We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for streaming realtime charts, analysis tools, and prices.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Better Capital Pcc Limited | LSE:BCAP | London | Ordinary Share | GG00BYXP9G82 | ORD GBP1.00 (2009) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 21.50 | 18.00 | 25.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMBCAP TIDMBC12
RNS Number : 4793Q
Better Capital PCC Limited
30 November 2016
30 November 2016
BETTER CAPITAL PCC LIMITED
(the "Company")
INTERIM RESULTS UPDATE
Better Capital PCC Limited announces its 2016 interim results for both the 2009 Cell and the 2012 Cell.
2009Cell Interim Results
-- NAV at 30 September 2016: GBP240.0 million, NAV at 31 March 2016: GBP241.4 million, NAV at 30 September 2015: GBP264.2 million
Hot Features
Premium
-- GBP210.0 million total capital raised
-- GBP203.8 million net proceeds invested in Fund I
-- GBP5.2 million/2.5 per cent. distributed in July 2016
-- GBP66.8 million/31.8 per cent. cumulative distributions to date
-- 49.7 per cent. return from NAV growth and distributions since inception
-- 6.08 per cent. annualised NAV total return including distributions
Key Financials
------------------------------------------------------------
NAV GBP240.0m
------------------------------------------- ---------------
NAV (including distributions) GBP306.8m
------------------------------------------- ---------------
NAV per share 116.08 pence
------------------------------------------- ---------------
NAV per share (including distributions) 148.38 pence
------------------------------------------- ---------------
17.09 per
NAV total return (*) cent.
------------------------------------------- ---------------
NAV total return (including distributions) 49.67 per
(*) cent.
------------------------------------------- ---------------
Annualised NAV total return (including
distributions) (**) 6.08 per cent.
------------------------------------------- ---------------
Share price at 30 September 2016 95.25 pence
------------------------------------------- ---------------
Market capitalisation at 30 September
2016 GBP197.0m
------------------------------------------- ---------------
* Based on the weighted average issue price of ordinary shares and net of share issue costs, since inception.
** Annualised return since inception
-- 4 remaining assets - Gardner, m-hance, Omncio, SPOT -- 3 good realisations - Santia, ATH Coal, Calyx Managed Services -- 2 poor realisations - Reader's Digest, Fairline -- 4.9 years average holding period of remaining portfolio companies -- GBP45.1 million net debt across Fund I portfolio companies
SPOT, a minority holding in Fund I excluded (group net debt of GBP36.1 million)
2012 Cell Interim Results
-- NAV at 30 September 2016: GBP211.9 million, NAV at 31 March 2016: GBP247.6 million, NAV at 30 September 2015: GBP263.3 million
-- GBP355.5 million total capital raised
-- GBP347.4 million net proceeds invested in Fund II
-- GBP6.1 million/1.7 per cent. distribution to date
-- 16.47 per cent. Better Capital 2012 Shares held by Fund II
-- 2.52 pence/4.13 per cent. estimated uplift to NAV per share following proposed buy-back and cancellation(1)
-- 37.4 per cent. value decline combined NAV and distributions since inception
-- 9.55 per cent. annualised value decline combined NAV and distributions
Key Financials
----------------------------------------------------------
NAV GBP211.9m
-------------------------------------------- ------------
NAV (including distributions) GBP218.0m
-------------------------------------------- ------------
NAV per share 61.13 pence
-------------------------------------------- ------------
NAV per share (including distributions) 62.88 pence
-------------------------------------------- ------------
(39.10) per
NAV total decline (*) cent.
-------------------------------------------- ------------
NAV total decline (including distributions) (37.36) per
(*) cent.
-------------------------------------------- ------------
Annualised NAV total decline (including (9.55) per
distributions) (**) cent.
-------------------------------------------- ------------
Share price at 30 September 2016 33.00 pence
-------------------------------------------- ------------
Market capitalisation at 30 September
2016 GBP114.4m
-------------------------------------------- ------------
* Based on the weighted average issue price of ordinary shares and net of share issue costs, since inception.
** Annualised return since inception
-- 6 total platform investments -- 1 follow-on investment -- 1 partial loss - City Link -- 5 remaining assets - Everest, Jaeger, SPOT, iNTERTAIN, Northern Aerospace(2) -- 2.9 years average holding period of portfolio companies -- GBP21.9 million net debt across Fund II portfolio companies
(1) Uplift based upon the 2012 Cell's NAV per share and share price on 30 September 2016
(2) Formerly traded as CAV Aerospace
Chairman's Statement
Better Capital PCC Limited, including its two cells, the 2009 Cell and the 2012 Cell, today issues its Interim Report for the six month period ended 30 September 2016.
The Better Capital team and the Funds have had a busy period since my last report. Fund I has entered into exclusive discussions on the proposed sale of Gardner to Shaanxi Ligeance Mineral Resources Co. Limited ("SLMR"). In Fund II, CAV Aerospace entered into, and left, a pre-packaged insolvency process on 16 November 2016. The trade and assets of the CAV Aerospace business were later acquired by Northern Aerospace, a special purpose vehicle within the same group. The Company recently issued proposals to Shareholders, announced in the circular published on 25 November 2016. In the proposal pertaining to the 2009 Cell the Board seeks to increase its flexibility to return cash to the 2009 Shareholders. In the proposal pertaining to the 2012 Cell, the Board seeks to undertake a buy-back of the 2012 Shares from Fund II, which would enhance the NAV per remaining 2012 share by crystallising the value for 2012 Shareholders. The Board is pleased with these announcements, which point to the direction of the Funds, being one of business improvement and asset realisation.
Better Capital 2009 Cell
The 2009 Cell continues to report good overall progress in the review period, with Gardner the main value driver. Brexit has, in particular, been positive for Gardner as the majority of its contracts are U.S. Dollar denominated. The Board is also pleased to note that following a period of restructuring, Omnico is now operating profitably and has received a modest write-up to its carrying value as at 30 September 2016. The 2009 Cell NAV summary is set out below.
Value Movement Movement Value Fund
at at cost in value at cost
Mar GBP'm GBP'm Sept Sept
2016 2016 2016
GBP'm GBP'm GBP'm
--------------------------------- ------- --------- ---------- ------- -------
Gardner 211.0 (3.2) 12.2 220.0 22.7
--------------------------------- ------- --------- ---------- ------- -------
m-hance 12.5 - (2.0) 10.5 14.0
--------------------------------- ------- --------- ---------- ------- -------
Omnico 25.0 - 1.5 26.5 40.8
--------------------------------- ------- --------- ---------- ------- -------
SPOT 6.2 (0.3) (1.8) 4.1 10.1
--------------------------------- ------- --------- ---------- ------- -------
254.7 (3.5) 9.9 261.1 87.6
--------------------------------- ------- --------- ---------- ------- -------
Fund cash on deposit 1.6
--------------------------------- ------- --------- ---------- ------- -------
Fund & SPV combined other
net assets attributable
to 2009 Cell 0.3(1)
--------------------------------- ------- --------- ---------- ------- -------
Provision for carried
interest (23.2)
--------------------------------- ------- --------- ---------- ------- -------
2009 Cell fair value of
investment in Fund I 239.8
--------------------------------- ------- --------- ---------- ------- -------
2009 Cell cash on deposit 0.3
--------------------------------- ------- --------- ---------- ------- -------
2009 Cell current assets
less liabilities (0.1)
--------------------------------- ------- --------- ---------- ------- -------
2009 Cell NAV 240.0
--------------------------------- ------- --------- ---------- ------- -------
2009 Cell capital distributions 66.8
--------------------------------- ------- --------- ---------- ------- -------
2009 Cell adjusted NAV 306.8 --------------------------------- ------- --------- ---------- ------- -------
(1) Includes GBP0.3 million of Santia escrow cash and GBP0.2 million of estimated net proceeds from the Fairline administration
The 2009 Cell NAV, including accumulated distributions of GBP66.8 million (31.8 per cent. of funds raised) rose by GBP3.7 million, 1.2 per cent. in the period to GBP306.8 million. This was after accounting for net carry provision of GBP23.2 million.
Gardner continues to perform at slightly above expectation. On 16 November 2016, the Fund I GP informed the Board that Fund I had entered into exclusive discussions with SLMR, a Chinese company quoted on the Shenzhen Stock Exchange, for the sale of Gardner on an Enterprise Value of GBP326.0 million.
Gardner's valuation has been written up by GBP9.0 million to GBP220.0 million, a discount to the stated price reflecting the timing and conditionality associated with completion. The proposed transaction remains subject to certain legal and other conditions and to regulatory and other approvals and are being presented to Gardner's works council in France, as is required under French law. However, if the proposed transaction proceeds to completion, the 2009 Cell's share of the proceeds net of costs and provisions could increase the 2009 Cell NAV by an estimated 7.35p to 123.43p per share based on the 2009 Cell NAV per share at 30 September 2016. Completion is expected to occur in Q1 2017.
The progress of m-hance has been slower than planned primarily due to lower achieved sales. However, there have been new sales wins across its services (Microsoft GP and HighCloud/NetSuite) and the pipeline is stronger going into Q4 FY16. The business has been written down by GBP2.0m to reflect slower progress than formerly envisaged.
Omnico closed its FY16 financial year ended September 2016 with positive EBITDA, a considerable improvement on the loss reported for the prior year. This performance demonstrates a turnaround for the business which has successfully transitioned from the legacy custom software development and hardware manufacture to focus on core product development and delivery for Food, Beverage and Retail customers. Opportunities in Hospitality, Entertainment and Retail are looking increasingly positive, particularly in theme parks in the US, Middle East and Asia due to market expansion.
SPOT, which is a minority interest in Fund I, is discussed further below. Comprehensive details on Fund I's investment activities, portfolio companies and valuation are set out in the Fund I GP's report below.
The 2009 Cell NAV per share was 116.08p at 30 September 2016 which compares to 116.73p at 31 March 2016 (127.77p at 30 September 2015). The 2009 Cell Adjusted NAV per share, which includes accumulated distributions, was 148.38p at 30 September 2016 which compares to 146.53p at 31 March 2016 (140.57p at 30 September 2015).
Better Capital 2012 Cell
It is disappointing to note a further decline of GBP35.7 million or 14.1 per cent. to the 2012 Cell NAV including accumulated distributions of GBP6.1 million (1.7 per cent. of funds raised) since the Annual Report. This is principally due to write downs in Everest, Jaeger and SPOT. The 2012 Cell NAV summary is set out below.
Value Movement Movement Value Fund
at March at cost in value at cost
2016 GBP'm GBP'm Sept Sept
GBP'm 2016 2016
GBP'm GBP'm
--------------------------------- ---------- --------- ---------- ------- -------
Everest 44.5 - (6.5) 38.0 25.4
--------------------------------- ---------- --------- ---------- ------- -------
Jaeger 37.0 3.0 (10.0) 30.0 69.0
--------------------------------- ---------- --------- ---------- ------- -------
City Link 2.5 (1.5) - 1.0 18.5
--------------------------------- ---------- --------- ---------- ------- -------
SPOT 65.0 - (23.1) 41.9 93.6
--------------------------------- ---------- --------- ---------- ------- -------
iNTERTAIN 38.0 - - 38.0 23.1
--------------------------------- ---------- --------- ---------- ------- -------
CAV Aerospace 31.0 - - 31.0 59.0
--------------------------------- ---------- --------- ---------- ------- -------
BC12 shares 10.5 7.6 0.7 18.8 22.3
--------------------------------- ---------- --------- ---------- ------- -------
228.5 9.1 (38.9) 198.7 310.9
--------------------------------- ---------- --------- ---------- ------- -------
Fund II cash on deposit 9.3
--------------------------------- ---------- --------- ---------- ------- -------
Fund II & SPV combined
other net assets attributable
to 2012 Cell 0.5
--------------------------------- ---------- --------- ---------- ------- -------
2012 Cell fair value
of investment in Fund
II 208.5
--------------------------------- ---------- --------- ---------- ------- -------
2012 Cell cash on deposit 1.9
--------------------------------- ---------- --------- ---------- ------- -------
2012 Cell current assets
less liabilities 1.5
--------------------------------- ---------- --------- ---------- ------- -------
2012 Cell NAV 211.9
--------------------------------- ---------- --------- ---------- ------- -------
2012 Cell capital distributions 6.1
--------------------------------- ---------- --------- ---------- ------- -------
2012 Cell adjusted NAV 218.0
--------------------------------- ---------- --------- ---------- ------- -------
Everest is expected to close its FY16 financial year ended December 2016 with positive EBITDA a little better than prior year, albeit significantly below expectations and potential, and with a much improved order pipeline going into FY17. This follows on from a series of cost reduction and revenue enhancing initiatives launched during the year. The GBP6.5 million write down in Everest reflects lower than expected earnings performance and a weakening of market comparable ratings at 30 September 2016.
Recent financial performance in Jaeger has been disappointing. Having enjoyed a strong start to its FY17 financial year through its Spring/ Summer 2016 collection with like-for-likes, full price sell through and EBITDA ahead of budget, the end of season sale proved very competitive with deeper markdowns and a longer sales period. The start of Autumn/ Winter 2016 sales have been slow with the warm weather affecting sales of outerwear. The consequent increase in competitive promotional activity means that trading continues to be challenging, however trading has shown an improvement in November 2016. Pressure from the weakness in Sterling will be more prominent for the purchase of the Spring/ Summer 2017 collection.
SPOT is trading profitably with good cash generation, significantly ahead of prior year but below budgeted levels in a fiercely competitive environment. Daily sales were impacted over the summer period following Brexit and margins are under pressure mainly due to the weakness of the Pound Sterling. The business's valuation has been written down by GBP23.1 million reflecting the underperformance in earnings.
iNTERTAIN has traded well ahead of prior year although marginally behind expectations. The business performed strongly throughout the Euro 2016 tournament but the prolonged period of hotter than usual weather in July to September was unhelpful to a business with limited outdoor areas. The business has progressed well under Fund II's ownership and is exit ready.
CAV continues its trend of steady improvement on an operational and financial basis. Considerable progress in areas such as machine maintenance and health and safety have helped improve both product quality and the working environment. Customer arrears are significantly and consistently reducing. On 16 November 2016, the business entered into a pre-packaged administration, with its trade and assets subsequently acquired by Northern Aeropsace, a special purpose vehicle within the group. The restructuring has enabled the group to eliminate contingent past liabilities and onerous sales contracts and puts the business on a firmer footing for future growth with expectation of an improved valuation in due course. 550 jobs have been protected as a result.
Further details on Fund II's investment activities, portfolio companies and valuation are set out in the Fund II GP's report below.
The 2012 Cell NAV per share was 61.13p at 30 September 2016 which compares to 71.43p at 31 March 2016 (75.96p at 30 September 2015). The 2012 Cell Adjusted NAV per share, which includes accumulated distributions, was 62.88p at 30 September 2016 which compares to 73.18p at 31 March 2016 (77.71p at 30 September 2015).
Better Capital 2012 Shares
Since the Annual Results, Fund II acquired a further 23.7 million Better Capital 2012 Shares with an average gross price of 31.96p per share. At 30 September 2016, Fund II held 57.1 million shares (16.47 per cent. of the 2012 Cell share capital) with an average gross price of 38.88p per share. The 2012 Shares are valued based on their quoted closing price at that date of 33.00p.
On 25 November 2016, the Company issued a circular to Shareholders of the Company. Subject to Shareholder consents, it is the Company's current intention to acquire up to 50 per cent. of Fund II's holding of the 2012 Shares by way of an off-market transaction, with an option to acquire the remaining 50 per cent. of the 2012 Shares in one or more tranches at a future date. Following acquisition, it is the Company's intention that these 2012 Shares are cancelled. The financial effect of such cancellation is estimated to be an uplift to the NAV per remaining 2012 Shares, of approximately 2.52p per 2012 Share or 4.13 per cent. based on the 2012 Cell's NAV per share and share price on 30 September 2016. The buy-back of 50 per cent. of Fund II's 2012 Shares is planned to take place before 31 December 2016.
The Extraordinary General Meeting to approve the share buy-back proposal will take place on 7 December 2016.
Distributions
In July 2016, Fund I repaid GBP5.2 million to the 2009 Cell which facilitated a fourth distribution of 2.5p per 2009 Share to the 2009 Shareholders. Cumulative distribution stands at GBP66.8 million, representing 31.8 per cent. of total funds raised. Future distributions in the 2009 Cell are expected to be fulfilled from further asset realisations in Fund I, with the likeliest next being Gardner.
To increase the Board's flexibility in relation to future returns of capital to the 2009 Shareholders, it is proposing to convert the 2009 Shares to being redeemable. Under the proposal the Board anticipates that any return of capital to 2009 Shareholders made under these new provisions, if they are approved, will be made, subject to cash being available for distribution, at or close to the last reported 2009 Cell NAV per share on the relevant redemption date less any costs of effecting the redemption.
The Extraordinary General Meeting to approve the 2009 Shares conversion to redeemable will take place on 7 December 2016.
Uses of remaining cash
On 25 November 2016, cash in Funds I and II were GBP1.6 and GBP7.3 million respectively. Remaining cash will be used to finance any compelling needs in portfolio companies and as required to fund Better Capital's operating expenses which are declining in line with the Funds' requirements. Any surplus cash will be returned to Shareholders in due course.
Better Capital team
There have been no significant senior personnel changes in Better Capital LLP, the Consultant to the Fund I GP and Fund II GP.
Simon Pilling who took over as CEO in September 2015 continues to lead the Consultant and remains the Head of Portfolio. The team has been structured to support the changing nature of the Funds which is now solely focussed on business improvement and asset realisation. Simon, together with Rob Asplin and Bonnie Kraus make up the executive team, with Rob heading up the deal and financial portfolio team and Bonnie, the finance and operations. The costs of the Better Capital team overall have been markedly reduced since this time last year and will continue to do so into next year. The team will be supplemented by additional skills or resources as necessary on a per project basis. This practice is already evident today across Everest, Jaeger, SPOT and CAV.
Board perspectives
The ongoing process to sell Fund I's interest in Gardner has been the Board's predominant focus for the 2009 Cell during the review period. We have maintained close contact with the Fund I GP and the Consultant regarding the sale process and have approved the Fund I GP's proposed valuation of Gardner in light of the business's continued strong performance and the information gained to date from the sale process. The Company has already published proposals to facilitate future returns of capital to the 2009 Shareholders and it remains our intention to effect a return of capital as soon as possible following any sale of Gardner.
Progress in the 2012 Cell has clearly been disappointing. The Board has sought to understand the dynamics of each business and to provide counsel to the Fund II GP and the Consultant as it progresses plans to drive improvements in operational efficiency, enhance growth potential and exit at a point appropriate for the business. The Board retains confidence in the Better Capital team's determination to achieve the best possible outcome for the 2012 Shareholders, but it is evident that a number of the businesses still face significant challenges and that the portfolio has a bias towards consumer-facing sectors which, given the uncertain economic outlook, may represent a headwind. Valuation in such circumstances carries inherent difficulties. The Board has approved the Fund II GP's proposed valuations, but cautions that the value ultimately realised will likely differ from these valuations due to further developments in the businesses, industries and economic environment.
Richard Crowder
Chairman
29 November 2016
For further information, please
contact:
+44 (0) 1481
Better Capital PCC Limited 716 000
Laurence McNairn (Administrator
and Company Secretary)
+44 (0)20
Better Capital LLP 7440 0840
Bonnie Kraus (Investor Relations)
+44 (0) 2072
Powerscourt 501 446
Justin Griffith
+44 (0) 2072
Numis Securities Limited 601 000
Nathan Brown
Statement of Responsibility and Other Information
Responsibility Statement
The Directors confirm that to the best of their knowledge:
-- the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union; and
-- the Interim Financial Report meets the requirements of an interim management report (as defined below), and includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first period of the financial year; and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties of the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first period of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the audited financial statements that could do so.
Interim management report
-- Important events of the interim period
The important events that have occurred during the interim period and the key factors influencing the financial statements are all set out in this report, comprising: the Chairman's Statement, Fund I General Partner's Report, Investment Report of Fund I, Fund II General Partner's Report, Investment Report of Fund II and the Financial Statement sections.
-- Principal risks
There are a number of risks that could have a material impact on the performance of the Company over the remaining six months of the financial year, thereby causing actual performance to differ materially from expectations.
The Board considers that the principal risks and uncertainties have not materially altered from those published in the Annual Report for the year ended 31 March 2016. The Company's principal risk relates to the financial and operational performance of the Fund I and Fund II portfolios. The Board has considered the impact of Brexit in light of each portfolio company valuation.
The Company's principal risk factors are fully discussed in the Company's prospectuses, available on the Company's website www.bettercapital.gg.
The Directors of the Company are listed below and have been directors throughout the period.
By order of the Board
Richard Crowder
Chairman
29 November 2016
Independent Review Report to Better Capital PCC Limited
Introduction
We have been engaged by the Company to review the condensed set of financial statements of the Company in the interim financial report for the period ended 30 September 2016 which comprises the Company Condensed Statement of Financial Position, Company Condensed Statement of Comprehensive Income, Company Condensed Statement of Changes in Equity, Company Condensed Statement of Cash Flows and Company related notes.
We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in Note 2, the annual financial statements of the Company are prepared in accordance with IFRS as adopted by the European Union. The Company's condensed set of financial statements included in this interim financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the Company's condensed set of financial statements in the interim financial report based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of interim financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the Company's condensed set of financial statements in the interim financial report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
BDO Limited
Chartered Accountants
Place du Pré, Rue du Pré, St Peter Port, Guernsey
29 November 2016
Condensed Statement of Financial Position
As at 30 September 2016
As at As at As at
30 30 September
September 31 March
2016 2015 2016
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
ASSETS:
Non-current assets
Investment in Limited
Partnerships 4 448,325 523,510 484,961
------------ -------------------------- --------------------------
Total non-current
assets 448,325 523,510 484,961
------------ -------------------------- --------------------------
Current assets
Trade and other
receivables 5 1,601 1,652 1,633
Cash and cash equivalents 2,160 2,566 2,593
------------ --------------------------
Total current assets 3,761 4,218 4,226
------------ -------------------------- --------------------------
TOTAL ASSETS 452,086 527,728 489,187
------------ -------------------------- --------------------------
Current liabilities
Trade and other
payables (183) (259) (223)
--------------------------
Total current liabilities (183) (259) (223)
------------ -------------------------- --------------------------
TOTAL LIABILITIES (183) (259) (223)
------------ -------------------------- --------------------------
NET ASSETS 451,903 527,469 488,964
============ ========================== ==========================
EQUITY
Share capital 7 480,064 520,387 485,234
(Accumulated losses)/Retained
earnings (28,161) 7,082 3,730
--------------------------
TOTAL EQUITY 451,903 527,469 488,964
============ ========================== ==========================
Number of 2009 Shares
in issue at
period/year end 7 206,780,952 206,780,952 206,780,952
============ ========================== ==========================
Number of 2012 Shares
in issue at period/year
end 7 346,600,520 346,600,520 346,600,520
============ ========================== ==========================
Net asset value
per 2009 Share (pence) 9 116.08 127.77 116.73
Adjusted net asset
value per 2009 Share
(pence) 9 148.38 140.57 146.53
Net asset value
per 2012 Share (pence) 9 61.13 75.96 71.43
Adjusted net asset
value per 2012 Share
(pence) 9 62.88 77.71 71.18
The unaudited condensed interim financial statements of the Company were approved and authorised for issue by the Board of Directors on 29 November 2016 and signed on their behalf by:
Richard Crowder Jon Moulton Chairman Director
The notes form an integral part of the Company's condensed interim financial statements.
Condensed Statement of Comprehensive Income
For the six months ended 30 September 2016
Six months
Six months to Year ended
to 30 September 30 September 31 March
2016 2015 2016
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Income
Change in fair value
of Investments in
Limited Partnerships 4 (31,462) (74,302) (77,251)
Interest income 2 3 7
--------------
Total expenses (31,460) (74,299) (77,244)
----------------- -------------- -----------------
Expenses
Administration fees 125 135 273
Directors' fees
and expenses 8 120 105 211
Legal and professional
fees 59 96 147
Other fees and expenses 67 52 74
Audit fees 32 34 71
Insurance premiums - - 29
Registrar fees 28 20 44
--------------
Total expenses 431 442 849
----------------- -------------- -----------------
Loss and total comprehensive
expense for the period/year (31,891) (74,741) (78,093)
================= ============== =================
Basic and diluted
earnings per 2009
Share (pence) 9 1.85 0.91 6.87
================= ============== =================
Basic and diluted
earnings per 2012
Share (pence) 9 (10.30) (22.10) (26.63)
================= ============== =================
All activities derive from continuing operations.
The notes form an integral part of the Company's condensed interim financial statements.
Condensed Statement of Changes in Equity
For the six months ended 30 September 2016
Share Accumulated Total
capital losses equity
GBP'000 GBP'000 GBP'000
As at 1 April 2016 485,234 3,730 488,964
Loss and total comprehensive
expense for the financial
period - (31,891) (31,891)
Total comprehensive expense
for the period - (31,891) (31,891)
Transactions with owners
Capital distribution (5,170) - (5,170)
--------- ------------ ---------
Total transactions with
owners (5,170) - (5,170)
--------- ------------ ---------
As at 30 September 2016
(unaudited) 480,064 (28,161) 451,903
========= ============ =========
Share Retained Total
capital earnings equity
GBP'000 GBP'000 GBP'000
As at 1 April 2015 520,387 81,823 602,210
Loss and total comprehensive
expense for the financial
period - (74,741) (74,741)
--------- ------------ ---------
Total comprehensive expense
for the period - (74,741) (74,741)
--------- ------------ ---------
As at 30 September 2015
(unaudited) 520,387 7,082 527,469
========= ============ =========
Share Retained Total
capital earnings equity
GBP'000 GBP'000 GBP'000
As at 1 April 2015 520,387 81,823 602,210
Loss and total comprehensive
expense for the financial
year - (78,093) (78,093)
--------- ------------ ---------
Total comprehensive expense
for the year - (78,093) (78,093)
--------- ------------ ---------
Transactions with owners
Capital distribution (35,153) - (35,153)
Total transactions with
owners (35,153) - (35,153)
--------- ------------ ---------
As at 31 March 2016 (audited) 485,234 3,730 488,964
========= ============ =========
The notes form an integral part of the Company's condensed interim financial statements.
Condensed Statement of Cash Flows
For the six months ended 30 September 2016
Six months Six months
to to Year ended
30 September 30 September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Cash flows from operating
activities
Loss for the financial
period/year (31,891) (74,741) (78,093)
Adjustments for:
Change in fair value
of financial assets
at fair value through
profit or loss 31,462 74,302 77,251
Movement in trade
and other receivables 32 2,210 2,229
Movement in trade
and other payables (40) 3 (33)
Repayment of loan
investment in Limited
Partnerships 5,174 - 35,600
Net cash generated
from operating activities 4,737 1,774 36,954
------------- ------------- ------------
Cash flow used in
financing activities
Capital distribution (5,170) - (35,153)
Net cash used in
financing activities (5,170) - (35,153)
------------- ------------- ------------
Net movement in cash
and cash equivalents
during the period/year (433) 1,774 1,801
Cash and cash equivalents
at the beginning
of the period/year 2,593 792 792
Cash and cash equivalents
at the end of the
period/year 2,160 2,566 2,593
============= ============= ============
The notes form an integral part of the Company's condensed interim financial statements.
Notes to the Condensed Interim Financial Statements
For the six months ended 30 September 2016
1. General information
Better Capital PCC Limited is a Closed-ended Investment Company incorporated in, and controlled from, Guernsey as a Protected Cell Company. It has an unlimited life and is registered with the GFSC as a Registered Closed-ended Collective Investment Scheme pursuant to the POI Law.
The Company maintains a separate cell account for each class of shares, to which the capital proceeds of issue and the income arising from the investment of these proceeds in the respective Fund are credited, and against which the expenses allocated are charged. In any redemption, shareholders are only entitled to their proportion of the net assets held in the cell relating to the particular shares.
The Company has two cells: 2009 Cell and 2012 Cell. The financial results for each cell can be found below.
2. Accounting policies
Basis of preparation
The unaudited company condensed financial information included in the interim financial report for the six months ended 30 September 2016 has been prepared in accordance with the DTRs and Listing Rules of the UK's FCA and IAS 34, 'Interim Financial Reporting' as adopted by the EU.
The interim financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements for the year to 31 March 2016, which are available on the Company's website www.bettercapital.gg. The annual financial statements have been prepared in accordance with EU adopted IFRS.
The Company does not operate in an industry where significant or cyclical variations, as a result of seasonal activity, are experienced during the financial period.
The same accounting policies and methods of computation are followed in the interim financial statements as in the annual financial statements for the year to 31 March 2016.
Standards, interpretations and amendments to published standards adopted in the period
There were no new standards applied during the period ended 30 September 2016.
New and revised standards
At the date of approval of these financial statements, the following standards and interpretations, which have not been applied in these financial statements, were issued but not yet effective (and in some cases had not yet been adopted by the EU) and are relevant to the financial statements of the Company and Cells:
-- IFRS 9: Financial Instruments - IFRS 9 replaces IAS 39. The Company will adopt IFRS 9 no later than the accounting period beginning on or after 1 January 2018 (subject to EU endorsement).
-- IFRS 15: Revenue from contracts with customers effective no earlier than 1 January 2018.
The Directors anticipate that the adoption of these standards and interpretations in the period of initial application will not have a material impact on the financial statements. IFRS 9 is not anticipated to have an impact as all investments are currently carried at fair value.
The Company has not adopted early any standards, amendments or interpretations to existing standards that have been published and will be mandatory for the Company's accounting periods beginning after 1 April 2016 or later periods.
Going concern
After making appropriate enquiries, the Directors have a reasonable expectation that the Company, and in turn Funds I and II, have adequate resources to continue in operational existence for the foreseeable future and do not consider there to be any threat to the going concern status of the Company. For this reason, they continue to adopt the going concern basis in preparing these interim financial statements.
Critical accounting judgement and estimation uncertainty
Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
The critical accounting judgements and estimation uncertainties for the 2009 Cell and 2012 Cell are stated below.
Taxation
The Company and Cells are exempt from taxation in Guernsey.
3. Segmental reporting
For management purposes, the Company is organised into two main operating segments, being the 2009 Cell and the 2012 Cell. Full details of the 2009 Cell's and 2012 Cell's results are shown below.
4. Investment in Limited Partnerships
Total Investment:
Loans Capital Total
GBP'000 GBP'000 GBP'000
Cost
Brought forward at 1
April 2016 483,805 37 483,842
Repayment of loan investment
in Limited Partnerships (5,174) - (5,174)
Carried forward 478,631 37 478,668
--------- -------- ---------
Fair value adjustment
through profit or loss
Brought forward 1,119 - 1,119
Fair value movement during
period (31,462) - (31,462)
Carried forward (30,343) - (30,343)
--------- -------- ---------
Fair value as at 30 September
2016 (unaudited) 448,288 37 448,325
========= ======== =========
Loans Capital Total
GBP'000 GBP'000 GBP'000
Cost
Brought forward at 1
April 2015 519,405 37 519,442
Carried forward 519,405 37 519,442
--------- -------- ---------
Fair value adjustment
through profit or loss
Brought forward 78,370 - 78,370
Fair value movement during
period (74,302) - (74,302)
Carried forward 4,068 - 4,068
--------- -------- ---------
Fair value as at 30 September
2015 (unaudited) 523,473 37 523,510
========= ======== =========
Loans Capital Total
GBP'000 GBP'000 GBP'000
Cost
Brought forward at 1
April 2015 519,405 37 519,442
Repayment of loan investment
in Limited Partnerships (35,600) - (35,600)
Carried forward 483,805 37 483,842
--------- -------- ---------
Fair value adjustment
through profit or loss
Brought forward 78,370 - 78,370
Fair value movement during
year (77,251) - (77,251)
Carried forward 1,119 - 1,119
--------- -------- ---------
Fair value as at 31 March
2016 (audited) 484,924 37 484,961
========= ======== =========
The movement in fair value is derived from the fair value movements in the underlying investments held by Fund I and Fund II, net of income and expenses of Fund I and Fund II and their related special purpose vehicles.
The outstanding loans do not incur interest. The loans are expected to be repaid by way of distributions from the Funds. The Company is not entitled to demand repayment of the outstanding loans, however, the General Partner may, upon request by the Company, repay to the Company any amount of the outstanding loan. During the period GBP5.2 million was repaid to the Company by Fund I (Six months to 30 September 2015: GBPnil, Year to 31 March 2016: GBP35.6 million) and GBPnil by Fund II (Six months to 30 September 2015: GBPnil, Year to 31 March 2016: GBPnil).
Income distributions receivable from the Funds in relation to the period amounted to GBPnil (Six months to 30 September 2015: GBPnil, Year to 31 March 2016: GBPnil) which have been allocated as income based on discretionary allocation powers of the respective General Partners of the Funds as set out in the respective Limited Partnership Agreements. At the period end an aggregate GBP1.6 million (Six months to 30 September 2015: GBP1.6 million, Year to 31 March 2016: GBP1.6 million) remained outstanding.
In the financial statements of the Company, the fair value of the investments in Limited Partnerships are adjusted to reflect the fair value of the Cell's attributable valuation of net assets within Fund I and Fund II, as seen in more detail in Note 6.
5. Trade and other receivables
Full details of the 2012 Cell's trade and other receivables are shown below.
6. Fair value
The level in the fair value hierarchy within which the financial assets or financial liabilities are categorised is determined on the basis of the lowest level of input that is significant to the fair value measurement.
Financial assets and financial liabilities are classified in their entirety into only one of the three levels.
The fair value hierarchy has the following levels:
- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2 - inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3 - inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The only financial instruments carried at fair value are the investments in Fund I and Fund II which are fair valued at each reporting date.
The Company's investments in Fund I and Fund II have been classified within Level 3 as they have unobservable inputs and are not traded. Amounts classified as Level 3 for the period are GBP239.9 million for Fund I (30 September 2015: GBP264.1 million, 31 March 2016: GBP241.0 million) and GBP208.5 million for Fund II (30 September 2015: GBP259.4 million, 31 March 2016: GBP244.0 million).
Transfers during the period
There have been no transfers between levels during the period.
Valuation techniques
The value of the Cells' investments in the Funds is based on the value of each Cell's limited partner capital and loan accounts within each Fund. This is based on the components within the Funds, principally the value of the underlying investee companies. Any fluctuation in the value of the underlying investee companies will directly impact on the value of the Company's investment in the Funds.
When valuing the underlying investee companies, the GPs of each Fund review information provided by the underlying investee companies and other business partners and apply IPEV methodologies to estimate a fair value that is in adherence to the requirements of IFRS 13 'Fair Value Measurement' as at the reporting date.
Initially acquisitions were valued at price of recent investment. Once maintainable earnings can be identified, or reasonably estimated, the preferred method of valuation is the earnings multiple valuation technique, where a multiple that is an appropriate and reasonable indicator of value (given the size, risk profile and earnings growth prospects of the underlying company) is applied to the maintainable earnings of the company. Occasionally other methods, as deemed suitable by the GPs, may be used, such as revenue multiple, net assets, break-up value or discounted cash flows. The techniques used in determining the fair value of the Cells' investments are selected on an investment by investment basis so as to maximise the use of market based observable inputs.
The Board reviews and considers the fair value arrived at by the GPs before incorporating into the fair value of the investment adopted by the Company. The variety of valuation bases adopted, quality of management information provided by the underlying investee companies and the lack of liquid markets for the investments mean that there are inherent difficulties in determining the fair value of these investments that cannot be eliminated. Therefore the amounts realised on the disposal of investments may differ from the fair values reflected in these interim financial statements and the differences may be significant.
The significant unobservable inputs in the 2009 Cell and in the 2012 Cell are shown below.
7. Share capital
Core shares
Period ended 30 September 2016
GBP
Core shares as at 1 April 2016
and as at 30 September 2016 100
====
Period ended 30 September 2015
GBP
Core shares as at 1 April 2015
and as at 30 September 2015 100
====
Year ended 31 March 2016
GBP
Core shares as at 1 April 2015
and as at 31 March 2016 100
====
Cell shares
Authorised:
The Cells are authorised to issue an unlimited amount of ordinary shares at GBP1 par value.
Period ended 30 September 2016
2009 Cell 2012 Cell Total
Issued and fully
paid:
Unlimited shares
of GBP1 par value No. No. No.
Shares as at
1 April 2016 206,780,952 346,600,520 553,381,472
Shares as at
30 September
2016 206,780,952 346,600,520 553,381,472
============ ============ ============
Share capital GBP'000 GBP'000 GBP'000
Share capital
as at 1 April
2016 143,386 341,848 485,234
Movements for
the year:
Capital distribution (5,170) - (5,170)
Share capital
as at 30 September
2016 138,216 341,848 480,064
============ ============ ============
Period ended 30 September 2015
2009 Cell 2012 Cell Total
Issued and fully
paid:
Unlimited shares
of GBP1 par value No. No. No.
Shares as at
1 April 2015 206,780,952 346,600,520 553,381,472
Shares as at
30 September
2015 206,780,952 346,600,520 553,381,472
============ ============ ============
Share capital GBP'000 GBP'000 GBP'000
Share capital
as at 1 April
2015 178,539 341,848 520,387
Share capital
as at 30 September
2015 178,539 341,848 520,387
============ ============ ============
Year ended 31 March 2016
2009 Cell 2012 Cell Total
Issued and fully
paid:
Unlimited shares
of GBP1 par value No. No. No.
Shares as at
1 April 2015 206,780,952 346,600,520 553,381,472
Shares as at
31 March 2016 206,780,952 346,600,520 553,381,472
============ ============ ============
Share capital GBP'000 GBP'000 GBP'000
Share capital
as at 1 April
2015 178,539 341,848 520,387
Movements for
the year:
Capital distribution (35,153) - (35,153)
------------ ------------ ------------
Share capital
as at 31 March
2016 143,386 341,848 485,234
============ ============ ============
The four capital distributions (reductions of share capital) to date for the 2009 Cell total GBP66.8 million, being 31.8 per cent. of funds raised.
The one capital distribution (a reduction of share capital) to date for the 2012 Cell totalled GBP6.1 million, being 1.7 per cent. of funds raised.
8. Related party transactions
The Company has four non-executive Directors. Mr Jon Moulton is a director and the sole shareholder of BECAP GP Limited, the general partner of the Fund I GP and BECAP12 GP Limited, the general partner of the Fund II GP.
Annual remuneration for each Director is as follows: the Chairman receives GBP70,000, the Chairman of the audit committee receives GBP62,500, the Chairman of the management engagement, nomination and remuneration committee receives GBP60,000 and the other non-executive Director receives GBP45,000.
Directors' fees and expenses for the period to 30 September 2016 amounted to GBP120,000 (31 March 2016: GBP211,000, 30 September 2015: GBP105,000), of which GBP59,000 (31 March 2016: GBP52,000, 30 September 2015: GBP52,000) remained outstanding at the period end.
9. Earnings per share and net asset value per share
The earnings per share, net asset value per share and adjusted net asset value per share for the 2009 Cell and 2012 Cell are shown below.
10. Subsequent events
Subsequent events for 2009 Cell and 2012 Cell are detailed below.
Better Capital 2009 Cell
Investment policy summary
Better Capital 2009 Cell has invested in a portfolio of businesses which, when purchased, had significant operating issues and associated financial distress, and which have significant activities within the United Kingdom.
The 2009 Cell Investment policy is in the Company's prospectus, available on the Company's website www.bettercapital.gg.
General Partner's Report
Fund I continues to make steady progress. Gardner, the principal investment in the fund, is now in a sales process with SLMR, a company headquartered in China and listed on the Shenzhen Stock Exchange. SLMR is an ultimate parent company of a group whose current main activity is mineral exploration and production, but whose interests include a growing aerospace machining and component manufacture division. The acquisition of Gardner will provide a solid platform for SLMR to grow its interest in the aerospace sector domestically and globally.
Portfolio update
Gardner published an audited EBITDA of GBP24.3 million for its FY16 financial year ended August 2016, against a budget of GBP23.1 million and prior year of GBP16.6 million. The new financial year has started well and Q1 FY17 is expected to trade ahead of its EBITDA budget. With sales volumes increasing in line with its customers' production plans, margins are stronger, further strengthened by the continuing weakness of Sterling. Operational performance continues to be good but nonetheless, the business is focussing on achieving ever higher levels of delivery and quality performance as well as continuing cost reduction programmes. The level of bid activity continues to be high and the strengthening of the business development team completed earlier in the year is bringing in leads from potential new customers.
SLMR's offer for Gardner of GBP326.0 million is on an Enterprise Value basis, providing an EV/ Historic EBITDA of 13.4 times. Gardner's valuation has been written up by GBP9 million, reflecting a GBP12.2 million improvement in the underlying value, offset by a GBP3.2 million repayment of capital and interest in the review period. The valuation is based on an earnings approach, discounted to stated price reflecting the timing and conditionality associated with completion. At 30 September, the business had net debt of GBP43.5 million.
m-hance is trading behind its FY16 plan for the year to December 2016 at both revenue and EBITDA levels. This is primarily due to lower monthly sales than budgeted and known contract attrition not being replaced at the same rate. However, there have been new sales wins and the pipeline is stronger going into Q4 FY16, particularly in the Microsoft GP and the SaaS services businesses. The HighCloud (NetSuite) sales pipeline has grown steadily through the year from a standing start. The sales and marketing team has been strengthened to support growth and to position this new business stream positively for FY17.
Previously there was no planned upgrade path available for Microsoft GP customers onto Microsoft Dynamics 365, a new Cloud-only business suite. A route to move customers onto this new platform is now being developed by Microsoft. This is excellent news for m-hance as it will enable the business to grow a new revenue stream of migration and continue to support its Microsoft GP customers.
The valuation for m-hance has been written down by GBP2.0 million to GBP10.5 million to reflect the slower than anticipated growth in EBITDA. This has been derived using an earnings approach (range of EV/EBITDA: 7.6 times to 11.8 times), supported by a revenue approach, on the business's maintainable earnings and revenue. Maintainable earnings is derived as the average of FY16 outturn EBITDA and FY17 planned EBITDA; whilst maintainable revenue is the average of FY16 outturn revenue and FY17 planned revenue. At 30 September 2016, the business had net debt of GBP1.0 million.
Omnico closed its FY16 financial year ended September 2016 in line with forecast expectations. Most significantly, the business has now moved into profit for the first time recording an underlying EBITDA (unaudited) of c. GBP1.1 million (audited FY15 EBITDA loss of GBP1.5 million). The business completed the closure of its loss-making hardware division during the first half of FY16 and has refocussed itself as a software solutions business that better serves both current and new customers. The software business has grown by some 9 per cent. over the past year. New contract wins include Excess Baggage and Co-Op Denmark.
The first two product updates were delivered to plan in July and November 2016, signalling a shift in how Omnico engages and supports its customers. Delivery performance continues to improve; however, there is still more to do in order to support a higher number of new contracts. The delivery teams have been better aligned to create clearer accountability for product delivery and customer projects which will enable Omnico to increase efficiency, boost billable utilisation and implement delivery more quickly.
Omnico's valuation benefits from a GBP1.5 million uplift to GBP26.5 million. This is supported using an earnings approach to valuation. Maintainable earnings is derived from the average of FY16 outturn and next year's projected EBITDA, benchmarked against Oracle's acquisition of MICROS Systems in September 2014. At 30 September, the business had net debt of GBP0.6 million.
An update on SPOT, a portfolio company 9.9 per cent. owned by Fund I, is provided in the Fund II General Partner's Report below. Fund I's interest in SPOT has been written down by GBP2.1 million, made up of a GBP1.8 million adverse movement in value and a GBP0.3 million repayment to Fund I in June 2016.
Investment activities
During the review period, Gardner repaid GBP3.2 million in a combination of capital and interest payments. Total capital and interest repaid to date is GBP22.5 million from a total capital outlay of GBP40.5 million (55.7 per cent.).
In June 2016, SPOT repaid GBP2.7 million of capital and interest funded from internal cash resources, of which GBP0.3 million was repaid to Fund I and the balance to BECAP12 SPOT Limited.
Valuation
The overall portfolio carrying value rose by GBP6.4 million between 1 April 2016 and 30 September 2016, largely driven by growth in Gardner and to a lesser extent, Omnico (totalling GBP13.7 million), offset by repayments in Gardner and SPOT (GBP3.5 million) and write downs in m-hance and SPOT (GBP3.8 million).
Distributions
On 8 July 2016, Fund I repaid GBP5.2 million to the 2009 Cell which facilitated a fourth distribution to the 2009 Shareholders, of 2.5p per share on 13 July 2016.
A successful Gardner sale will see a very significant return of value to the 2009 Cell and its Shareholders. Planning to facilitate such an eventuality has commenced.
Closing remarks
Fund I has achieved a milestone with Gardner, our most valuable asset now in exclusive talks for its disposal. The Better Capital team continues to work tirelessly to ensure the best outcome for the fund and the 2009 Cell, not just on delivering Gardner but also driving incremental value in the remaining assets in Fund I.
Jon Moulton
Chairman
BECAP GP Limited
29 November 2016
Investment Report of Fund I
Gardner
Business description
A Tier-1 supplier of medium and high complexity machined metallic components to the aerospace industry (www.gardner-aerospace.com)
Investment details
GBP'm 30 September 2016 31 March 2016 30 September 2015 Total invested 22.7 25.9 27.8 Total committed 22.7 25.9 27.8 Fund I fair value (earnings based) 220.0 211.0 185.0
m-hance
Business description
Implements, deploys and manages enterprise wide business management software solutions (www.m-hance.com) (www.highcloudsolutions.co.uk)
Investment details
30 September 31 March 30 September
GBP'm 2016 2016 2015
Total invested 14.0 14.0 14.0
Total committed 14.0 14.0 14.0
Fund I fair value (earnings
based) 10.5 12.5 12.5
Omnico Group
Business description
Provider of omni-channel software solutions and services to the retail, hospitality, entertainment and leisure sectors (www.omnicogroup.com)
Investment details
30 September 31 March 30 September
GBP'm 2016 2016 2015
Total invested 40.8 40.8 37.6
Total committed 40.8 40.8 37.6
Fund I fair value (earnings
based) 26.5 25.0 25.0
SPOT
Business description
Spicers is a leading office products and stationery wholesaler (www.spicers.co.uk)
OfficeTeam is a leading office products and services supplier (www.officeteam.co.uk)
Investment details
30 September 31 March 30 September
GBP'm 2016 2016 2015
Total invested 10.1 10.4 10.4
Total committed 10.1 10.4 10.4
Fund I fair value (earnings
based) 4.1 6.2 6.2
Portfolio summary
Fund fair
value Valuation
30 September Fund project investment in percentage of Valuation
2016 Sector cost* SPVs** NAV methodology
---------------- ------------------ ----------------- --------------- --------------- ---------------
GBP'm GBP'm
Gardner Aerospace 22.7 220.0 91.7% Earnings
Information
m-hance Systems 14.0 10.5 4.4% Earnings
Information
Omnico Group Systems 40.8 26.5 11.0% Earnings
SPOT Office Products 10.1 4.1 1.7% Earnings
87.6 261.1 108.8%
------------------ ----------------- --------------- --------------- ---------------
Fund cash on deposit 1.6 0.7%
Fund & SPV combined other net assets 0.3(1) 0.1%
Provision for carried interest (23.2) (9.7%)
2009 Cell fair value of investment
in Fund I 239.8 99.9%
------------------------------------ -------------------------------- --------------- ---------------
2009 Cell cash on
deposit 0.3 0.1%
2009 Cell other current assets less
liabilities (0.1) 0.0%
2009 Cell NAV 240.0 100.0%
----------------- ------------------- -------------------------------- --------------- ---------------
Cumulative capital distributions 66.8
-------------------------------------- -------------------------------- --------------- ---------------
2009 Cell Adjusted NAV 306.8
-------------------------------------- -------------------------------- --------------- ---------------
* Fund I holds its investments at cost in accordance with the terms of the Limited Partnership Agreement.
** 2009 Cell fair values its investment in Fund I in accordance with the accounting policies as set out in Note 2.
(1) Includes GBP0.3 million of Santia escrow cash and GBP0.2 million of estimated net proceeds from the Fairline administration.
Summary income statement for the Partnership
1 Apr
2016 1 Apr 1 Apr
to 2015 to 2015 to
30 Sept 30 Sept 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
---------------------------------- -------- --------- ---------
Total income 33 93 22,000
Net profit on Fund I investment
portfolio 9,059 5,498 9,223
Fund I GP's Share (1,031) (1,030) (1,807)
Other operating income/(expenses
) 9 (423) (701)
Carried interest movement (4,033) (2,069) (14,134)
Partnership's operating
profit for the period/year 4,037 2,069 14,581
----------------------------------- -------- --------- ---------
Portion of the operating
profit for the period/year
for 2009 Cell's investment
in the Partnership (Note
4) 4,037 2,069 14,581
------------------------------------ -------- --------- ---------
Cash Management
As at 30 September 2016, Fund I had placed a total of GBP1.7 million (31 March 2016: GBP4.4 million, 30 September 2015: GBP0.4 million) of cash on instant access deposit with one bank. Fund I has in place a strict cash management policy that limits counterparty credit risk whilst simultaneously seeking to maximise returns.
Standard
& Poor's 30 September 31 March 30 September
Counterparty Location Rating Term 2016 2016 2015
GBP'000 GBP'000 GBP'000
Barclays Instant
Bank PLC Guernsey A-2 access 1,688 4,381 353
INDEPENT REVIEW REPORT TO BETTER CAPITAL PCC LIMITED IN RESPECT OF THE 2009 CELL
Introduction
We have been engaged by the Company to review the condensed set of financial statements of the 2009 Cell, a cell of Better Capital PCC Limited, for the period ended 30 September 2016 which comprises the 2009 Cell Condensed Statement of Financial Position, the 2009 Cell Condensed Statement of Comprehensive Income, the 2009 Cell Condensed Statement of Changes in Equity, the 2009 Cell Condensed Statement of Cash Flows, and the 2009 Cell related notes.
We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the Company's Directors. The Directors are responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in Note 2, the annual financial statements of the 2009 Cell are prepared in accordance with IFRS as adopted by the European Union. The 2009 Cell's condensed set of financial statements included in this interim financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the 2009 Cell's condensed set of financial statements in the interim financial report based on our review.
Our report, including the conclusion, has been prepared in accordance with the terms of our engagement to assist the 2009 Cell in meeting its responsibilities in respect of interim financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the 2009 Cell's condensed set of financial statements in the interim financial report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
BDO Limited
Chartered Accountants
Place du Pré, Rue du Pré, St Peter Port, Guernsey
29 November 2016
Condensed Statement of Financial Position
As at 30 September 2016
As at As at As at
30 September 30 September 31 March
2016 2015 2016
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
ASSETS:
Non-current assets
Investment in Limited
Partnership 4 239,864 264,089 241,001
-------------
Total non-current
assets 239,864 264,089 241,001
------------- ------------- ------------
Current assets
Trade and other
receivables - 23 27
Cash and cash equivalents 261 179 445
------------- -------------
Total current assets 261 202 472
------------- ------------- ------------
TOTAL ASSETS 240,125 264,291 241,473
------------- ------------- ------------
Current liabilities
Trade and other
payables (90) (92) (88)
-------------
Total current liabilities (90) (92) (88)
------------- ------------- ------------
TOTAL LIABILITIES (90) (92) (88)
------------- ------------- ------------
NET ASSETS 240,035 264,199 241,385
============= ============= ============
EQUITY
Share capital 6 138,216 178,539 143,386
Retained earnings 101,819 85,660 97,999
-------------
TOTAL EQUITY 240,035 264,199 241,385
============= ============= ============
Number of 2009
Shares in issue
at period/year
end 6 206,780,952 206,780,952 206,780,952
============= ============= ============
Net asset value
per 2009 Share
(pence) 8 116.08 127.77 116.73
Adjusted net asset
value per 2009
Share (pence) 8 148.38 140.57 146.53
The unaudited condensed interim financial statements of the 2009 Cell were approved and authorised for issue by the Company's Board of Directors on 29 November 2016 and signed on its behalf by:
Richard Crowder Jon Moulton Chairman Director
The notes below form an integral part of the 2009 Cell condensed interim financial statements.
Condensed Statement of Comprehensive Income
For the six months ended 30 September 2016
Six months Six months
to to Year ended
30 September 30 September 31 March
2016 2015 2016
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Income
Change in fair value
investment in Limited
Partnership 4 4,037 2,069 14,581
Total income 4,037 2,069 14,581
------------- ------------- -----------------
Expenses
Administration fees 62 59 119
Directors' fees
and expenses 7 59 43 89
Legal and professional
fees 32 41 55
Other fees and expenses 31 23 32
Audit fees 16 18 34
Insurance premiums - - 13
Registrar fees 17 10 25
-------------
Total expenses 217 194 367
------------- ------------- -----------------
Profit and total comprehensive
income for the period/year 3,820 1,875 14,214
============= ============= =================
Basic and diluted
earnings per 2009
Share (pence) 8 1.85 0.91 6.87
============= ============= =================
All activities derive from continuing operations.
The notes below form an integral part of the 2009 Cell condensed interim financial statements.
Condensed Statement of Changes in Equity
For the six months ended 30 September 2016
Share Retained Total
capital earnings equity
GBP'000 GBP'000 GBP'000
As at 1 April 2016 143,386 97,999 241,385
Profit and total comprehensive
income for the financial
period - 3,820 3,820
Total comprehensive income
for the period - 3,820 3,820
-------- --------- --------
Transactions with owners
Capital distribution (5,170) - (5,170)
-------- --------- --------
Total transactions with
owners (5,170) - (5,170)
-------- --------- --------
As at 30 September 2016
(unaudited) 138,216 101,819 240,035
======== ========= ========
Share Retained Total
capital earnings equity
GBP'000 GBP'000 GBP'000
As at 1 April 2015 178,539 83,785 262,324
Profit and total comprehensive
income for the financial
period - 1,875 1,875
Total comprehensive income
for the period - 1,875 1,875
-------- --------- --------
As at 30 September 2015
(unaudited) 178,539 85,660 264,199
======== ========= ========
Share Retained Total
capital earnings equity
GBP'000 GBP'000 GBP'000
As at 1 April 2015 178,539 83,785 262,324
Profit and total comprehensive
income for the financial
year - 14,214 14,214
Total comprehensive income
for the year - 14,214 14,214
--------- --------- ---------
Transactions with owners
Capital distribution (35,153) - (35,153)
--------- --------- ---------
Total transactions with
owners (35,153) - (35,153)
--------- --------- ---------
As at 31 March 2016 (audited) 143,386 97,999 241,385
========= ========= =========
The notes below form an integral part of the 2009 Cell condensed interim financial statements.
Condensed Statement of Cash Flows
For the six months ended 30 September 2016
Six months Six months
to to Year ended
30 September 30 September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Cash flows used in
operating activities
Profit for the financial
period/year 3,820 1,875 14,214
Adjustments for:
Change in fair value
on financial assets
at fair value through
profit or loss (4,037) (2,069) (14,581)
Movement in trade
and other receivables 27 1 (3)
Movement in trade
and other payables 2 13 9
Repayment of loan
investment in limited
partnership 5,174 - 35,600
Net cash generated
from/(used in) operating
activities 4,986 (180) 35,239
------------- ------------- ----------------
Cash flows used in
financing activities
Capital distribution (5,170) - (35,153)
------------- ------------- ----------------
Net cash used in financing
activities (5,170) - (35,153)
------------- ------------- ----------------
Net movement in cash
and cash equivalents
during the period/year (184) (180) 86
Cash and cash equivalents
at the beginning of
the period/year 445 359 359
Cash and cash equivalents
at the end of the
period/year 261 179 445
============= ============= ================
The notes below form an integral part of the 2009 Cell condensed interim financial statements.
Notes to the Condensed Interim Financial Statements
For the six months ended 30 September 2016
1. General information
The 2009 Cell is a cell of Better Capital PCC Limited and has the investment objective of generating attractive total returns from investing (through Fund I) in a portfolio of businesses which have significant operating issues and may have associated financial distress, with a primary focus on businesses which have significant activities within the United Kingdom. Such returns are expected to be largely derived from capital growth.
Fund I is managed by its general partner, BECAP GP LP, which is in turn managed by its general partner BECAP GP Limited. Such arrangements are governed under the respective Limited Partnership Agreements, as amended.
The 2009 Cell is listed on the London Stock Exchange Main Market.
2. Accounting policies
Basis of preparation
The unaudited 2009 Cell condensed financial information included in the interim financial report for the six months ended 30 September 2016 has been prepared in accordance with the DTRs and Listing Rules of the UK's FCA and IAS 34, 'Interim Financial Reporting' as adopted by the EU.
The interim financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements for the year to 31 March 2016, which are available on the Company's website www.bettercapital.gg. The annual financial statements have been prepared in accordance with EU adopted IFRS.
The principal accounting policies adopted are set out in the Company's accounting policies above.
Going concern
After making appropriate enquiries, the Directors have a reasonable expectation that the 2009 Cell, and in turn Fund I, have adequate resources to continue in operational existence for the foreseeable future and do not consider there to be any threat to the going concern status of the 2009 Cell. For this reason, they continue to adopt the going concern basis in preparing these interim financial statements.
Critical accounting judgement and estimation uncertainty
Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The areas involving a high degree of judgement or complexity or areas where assumptions and estimates are significant to the interim financial statements are disclosed below. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
The resulting accounting estimates will, by definition, seldom equal the related actual results.
Investment in Fund I
The value of the 2009 Cell's investment in Fund I is based on the value of the 2009 Cell's limited partner capital and loan accounts within Fund I. This is based on the components within Fund I, principally the value of the underlying investee companies. Any fluctuation in the value of the underlying investee companies will directly impact on the value of the 2009 Cell's investment in Fund I.
When valuing the underlying investee companies, the General Partner of Fund I reviews information provided by the underlying investee companies and other business partners and applies IPEV methodologies, as noted below, to estimate a fair value as at the date of the statement of financial position. The variety of valuation bases adopted, quality of management information provided by the underlying investee companies and the lack of liquid markets for the investments mean that there are inherent difficulties in determining the fair value of these investments that cannot be eliminated. Therefore the amounts realised on the sale of investments will likely differ from the fair values reflected in these financial statements and the differences may be significant.
Further information in relation to the valuation of the investment in Fund I is disclosed in Notes 4 and 5.
3. Segmental reporting
For management purposes, the 2009 Cell is organised into one main operating segment, which invests in one limited partnership.
4. Investment in Limited Partnership
Loans Capital Total
GBP'000 GBP'000 GBP'000
Cost
Brought forward at 1 April
2016 142,480 20 142,500
Repayment of loan investment
in Limited Partnership (5,174) - (5,174)
Carried forward 137,306 20 137,326
-------- -------- --------
Fair value adjustment through
profit or loss
Brought forward 98,501 - 98,501
Fair value movement during
period 4,037 - 4,037
Carried forward 102,538 - 102,538
-------- -------- --------
Fair value as at 30 September
2016 (unaudited) 239,844 20 239,864
======== ======== ========
Loans Capital Total
GBP'000 GBP'000 GBP'000
Cost
Brought forward at 1 April
2015 178,080 20 178,100
Carried forward 178,080 20 178,100
-------- -------- --------
Fair value adjustment through
profit or loss
Brought forward 83,920 - 83,920
Fair value movement during
period 2,069 - 2,069
Carried forward 85,989 - 85,989
-------- -------- --------
Fair value as at 30 September
2015 (unaudited) 264,069 20 264,089
======== ======== ========
Loans Capital Total
GBP'000 GBP'000 GBP'000
Cost
Brought forward at 1 April
2015 178,080 20 178,100
Repayment of loan investment
in Limited Partnership (35,600) - (35,600)
Carried forward 142,480 20 142,500
--------- -------- ---------
Fair value adjustment through
profit or loss
Brought forward 83,920 - 83,920
Unrealised fair value movement
during the year 14,581 - 14,581
Carried forward 98,501 - 98,501
--------- -------- ---------
Fair value as at 31 March
2016 (audited) 240,981 20 241,001
========= ======== =========
The movement in fair value of the Fund I investment is derived from the fair value increase in Gardner and Omnico, fair value decrease in m-hance and SPOT and expenses of Fund I and its related special purpose vehicles.
The outstanding loans do not incur interest. The loans are expected to be repaid by way of distributions from Fund I. The 2009 Cell is not entitled to demand repayment of the outstanding loans, however the General Partner may, upon request by the Company, repay to the 2009 Cell any amount of the Cell's outstanding loan. During the period GBP5.2 million was repaid to the 2009 Cell by Fund I (Six months to 30 September 2015: GBPnil, Year to 31 March 2016: GBP35.6 million).
In the financial statements of the 2009 Cell the fair value of the investment in the Limited Partnership is adjusted to reflect the fair value of the 2009 Cell's attributable valuation of net assets within Fund I, as seen in more detail in Note 5.
5. Fair value
The level in the fair value hierarchy within which the financial assets or financial liabilities are categorised is determined on the basis of the lowest level of input that is significant to the fair value measurement. The fair value hierarchy and further information on valuation techniques can be found in Note 6 in the Company financial statements.
The following table summarises the valuation methodologies and inputs used for the 2009 Cell's Level 3 investments as at the period end:
Valuation Description Input Adjustments Discount Discounted
Methodology Rate Multiples
Applied to Value of portfolio valued on
Multiples this basis (GBP'm)
------------- ----------------- --------------- ------------- ------------ ------------ ---------------------------------------------------------
30 30 31 March
September September 2016
2016 2015
Most commonly
used
Private Equity
valuation
methodology.
Used for
investments
which are
profitable and A discount
for is applied
which a set of Multiples are to
listed applied to earnings
companies and the earnings Relevant multiples, EBITDA
precedent of the provisions ranging multiples
transactions investee may be from ranging
with similar company to deducted 20 per from
characteristics determine the from the cent. 6.5 times
can enterprise multiple to 36 per to
Multiple be determined. value valuation cent. 11.2 times 261.1 268.7 254.7
30 September Earnings
2016 Reported
Gardner earnings
m-hance adjusted
Omnico for
SPOT non-recurring
items,
such as
restructuring
expenses,
for
significant
corporate
actions and,
in exceptional
cases,
run-rate
adjustments
to arrive at
maintainable
earnings. Most
common measure
is EBITDA
(Gardner,
m-hance,
Omnico, SPOT).
Further
information
in relation to
the
application
of earnings
can be found
in the Fund I
GP report
above
30 September Discounts to the
2015 valuation
Gardner generated by
m-hance applying
Santia multiples to
Omnico reflect
SPOT the time and
costs
of reaching
sustainable
profitability
and the
inevitable
accompanying
uncertainties
31 March Multiples
2016 The earnings
Gardner multiple is
m-hance derived from
Omnico market
SPOT transaction
multiples
(Gardner,
m-hance,
Omnico, SPOT).
The Fund
I GP typically
selects
businesses
in the same
industry and,
where
possible, with
a similar
business model
and profile
in terms of
size,
products,
services and
customers,
growth rates
and geographic
focus and
adjust for
changes
in the
relative
performance
in the set of
comparables
vel 3 Portfolio valuation 261.1 268.7 254.7
Other net assets/(liabilities) 1.9 2.4 5.5
Provision for Better Capital SLP interest in Fund I (23.2) (7.1) (19.1)
---------- ---------- ---------------------------------
2009 Cell fair value of investments in Fund I 239.8 264.0 241.1
This approach requires the use of assumptions about certain unobservable inputs. Significant unobservable inputs as at 30 September 2016 are:
- Multiples used to derive enterprise value - Discount factors
A reasonably possible change in the multiples used +/- 10.0 per cent. would result in:
- An increase in carrying value of GBP28.3 million or 10.8 per cent. (+10.0 per cent.)
- A decrease in the carrying value of GBP26.8 million or 10.3 per cent. (-10.0 per cent.)
A reasonably possible change in the discount factors used would be to completely remove the discount factor or to double the discount factor. This would result in:
- A decrease in carrying value of GBP75.1 million or 28.8 per cent. (+100.0 per cent.)
- An increase in the carrying value of GBP78.1 million or 29.9 per cent. (-100.0 per cent.)
The Fund I GP approves the valuations performed with input from the Consultant and monitors the range of reasonably possible changes in significant observable inputs on a regular basis.
6. Share capital
Share capital for the 2009 Cell is detailed in the relevant column in Note 7 of the Company's financial statements above.
The four capital distributions (reductions of share capital) announced to date for the 2009 Cell total GBP66.8 million, being 31.8 per cent. of funds raised.
7. Related party transactions
Further information on related party transactions can be found in Note 8 of the Company financial statements above.
Directors' fees and expenses, incurred by the 2009 Cell, for the period to 30 September 2016 amounted to GBP59,000 (31 March 2016: GBP89,000, 30 September 2015: GBP43,000) apportioned on a NAV basis between the cells. At the period end, GBP29,000 (31 March 2016: GBP23,000, 30 September 2015: GBP23,000) remained outstanding.
8. Earnings per share and net asset value per share
Earnings per share
2009 Cell Six months
to 30 Six months Year ended
September to 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
Profit for the period/year GBP3,819,531 GBP1,874,757 GBP14,214,323
Weighted average
number of 2009 Shares
in issue 206,780,952 206,780,952 206,780,952
EPS (pence) 1.85 0.91 6.87
============= ================= ==============
The earnings per share is based on the profit or loss of the 2009 Cell for the period/year and on the weighted average number of shares of the 2009 Cell in issue for the period/year.
The 2009 Cell does not have any instruments which could potentially dilute basic earnings per share in the future.
Net asset value per share
As at As at As at
30 September 2016 30 September 2015 31 March 2016
(unaudited) (unaudited) (audited)
Net assets attributable to 2009 Cell
shareholders GBP240,035,635 GBP264,200,823 GBP241,385,627
Capital distributions GBP66,790,246 GBP26,467,962 GBP61,620,724
------------------- -------------------------------- ---------------
Adjusted Net asset value GBP306,825,881 GBP290,668,785 GBP303,006,351
------------------- -------------------------------- ---------------
2009 Shares in issue 206,780,952 206,780,952 206,780,952
NAV per share (IFRS) (pence) 116.08 127.77 116.73
------------------- -------------------------------- ---------------
Adjusted NAV per share (pence) 148.38 140.57 146.53
------------------- -------------------------------- ---------------
The net asset value per share for the 2009 Cell is arrived at by dividing the total net assets of the 2009 Cell at the period/year end by the number of shares in issue at the period/year end.
The adjusted net asset value adds back capital distributions made to the 2009 Share investors to date.
The adjusted net asset value per share for the 2009 Cell is arrived at by dividing the adjusted net asset value of the 2009 Cell at the period/year end by the number of 2009 Shares in issue at the period/year end.
9. Subsequent events
On 16 November 2016, the Fund I GP received a cash offer for the sale of its interest in Gardner of GBP326 million, and entered into exclusive discussions with Shaanxi Ligeance Mineral Resources Co. Limited. The proposed transaction remains subject to certain legal and other conditions and to regulatory and other approvals and will be presented to the Gardner works council in France imminently, as required under French law.
On 25 November 2016, the Company issued a circular and notices of Extraordinary General Meetings with the following proposals:
(i) convert the Company's 2009 Shares to redeemable shares to facilitate future returns of capital to 2009 Shareholders;
(ii) purchase certain 2012 Shares from Fund II by means of an off market purchase contract; and
(iii) update the Company's memorandum and articles of incorporation.
Other than the above, there were no significant events occurring after 30 September 2016.
Better Capital 2012 Cell
Investment policy summary
Better Capital 2012 Cell has invested in a portfolio of businesses which, when purchased, had significant operating issues and associated financial distress, and which have significant activities within the United Kingdom.
The 2012 Cell Investment policy is in the Company's prospectuses, available on the Company's website www.bettercapital.gg.
General Partner's Report
Progress with Fund II is unsatisfactory. Trading across the portfolio companies is showing improvement against prior year; however, this is behind the budgeted expectations and has resulted in further write downs in Everest, Jaeger and SPOT.
Portfolio update
Everest published its FY15 financial results ended December 2015 with EBITDA significantly weaker than prior year (FY15 audited EBITDA: GBP1.6 million; FY14 audited EBITDA: GBP8.6 million). The business is trading behind its current FY16 budget but, since the appointment of Peter Mottershead as CEO, is showing improvement. A significant change programme was carried out giving rise to both cost reductions and revenue enhancing initiatives designed to place the business on a firmer footing for growth in the medium to long term. Although the FY16 sales are expected to be below FY15 levels, I am pleased to report that Everest has been delivering steady positive EBITDA since March 2016 and entering FY17 with an improved run-rate EBITDA.
The improvements to date are most visible in sales and marketing where lead generation is 8 per cent. better than prior year with a considerably lower overall marketing spend. Better use of data analytics is enabling more focussed customer segmentation targeting. The new products launched in the current year, such as a new doors range, have been well received. Conversion rates in the core Window and Doors are much improved compared to prior year. Changes to the sales team, a larger sales force and substantially enhanced training regime are now all in place, providing Everest with a healthy order pipeline to enter into FY17. Further changes are being implemented to improve installation performance that had seen a number of constraints during the year. These constraints are now understood and the changes identified are being rolled out over the remainder of FY16 to effect a step change to both installation capacity and efficiency.
Applying an earnings approach, Everest has been written down by GBP6.5 million to GBP38.0 million reflecting weaker than expected current year EBITDA performance, compounded by weaker market comparables (range of EV/EBITDA: 5.2 times to 8.9 times). At 30 September, the business had net cash of GBP6.2 million.
Jaeger published its FY16 accounts for the year ended February 2016 with an EBITDA loss of GBP4.5 million (FY15 audited EBITDA loss: GBP4.1 million) but with significantly improved operating cash flows.
Following a strategic review last year, Jaeger has been focussing on redefining the brand, building a more detailed understanding of the core customer and developing products accordingly. The result is Jaeger now offers a broader product range with more casual wear while continuing to offer core Jaeger signature pieces with a more contemporary and fashionable appeal. Performance in Q1 FY17 was strong through its Spring/Summer 2016 collection with like-for-likes, full price sell through and EBITDA ahead of budget. However, the high street proved very competitive going into early summer with heavy, and a longer period of, discounting. Recent weeks' trading of the Autumn/ Winter 2016 collection have been in line with forecast although it was a slow start due to the warm weather affecting sales of outerwear. Like-for-like trading to the week ended 12 November 2016 (Week 37) is 6 per cent. behind budget and 5 per cent. behind prior year.
Mainline online sales continue to grow and are 17 per cent. higher than prior year on a like-for-like basis, supported by improved stock management software. During the review period, Jaeger's mainline online offering received an upgraded website design with new branding and tone of voice, and improved usability.
The marketing strategy has supported both brand and tactical initiatives, with considerable attention to the re-brand. This has culminated in the opening of a new Central London location on Marylebone High Street, launching a more modern retail design concept, brand identity and showcasing all the new product stories. Although early days, the new look to the store and brand have received good reviews from both customers and press with encouraging sales performance.
It is disappointing that following the concerted efforts from the business, the operating outturn for Jaeger in FY17 is still no further forward than prior year. For this reason, Jaeger's valuation has been written down by a net GBP7.0 million, reflecting a GBP10.0 million adverse movement to its value, offset by a GBP3.0 million cash injection in September 2016. This has been derived using a revenue approach (revenue multiple range of 0.3 times to 0.5 times). At 30 September, the business had cash of GBP4.2 million and no external debt funding.
SPOT, comprising Spicers, the office supplies wholesaler and OfficeTeam, a leading business supplies dealer, continues to operate in a fiercely competitive market. The business is trading well and profitably with good cash generation but below budgeted levels for the FY16 financial year ending December 2016.
Brexit had an adverse impact on daily sales over the summer period, with margins under pressure mainly due to FX price increases which are looking to continue into the medium term. SPOT has implemented a range of measures to deal with this, not only through passing on currency increases but also revising its 'cost to serve' model. This involves the implementation of a well-planned and effectively managed network change programme, with material benefits to the cost base and a widened service offering through FY17 with full year benefits in FY18.
Spicers has also implemented the 'Alliance' programme - working with dealers in order to reduce substantially their supply chain costs whilst supporting their sales growth. This initiative has the opportunity to grow Spicers' business through a greater share of the dealers' purchases. The programme is receiving good response with several dealers already in transition; however, it will take time to gain traction with the financial benefits expected to manifest in FY17.
Both OfficeTeam and Spicers have undergone further sales restructures during the summer. OfficeTeam sales are now performing well across the wider business supplies market (UK market size c. GBP15 billion) with revenues improving on prior year, record new business wins reported and a strong pipeline entering into FY17. Meanwhile, Spicers seeks to expand its product offering whilst maintaining its traditional office supplies position (UK market size c. GBP5 billion) which currently represents c. 85 per cent. of turnover to match the spread of OfficeTeam's range to the dealer community.
Further initiatives in SPOT including further cost efficiencies and changes to the technology platform to improve customer experience, reduce administration and enhance sales will continue to move the business forward through FY17 and beyond.
SPOT has been written down by GBP23.1 million to GBP41.9 million, reflecting the below budget performance in FY16. The valuation has been derived using an earnings basis, applied to the group's FY16 EBITDA outturn (EV/ EBITDA range: 5.2 times to 8.2 times). Net debt at 30 September was GBP36.1 million; GBP6.6 million lower than at 31 March.
iNTERTAIN has traded well in the year to date although is expecting to close its FY17 financial year ending January 2017 marginally behind expectations. The Euro 2016 tournament has been successful for the business but the warm summer hurt trading as it had limited outside space.
The business now has 25 Walkabouts, 16 in the new format and nine still trading in the old style, with an additional five unbranded venues. A new Walkabout in Chelmsford opened in September 2016 to good reviews, particularly with food sales. The launch of new sub-brands has also been successful, most notably Felsons, a sports lounge and stick hall in Bournemouth and the Comedy Loft as a replacement for Jongleurs for live comedy in four of the venues.
Progress on acquiring new venues is behind plan (assumed four new sites in FY16) having acquired two only to date; however, the pipeline is strong and several sites are in the legal process with anticipated end of year agreements. Refurbishments are offering good returns on capex investment, with new site acquisitions offering returns averaging at 2.2 years payback.
The value of iNTERTAIN is unchanged at GBP38.0 million using an earnings approach (EV/ EBITDA range: 5.9 times to 8.4 times). At 30 September, the business had net cash of GBP3.6 million.
CAV Aerospace, trading as Northern Aerospace from 16 November 2016, continues its trend of steady improvement on a day to day operational basis.
Good progress has been made on the machine maintenance and health and safety upgrade programmes over the summer and has helped considerably to improve both product quality and the working environment. Customer arrears are consistently reducing and in particular, delivery performance has been excellent for the most recent ten week period on major contracts. Scrap remains costly and is work in progress but is substantially better than prior year.
The warranty claim process is running to its planned course and the probability of success and claim value expectations remain unchanged.
CAV Aerospace's valuation remains unchanged at GBP31.0 million, derived using an assets approach. At 30 September, the business had net cash of GBP2.0 million.
Following the acquisition of its trade and assets from the pre-packaged administration on 16 November 2016, Fund II injected GBP1.0 million into the group to fund working capital. The restructuring has saved 550 jobs and frees the group from contingent historic liabilities and onerous sales contracts to pursue further profitable growth.
Investment activities
The Fund II GP authorised further purchases of the 2012 Shares in the period between April 2016 and July 2016. A total of 23.7 million shares were acquired at the average gross price of 31.96p per share during this period. Total 2012 Shares held by Fund II are 57.1 million (16.47 per cent. of the total issued share capital) at an average gross price of 38.88p per share. The 2012 Shares were quoted at a closing price of 33.00p per share at 30 September.
Jaeger received further investments of GBP3.0 million in the review period to fund on-going losses and to provide the working capital necessary to build on the progress achieved to date. Total investment in Jaeger stands at GBP69.0 million.
SPOT repaid GBP2.7 million in June 2016 to the Better Capital entities, of this GBP2.4 million was repaid to BECAP12 SPOT Limited and GBP0.3 million to Fund I. In turn, BECAP12 SPOT repaid GBP6.3 million in capital and interest to Fund II in September 2016.
As a secured creditor to City Link, Fund II received total distributions of GBP1.5 million in the review period. The most recent estimate of total net receivable by Fund II as prepared by the administrators of City Link is unchanged at GBP22.5 million with GBP21.5 million received to date.
Valuation
The investment portfolio value has declined by a net GBP29.8 million in the period. Total movement of the investment portfolio during the period was as follows:
GBP'm
Portfolio value at 1 April
2016 228.5
Acquisition of 23.7 million
2012 Cell Shares 7.6
Additions at cost - follow
on investments 3.0
-------
239.1
City Link distribution (1.5)
NAV movement - portfolio
companies (39.6)
NAV movement - 2012 Cell
Shares 0.7
-------
Portfolio value at 30 September
2016 198.7
-------
As detailed in the portfolio update, the decline in the portfolio value during the period was due to significant write downs in SPOT (GBP23.1 million), Jaeger (GBP10.0 million), and Everest (GBP6.5 million). The 2012 Shares held by Fund II also benefitted from a 1.5 pence per share improvement, totalling GBP0.7 million during the review period.
Cash and closing remarks
On 29 November 2016, Fund II had cash of GBP7.3 million. In addition to cash in Fund II, there is GBP5.0 million of cash in BECAP12 SPOT Limited which may be repatriated to Fund II in the absence of attractive follow-on investments for SPOT. Cash surplus to requirements will be returned to the 2012 Cell.
Jon Moulton
Chairman
BECAP12 GP Limited
29 November 2016
Investment Report of Fund II
Everest
Business description
A leading consumer brand in the manufacture, installation and supply of uPVC and aluminium windows and doors, conservatories, roofline products, garage doors, security systems, driveways and other home improvement products (www.everest.co.uk).
Investment details
30 September 2016 31 March 2016 30 September 2015
GBP'm
Total invested 25.4 25.4 25.4
Total committed 25.4 25.4 25.4
Fund II fair value (earnings based) 38.0 44.5 53.5
Jaeger
Business description
Ladies' and men's wear retailer, operating in the premium segment of the market (www.jaeger.co.uk)
Investment details
30 September 2016 31 March 2016 30 September
GBP'm 2015
Total invested 69.0 66.0 63.0
Total committed 69.0 66.0 63.0
Fund II fair value (revenue based) 30.0 37.0 37.0
City Link (in administration)
Business description
Formerly a parcel delivery business
Substantially realised with total cash returned to date of GBP21.5 million.
Investment details
30 September 2016 31 March 2016 30 September
GBP'm 2015
Total invested 18.5 20.0 25.0
Total committed 18.5 20.0 25.0
Fund II fair value (net realisable value) 1.0 2.5 7.0
SPOT
Business description
Spicers is a leading office products and stationery wholesaler (www.spicers.co.uk)
OfficeTeam is a leading office products and services supplier (www.officeteam.co.uk)
Investment details
30 September 2016 31 March 2016 30 September
GBP'm 2015
Total invested 93.6* 100.0 100.0
Total committed 93.6 100.0 100.0
Fund II fair value (earnings based) 41.9 65.0 65.0
*GBP6.4 million was repaid to Fund II by BECAP12 SPOT Limited in September 2016, with a further GBP5.0 million still retained in the company for follow-on investments
iNTERTAIN
Business description
Operator of late night bars across the UK, trading predominantly under the brand name 'Walkabout' (www.intertainuk.com)
Investment details
30 September 31 March 30 September
GBP'm 2016 2016 2015
Total invested 23.1 23.1 23.1
Total committed 23.1 23.1 23.1
Fund II fair value (earnings
based) 38.0 38.0 32.0
CAV Aerospace (trading as Northern Aerospace)*
Business description
A leading European aerospace manufacturer of complex metallic components and sub-assemblies to major original equipment manufacturers (www.cav-aerospace.net)
Investment details
30 September 31 March 30 September
GBP'm 2016 2016 2015
Total invested 59.0 59.0 48.0
Total committed 59.0 59.0 48.0
Fund II fair value (assets
basis) 31.0 31.0 20.0
* since 16 November 2016
Portfolio summary
Fund
fair
Fund value Valuation
project investment percentage Valuation
Sector cost* in SPVs** of NAV methodology
------------------------------- -------------------- ---------- ------------- ------------- ---------------
GBP'm GBP'm
Home Improvement
Everest Products 25.4 38.0 17.9% Earnings
Jaeger Retail 69.0 30.0 14.2% Revenue
Net realisable
City Link Parcel Delivery 18.5 1.0 0.5% value
SPOT Office Products 93.6 41.9 19.8% Earnings
iNTERTAIN Leisure 23.1 38.0 17.9% Earnings
Aerospace Assets
CAV Aerospace Manufacturing 59.0 31.0 14.6% basis
Private Equity
Better Capital Investment Market
2012 Cell Vehicle 22.3 18.8 8.9% value
310.9 198.7 93.8%
------------------------------- -------------------- ---------- ------------- ------------- ---------------
Fund cash on deposit 9.3 4.4%
Fund & SPV combined other
net assets 0.5 0.2%
2012 Cell fair value
of investment in Fund
II 208.5 98.4%
----------------------------------------------------- ---------- ------------- ------------- ---------------
2012 Cell cash on
deposit 1.9 0.9%
2012 Cell other current
assets less liabilities 1.5 0.7%
2012 Cell
NAV 211.9 100.0%
----------------------------------------------------- ---------- ------------- ------------- ---------------
Cumulative capital distributions 6.1
----------------------------------------------------- ---------- ------------- ------------- ---------------
2012 Cell Adjusted NAV 218.0
----------------------------------------------------- ---------- ------------- ------------- ---------------
* Fund II holds its investments at cost in accordance with the terms of the Limited Partnership
Agreement.
** 2012 Cell fair values its investment in Fund II in accordance with the accounting policies
as set out in Note 2
Summary Income Statement for the Partnership
1 Apr 2016 to 1 Apr 2015 to 1 Apr 2015 to
30 Sept 2016 30 Sept 2015 31 March 2016
GBP'000 GBP'000 GBP'000
---------------------------- ----- --------------------------- -------------- --------------
Total income 106 248 420
Net loss on Fund II investment
portfolio (32,593) (72,233) (84,952)
Fund II GP's Share (2,774) (2,673) (5,343)
Other operating expenses (238) (1,713) (1,957)
Distribution to 2012 Cell - - -
Partnership's operating loss
for the period/year (35,499) (76,371) (91,832)
----------------------------- ----- --------------------------- -------------- --------------
Portion of the operating loss for
the period/year for 2012 Cell's
investment in the Partnership
(Note 4) (35,499) (76,371) (91,832)
------------------------------------ --------------------------- -------------- --------------
Cash Management
As at 30 September 2016, Fund II had placed a total of GBP9.3 million (31 March 2016: GBP15.0 million, 30 September 2015: GBP39.5 million) of cash on instant access deposit with three banks. Fund II has in place a strict cash management policy that limits counterparty risks whilst simultaneously seeking to maximise returns.
Standard
& Poor's 30 September 31 March 30 September
Counterparty Location Rating Term 2016 2016 2015
GBP'000 GBP'000 GBP'000
Royal Bank
of Scotland
International Instant
Limited Guernsey A-2 access 7 134 40
Barclays Bank Instant
PLC Guernsey A-2 access 2,597 3,318 2,900
Lloyds Bank
International Instant
Limited Jersey A-1 access 6,674 11,554 36,523
9,278 15,006 39,463
------------- --------- -------------
INDEPENT REVIEW REPORT TO BETTER CAPITAL PCC LIMITED IN RESPECT OF 2012 CELL
Introduction
We have been engaged by the Company to review the condensed set of financial statements of the 2012 Cell, a cell of Better Capital PCC Limited, for the period ended 30 September 2016 which comprises the 2012 Cell Condensed Statement of Financial Position, the 2012 Cell Condensed Statement of Comprehensive Income, the 2012 Cell Condensed Statement of Changes in Equity, the 2012 Cell Condensed Statement of Cash Flows and the 2012 Cell related notes.
We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the Company's Directors. The Directors are responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in Note 2, the annual financial statements of the 2012 Cell are prepared in accordance with IFRS as adopted by the European Union. The 2012 Cell's condensed set of financial statements included in this interim financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the 2012 Cell's condensed set of financial statements in the interim financial report based on our review.
Our report, including the conclusion, has been prepared in accordance with the terms of our engagement to assist the 2012 Cell in meeting its responsibilities in respect of interim financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the 2012 Cell's condensed set of financial statements in the interim financial report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
BDO Limited
Chartered Accountants
Place du Pré, Rue du Pré, St Peter Port, Guernsey
29 November 2016
Condensed Statement of Financial Position
As at 30 September 2016
As at As at As at
30 September 30 September 31 March
2016 2015 2016
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
ASSETS:
Non-current assets
Investment in Limited
Partnership 4 208,461 259,421 243,960
-------------
Total non-current
assets 208,461 259,421 243,960
------------- ------------- ------------
Current assets
Trade and other
receivables 5 1,601 1,629 1,606
Cash and cash equivalents 1,899 2,335 2,125
------------- -------------
Total current assets 3,500 3,964 3,731
------------- ------------- ------------
TOTAL ASSETS 211,961 263,385 247,691
------------- ------------- ------------
Current liabilities
Trade and other
payables (93) (115) (112)
-------------
Total current liabilities (93) (115) (112)
------------- ------------- ------------
TOTAL LIABILITIES (93) (115) (112)
------------- ------------- ------------
NET ASSETS 211,868 263,270 247,579
============= ============= ============
EQUITY
Share capital 7 341,848 341,848 341,848
Accumulated losses (129,980) (78,578) (94,269)
-------------
TOTAL EQUITY 211,868 263,270 247,579
============= ============= ============
Number of 2012
Shares in issue
at period/year
end 7 346,600,520 346,600,520 346,600,520
============= ============= ============
Net asset value
per 2012 Share
(pence) 9 61.13 75.96 71.43
Adjusted net asset
value per 2012
Share (pence) 9 62.88 77.71 73.18
The unaudited condensed interim financial statements of the 2012 Cell were approved and authorised for issue by the Company's Board of Directors on 29 November 2016 and signed on its behalf by:
Richard Crowder Jon Moulton Chairman Director
The notes below form an integral part of the 2012 Cell condensed interim financial statements.
Condensed Statement of Comprehensive Income
For the six months ended 30 September 2016
Six months Six months
to to Year ended
30 September 30 September 31 March
2016 2015 2016
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Income
Change in fair value
investment in Limited
Partnership 4 (35,499) (76,371) (91,832)
Interest income 2 3 7
-------------
Total expenses (35,497) (76,368) (91,825)
------------- ------------- ---------------------------------
Expenses
Administration fees 63 76 154
Directors' fees
and expenses 8 61 62 122
Legal and professional
fees 27 55 92
Other fees and expenses 36 29 42
Audit fees 16 16 37
Insurance premiums - - 16
Registrar fees 11 10 19
-------------
Total expenses 214 248 482
------------- ------------- ---------------------------------
Loss and total comprehensive
expense for the financial
period/year (35,711) (76,616) (92,307)
============= ============= =================================
Basic and diluted
earnings per 2012
Share (pence) 9 (10.30) (22.10) (26.63)
============= ============= =================================
All activities derive from continuing operations.
The notes below form an integral part of the 2012 Cell condensed interim financial statements.
Condensed Statement of Changes in Equity
For the six months ended 30 September 2016
Share Accumulated Total
capital losses equity
GBP'000 GBP'000 GBP'000
As at 1 April 2016 341,848 (94,269) 247,579
Loss and total comprehensive expense for the financial period - (35,711) (35,711)
Total comprehensive expense for the period - (35,711) (35,711)
-------- ------------ ---------
As at 30 September 2016 (unaudited) 341,848 (129,980) 211,868
======== ============ =========
Share Accumulated Total
capital losses equity
GBP'000 GBP'000 GBP'000
As at 1 April 2015 341,848 (1,962) 339,886
Loss and total comprehensive expense for the financial period - (76,616) (76,616)
Total comprehensive expense for the period - (76,616) (76,616)
-------- ------------ ---------
As at 30 September 2015 (unaudited) 341,848 (78,578) 263,270
======== ============ =========
Share Accumulated Total
capital losses equity
GBP'000 GBP'000 GBP'000
As at 1 April 2015 341,848 (1,962) 339,886
Loss and total comprehensive expense for the financial year - (92,307) (92,307)
Total comprehensive expense for the year - (92,307) (92,307)
-------- ------------ ---------
As at 31 March 2016 (audited) 341,848 (94,269) 247,579
======== ============ =========
There have been no transactions with owners during the period.
The notes below form an integral part of the 2012 Cell condensed interim financial statements.
Condensed Statement of Cash Flows
For the six months ended 30 September 2016
Six months Six months Year ended
to to
30 September 30 September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Cash flows used in
operating activities
Loss for the financial
period/year (35,711) (76,616) (92,307)
Adjustments for:
Change in fair value
on financial assets
at fair value through
profit or loss 35,499 76,371 91,832
Movement in trade
and other receivables 5 2,209 2,232
Movement in trade
and other payables (19) (10) (13)
Net cash (used in)/generated
from operating activities (226) 1,954 1,744
------------- ------------- -----------
Net movement in cash
and cash equivalents
during the period/year (226) 1,954 1,744
Cash and cash equivalents
at the beginning of
the period/year 2,125 381 381
Cash and cash equivalents
at the end of the
period/year 1,899 2,335 2,125
============= ============= ===========
The notes below form an integral part of the 2012 Cell condensed interim financial statements.
Notes to the Condensed Interim Financial Statements
For the six months ended 30 September 2016
1. General information
The 2012 Cell is a cell of Better Capital PCC Limited and has the investment objective of generating attractive total returns from investing (through Fund II) in a portfolio of businesses which have significant operating issues and may have associated financial distress, with a primary focus on businesses which have significant activities within the United Kingdom. Such returns are expected to be largely derived from capital growth.
Fund II is managed by its general partner, BECAP12 GP LP, which is in turn managed by its general partner BECAP12 GP Limited. Such arrangements are governed under the respective Limited Partnership Agreements, as amended.
The 2012 Cell is listed on the London Stock Exchange Main Market.
2. Accounting policies
Basis of preparation
The unaudited 2012 Cell condensed financial information included in the interim financial report for the six months ended 30 September 2016 has been prepared in accordance with the DTRs and Listing Rules of the UK's FCA and IAS 34, 'Interim Financial Reporting' as adopted by the EU.
The interim financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements for the year to 31 March 2016, which are available on the Company's website www.bettercapital.gg. The annual financial statements have been prepared in accordance with EU adopted IFRS.
The principal accounting policies adopted are set out in the Company's accounting policies above.
Going concern
After making appropriate enquiries, the Company's Directors have a reasonable expectation that the 2012 Cell, and in turn Fund II, have adequate resources to continue in operational existence for the foreseeable future and do not consider there to be any threat to the going concern status of the 2012 Cell. For this reason, they continue to adopt the going concern basis in preparing these interim financial statements.
Critical accounting judgement and estimation uncertainty
Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The areas involving a high degree of judgement or complexity or areas where assumptions and estimates are significant to the interim financial statements are disclosed below. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
The resulting accounting estimates will, by definition, seldom equal the related actual results.
Investment in Fund II
The value of the 2012 Cell's investment in Fund II is based on the value of the 2012 Cell's limited partner capital and loan accounts within Fund II. This is based on the components within Fund II, principally the value of the underlying investee companies. Any fluctuation in the value of the underlying investee companies will directly impact on the value of the 2012 Cell's investment in Fund II.
When valuing the underlying investee companies, the General Partner of Fund II reviews information provided by the underlying investee companies and other business partners and applies IPEV methodologies, as noted below, to estimate a fair value as at the date of the statement of financial position. The variety of valuation bases adopted, quality of management information provided by the underlying investee companies and the lack of liquid markets for the investments mean that there are inherent difficulties in determining the fair value of these investments that cannot be eliminated. Therefore the amounts realised on the sale of investments will likely differ from the fair values reflected in these financial statements and the differences may be significant.
Further information in relation to the valuation of the investment in Fund II is disclosed in Notes 4 and 6.
3. Segmental reporting
For management purposes, the 2012 Cell is organised into one main operating segment, which invests in one limited partnership.
4. Investment in Limited Partnership
Loans Capital Total
GBP'000 GBP'000 GBP'000
Cost
Brought forward at 1 April
2016 341,325 17 341,342
Carried forward 341,325 17 341,342
---------- -------- ----------
Fair value adjustment through
profit or loss
Brought forward (97,382) - (97,382)
Fair value movement during
period (35,499) - (35,499)
Carried forward (132,881) - (132,881)
---------- -------- ----------
Fair value as at 30 September
2016 (unaudited) 208,444 17 208,461
========== ======== ==========
Loans Capital Total
GBP'000 GBP'000 GBP'000
Cost
Brought forward at 1 April
2015 341,325 17 341,342
Carried forward 341,325 17 341,342
--------- -------- ---------
Fair value adjustment
through profit or loss
Brought forward (5,550) - (5,550)
Fair value movement during
period (76,371) - (76,371)
--------- -------- ---------
Carried forward (81,921) - (81,921)
--------- -------- ---------
Fair value as at 30 September
2015 (unaudited) 259,404 17 259,421
========= ======== =========
Loans Capital Total
GBP'000 GBP'000 GBP'000
Cost
Brought forward at 1 April
2015 341,325 17 341,342
Carried forward 341,325 17 341,342
--------- -------- ---------
Fair value adjustment
through profit or loss
Brought forward (5,550) - (5,550)
Fair value movement during
the year (91,832) - (91,832)
Carried forward (97,382) - (97,382)
--------- -------- ---------
Fair value as at 31 March
2016 (audited) 243,943 17 243,960
========= ======== =========
The movement in fair value of the Fund II investment is derived from the write downs in Everest, Jaeger and SPOT net of income and expenses of Fund II and its related special purpose vehicles.
The outstanding loans do not incur interest. The loans are expected to be repaid by way of distributions from Fund II. The 2012 Cell is not entitled to demand repayment of the outstanding loans, however, the General Partner may, upon request by the Company, repay to the 2012 Cell any amount of the outstanding loan. During the period GBPnil (Year to 31 March 2016: GBPnil, Six months to 30 September 2015: GBPnil) was repaid to the 2012 Cell by Fund II.
Income distributions receivable from Fund II in the period amounted to GBPnil (Year to 31 March 2016: GBPnil, Six months to 30 September 2015: GBPnil) which have been allocated as income based on the discretionary allocation powers of the General Partner of Fund II as set out in the Limited Partnership Agreement. At the period end an aggregate GBP1.6 million (Year to 31 March 2016: GBP1.6 million, Six months to 30 September 2015: GBP1.6 million) remained outstanding.
In the interim financial statements of the 2012 Cell the fair value of the investment in the Limited Partnership is adjusted to reflect the fair value of the 2012 Cell's attributable valuation of net assets within Fund II, as seen in more detail in Note 6.
5. Trade and other receivables
As at As at As at
30 September 30 September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Debtors 1,601 1,629 1,600
Prepayments - - 6
-------------- -------------- ------------
1,601 1,629 1,606
============== ============== ============
There are no past due or impaired receivable balances outstanding at the period end. The Directors consider that the carrying value of debtors and prepayments approximates their fair value.
In outstanding debtors at the period end GBP1.6 million (Year to 31 March 2016: GBP1.6 million, Six months to 30 September 2015: GBP1.6 million) relates to income distributions receivable from Fund II.
6. Fair value
The level in the fair value hierarchy within which the financial assets or financial liabilities are categorised is determined on the basis of the lowest level of input that is significant to the fair value measurement. The fair value hierarchy and further information on valuation techniques can be found in Note 6 in the Company financial statements.
Fund II's Level 1 investment consists of 57.1 million (Year to 31 March 2016: 33.4 million, Six months to 30 September 2015: 3.3 million) shares in the 2012 Cell, which are valued at GBP18.8 million based on their 30 September 2016 (Year to 31 March 2016: GBP10.5 million, Six months to 30 September 2015: GBP2.0 million) quoted price.
The following table summarises the valuation methodologies and inputs used for the 2012 Cell's Level 3 investments as at the period end:
Valuation Description Input Adjustments Discount Discounted
Methodology Rate Multiples
Applied to Value of portfolio valued on
Multiples this basis (GBP'm)
------------- ----------------- --------------- ------------- ----------- ------------ ---------------------------------
30 30 31 March
September September 2016
2016 2015
Most commonly
used
Private Equity
valuation
methodology.
Used for
investments
which are
profitable and Multiples
for being
which a set of Multiples are A discount 0.4 times
listed applied to is revenue
companies and the earnings Relevant applied and
precedent of the provisions to ranging
transactions investee may be earnings from 5.8
with similar company to deducted multiples times
characteristics determine the from the at to 6.5
can enterprise multiple 20 per times
Multiple be determined. value valuation cent. EBITDA) 147.9 187.5 184.5
-------------
30 September Earnings
2016 Reported
Everest earnings
SPOT adjusted
iNTERTAIN for
Jaeger non-recurring
items,
such as
restructuring
expenses,
for
significant
corporate
actions and,
in exceptional
cases,
run-rate
adjustments
to arrive at
maintainable
earnings. Most
common measure
is EBITDA
(Everest,
SPOT,
iNTERTAIN).
Other earnings
such as
revenue may
also
be used where
relevant
(Jaeger).
Further
information in
relation
to the
application of
earnings
can be found
in the Fund
II GP report
above
-------------
30 September Discounts to the
2015 valuation
Everest generated by
SPOT applying
iNTERTAIN multiples to
Jaeger reflect
the time and
costs
of reaching
sustainable
profitability
and the
inevitable
accompanying
uncertainties
31 March Multiples
2016 The earnings
Everest multiple is
SPOT derived from
iNTERTAIN comparable
Jaeger listed
companies
(Everest,
iNTERTAIN) or
relevant
market
transaction
multiples
(Jaeger,
SPOT) . The
Fund II GP
typically
selects
businesses in
the
same industry
and, where
possible, with
a similar
business model
and profile
in terms of
size,
products,
services and
customers,
growth rates
and geographic
focus and
adjust for
changes
in the
relative
performance
in the set of
comparables
Values of
separate
elements
prepared under
other methods,
as deemed
suitable by the
Fund
II GP, such as
net
realisable As
value (City determined
Link) and asset on a case
basis Net realisable by case
Other (CAV Aerospace) value, assets basis n/a n/a 32.0 27.0 33.5
----------------- --------------- ------------- ----------- ------------ ---------- ---------- ---------
30 September
2016
City Link CAV
Aerospace
---------- ---------- ---------
30 September
2015
City Link
CAV Aerospace
31 March 2016
City Link
CAV Aerospace
---------- ---------- ---------
Level 3 Portfolio valuation 179.9 214.5 218.0
Level 1 Portfolio valuation 18.8 2.0 10.5
Other net assets 9.8 42.9 15.5
---------- ---------- ---------
2012 Cell fair value of investments in Fund II 208.5 259.4 244.0
This approach requires the use of assumptions about certain unobservable inputs. Significant unobservable inputs as at 30 September 2016 are:
- Multiples used to derive enterprise value - Discount factors
A reasonably possible change in the multiples used +/- 10.0 per cent. would result in:
- An increase in carrying value of GBP16.1 million or 8.1 per cent. (+10.0 per cent.)
- A decrease in the carrying value of GBP16.1 million or 8.1 per cent. (-10.0 per cent.)
A reasonably possible change in the discount factors used would be to completely remove the discount factor or to double the discount factor. This would result in:
- A decrease in carrying value of GBP40.2 million or 20.2 per cent. (+100.0 per cent.)
- An increase in the carrying value of GBP39.3 million or 19.8 per cent. (-100.0 per cent.)
The Fund II GP approves the valuations performed with input from the Consultant and monitors the range of reasonably possible changes in significant observable inputs on a regular basis.
7. Share capital
Share capital for the 2012 Cell is detailed in the relevant column in Note 7 of the Company's financial statements above.
The one capital distribution (reduction of share capital) announced to date for the 2012 Cell totalled GBP6.1 million, being 1.7 per cent. of funds raised.
8. Related party transactions
Further information on related party transactions can be found in Note 8 of the Company financial statements.
Directors' fees and expenses, incurred by the 2012 Cell, for the period to 30 September 2016 amounted to GBP61,000 (31 March 2016: GBP122,000, 30 September 2015: GBP62,000) apportioned on a NAV basis between the Cells. At the period end, GBP30,000 (31 March 2016: GBP29,000, 30 September 2015: GBP29,000) remained outstanding.
9. Earnings per share and net asset value per share
Earnings per share
2012 Cell Six months Six months Year ended
to 30 September to 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
Loss for the period/year GBP(35,710,463) GBP(76,615,949) GBP(92,307,568)
Weighted average
number of 2012
Shares in issue 346,600,520 346,600,520 346,600,520
EPS (pence) (10.30) (22.10) (26.63)
=================
The earnings per share is based on the profit or loss of the 2012 Cell for the period/year and on the weighted average number of shares of the 2012 Cell in issue for the period/year.
The 2012 Cell does not have any instruments which could potentially dilute basic earnings per share in the future.
Net asset value per share
As at As at As at
30 September 2016 30 September 2015 31 March 2016
(unaudited) (unaudited) (audited)
Net assets attributable to 2012 Cell shareholders GBP211,868,910 GBP263,269,992 GBP247,578,373
Capital distributions GBP6,065,509 GBP6,065,509 GBP6,065,509
------------------- ------------------- ---------------
Adjusted net asset value GBP217,934,419 GBP269,335,501 GBP253,643,882
------------------- ------------------- ---------------
2012 Shares in issue 346,600,520 346,600,520 346,600,520
NAV per share (IFRS) (pence) 61.13 75.96 71.43
Adjusted NAV per share (pence) 62.88 77.71 73.18
------------------- ------------------- ---------------
The net asset value per share for the 2012 Cell is arrived at by dividing the total net assets of the 2012 Cell at the period/year end by the number of shares in issue at the period/year end.
The adjusted net asset value adds back capital distributions made to the 2012 Share investors to date.
The adjusted net asset value per share for the 2012 Cell is arrived at by dividing the adjusted net asset value of the 2012 Cell at the period/year end by the number of 2012 Shares in issue at the period/year end.
10. Subsequent events
On 17 November 2016, the Fund II GP informed the Board that following an intra group restructuring, facilitated through a pre-packaged insolvency process, the business and assets of CAV Aerospace have been acquired by Northern Aerospace, a special purpose vehicle within the same group.
Fund II has backed the business with the provision of additional funding of up to GBP7 million, to fund major capital expenditure projects and working capital to support management's plans for revenue growth and improved profitability.
On 25 November 2016, the Company issued a circular and notices of Extraordinary General Meetings with the following proposals:
(i) convert the Company's 2009 Shares to redeemable shares to facilitate future returns of capital to 2009 Shareholders;
(ii) purchase certain 2012 Shares from Fund II by means of an off market purchase contract; and
(iii) update the Company's memorandum and articles of incorporation.
Other than the above, there were no significant events occurring after 30 September 2016.
Defined Terms
"2009 Cell" or "Better the Cell in the Company established
Capital 2009 Cell" following the Conversion which
holds partnership interests in
Fund I, and is interpreted as the
Company acting in its capacity
as a protected cell company transacting
its business in the name of the
2009 Cell;
"2009 Shares" the ordinary shares of GBP1 par
value in the 2009 Cell;
"2012 Cell" or "Better the Cell in the Company established
Capital 2012 Cell" following the Conversion which
holds partnership interests in
Fund II, and is interpreted as
the Company acting in its capacity
as a protected cell company transacting
its business in the name of the
2012 Cell;
"2012 Shares" the ordinary shares of GBP1 par
value in the 2012 Cell issued by
the Company pursuant to the Firm
Placing and Placing and Open Offer;
"Administrator" means Heritage International Fund
or "Heritage" or Managers Limited;
"HIFM"
"Carried Interest" the Special Limited Partner's entitlement
to participate in the gains and
profits of Fund I or Fund II, as
set out in the relevant partnership
agreement;
"CAV Aerospace" means CAV Aerospace Limited;
"Cells" the 2009 Cell and 2012 Cell together;
"Cell Shares" the 2009 Shares and 2012 Shares
together;
"City Link" means City Link Limited;
"Companies Law" the Companies (Guernsey) Law, 2008
as amended;
"Company" or "Better Better Capital Limited, being prior
Capital PCC Limited" to the Conversion, a non-cellular
company limited by shares and being
upon and after the Conversion a
protected cell company, in each
case incorporated in Guernsey with
registered number 51194 whose registered
office is at Heritage Hall, PO
Box 225, Le Marchant Street, St
Peter Port, Guernsey GY1 4HY;
"Consultant" means Better Capital LLP;
"Core" the Company excluding its Cells;
"Core Shares" the shares in the Core;
"Directors" or "Board" the directors of the Company as
at the date of this document and
"Director" means any one of them;
"DTR" Disclosure Guidance and Transparency
Rules of the UK's FCA;
"EBITDA" being earnings before interest,
tax, depreciation and amortisation;
"EU" or "European the European Union first established
Union" by the treaty made at Maastricht
on 7 February 1992;
"EU Adopted IFRS" International Financial Reporting
Standards as adopted in the EU;
"Fairline" means the Fairline group of companies;
"FCA" the Financial Conduct Authority;
"FCA Rules" the rules or regulations issued
or promulgated by the FCA from
time to time and for the time being
in force (as varied by any waiver
or modification granted, or guidance
given, by the FCA);
"Funds" both Fund I and Fund II together;
"Fund GPs" being both Fund I GP and Fund II
GP;
"Fund I" BECAP Fund LP, a Guernsey limited
partnership established on 23 November
2009 and registered in Guernsey
as a limited partnership on 25
November 2009 (registration number
1242);
"Fund I GP" means BECAP GP LP acting as general
partner of Fund I and by its general
partner, BECAP GP Limited;
"Fund II" BECAP12 Fund LP, a Guernsey limited
partnership established and registered
in Guernsey as a limited partnership
on 17 November 2011 (registration
number 1558);
"Fund II GP" means BECAP12 GP LP acting as general
partner of Fund II and by its general
partner, BECAP12 GP Limited;
"Gardner" Gardner Group Limited;
"General Partners" both Fund I GP and Fund II GP together;
or "GPs"
"General Partner's the priority profit share payable
Share" to the General Partner pursuant
to the Partnership Agreement;
"IFRS" International Financial Reporting
Standards;
"iNTERTAIN" means the iNTERTAIN group of companies;
"IPEV" International Private Equity and
Venture Capital Valuation Guidelines;
"Jaeger" means the Jaeger group of companies;
"Listing Rules" the listing rules made under section
73A of the FSMA (as set out in
the FCA Handbook), as amended;
"London Stock Exchange" London Stock Exchange plc;
"Main Market" the main market of the London Stock
Exchange;
"Net Asset Value" the value of the assets of the
Company less its liabilities, calculated
in accordance with the valuation
guidelines laid down by the Board;
"Northern Aerospace" means Northern Aerospace Limited;
"OfficeTeam" means Project Oliver Topco Limited
and its subsidiaries, which together
trade as OfficeTeam;
"Omnico Group" means the Omnico Group of companies;
"PCC" Protected Cell Company;
"POI Law" The Protection of Investors (Bailiwick
of Guernsey) Law, 1987, as amended;
"Prospectus" The prospectus of the Company,
most recently updated on 29 July
2013 and available on the Company's
website (www.bettercapital.gg);
"Registrar" Capita Registrars (Guernsey) Limited;
"Santia" means the Santia group of companies;
"Spicers" means the Spicers group of companies;
"SPOT" means the Spicers OfficeTeam group
of companies;
"UK" United Kingdom;
General Information
Board of Directors Guernsey advocates to the
Richard Crowder (Chairman) Company
Richard Battey Carey Olsen
Philip Bowman PO Box 98
Jon Moulton Carey House
Les Banques
Company secretary St Peter Port
Heritage International Fund Guernsey
Managers Limited GY1 4BZ
Heritage Hall
PO Box 225 English solicitors to the
Le Marchant Street Company
St Peter Port DLA Piper UK LLP
Guernsey 3 Noble Street
GY1 4HY London
EC2V 7EE
Registered office
Heritage Hall Corporate broker and financial
PO Box 225 adviser
Le Marchant Street Numis Securities Limited
St Peter Port 10 Paternoster Square
Guernsey London
GY1 4HY EC4M 7LT
Guernsey administrator Independent auditor
Heritage International Fund BDO Limited
Managers Limited PO Box 180
Heritage Hall Place du Pré
PO Box 225 Rue du Pré
Le Marchant Street St Peter Port
St Peter Port Guernsey
Guernsey GY1 3LL
GY1 4HY
Public relations adviser
Registrar Powerscourt
Capita Registrars (Guernsey) 1 Tudor Street
Limited London
Longue Hougue House EC4Y 0AH
St Sampson
Guernsey Website
GY2 4JN www.bettercapital.gg
Tickers
2009 Cell: BCAP.L
2012 Cell: BC12.L
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKCDKFBDDNDB
(END) Dow Jones Newswires
November 30, 2016 02:00 ET (07:00 GMT)
1 Year Better Capital Pcc Chart |
1 Month Better Capital Pcc Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
