Hermes Pac. Regulatory News (HPAC)

This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

26 September 2023

HERMES PACIFIC INVESTMENTS PLC

("Hermes" or the "Company")

Final results for the year ended 31 March 2022

Hermes Pacific Investments Plc (AIM: HPAC) today reports its financial results for the year ended 31 March 2023 ("FY23", "Period" or "Year")

Chairman's statement

I am pleased to present the annual results of Hermes for the financial year ending on March 31, 2023. The Company has generated income of £21,000 through the rental of our residential property which was acquired in May 2022. The Company made a loss for the year of £62,000 (FY22: a loss of £105,000), the improvement reflects the rental income now being generated from this investment property. Our unwavering commitment to cost minimisation remained steadfast as we actively sought opportunities to allocate our available funds.

At the close of the financial year, the Company's net assets amounted to £3,432,000 (FY22 £3,486,000), a marginal decrease from the previous year. Notably, in the prior financial period, we adopted a new investment policy, primarily focusing on the property sector, although not exclusively. We are pleased to report that we successfully executed our first investment within the property sector in May 2022. The Company purchased a two-bedroom leasehold flat and a single garage in Westcliff-on-sea. The purchase price of £594,907 was funded from the Company's existing cash resources. This flat has now been rented out on assured shorthold tenancy agreement.

The Company is not only benefitting from the rental income but due to rising interest rates, our cash holdings have begun to accrue interest through investments in treasury deposits.

Company Activities Review

Hermes operates as an investment company and has previously committed funds in alignment with its investment policy, particularly in companies engaged in financial activities within the emerging market sector. These investments have consistently met management's expectations. Our balance sheet remains robust, with cash and treasury deposits amounting to £2.571 million as of March 31, 2023, compared to £3.284 million in the prior fiscal year. Over the course of this year, we diligently assessed potential opportunities to deploy our financial resources but regrettably did not identify any transactions that met our criteria.

As we reflect upon the past year, it is imperative to acknowledge the challenges and strategic decisions that have influenced our operations. We observed a cautious approach within our company regarding additional investments, primarily driven by the prevailing economic conditions. The rapid escalation of interest rates and the resultant contraction of yields in the property market prompted this strategic decision. Our steadfast commitment to prudent risk management necessitated a careful evaluation of potential impacts on our investments, leading us to exercise caution in deploying further capital at this juncture.

Despite the constraints we encountered, it is noteworthy that the underlying fundamentals of the property market remained relatively robust. The demand for properties in the United Kingdom continued to display resilience, underpinned by a robust economy and favourable demographics. However, we must acknowledge that, akin to any investment, inherent risks persist.

One pivotal risk is the potential for a decline in property prices. As an investment company, we maintain vigilant oversight of market indicators to ensure the long-term stability and growth of our investments. We remain cognizant of the prospect of price adjustments and are prepared to proactively safeguard our investments against adverse market conditions.

Looking forward, our commitment entails continued vigilance in monitoring market trends, harnessing our expertise, and seeking appealing investment opportunities that align with our risk tolerance and long-term objectives. While we acknowledge the uncertainties and potential challenges within the property market, our optimism endures regarding the underlying strength and resilience of the sector over the long term.

Haresh Kanabar

Chairman

26 September 2023

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2023

STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2023

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2023

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2023

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023

1. General information

Statement of compliance

2. Accounting policies

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company's financial statements.

Going concern

The financial statements have been prepared on a going concern basis as, after making appropriate enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future at the time of approving the financial statements. 

Critical accounting estimates and judgments

The preparation of financial statements in conformity with UK adopted international accounting standards requires management to make judgements, estimates and assumptions that affect the application of the Company's accounting policies with respect to the carrying amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting year. The judgements, estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, including current and expected economic conditions. Although these judgements, estimates and associated assumptions are based on management's best knowledge of current events and circumstances, the actual results may differ. Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised and in any future years affected.

Management have not made any material estimates or judgements that may result in a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Revenue

Revenue comprises rental income which is recognised on a straight line and accruals basis over the rental period.

Deferred taxation

Deferred taxation is provided in full using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly liquid funds with original maturities of three months or less and bank overdrafts.

Investments

The Company carries its investments at fair value. Gains and losses are either recorded in profit or loss or other comprehensive income. For investments in equity instruments that are not held for trading, this will depend on whether the company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.

Financial instruments

Financial assets and liabilities are recognised in the balance sheet when the company becomes party to the contractual provisions of the instrument.

Trade and other receivables

Trade receivables are measured at cost less any provision necessary when there is objective evidence that the Company will not be able to collect all amounts due.

Trade and other payables

Trade and other payables are not interest bearing and are measured at original invoice amount.

Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at fair value at the reporting date. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise.

3. Revenue

Revenue represents rentals received in respect of the Company's investment property which is rented under an assured shorthold tenancy. The lease provides for an annual rental of £25,380, expiring in May 2027.

4. Operating loss

5. Auditors' remuneration

6. Directors' emoluments

7. Employees and staff costs

The Company has no employees. Staff costs comprises payments made in respect of services provided by the Directors.

8. Taxation

The Company has approximately £4.2m (2022: £4.1m) of trading losses to carry forward and offset against future trading profits

9. Loss per share

10. Investment property

The investment property has been valued by the Directors at the year end. This is based on the advice of local agents and having considered property price movements since acquisition.

11. Investments

The Directors have elected to hold the investments at fair value through OCI as it is their intention to hold these

for the long term.

12. Treasury Deposit

The treasury deposit is a deposit held with the Company's bankers with a four month maturity.

13. Cash and cash equivalents

14. Trade and other receivables

15. Trade and other payables

16. Share capital

All ordinary shares rank equally in respect of shareholders' rights.

The deferred shares have no voting and dividend rights. On winding up of the Company, they will be entitled to the nominal value only after all ordinary shareholders receive the nominal value of their shares plus £10m per share.

As at 31 March 2023 and 31 March 2022 the authorised share capital was 3,500,000 ordinary shares of 100p and 200,000,000 deferred shares of 9.5p.

17. Reserves

Share premium

This is the amount subscribed for share capital in excess of nominal value.

Share based payments reserve

This is the fair value of equity instruments issued as share based payments.

Fair value reserve

This is gains and losses arising on the revaluation of the company's long term investments.

Retained earnings

This is all other net gains and losses and transactions with the owners not recognised elsewhere.

18. Financial Instruments

Financial risk management

The Company's activities expose the Company to a number of risks including credit risk, interest rate risk and liquidity risk. The Board manages these risks through a risk management programme. The fair value of the Company's assets and liabilities at 31 March 2023 are not materially different from their book value.

Financial assets at fair value

 through other comprehensive income

The fair value measured is categorised within level 1 of the fair value hierarchy.

Credit risk

The Company monitors credit risk on an on-going basis and manages risk by concentrating on trading and placing bank deposits with reliable counterparties. The Company has no significant concentration of credit risk associated with trading counterparties. Credit risk predominantly arises from cash and cash equivalents. 

Interest rate risk

The Company has interest bearing assets. Interest bearing assets comprise cash balances which earn interest at a variable rate. The financial liabilities in the current year are all non-interest bearing. The Company has not entered into derivatives transactions and has not traded in financial instruments during the period under review. The entire Company's debt is non-interest bearing there would be no effect on the Company if interest rates changed.

Liquidity risk

The Company seeks to manage liquidity risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. All cash and cash equivalents are immediately accessible. 

Price risk

The Company's exposure to equity securities price risk arises from investments held by the Company and classified in the statement of financial position either as at fair value through other comprehensive income or at fair value through profit or loss. The risk is managed by regular reviews of the portfolio of investments held to ensure that exposure to price movements is within acceptable limits. 

The maturity dates of the Company's financial instruments are shown below and are based on the period outstanding at the balance sheet date up to the contractual maturity date.

19. Cash flows from operating activities

20. Related party transactions

Key Management Personnel and Director Transactions A number of key management personnel, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial and operating policies of these entities.

A number of these entities transacted with the Company during the year. The terms and conditions of these transactions with key management personnel and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel related entities on an arm's length basis.

The aggregate value of transactions related to key management personnel and entities over which they have control or significant influence was £33,600 (2022: £33,600).

During the year, the Company used the services of Poonam & Roshni Limited totalling £21,600 (2022: £21,600). H Kanabar is a director of both companies. No balance was outstanding at the year end (2022: Nil).

During the year the Company used the services of Thirty Acre Stables totalling £12,000 (2022: £12,000). J Morton is the owner of that business. No balance was outstanding at the year end (2022: Nil).

The compensation of key management is as disclosed in the Directors' emoluments note.

21. Annual report

The Annual Report will be posted to shareholders shortly and will be available on the Company's website http://www.hermespacificinvestments.com. Copies will be available thereafter in hard copy format from the Company's registered office, 22 Great James Street, London WC1N 3ES.