DEVELOPMENTS

In the coming year the Company will continue to execute its investment strategy. Details of post year end transactions are disclosed in note 17.

SIGNIFICANT SHAREHOLDERS

Shareholders with holdings of more than 3% of the Company as of the date of this report are as follows;

Jim Nominees Ltd - 19.0%

Vidacos Nominees Ltd - 12.4%

Interactive Brokers LLC - 10.8%

Lynchwood Nominees Ltd - 10.2%

WB Nominees Ltd - 6.5%

PWB Enterprises Inc - 4.7%

DIRECTOR SHAREHOLDINGS

Shareholdings in the Company by directors as of the date of this report are as follows;

Mr M J Pajak indirect holdings (via Desmond Holdings Ltd) - 272,705 ordinary shares of $1.00

             Mr B S Bindra - 14,440 ordinary shares of $1.00

             Mr C P Morrison - 7,356 ordinary shares of $1.00

             CRAVEN HOUSE CAPITAL PLC

             REPORT OF THE DIRECTORS - continued

FOR THE YEAR ENDED 31 MAY 2020

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and applicable law. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company, and of the profit or loss for that period. In preparing these financial statements, the directors are required to:

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of the accounts and the other information included in annual reports may differ from legislation in other jurisdictions.

The Company is compliant with AIM Rule 26 regarding the Company's website.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the Company's auditors are unaware, and each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

AUDITOR

RBK Business Advisers, Chartered Accountants & Statutory Audit Firm resigned as auditors during the year and Edwards Veeder (UK) Limited, Chartered Accountants & Business Advisors were appointed. A resolution for the re-appointment of Edwards Veeder (UK) Limited, Chartered Accountants & Business Advisors will be proposed in accordance with Section 489 of the Companies Act 2006 at the forthcoming Annual General Meeting.

Mr M J Pajak - Director of behalf of the Board            

Date

             INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF

CRAVEN HOUSE CAPITAL PLC

Opinion

We have audited the financial statements of Craven House Capital Plc (the 'company') for the year ended 31 May 2020 which comprise the statement of comprehensive income, the statement of financial position, the statement of changes in equity, the statement of cash flows and the related notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion, the financial statements:

·              give a true and fair view of the state of the company's affairs as at 31 May 2020 and of its loss for the     

year then ended;

·              have been properly prepared in accordance with IFRSs as adopted by the European Union; and

·              have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

·              the directors' use of the going concern basis of accounting in the preparation of the financial statements

is not appropriate; or

·              the directors have not disclosed in the financial statements any identified material uncertainties that

may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

             INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF

CRAVEN HOUSE CAPITAL PLC - continued

             CRAVEN HOUSE CAPITAL PLC

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MAY 2020

The notes on pages 15 to 33 form part of the financial statements.

             CRAVEN HOUSE CAPITAL PLC                                                  Company Number 05123368

STATEMENT OF FINANCIAL POSITION

AS AT 31 MAY 2020

Approved and authorised for issue by the Board on ………………….2020 and signed on its behalf by:

.................................................................

Mr M J Pajak - Director

The notes on pages 15 to 33 form part of the financial statements.

             CRAVEN HOUSE CAPITAL PLC

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MAY 2020

CRAVEN HOUSE CAPITAL PLC

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MAY 2020

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MAY 2020

        CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

1.            ACCOUNTING POLICIES - continued

The Company has applied for the first time certain amendments to the standards

Amendments to IAS 28: Long Term Interests in Associates and Joint Ventures (effective for annual periods beginning on or after 1 January 2019, endorsed by the European Union on 8 February 2019).

Amendments to IFRS 9: Prepayment Features with Negative Compensation (effective for annual periods beginning on or after 1 January 2019, endorsed by the European Union 22 March 2018).

IFRIC 23 Uncertainty Over Income Tax Treatments (effective for annual periods beginning on or after 1 January 2019, endorsed by the European Union on 23 October 2018).

Annual improvements to IFRS Standards 2015-2017 Cycle (effective for annual periods beginning on or after 1 January 2019, endorsed by the European Union on 14 March 2019).

None of these amendments have had an effect on the Company's financial position and performance.

The following new and revised standards and interpretations have not been adopted by the Company, whether endorsed by the European Union or not

Amendments to References to the Conceptual Framework in IFRS Standards (effective for annual periods beginning on or after 1 January 2020, endorsed by the European Union on 29 November 2019).

Amendments to IAS 1 and IAS 8: Definition of Material (effective for annual periods beginning on or after 1 January 2020, endorsed by the European Union 29 November 2019).

Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform (effective for annual periods beginning on or after 1 January 2020, endorsed by the European Union on 15 January 2020).

Amendments to IFRS 3: Business Combinations (effective for annual periods beginning on or after 1 January 2020, endorsed by the European Union on 21 April 2020).

The Company has assessed the impact of the adoption of these standards and interpretations on its financial statements on initial adoption and do not expect these standards to have a material impact.

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

1.            ACCOUNTING POLICIES - continued

Financial assets

Purchases or sales of financial assets are recognised at the date of the transaction. Where appropriate criteria are met, the Company makes use of the option of measuring non current investments upon initial recognition as financial assets at fair value through profit or loss. These criteria include that the fixed asset investment should meet the Company's published Investing Policy and form part of the Company's managed portfolio or similar investments. Such financial assets are carried at fair value and movements in fair value are recognised through profit and loss. For quoted securities, fair value is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted.

Impairment of financial assets

A financial asset not classified at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

The new impairment model requires forward looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other.  It also requires management to assign probability to various categories of receivables.  Probability of default constitutes a key input in measuring an ECL and entails considerable judgment; it is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectation of future conditions.

The directors have determined that the application of IFRS 9's impairment requirements does not have a material impact on the financial statements.

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

             1.    ACCOUNTING POLICIES - continued

Measurement

Financial assets at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed through profit and loss. Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value in accordance with International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines, as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income. Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the year in which they arise.

Valuation of investments

A number of the Company's assets are measured at fair value for financial reporting purposes. The Investment Manager determines the appropriate valuation techniques and inputs for fair value measurements.

In estimating the fair value of an asset, the Investment Manager uses market-observable data to the extent it is available. The Investment Manager reports its findings to the Board of Directors of the Company every quarter to explain the cause of fluctuations in the fair value of the assets.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in notes 8 and 14.

Financial instruments that are measured subsequent to initial recognition at fair value are grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 fair value measurements for those derived from inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectly; and Level 3 fair value measurements are those derived from inputs that are not based on observable market data.

a)           Quoted investments

Where investments are quoted on recognised stock markets and an active market in the shares exists, the company values those investments at closing mid-market price on the reporting date. Where an active market does not exist those quoted investments are valued by the application of an appropriate valuation methodology as if the relevant investment was unquoted.

b)        Unquoted investments

In estimating the fair value for an unquoted investment, the Company applies a methodology that is    appropriate in light of the nature, facts and circumstances of the investment and its materiality in the context of the total investment portfolio using reasonable data, market inputs, assumptions and estimates. Any changes in the above data, market inputs, assumptions and estimates will affect the fair value of an investment.

Financial liabilities and equity

Financial liabilities are recognised when the Company becomes party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs. Financial liabilities are measured subsequently at amortised cost using the effective interest method.

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all its liabilities.

In accordance with IFRIC 19, when a financial liability is extinguished by the issue of equity, the equity instrument issued is measured at fair value and any difference between the financial liability extinguished and the measurement of the equity instrument is recognised in profit and loss.

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

1.       ACCOUNTING POLICIES - continued

 Current 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 income statement because it excludes items of income or 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 enacted by the statement of financial position date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the statement of financial position date. Timing differences between the Company's taxable profits and its results as stated in the financial information that arises from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial information.

A deferred tax asset is only recognised for an unused tax loss carried forward if it is considered probable that there will be sufficient future taxable profits against which the loss can be utilised.

Foreign currencies

In preparing the financial statements of the Company, transactions in currencies other than the entity's functional currency are recorded at the rates of exchange prevailing at the dates of the transactions. At each statement of financial position date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur; which form part of the net investment in a foreign operation and which are recognised in the foreign currency translation reserve.

For the purposes of presenting US dollar financial statements, the assets and liabilities of the Company's foreign operations are expressed using exchange rates prevailing at the statement of financial position date. Income and expense items are translated at the average exchange rate for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and recognised in a foreign currency translation reserve.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the directors. The directors, who are responsible for allocating resources and assessing performance of the operating segments, have been identified as the senior management that make strategic decisions.

Critical accounting estimates and judgements

Preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Further information regarding the assumptions relied upon and sensitivity analysis around these assumptions is provided in note 14 below.

In particular, significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements relate to the valuation of investments.

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

1.       ACCOUNTING POLICIES - continued

Critical accounting estimates and judgements - continued

The Company has made a number of investments in the form of equity instruments in private companies operating in emerging markets. The investee companies are generally at a key stage in their development and operating in an environment of uncertainty in capital markets. Should planned development prove successful, the value of the Company's investment is likely to increase, although there can be no guarantee that this will be the case. Should planned development prove unsuccessful, there is a material risk that the Company's investments may be impaired. The carrying amounts of investments are therefore highly sensitive to the assumption that the strategies of these investee companies will be successfully executed.

The directors have also determined that the Company meets IFRS 10's definition of an investment company and that the functional currency is appropriate given that underlying transactions, events and conditions that are most likely to impact on the Company's performance are more closely linked to the US dollar than GB sterling.

Share capital and share premium

Share capital represents the nominal (par) value of shares that have been issued.

Share premium includes any premium received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.

             2.       SEGMENTAL REPORTING

The operating segment has been determined and reviewed by the directors to be used to make strategic decisions. The directors consider there to be a single business segment being that of investing activities, therefore there is only one reportable segment.

             3.       EMPLOYEES AND DIRECTORS

           The average monthly number of employees (including directors) during the year was as follows:

The Company has no employees other than the directors.

                       Directors' remuneration is analysed as follows;

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

 3.       EMPLOYEES AND DIRECTORS - continued

The service contracts of the directors who served during the year are as follows:

           ** Payable in new ordinary shares of the company at $1.00 per share

Desmond Holdings Ltd is the Company's Investment Manager. The directors are the key management of the Company. There were no directors (2019: none) to whom retirement benefits were accruing under money purchase schemes.

             4.       OTHER INCOME

                       Other income includes dividends received from joint venture, Qeton Ltd, of $143,214 (2019: $97,514).

             5.        LOSS BEFORE INCOME TAX

              The loss before income tax is stated after charging:

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

        6.      INCOME TAX

                Analysis of charge in the year

                Analysis of charge in the year

 At 31 May 2020, the Company had UK tax losses of $4,472,598 (2019: $5,378,098) available to be carried forward and utilised against future taxable profits. A deferred tax asset of $849,794 (2019: $1,021,839) has not been recognised due to uncertainties over the timing of when taxable profits will arise.

7.          EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share has not been disclosed as the inclusion of the unexercised warrants described in note 11 would be non-dilutive.

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

7.       EARNINGS PER SHARE - continued

Reconciliations are set out below.

The Company adopted the valuation methodology prescribed in the IPEVCV guidelines to value its investments at fair value through profit and loss.

The Company had the following holdings at 31 May 2020:

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

 Investments at fair value through profit or loss

As part of a group reconstruction undertaken during the year, the Company's beneficial ownership of its historic portfolio was transferred to Ordinary Shareholders via a dividend in specie of shares in its wholly owned subsidiary, Craven Industrial Holdings Plc.

The value of Investments at 31 May 2020 therefore represents the Company's acquisitions on 13 March 2020 of a 29.9% interest, at consideration of $1.6m each, in the above-named five UK entities. These are all unquoted investments and have therefore been measured on a Level 3 basis as no observable market data is available. Further information on each investment holding is as follows;

Shares in Garimon Ltd are valued at $1,600,000 representing a 29.9% holding. This shareholding has been valued on a Price of Recent Investment basis which the directors consider represents the best indication of the fair value at the year end. Garimon is the owner of "Magazinos.com", the world's largest-by-content on-line media magazine and periodical content provision service. The management of Magazinos are currently evaluating options available to broaden Magazinos' shareholder base by means of IPO and/or partnering with a major industry investor.

Shares in Onebas.com Ltd are valued at $1,600,000 representing a 29.9% holding. This shareholding has been valued on a Price of Recent Investment basis which the directors consider represents the best indication of the fair value at the year end. Onebas.com Ltd is the owner of "ONEBas.com Music", an optimised search engine providing a portal to music content freely circulating online.

Shares in IZYRadio Ltd are valued at $1,600,000 representing a 29.9% holding. This shareholding has been valued on a Price of Recent Investment basis which the directors consider represents the best indication of the fair value at the year end. IZYRadio Ltd is a UK/Swedish-based B2B and B2C venture which aims to offer superior music quality and music videos to radio stations via software applications.

Shares in Rosedog Ltd are valued at $1,600,000 representing a 29.9% holding. This shareholding has been valued on a Price of Recent Investment basis which the directors consider represents the best indication of the fair value at the year end. Rosedog Ltd is the owner of Pro Vitos™, an online marketer of vitamins and diet supplements and Omega 3 North Norway™, a distributor of branded diet supplements

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

The aggregate nominal values of shares include exchange differences arising from the translation of shares at historic rates and the translation at the rate prevailing at the date of the change in functional currency.

During the year ended 31 May 2018, the Company extended the time scale of 78,632 fully transferable exercisable warrants which were originally issued in the year ended 31 May 2012. At the date of issue, the warrants could be exercised on or before 30 June 2014, this period has now been extended to 30 June 2020. The warrants are exercisable at a price of $15.00 per share.

             12.      TRADE AND OTHER PAYABLES

During the year, $300,000 of the convertible loan note was satisfied by way of share issue. As part of the group reconstruction, the outstanding balance of $500,000 was assigned to the Company's wholly owned subsidiary, Craven Industrial Holdings Plc.

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

14.    FINANCIAL INSTRUMENTS - continued

The table below summarises the maturity profile of the Company's financial liabilities based on contractual discounted payments.

Price risks

The Company's securities are susceptible to price risk arising from uncertainties about future value of its investments. This price risk is the risk that the fair value of future cash flows will fluctuate because of changes in market prices, whether those changes are caused by factors specific to the individual investment or financial instrument or its holder or factors affecting all similar financial instruments or investments traded in the market.

During the year under review, the Company did not hedge against movements in the value of its investments. A 10% increase/decrease in the fair value of investments would result in a $800,000 (2019: $2,736,857 increase/decrease in the net asset value).

While investments in companies whose business operations are based in emerging markets may offer the opportunity for significant capital gains, such investments also involve a degree of business and financial risk, in particular for unquoted investments.

Generally, the Company is prepared to hold unquoted investments for a medium to long time frame, in particular if an admission to trading on a stock exchange has not yet been planned. Sale of securities in unquoted investments may result in a discount to the book value.

Currency risks

The Company is exposed to foreign currency risk on its investments held at fair value and adverse movements in foreign exchange rates will reduce the values of these investments. There is no systematic hedging in foreign currencies against such possible losses on translation/realisation.

Foreign exchange volatility is significantly reduced following the transition to US Dollar as the Company's currency exposures are now more closely matched to its functional and reporting currency. The Company's exposure to other foreign currency changes is not deemed to be material as the Company's investments are US Dollar based.

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

14.     FINANCIAL INSTRUMENTS - continued

Capital management

The Company's financial strategy is to utilise its resources to further grow its portfolio. The Company keeps investors and the market informed of its progress with its portfolio through periodic announcements and raises additional equity finance at appropriate times. The Company regularly reviews and manages its capital structure for the portfolio companies to maintain a balance between the higher shareholder returns that might be possible with certain levels of borrowing for the portfolio and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure of the portfolio in the light of changes in economic conditions. Although the Company has utilised loans from shareholders to acquire investments, it is the Company's policy as far as possible to finance its investing activities with equity and not to have gearing in its portfolio.

At the statement of financial position date the capital structure of the Company consisted of borrowings disclosed in note 13, cash and cash equivalents and equity comprising issued capital and reserves.

The table below sets out the Company's classification of each class of financial assets/liabilities, their fair values (where appropriate) and under which valuation method they are valued:

15.     RELATED PARTY DISCLOSURES

Transactions with subsidiaries

During the year, the Company made a number of payments on behalf of, advanced and received loans to/from its subsidiary undertakings, Craven Industrial Holdings Plc., DLC Holdings Corp., Craven House Capital North America LLC, Craven House Angola LDA and Kwikbuild Corporation Ltd.

To facilitate the group reconstruction, all amounts due to/from DLC Holdings Corp., Craven House Capital North America LLC, Craven House Angola LDA and Kwikbuild Corporation Ltd were assigned to their immediate parent Craven Industrial Holdings Plc. At the year end, the resultant balance of $7,158,248 due from Craven Industrial Holdings Plc. to the Company was written off in full.

Loan to Craven Industrial Holdings Plc

During the year, the Company made a number of payments on behalf of, and received a loan repayment from its subsidiary Craven Industrial Holdings Plc. At the year end the outstanding balance was $nil (2019: $38,969). During the year, a balance of £7,158,248 was written off in full as part of the group reconstruction.

Loan to Craven House Capital North America LLC

During the year, the Company made a number of payments on behalf of, advanced and received loans to/from its subsidiary Craven House Capital North America LLC. At the year end the outstanding balance was $nil (2019: $777,645). During the year, a balance of £4,437,192 was transferred to  Craven Industrial Holdings Plc as part of the group restructuring mentioned above.

Loan from Craven House Angola LDA

During the year, the Company received a number of loans from its subsidiary Craven House Angola LDA. At the year end the outstanding balance was $nil (2019: $1,175,664). During the year, a balance of £1,208,187 was transferred to Craven Industrial Holdings Plc as part of the group restructuring mentioned above.

Loan from Kwikbuild Corporation Ltd

During the year, the Company paid a number of costs on behalf of, advanced and received loans to/from its subsidiary Kwikbuild Corporation Ltd. At the year end the outstanding balance was $nil (2019: $813,443). During the year, a balance of £795,443 was transferred to Craven Industrial Holdings Plc as part of the group restructuring mentioned above.

Loan from Desmond Holdings Limited

During the year, the Company received a loan of $nil (2019: $75,000) from Desmond Holdings Limited. At the year end the outstanding balance was $nil (2019: $50,000). In May 2020 a balance of £3,529 was transferred to Craven Industrial Holdings Plc as part of the group restructuring mentioned above.

All loans accrue interest at a rate of 5% as of 1 June 2019 (prior to this date no interest was charged) and are repayable on demand.

Sales to 7Mobile LDA

During the year, the Company's joint venture, Qeton Ltd, made sales totalling €99,950 (2019: €934,832) to 7Mobile LDA. Craven House Angola Lda., a subsidiary of the Company, has directors in common with 7Mobile Lda. As of 31 May 2020, Qeton Ltd and Craven House Angola Lda are no longer owned by the Company.

             CRAVEN HOUSE CAPITAL PLC

NOTES TO THE FINANCIAL STATEMENTS - continued

FOR THE YEAR ENDED 31 MAY 2020

15.     RELATED PARTY DISCLOSURES -continued

Desmond Holdings Limited

Desmond Holdings Limited is the Investment Manager of the Company. Mr M J Pajak is the sole shareholder and director of Desmond Holdings Limited. During the year, the Company incurred management fees of $211,614 (2019: $219,860) from Desmond Holdings Limited. At the year end, the balance payable of $629,529 was assigned to Craven Industrial Holdings Plc.

Also during the year, an accrual for prior year management fees in the sum $1,657,438 was waived in full. At the year end, $Nil (2019: $424,426) was due to Desmond Holdings Limited in relation to management fees.

A further $50,000 owed to Desmond Holdings Limited as at 31 May 2019 in relation to a working capital loan was repaid in full during the year.

All loans accrue interest at a rate of 5% as of 1 June 2019 (prior to this date no interest was charged) and are repayable on demand.

Directors and key management

All key management personnel are directors and appropriate disclosure with respect to them is made in note 3 of the financial statements. There are no other contracts of significance in which any director has or had during the year a material interest.

16.      ULTIMATE CONTROLLING PARTY

          The directors consider that there is no ultimate controlling party.

17.      EVENTS AFTER THE REPORTING PERIOD

None.

The Annual Results for year ended 31 May 2020 will be available to download from the Company's website at: http://www.cravenhousecapital.com 

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

~ Ends ~

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About Craven House Capital:

The Company's Investing Policy is primarily to invest in or acquire a portfolio of companies, partnerships, joint ventures, businesses or other assets participating in the e-Commerce sector.