Marechale is pleased to announce its final results for the year ended 30 April 2020.
Chairman’s statement
Marechale Capital is an established corporate finance firm providing strategic, M&A and advisory services primarily to hospitality and renewable companies in the UK and Europe. Marechale also finances earlier stage and growth capital companies from its family office, private investor and private equity relationships.
A year ago we took the difficult decision to significantly reduce our cost base in order to deliver an annual profit and we were on-track to doing so before the Covid lockdown stopped most commercial activity, and specifically investments. Traditionally we earn a significant proportion of our annual revenues in the last quarter, much of it tax driven growth investments, which affected our March and April revenues, and meant that we missed our target. Our business, which is predominantly hospitality advisory and growth finance has since been affected by the coronavirus.
Marechale’s revenues for the year of £477,000 (2019: £512,000) were slightly down on last year, but because of lower third-party commissions, we delivered a higher Gross Profit of £422,000 (2019: £400,000).
Administrative expenses were reduced to £447,000 from £688,000 in 2019.
Whilst the Company was not profitable for the year as hoped, the business delivered an operating loss of £25,000, significantly better than the £288,000 loss in 2019.
Investments in two client companies realised gains of £19,350 which were offset by the need to write off £20,850 for an investment now in liquidation, producing a net overall loss of £1,500 compared to £22,000 of gains in 2019.
The Company has raised equity and debt funding for a number of new and existing clients. This included funding for the telecommunications business Fast2fibre and raising capital for The Forest Road Brewing Company for their new brewery. Funding for existing clients include leading gastropub group Brewhouse & Kitchen, and the craft spirits distiller Oslo Distillery to finance their further development and product launch into the United States. Additionally, the Company has completed advisory work for a wide range of consumer brand, hospitality and renewable energy businesses.
In accordance with IFRS9 Equity Investments and Warrants are valued at ‘fair value’, typically at a price that reflects their last funding round, and underlying movement in fair value is reflected through the Profit and Loss Account. Given our Investments and Warrants are held, broadly speaking, in the Renewables and in the Hospitality sectors, where under Lockdown the former continued to trade but the latter were closed, with potential well publicised difficulties to re-open, the Board was forced to consider re-valuing the latter at 30 April 2020, rather than two months earlier in healthier times. The Board determined to make a 50% ‘Covid 19’ downward fair value adjustment of £11,000 (2019: ‘non Covid’ of £30,000) against all our Hospitality Investments and Warrants in the sincere hope that these may be recovered this time next year.
The net effect is a loss for the year before tax of £37,500 compared to a £298,000 loss in 2019.
The balance sheet value has reduced during the year to £159,000 (2019: £179,000) which is more fully explained in the Statement of Changes in Equity.
Finally, it will come as no surprise that current trading is very challenging as there is concern and lack of confidence in the Hospitality sector, nonetheless the Directors are confident that markets will recover. While there is increasing optimism that the worst of Covid is over, there is significant uncertainty as to the timing and extent of any recovery.
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