Eight Capital Partners posts swing to profit, targets acquisition of digital bank

Eight Capital Partners PLC (AQUIS:ECPE) reported annual results showing a swing to profit thanks to a partial reversal of fair value adjustments made in the prior year, while revenue more than doubled.

Its shares are being restored to trading on the AQSE Growth Market on the publication of the results, which also follows a further debt-to-equity conversion last month.

Through its two subsidiaries, Innovative Finance and Epsion Capital, the group reported £895,000 of revenues for the 2022 calendar year, up from £444,000, with both subsidiaries working on the initial public offering and related transactions for Zamaz PLC (LON:ZAMZ) last September.

It said this income was further supplemented by ECP providing management services to certain investees, recovering £84,000 of overhead costs, while also benefitting from interest income less expense swinging to a positive £2 million from a loss of £1.7 million.

A profit before tax of £4.6 million was recorded for the year, compared to the prior year’s loss of £11.4 million, following a £2.8 million positive net movement in fair value of both realised and unrealised gains and losses on investments at fair value, compared to a £9.5 million loss last time, while overheads increased 51% to £1.1 million.

“The significant swings in the trading for the year are primarily due to the partial reversal of the IFRS fair value adjustments made in the prior year and it should also be noted that 2021 only represented six months of trading at a consolidated level,” the company noted.

This followed a review of the 2021 results by the Financial Reporting Council (FRC), leading to certain balance sheet items being reclassified and further explained, with the main adjustment to the fair value of the 1AF2 Bond and the cost differential between the two funding structures used to fund the bond’s acquisition.

On strategy and outlook, the company hailed 2022 as a “watershed year”, with the transition to a financial services operating group the previous year followed by a conversion of most of its debt into equity to strengthen the balance sheet.

ECP “has a clear strategy in place for the transformation of the business in terms of its size, market value and influence within the fintech sector of financial services, both as a player in its own right and through its wholly owned subsidiaries, Epsion and Innovative Finance.”

Believing SMEs are under-served by the traditional financial services sector and sometimes overlooked by larger funding institutions, the group is targeting the acquisition of a European licensed digital bank to be the core of its fintech ecosystem, with bolt-on strategic acquisitions of fintech operators to deliver financial products to its customers.

“The company has a pipeline of opportunities in fintech banking with European SME loan books and fintech working capital providers, that are synergistically very well matched.”