EPE Special Opps updates on profitable year – EPE Special Opportunities has taken the unusual step of making a trading statement on its performance for the year ended 31 January 2021. Audited accounts covering the same period will be published, probably in a couple of months. [The trust might be keen to explain its run of good fortune. A sector-leading performance has propelled it towards the top of the performance tables for the private equity sector over most time periods.]
Summary
- The unaudited estimate of the NAV as at 31 January 2021 is 437.63p, an increase of 38.0% over the previous 12 months.
- The share price as at 31 January 2021 was 271.0p, up 36.2% over the same period.
- COVID-19 related disruption to the economy could lead to businesses needing further financial support over the coming 12-18 months. This dynamic is both an investment opportunity and a portfolio risk for the company. The board continues to examine new investment opportunities identified by the investment adviser.
- Liquidity stands at about £28.0m. The company has £3.9m of outstanding unsecured loan notes repayable in July 2022 and no other third-party debt outstanding.
Portfolio highlights
On 21 January 2021, Luceco plc released its a full year trading statement for the year ended 31 December 2020. The business reported year-on-year revenue growth of 2.3% despite disruption in the first half of 2020. In addition, the business achieved year-on-year gross margin gains (40% versus 36% in the prior year) and increased profitability (£30m operating profit versus £18m in the prior year). This was driven by manufacturing improvements, a shift in sales mix towards high margin professional sales and tight control of overheads. Net debt improved by £9.1m over the year to £18.3m at year end. In November 2020, EPE Special Opportunities sold 4.0m shares in Luceco, freeing up £10.0m in cash, whilst retaining a 24.9% holding in the business [worth around £105m today – while EPE Special Opportunities’ market cap is £87m].
Whittard of Chelsea experienced unprecedented disruption during the year ended 31 December 2020. UK retail stores were closed for multiple periods throughout year which led to a reduction in Whittard’s group sales of 20%. Whittard’s UK retail stores were the largest and most profitable sales channel in 2019 and sales were 60% down for the same period in 2020. The statement says that “Lockdowns and landlord inflexibility continue to blight UK retail and much more must be done to mitigate the disruption and costs that are no fault of hard-pressed retailers“. [Landlords need to service their debt and overheads too!] Nevertheless, Whittard has remained EBITDA positive through the period due to growth in UK ecommerce. Over the period, the business pursued international opportunities, with the Asian part of the business trading strongly. They say that corporate gifting, online marketplaces and new geographies also provide encouragement for the future.
David Phillips (furniture) maintained its overall sales levels and improved EBITDA year on year by £2.9m.
Pharmacy2U experienced significant sales growth as patients sought direct-to-home alternatives to collecting prescriptions in high street pharmacies. The business’s new distribution facility began dispensing live orders in November 2020.
In September 2020, the company invested £1.9m in Atlantic Credit Opportunities Fund, a commingled distressed credit fund, and in November 2020, the company completed a $2.5 million investment in a segregated account of Prelude Structured Alternatives Master Fund LP, a multi-manager hedge fund platform invested in high yield credit securities. Both investments aim to benefit from increased credit markets opportunities in the coming period.
Between November and December 2020, the company completed buybacks in the market totaling 799,480 ordinary shares (or 2.4% of its issued ordinary share capital).
ESO : EPE Special Opps updates on profitable year