Audited Results for the year ended 31 August 2024

Capital for Colleagues plc / EPIC: CFCP / Market: AQSE / Sector: Financials

27 January 2025

CAPITAL FOR COLLEAGUES PLC

(‘Capital for Colleagues’, ‘C4C’ or the ‘Company’)

AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2024

Capital for Colleagues, the investment vehicle focused on opportunities in the Employee Owned Business (‘EOB’) sector, is pleased to announce its audited results for the year ended 31 August 2024.

Chief Executive’s Report

The Net Asset Value per share (NAV) at 31 August 2024 was marginally higher than the prior year at 82.02p (2023: 81.99p). Also, a dividend of 2.00p (2023: 1.75p) per share was paid in March 2024. Although the NAV was broadly flat over the year under review, I am pleased to report that a number of investments made excellent progress during the year. More detail of some of these investments is provided in the highlights below.

The strong trading performance of several companies in the portfolio resulted in net revaluation gains of £0.798m (2023: £1.802m). In the final quarter of the current financial year we reduced the valuations of some earlier stage investments in the portfolio reflecting the challenging and uncertain environment for fund raising in the UK Private Equity and Venture Capital marketplace. These reductions are reflected in the net revaluation gains referred to above.

Loan impairments during the year under review were £0.395m (2023: £0.017m). Regrettably, after struggling in an exceptionally difficult market for many years, Place to Place Logistics Limited (P2P) was placed in administration during the year leading to a substantial write down in the value of C4C’s loan book. However we are pleased to advise that C4C was instrumental in recovering part of the business, resulting in the saving of 20 jobs. The new entity is now trading successfully as Emerald Specialist Logistics Limited and the headcount has risen to 26. Further information on C4C’s restructured investment is below.

It is pleasing to report that revenue from operations rose by 16% over the previous year and exceeded £1m for the first time at £1.031m. Administrative costs rose by 10.2% to £1.078m.Dividend income was again a meaningful contributor to revenues but is likely to fall somewhat in the current year due to the recently announced sale of part of our holding in TPS Investment Holdings Limited. MI Accountancy Solutions Limited (MIA), the accountancy firm acquired last year, has proven to be a successful acquisition providing not just quality accounting services to a number of C4C’s investee companies, but also contributing profitability to the Group. MIA has assisted C4C in broadening the support and advice it offers EOBs, whilst at the same time strengthening relationships with existing investee companies.

Chairman of the Board

Our Chairman, Richard Bailey, has led the Company since its inception in 2013. Richard has intimated his intention to retire at the Annual General Meeting following the financial year to 31 August 2025.

Ed Jenkins, the senior Independent non-executive Director has agreed to become Chairman thereafter for a two-year period until the Annual General Meeting following the financial year to August 31 2027. The Board recognises that both Richard and Ed have been in situ for longer than the 9 years recommended under the UK Corporate Governance Code. However, having consulted with most of C4C’s major shareholders, we have established that there is broad agreement that this continuity makes sense at this time as the Company considers the next stage in its evolution.

New Investment

Rapid Retail Limited (RRL)

RRL was established in 2007 and is based in the West Midlands. RRL designs, sells, refurbishes and rents portable shops, retail kiosks and retail merchandising units. These products are typically used at sporting and entertainment venues to augment existing merchandise, food and beverage sales. RRL's clients include the majority of the Premier League and major European Champions League football clubs, racecourses, other sporting venues and concerts. RRL's products are also used to augment conventional retail parks at times of development, refurbishment and under capacity. C4C has invested a total of £0.500m in RRL: £0.100m through the acquisition of existing ordinary shares and £0.400m through the provision of a secured convertible loan. C4C invested alongside Harrock Capital Partners, a private investment company controlled by Bill Ainscough, a non-executive Director of Capital for Colleagues.

Restructured Investment

Emerald Specialist Logistics Limited (ESL)

Following the administration of P2P, ESL was established as a new company to acquire from P2P’s administrator certain assets and the part of P2P’s business which related to the time-critical delivery of radiopharmaceutical products. P2P’s challenges related entirely to its traditional haulage activities, which ESL did not acquire.

ESL currently has 26 employees, including 20 former P2P drivers, delivering time-critical, radiopharmaceutical products from the manufacturer to a range of hospitals and medical centres. This business is now growing profitably and all employees will shortly be offered the opportunity to become shareholders in the company.

Additional Investment

Bright Ascension Limited (BAL)

During the year C4C invested £0.750m into a Convertible Loan Note (CLN) with an interest rate of 10% per annum. The interest on the CLN will be rolled up until the conversion date and will then either be paid in cash or converted into equity. This investment formed part of a £2.250m funding round alongside other existing investors to enable BAL to accelerate the development and market release of its HELIX products, which offer a comprehensive end-to-end space software solution, covering the entire mission lifecycle. As previously announced, HELIX has been selected to form the foundation for the 3-4 year OS2-VOLT mission, led under the ESA ScyLight Programme. The OS2-VOLT mission is led by another C4C investee company, Craft Prospect Limited.

Working Capital Funding

We advanced short term loans totalling £1.053m (2023: £0.762m) to seven existing investees; 2C Services Limited, Computer Application Services Limited, Emerald Specialist Logistics Limited, Hire & Supplies Limited, Place to Place Logistics Limited, The Security Awareness Group Limited and The Real Outdoor Xperience Limited, providing those companies with additional short term working capital. During the year, loan repayments of £1.331m (2023: £0.969m) were returned from six existing investees.

Realisations

There were no major realisations during the year but we reduced our exposure to Computer Application Services Limited resulting in a significant gain over the original cost.

Highlights

Many of the companies in the portfolio made good progress during the year at the operating level and some highlights are provided below. Further details on all of the company’s equity investments can be found in the following section of the Annual Report and on C4C’s website.

Computer Application Services Limited (CAS)

CAS is a developer of case management software branded as Workpro. Since our initial investment in 2016, CAS has grown its client base significantly in both its traditional public sector markets and newer markets that it has targeted in the private sector. Over the last year, Workpro recurring revenue grew by 25% to almost £2.2m per annum, covering an increasingly significant proportion of the company’s cost base. It is particularly pleasing to note that growth continues to come from both new clients won as well as increased revenues from existing customers. The strong growth achieved by CAS has led to a further significant increase in the valuation of our holding. Despite the sale of part of our holding, as mentioned above, the investment in CAS remains one of the largest holdings in C4C’s portfolio.

Craft Prospect Limited (CPL)

CPL is a space engineering business founded in 2017, based in Glasgow, recognised as the “CubeSat” capital of Europe. CPL has three distinct capabilities which it applies to the small (nano) satellite market. First, mission architecture and design services, which is critical for any successful mission. Second, responsive operations which enables the transfer of decision-making and data processing from the ground to space craft and lastly deploying its expertise in AI and Quantum Technology through Quantum Key Distribution (QKD) which enhances secure communication between space and ground receiver stations. Last year a major accomplishment for CPL was winning the competitive OPS-SAT Versatile Optical Laboratory for Telecoms (OS2-VOLT) Mission for the European Space Agency, which is also funded by the UK Space Agency. This project is being led by CPL and will incorporate a range of CPL’s previously developed technologies on board, including QKD, Space hardware and autonomous operations software. The Telecom Directorate of ESA under the ScyLight programme will evaluate and test radical new techniques and technologies in real time in a Low Earth Orbit (LEO) environment. The project will deliver over €19.0m (including partner costs and match funding) in revenue to CPL over the next 4 years. Changes in scope have resulted in an uplift of more than €8.0m over the original contract award. One of the other UK consortium members (also based in Scotland) is BAL, which is also a C4C investee company. BAL is involved with the development and delivery of flight software. AAC Clyde Space, another notable Scottish based satellite business, joined the consortium during the year and will be responsible for providing the space rocket to transport this satellite into orbit.

Morris Commercial Limited (MCL)

MCL is a UK based automotive engineering and manufacturing company. MCL will produce the Morris JE van, based on the iconic 1950s Morris J-Type van. Uniquely for the sector, the Morris JE van is constructed from recycled carbon fibre and aluminium, endowing it with considerably greater efficiency and payload than its more conventional rivals. The vehicle therefore has appeal for both aesthetic and practical reasons and the initial business plan projects profitability at 1,000 vehicle sales per annum. Highlights of the year include enquiry levels rising to over 6,000 and an approach from the People’s Postcode Lottery to brand and use one of the Morris JE prototypes within a recent television advertising campaign where it has already been widely seen being driven by celebrity Tom Allen. After considering a wide range of other options the company is currently close to agreeing terms with the Welsh Government to commence volume manufacture in St Athan near Cardiff during the current year.

Rapid Retail Limited (RRL)

Our recent new investment, RRL has already performed extremely well and has exceeded all expectations at the time of investment. With further investment from RRL’s investors, the previous major barrier to growth, lack of suitable funding, has been removed and the business is currently going from strength to strength.

TPS Investment Holdings Limited (TPS)

TPS is a market-leading provider of infrastructure products for water, energy, housing and transport markets on the island of Ireland via depots in Lisburn and Dublin. There is considerable pent-up demand in all of these sectors, including the recent announcement of major new intergovernmental plans for the integration and expansion of the rail network across the island of Ireland. The current year has seen a pause in the recent exceptional rate of business growth, with some infrastructure investments on temporary hold, but this has enabled the business to continue to strengthen its finances and its management development programme and secure long awaited additional premises in Cork ahead of an anticipated very busy 2025. This strong position and TPS’s strong growth prospects have been reflected in the value at which C4C has been able to attract the interest of additional investors in the business and rebalance our portfolio accordingly.

Dividend

The Board of C4C believes that where profitable realisations occur, it would be appropriate to distribute some of these gains to shareholders. A final dividend of 2.10p (2023: 2.00p) per ordinary share will be paid on 7 March 2025 to shareholders on the register on 7 February 2025.

Outlook

The current economic outlook for the UK is demanding, with forecasts for economic growth scaled back and expectations that interest rates will remain higher for longer than previously anticipated. In addition, the recent UK Budget has imposed unexpected, additional costs on business that will significantly impact the profit margins of many companies. Most of our investees are mainly exposed to the UK economy so there are clearly a number of headwinds that will pose challenges in the year ahead. Regardless of such a scenario, we are confident that EOBs will display the additional resilience and flexibility that will be required to continue to prosper.

Alistair Currie

Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 AUGUST 2024

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED 31 AUGUST 2024

For further information, please visit www.capitalforcolleagues.com or contact:

Capital for Colleagues plc

Capital for Colleagues is an investment company focused on the UK EOB sector. The Company has a proven management team, with a wide network of contacts and affiliates, as well as established access to investment opportunities, enabling the Company to execute its strategy and capitalise on EOB-focused investment opportunities. In addition, the Company educates and assists companies that are looking to launch employee ownership schemes, advising them, amongst other things, on how to secure investment and achieve their objectives.

Market Abuse Regulation (MAR) Disclosure

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation EU 596/2014 as it forms part of retained EU law (as defined in the European Union (Withdrawal) Act 2018).