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EPE Special Opportunities benefits from narrower discount

EPE Special Opportunities disposes its investment in Process Components

EPE Special Opportunities results for the 12 months ended 31 January 2022 show its NAV increasing by a modest 4.1% and its share price by 14.0%, thanks to a narrower discount.

Highlights within the portfolio:

  • Luceco released its trading update for the year ended 31 December 2021 in January 2022, announcing strong revenue growth 36.0%. ahead of the 2019 pre-COVID-19 figures, operating profit of £39.0m and net debt to EBITDA of 0.7x. The business outperformed the market due to new business wins, superior channel access and superior product availability, despite global supply chain disruption. In October 2021, Luceco announced the acquisition of DW Windsor Group for £16.9m. Luceco delivered share price growth of 15.4% for the year ended 31 January 2022. In June 2021, EPE Special Opportunities sold 4.5m shares in Luceco, returning £15.0m in cash, whilst retaining a 22.1% holding in the business.
  • The Rayware Group performed well in the period since acquisition in July 2021, achieving sales ahead of forecast and the prior year, and maintaining strong profitability despite headwinds from increased input and freight costs. The business made a number of additions to the management team, appointing a new CFO, as well as a US Sales VP to support the strategic focus on the US market. Looking ahead, Rayware is well positioned for growth via international expansion and the development of its digital offering.
  • Whittard of Chelsea continued to face a difficult trading environment as a result of ongoing COVID-19 disruption throughout 2021. Whittard’s retail stores remained closed until April 2021 in line with government restrictions, while fourth quarter trading was impacted by the resurgent Omicron variant. The business benefitted from further government support extended in the period as well as the agreement of bilateral deals with the majority of the business’ landlords. Whittard’s e-commerce platform continued to trade at an elevated level in the period, partially mitigating the disruption to the retail channel. Whittard has made encouraging progress in its international channels, securing a new franchise partner in South Korea, as well as new marketplace partners in the US and the EU.
  • David Phillips achieved sales growth in the period, supported by the delivery of strong project pipelines. However, profitability was adversely affected by exceptional global supply chain pressures and raw material price increases. Whilst the narrowing profitability represents a set-back, the sales growth achieved in the year is validation of the market opportunity for the business and provides the scale to achieve meaningful profitability once margin pressure subsides.
  • Pharmacy2U continued to build on the increased scale achieved as a result of the expansion of online pharmacy in the COVID-19 period, delivering further sales growth and improving profitability. In addition, the business has supplemented its core divisions with a new Services division, operating vaccination centres and associated services.
  • In December 2021, the company announced a €10m investment in EPIC Acquisition Corp, a special purpose acquisition company co-sponsored by the investment advisor and TTB Partners, a Hong Kong based investment and advisory firm. EAC was admitted to Euronext Amsterdam on 6 December 2021, raising €150m. EAC intends to leverage the experience of the investment advisor and TTB Partners to identify, acquire and develop a consumer company operating in the EEA or UK which has the potential for significant growth in Asian markets. EAC has appointed a highly experienced group of non-executive directors, who are leaders in global consumer and investment businesses and will be able to provide further access to and guidance on potential targets. EAC is targeting companies with an enterprise value of between €500m and €1bn.

The trust had liquidity of £27.6m as at 31 January 2022. In December 2021, it raised £20.0m from a placement of zero dividend preference shares. The ZDP is repayable in December 2026. The company has £4.0m of unsecured loan notes repayable in July 2022 and no other third-party debt outstanding.

ESO : EPE Special Opportunities benefits from narrower discount

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