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| 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 : 0583Y
Better Capital PCC Limited
01 December 2017
1 December 2017
BETTER CAPITAL PCC LIMITED
(the "Company")
INTERIM RESULTS UPDATE
Better Capital PCC Limited announces its 2017 interim results for both the 2009 Cell and the 2012 Cell.
2009 Cell Interim Results
-- NAV at 30 September 2017: GBP40.4 million, NAV at 31 March 2017: GBP260.3 million, NAV at 30 September 2016: GBP240.0 million
Hot Features
Premium
-- GBP210.0 million total capital raised
-- GBP203.8 million net proceeds invested in Fund I
-- GBP288.8 million/137.5 per cent. cumulative distributions to date
-- 60.55 per cent. return from NAV growth and distributions since inception
Key Financials
----------------------------------------------------------
NAV GBP40.4 m
------------------------------------------- -------------
NAV (including distributions) GBP329.2 m
------------------------------------------- -------------
NAV per share 114.48 pence
------------------------------------------- -------------
NAV per share (including distributions) 159.17 pence
------------------------------------------- -------------
15.47 per
NAV total return (1) cent.
------------------------------------------- -------------
NAV total return (including distributions) 60.55 per
(1) cent.
------------------------------------------- -------------
Share price at 30 September 2017 59.00 pence
------------------------------------------- -------------
Market capitalisation at 30 September
2017 GBP20.8m
------------------------------------------- -------------
-- 9 total platform investments
-- 10 follow-on investments
-- 4 good realisations - Gardner, Santia, ATH Coal, Calyx Managed Services
-- 2 poor realisations - Reader's Digest, Fairline
-- 3 remaining assets - m-hance, Omnico, SPOT(2)
-- 6.0 years average holding period of remaining portfolio companies
-- GBP1.1 million(3) net debt across Fund I portfolio companies
(1) Based on the weighted average issue price of ordinary shares and net of share issue costs, since inception.
(2) SPOT, a minority holding in Fund I
(3) SPOT net debt (GBP34.1m) excluded from net debt figure
2012 Cell Interim Results
-- NAV at 30 September 2017: GBP144.3 million, NAV at 31 March 2017: GBP172.3 million, NAV at 30 September 2016: GBP211.9 million
-- GBP355.5 million total capital raised
-- GBP347.4 million net proceeds invested in Fund II
-- GBP48.4 million/13.6 per cent. cumulative distributions to date
-- 9.0 per cent. Better Capital 2012 Shares held by Fund II
-- 39.7 per cent. value decline combined NAV and distributions since inception(1)
Key Financials
----------------------------------------------------------
NAV GBP144.3 m
-------------------------------------------- ------------
NAV (including distributions) GBP192.7 m
-------------------------------------------- ------------
NAV per share 45.36 pence
-------------------------------------------- ------------
NAV per share (including distributions) 60.57 pence
-------------------------------------------- ------------
(54.81) per
NAV total decline (1) cent.
-------------------------------------------- ------------
NAV total decline (including distributions) (39.66) per
(1) cent.
-------------------------------------------- ------------
Share price at 30 September 2017 34.00 pence
-------------------------------------------- ------------
Market capitalisation at 30 September
2017 GBP108.1 m
-------------------------------------------- ------------
-- 6 total platform investments
-- 1 follow-on investment
-- 1 good realisation -iNTERTAIN
-- 2 partial losses - City Link, Jaeger
-- 3 remaining assets - Everest, SPOT, Northern Aerospace
-- 3.8 years average holding period of portfolio companies
-- GBP26.5 million(2) net debt across Fund II portfolio companies
(1) Based on the weighted average issue price of ordinary shares and net of share issue costs, since inception.
(2) Including total net debt of SPOT (GBP34.1m).
http://www.rns-pdf.londonstockexchange.com/rns/0583Y_-2017-11-30.pdf
For further information, please
contact:
+44 (0) 1481
Better Capital PCC Limited 716 000
Norman Amey (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
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 2017.
The sale of Gardner dominated activities in the earlier part of the review period culminating in a successful exit in June 2017. With the departure of Gardner from Fund I, the 2009 Cell is now greatly reduced in size. With the Board's blessing, the Fund I GP has been working with the Consultant to explore strategies available to Fund I with a view to maximising total returns to the 2009 Cell Shareholders. This is discussed further below.
The 2012 Cell with its interest in Fund II has experienced a further write down at the period end, but the Fund II GP believes it is clearly capable of further improvements. The Board has discussed at length with the Fund II GP regarding the strategies available; we remain wholly supportive of the Fund II GP's effort and commitment to Fund II and the 2012 Cell Shareholders.
Better Capital 2009 Cell
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
2017 2017 2017
GBP'm GBP'm GBP'm
--------------------------------- --------- --------- ---------- --------- -------
Gardner 254.1 (22.7) (231.4) - -
--------------------------------- --------- --------- ---------- --------- -------
m-hance 10.5 - - 10.5 14.0
--------------------------------- --------- --------- ---------- --------- -------
Omnico 20.0 0.7 1.3 22.0 41.5
--------------------------------- --------- --------- ---------- --------- -------
SPOT 4.7 - (0.2) 4.5 10.1
--------------------------------- --------- --------- ---------- --------- -------
289.3 (22.0) (230.3) 37.0 65.6
--------------------------------- --------- --------- ---------- --------- -------
Fund cash on deposit 1.4 3.1
--------------------------------- --------- --------- ---------- --------- -------
Fund & SPV combined other
net assets attributable
to 2009 Cell (0.9)(1) 0.3(2)
--------------------------------- --------- --------- ---------- --------- -------
Provision for carried
interest (29.6) (0.3)(3)
--------------------------------- --------- --------- ---------- --------- -------
2009 Cell fair value of
investment in Fund I 260.2 40.1
--------------------------------- --------- --------- ---------- --------- -------
2009 Cell cash on deposit 0.2 0.4
--------------------------------- --------- --------- ---------- --------- -------
2009 Cell current assets
less liabilities (0.1) (0.1)
--------------------------------- --------- --------- ---------- --------- -------
2009 Cell NAV 260.3 40.4
--------------------------------- --------- --------- ---------- --------- -------
2009 Cell capital distributions 66.8 288.8
--------------------------------- --------- --------- ---------- --------- -------
2009 Cell adjusted NAV 327.1 329.2
--------------------------------- --------- --------- ---------- --------- -------
(1) Includes GBP225,000 of estimated net proceeds from the Fairline administration. GBP200,000 was received in May 2017.
(2) Includes GBP150,000 of estimated net proceeds from the Fairline administration at 30 September 2017. This was received in full in November 2017.
(3) Carried interest obligation of GBP29.6 million was paid to Better Capital SLP LP on 14 June 2017.
The Fund I portfolio value declined by GBP252.3 million over the review period principally due to the sale of Gardner. The disposal enabled the return of GBP222.0 million to the 2009 Cell Shareholders by way of a pro-rata redemption of the 2009 Shares. The 2009 Cell NAV, including accumulated distributions of GBP288.8 million is broadly flat at GBP329.2 million (0.6 per cent. improvement in the period).
Year to date performance in m-hance has been mixed. Whilst there has been strong growth in the CRM business with significant contract wins, mainly in the NfP sector, there has been contraction in the ERP business. In addition, NetSuite opportunities have taken longer than planned to convert.
Omnico's software and services provision is growing from strength to strength. The business achieved a number of milestones during 2017, including the rollout of a major software upgrade (V6) and new products such as omniEnable. A key focus in 2018 is to leverage on the work already done and accelerate top line growth on the back of a strong pipeline.
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.
Better Capital 2012 Cell
The 2012 Cell NAV summary is set out below.
Value Movement Movement Value Fund
at March at cost in value at cost
2017 GBP'm GBP'm Sept Sept
GBP'm 2017 2017
GBP'm GBP'm
--------------------------------- ---------- --------- ---------- --------- --------
Everest 38.0 - (18.0) 20.0 25.4
--------------------------------- ---------- --------- ---------- --------- --------
SPOT 47.3 (4.6) (2.0) 40.7 91.6
--------------------------------- ---------- --------- ---------- --------- --------
Northern Aerospace 60.0 2.0 (2.0) 60.0 66.9
--------------------------------- ---------- --------- ---------- --------- --------
2012 Shares 7.9 - 1.8 9.7(2) 11.1(3)
--------------------------------- ---------- --------- ---------- --------- --------
153.2 (2.6) (20.2) 130.4 195.0
--------------------------------- ---------- --------- ---------- --------- --------
Fund II cash on deposit 15.2 10.2
--------------------------------- ---------- --------- ---------- --------- --------
Fund II & SPV combined
other net assets attributable
to 2012 Cell 1.9(1,4) 2.7(1,4)
--------------------------------- ---------- --------- ---------- --------- --------
2012 Cell fair value
of investment in Fund
II 170.3 143.3
--------------------------------- ---------- --------- ---------- --------- --------
2012 Cell cash on deposit 0.5 0.3
--------------------------------- ---------- --------- ---------- --------- --------
2012 Cell current assets
less liabilities 1.5 0.7
--------------------------------- ---------- --------- ---------- --------- --------
2012 Cell NAV 172.3 144.3
--------------------------------- ---------- --------- ---------- --------- --------
2012 Cell capital distributions 40.1 48.4
--------------------------------- ---------- --------- ---------- --------- --------
2012 Cell adjusted NAV 212.4 192.7
--------------------------------- ---------- --------- ---------- --------- --------
The 2012 Cell NAV, including accumulated distributions of GBP48.4 million (13.6 per cent. of funds raised) declined by GBP19.7 million to GBP192.7 million (-9.3 per cent. in the period), principally due to write downs in Everest and to a lesser extent in SPOT. This is offset by an improvement in the mark-to-market value of the 2012 Shares (GBP1.8 million) and a rebate from the Fund II GP of management fees due of GBP0.5 million. During the period the 2012 Cell Shareholders received distributions of GBP8.3 million, following the realisation of the debt instruments in Jaeger.
Everest has not done well in 2017. Sales have been constrained by an inadequate installation operation for much of the year and marketing has been expensive in a competitive market. The drop in valuation reflects this but Everest remains profitable and has no external debt. Energetic improvement efforts are in train.
SPOT experienced a marked downturn in the summer, having enjoyed a good first half of 2017. Recent performance has seen improvement. It is performing well operationally and both Spicers and OfficeTeam are making significant new wins; however, both divisions are seeing lower volumes and downward pressure on margins.
Northern Aerospace has generally performed to expectations in 2017. However, sales to its largest customer seem likely to cease from the end of 2018. New business from new customers has been won and the business is hopeful of more wins which together with substantial planned business improvements gives the prospect of a reliable future.
Further details on Fund II's investment activities, portfolio companies and valuation are set out in the Fund II GP's report below.
(1) Includes proceeds in escrow payable pending the resolution of legacy matters recorded as a fund receivable
(2) 28,548,277 2012 Shares at the closing price of 34.00p per share on 30 September 2017
(3) Average cost per remaining share, 40.84p. Includes commission and levy
(4) At 30 September 2017, the estimated remaining net receivable from the City Link administration is GBP100,000 (at 31 March 2017: GBP200,000). This is after accounting for receipts of GBP250,000 in September 2017 and a GBP150,000 improvement to the overall estimated outcome.
Strategic direction
The Fund I GP, through the Consultant, has been working with the Board on a range of strategies to dissolve Fund I in an orderly manner. In respect of Omnico, the Fund I GP has informed the Board that optimal value is unlikely to be attained in the short term and, rather than seek a premature exit, the Fund I GP is exploring the option of an introduction of the business to AIM, with 2009 Cell Shareholders expected to receive an in specie distribution of quoted Omnico shares. In respect of m-hance, a review of the optimal timescale for M&A activity is being considered. The Fund I GP is also seeking independent advice in respect of finding an exit route for Fund I's 9.9 per cent. holding in SPOT - which is majority owned by Fund II.
The past two years have seen a steady cutback to the team at Better Capital reflecting the Funds' lifecycles. This is set to continue over the coming months and its functions will be increasingly assumed by the General Partners of both Funds.
The Fund II GP has reiterated its commitment in respect of Fund II. To assist in this next stage, a recruitment drive is now underway to place active Chairs into certain of the Fund II businesses. Greater use of specialist external consultants is also being employed to address specific challenges within the organisations.
Richard Crowder
Chairman
30 November 2017
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 2017. 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
30 November 2017
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 2017 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 2017 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
30 November 2017
Condensed Statement of Financial Position
As at 30 September 2017
As at As at As at
30 September 30 September 31 March
2017 2016 2017
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
ASSETS:
Non-current assets
Investment in Limited
Partnerships 4 183,313 448,325 430,340
------------- ------------- ------------
Total non-current
assets 183,313 448,325 430,340
------------- ------------- ------------
Current assets
Trade and other
receivables 5 800 1,601 1,611
Cash and cash equivalents 713 2,160 813
------------- -------------
Total current assets 1,513 3,761 2,424
------------- ------------- ------------
TOTAL ASSETS 184,826 452,086 432,764
------------- ------------- ------------
Current liabilities
Trade and other
payables (177) (183) (207)
-------------
Total current liabilities (177) (183) (207)
------------- ------------- ------------
TOTAL LIABILITIES (177) (183) (207)
------------- ------------- ------------
NET ASSETS 184,649 451,903 432,557
============= ============= ============
EQUITY
Share capital 7 288,950 480,064 435,436
Accumulated losses (104,301) (28,161) (2,879)
-------------
TOTAL EQUITY 184,649 451,903 432,557
============= ============= ============
Number of 2009 Shares
in issue at
period/year end 7 35,262,505 206,780,952 206,780,952
============= ============= ============
Number of 2012 Shares
in issue at period/year
end 7 318,052,242 346,600,520 318,052,242
============= ============= ============
Net asset value
per 2009 Share (pence) 9 114.48 116.08 125.86
Adjusted net asset
value per 2009 Share
(pence) 9 159.17 148.38 158.16
Net asset value
per 2012 Share (pence) 9 45.36 61.13 54.17
Adjusted net asset
value per 2012 Share
(pence) 9 60.57 62.88 66.78
The unaudited condensed interim financial statements of the Company were approved and authorised for issue by the Board of Directors on 30 November 2017 and signed on their behalf by:
Richard Crowder Richard Battey Chairman Director
The notes below form an integral part of the Company's condensed interim financial statements.
Condensed Statement of Comprehensive Income
For the six months ended 30 September 2017
Six months Six months Year ended
to 30 September to 30 September 31 March
2017 2016 2017
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Income
Change in fair value
of Investments in
Limited Partnerships 4 (102,546) (31,462) (5,550)
Distributions 85,365 - -
Interest income - 2 4
-----------------
Total expenses (17,181) (31,460) (5,546)
------------------ ----------------- -----------
Expenses
Administration fees 140 125 263
Directors' fees
and expenses 8 165 120 241
Legal and professional
fees 68 59 301
Other fees and expenses 42 67 98
Audit fees 32 32 73
Insurance premiums - - 26
Registrar fees 31 28 61
-----------------
Total expenses 478 431 1,063
------------------ ----------------- -----------
Loss and total comprehensive
expense for the period/year (17,659) (31,891) (6,609)
================== ================= ===========
Basic and diluted
earnings per 2009
Share (pence) 9 1.75 1.85 11.62
================== ================= ===========
Basic and diluted
earnings per 2012
Share (pence) 9 (6.21) (10.30) (9.05)
================== ================= ===========
All activities derive from continuing operations.
The notes below 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 2017
Share Accumulated Total
capital losses equity
GBP'000 GBP'000 GBP'000
As at 1 April 2017 435,436 (2,879) 432,557
Loss and total comprehensive
expense for the financial
period - (17,659) (17,659)
Total comprehensive expense
for the period - (17,659) (17,659)
Transactions with owners
Distributions (146,486) (83,763) (230,249)
Total transactions with
owners (146,486) (83,763) (230,249)
---------- ------------ ----------
As at 30 September 2017
(unaudited) 288,950 (104,301) 184,649
========== ============ ==========
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
Distributions (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 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
year - (6,609) (6,609)
---------- ------------ ----------
Total comprehensive expense
for the year - (6,609) (6,609)
---------- ------------ ----------
Transactions with owners
Distributions (39,202) - (39,202)
Share buyback and cancellation (10,596) (10,596)
Total transactions with
owners (49,798) - (49,798)
---------- ------------ ----------
As at 31 March 2017 (audited) 435,436 (2,879) 432,557
========== ============ ==========
The notes below form an integral part of the Company's condensed interim financial statements.
Condensed Statement of Cash Flows
For the six months ended 30 September 2017
Six months Six months
to to Year ended
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Cash flows from operating
activities
Loss for the financial
period/year (17,659) (31,891) (6,609)
Adjustments for:
Change in fair value
of financial assets
at fair value through
profit or loss 102,546 31,462 5,550
Movement in trade
and other receivables 811 32 23
Movement in trade
and other payables (30) (40) (16)
Repayment of loan
investment in Limited
Partnerships 144,481 5,174 38,474
Net cash generated
from operating activities 230,149 4,737 37,422
------------- ------------- -------------
Cash flow used in
financing activities
Distributions (230,249) (5,170) (39,202)
Net cash used in
financing activities (230,249) (5,170) (39,202)
------------- ------------- -------------
Net movement in cash
and cash equivalents
during the period/year (100) (433) (1,780)
Cash and cash equivalents
at the beginning
of the period/year 813 2,593 2,593
Cash and cash equivalents
at the end of the
period/year 713 2,160 813
============= ============= =============
The notes below 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 2017
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 2017 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 2017, 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 2017.
Standards, interpretations and amendments to published standards adopted in the period
There were no new standards applied during the period ended 30 September 2017.
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 from the effective date 1 January 2018.
-- IFRS 15: Revenue from contracts with customers effective 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 2017 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 2017 434,734 37 434,771
Repayment of loan investment
in Limited Partnerships (144,481) - (144,481)
Carried forward 290,253 37 290,290
---------- -------- ----------
Fair value adjustment
through profit or loss
Brought forward (4,431) - (4,431)
Fair value movement during
period (102,546) - (102,546)
Carried forward (106,977) - (106,977)
---------- -------- ----------
Fair value as at 30 September
2017 (unaudited) 183,276 37 183,313
========== ======== ==========
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 2016 483,805 37 483,842
Repayment of loan investment
in Limited Partnerships (49,071) - (49,071)
Carried forward 434,734 37 434,771
--------- -------- ---------
Fair value adjustment
through profit or loss
Brought forward 1,119 - 1,119
Fair value movement during
year (5,550) - (5,550)
Carried forward (4,431) - (4,431)
--------- -------- ---------
Fair value as at 31 March
2017 (audited) 430,303 37 430,340
========= ======== =========
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 GBP137 million was repaid to the Company by Fund I (Six months to 30 September 2016: GBP5.2 million, Year to 31 March 2017: GBP5.5 million) and GBP7.5 million by Fund II (Six months to 30 September 2016: GBPnil, Year to 31 March 2017: GBP43.6 million).
No distributions receivable from the Funds in relation to the current or comparative periods 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 GBP0.8 million (Six months to 30 September 2016: GBP1.6 million, Year to 31 March 2017: 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 Cells' 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 GBP40.1 million for Fund I (30 September 2016: GBP239.9 million, 31 March 2017: GBP260.1 million) and GBP143.3 million for Fund II (30 September 2016: GBP208.5 million, 31 March 2017: GBP170.2 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.
Fund II's investment in the shares of the 2012 Cell are valued at the quoted price.
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 2017
GBP
Core shares as at 1 April 2017
and as at 30 September 2017 100
====
Period ended 30 September 2016
GBP
Core shares as at 1 April 2016
and as at 30 September 2016 100
====
Year ended 31 March 2017
GBP
Core shares as at 1 April 2016
and as at 31 March 2017 100
====
Cell shares
Authorised:
The Cells are authorised to issue an unlimited amount of ordinary shares at GBP1 par value.
Period ended 30 September 2017
2009 Cell 2012 Cell Total
Issued and fully
paid:
Unlimited shares
of GBP1 par value No. No. No.
Shares as at
1 April 2017 206,780,952 318,052,242 524,833,194
Movements for
the period (171,518,447) - (171,518,447)
Shares as at
30 September
2017 35,262,505 318,052,242 353,314,747
============== ============ ==============
Share capital GBP'000 GBP'000 GBP'000
Share capital
as at 1 April
2017 138,216 297,220 435,436
Movements for
the period:
Distributions (138,216) (8,270) (146,486)
Share capital
as at 30 September
2017 - 288,950 288,950
============== ============ ==============
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 period:
Distributions (5,170) - (5,170)
Share capital
as at 30 September
2016 138,216 341,848 480,064
============ ============ ============
Year ended 31 March 2017
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
Movements for
the year - (28,548,278) (28,548,278)
Shares as at
31 March 2017 206,780,952 318,052,242 524,833,194
============ ============= =============
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:
Distributions (5,170) (34,032) (39,202)
Buyback and
cancellation - (10,596) (10,596)
------------ ------------- -------------
Share capital
as at 31 March
2017 138,216 297,220 435,436
============ ============= =============
The five cumulative distributions to date for the 2009 Cell total GBP288.8 million, being 137.5 per cent. of funds raised.
The three cumulative distributions to date for the 2012 Cell totalled GBP48.4 million, being 13.6 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 2017 amounted to GBP165,000 (31 March 2017: GBP241,000, 30 September 2016: GBP120,000), of which GBP59,000 (31 March 2017: GBP59,000, 30 September 2016: GBP59,000) 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 set out in the Company's prospectus, available on the Company's website www.bettercapital.gg.
General Partner's Report
Fund I is now much smaller with the successful sale of Gardner over the summer. The key focus is to examine and execute options available to ensure an orderly disposal of the remaining assets in Fund I whilst maximising total returns to the 2009 Cell Shareholders. Options under consideration include seeking an introduction for Omnico on AIM, or similar, possibly during the course of next year.
Portfolio update
There has been mixed performance across m-hance's various product streams in the current FY17 financial year ending 31 December. This has resulted in a deterioration of revenue and profitability against YTD budget plans.
The ERP and development offerings are not faring as planned due to delays and uncertainty in the Microsoft product roadmap which have seen the traditional Microsoft Dynamics and development business significantly less buoyant. NetSuite has continued to make progress this year but this has been well behind the pace we would have liked.
On a positive note, m-hance's cloud based CRM services have seen marked year-on-year growth of 32 per cent. with excellent blue chip wins especially in the NfP sector where m-hance is the clear market leader. During the year the business was successful in signing up large contracts with four charities; furthermore, it is in negotiations on a preferred supplier basis with two other charities and has a healthy pipeline. This has, however, put some strain on delivery resource and necessitated additional contractor based staff to supplement the core delivery team. The significant sales wins are in part driven by GDPR but also reflect the attributes of the Microsoft product, m-hance's internally developed IP and a highly competent team. We anticipate further growth in this area as more charities look to adopt new solutions, rather than enhance existing ones to enable compliance with GDPR. In order to address the lower end of the market where similar requirements exist, NfP Essentials was launched in early November. NfP Essentials is based on the same Microsoft Dynamics cloud based platform as NfP 365 but is much more prescriptive in how it is implemented and hence can be offered at a lower cost.
The management team are constantly reviewing how best to allocate resources to support the changing market and some efficiency initiatives are planned which will further underpin FY18 performance.
The valuation for m-hance is unchanged at GBP10.5 million. This has been derived using an earnings approach (range of EV/EBITDA: 7.6 times to 11.8 times) on the business's maintainable earnings, supported by a revenue approach. Maintainable earnings is derived as the outturn of FY17 adjusted for planned savings under the efficiency initiatives. At 30 September 2017, the business had net debt of GBP0.7 million.
Unaudited full year sales and EBITDA for Omnico's FY17 financial year ended 30 September showed broadly flat growth in revenues at GBP26.0 million (audited FY16 continuing operations: GBP26.4 million) but a 77 per cent. growth in reported EBITDA at GBP2.3 million (audited FY16 continuing operations: GBP1.3 million). The business continues to improve, with the focus solely on software and services. Significantly, core software and services revenues increased by 11 per cent. to GBP23.9 million whilst hardware revenue declined by 56 per cent. to GBP2.1 million.
Growth in software revenues came as a result of Omnico expanding from its traditional retail market to the destinations and theme park sectors, with the business already working with seven out of the top 11 worldwide destination resorts. During FY17 major software upgrades were sold to the largest three, resulting in new software and services orders of circa GBP5 million. In addition, agreements were signed to provide managed services to a large UK caterer, valued at over GBP2 million and software upgrades to a large retailer in the Americas, valued at over USD1 million. Omnico's order book at FY17 stood at GBP13.0 million (FY16: GBP7.6 million).
During FY17 Omnico successfully launched and delivered new products, including omniEnable which allows easy migration from traditional fixed Point of Sale ("PoS") systems, to the various mobile and digital technologies now more favoured by consumers. Omnico's unique proposition provides a single, seamless platform across retail, food and beverage as well as loyalty, entitlements and stock fulfilment products that enhance the consumer's overall experience.
The main thrust of the Omnico strategy for FY18 is to substantially complete the transition from bespoke software offering to customisable products that lend to easier resale, either directly or via the business's global channel partners. A highly defined development roadmap is in place to capture the opportunities. Furthermore, the completion of the deployment of Omnico's integrated PoS software across all Dubai Parks and Resorts various retail and hospitality sites provides reference-ability for Omnico in the Middle East and the Asian destinations market.
The business also benefitted from additional investment of GBP750,000 from Fund I to support short term working capital and on-going product development.
Omnico has been written up by GBP2.0 million to GBP22.0 million, reflecting the cash injection during the period and improvement in the business's underlying performance. This is supported using an earnings approach to valuation, applying the FY17 EBITDA outturn. At 30 September, the business had net debt of GBP0.4 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 GBP0.2 million due to the below budget performance in the financial year to 31 December 2017.
Sale of Gardner and the redemption of the 2009 Shares
On 12 June 2017, Fund I completed the sale of Gardner to SLMR for GBP326.0 million on an Enterprise Value basis. The sale realised net proceeds to the 2009 Fund of GBP254.1 million, recording an IRR of 35.3 per cent. and 7 times money multiple on total investment of GBP41.0 million.
GBP222.4 million was returned to the 2009 Cell. Accordingly, this enabled the Company to effect a pro rata redemption of the 2009 Shares in July 2017 and return GBP222.0 million (equivalent to 107.35 pence per share) to the 2009 Cell Shareholders.
Total distributions from the 2009 Cell to investors stand at GBP288.8 million, a multiple of 1.4 times money raised.
Portfolio carrying value
The overall portfolio carrying value declined by GBP252.3 million between 1 April 2017 and 30 September 2017 due to the disposal of Gardner in June 2017. On a like-for-like basis, the portfolio carrying value grew by GBP1.8 million (5.1 per cent.) in the period principally due to a GBP2.0 million write up in Omnico, offset by a write down in SPOT of GBP0.2 million.
Closing remarks
We are pleased to have delivered the sale of Gardner during the period - this was a highly complex cross-border transaction and the timing was fortuitous. However, our focus has long since moved onto the remaining constituents of the now not very large Fund I. If we are successful in our efforts, Fund I will be dissolved well within the life of the fund (i.e. 31 December 2019), through multiple options currently available with the aim of maximising total returns. My team and I remain encouraged and motivated to do so.
Jon Moulton
Chairman
BECAP GP Limited
30 November 2017
Investment Report of Fund I
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 2017 2017 2016
Total invested 14.0 14.0 14.0
Total committed 14.0 14.0 14.0
Fund I fair value (earnings
based, supported by
revenue basis) 10.5 10.5 10.5
The company received GBP0.4 million short term funding from Fund I in October 2017 to fund working capital.
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 2017 2017 2016
Total invested 41.5 40.8 40.8
Total committed 41.5 40.8 40.8
Fund I fair value (earnings
based) 22.0 20.0 26.5
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 2017 2017 2016
Total invested 10.1 10.1 10.1
Total committed 10.1 10.1 10.1
Fund I fair value (earnings
based) 4.5 4.7 4.1
Portfolio summary
Fund fair
value Valuation
30 September Fund project investment in percentage of Valuation
2017 Sector cost(1) SPVs(2) NAV methodology
---------------- ------------------ ----------------- --------------- --------------- ---------------
GBP'm GBP'm
Information
m-hance Systems 14.0 10.5 26.0% Earnings
Information
Omnico Group Systems 41.5 22.0 54.5% Earnings
SPOT Office Products 10.1 4.5 11.1% Earnings
65.6 37.0 91.6%
------------------ ----------------- --------------- --------------- ---------------
Fund cash on deposit 3.1 7.6%
Fund & SPV combined other net assets 0.3 0.7%
Provision for carried interest (0.3) (0.7)%
2009 Cell fair value of investment
in Fund I 40.1 99.2%
------------------------------------ -------------------------------- --------------- ---------------
2009 Cell cash on
deposit 0.4 1.0%
2009 Cell other current assets less
liabilities (0.1) (0.2)%
2009 Cell NAV 40.4 100.0%
----------------- ------------------- -------------------------------- --------------- ---------------
Cumulative distributions 288.8
2009 Cell Adjusted NAV 329.2
-------------------------------------- -------------------------------- --------------- ---------------
Summary income statement for the Partnership
1 Apr
2017 1 Apr 1 Apr
to 2016 to 2016 to
30 Sept 30 Sept 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------------ ---------- --------- ---------
Total income 231,199 33 65
Net profit on Fund I investment
portfolio (228,060) 9,059 37,496
Fund I GP's Share (494) (1,031) (1,348)
Other operating (expenses)/income (111) 9 (1,191)
Carried interest movement (282) (4,033) (10,452)
Distributions (85,365) - -
Partnership's operating
(loss)/profit for the
period/year (83,113) 4,037 24,570
------------------------------------- ---------- --------- ---------
Portion of the operating
(loss)/profit for the period/year
for 2009 Cell's investment
in the Partnership (Note
4) (83,113) 4,037 24,570
-------------------------------------- ---------- --------- ---------
(1) Fund I holds its investments at cost in accordance with the terms of the Limited Partnership Agreement.
(2) 2009 Cell fair values its investment in Fund I in accordance with the accounting policies as set out in Note 2.
Cash Management
As at 30 September 2017, Fund I had placed a total of GBP3.1 million (31 March 2017: GBP1.4 million, 30 September 2016: GBP1.7 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.
Moody's 30 September 31 March 30 September
Counterparty Location Rating Term 2017 2017 2016
GBP'000 GBP'000 GBP'000
Barclays Instant
Bank PLC Guernsey A1 access 3,071 1,392 1,688
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 2017 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 2017 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
30 November 2017
Condensed Statement of Financial Position
As at 30 September 2017
As at As at As at
30 September 30 September 31 March
2017 2016 2017
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
ASSETS:
Non-current assets
Investment in Limited
Partnership 4 39,978 239,864 260,097
-------------
Total non-current
assets 39,978 239,864 260,097
------------- ------------- ------------
Current assets
Trade and other
receivables - - 5
Cash and cash equivalents 447 261 223
------------- -------------
Total current assets 447 261 228
------------- ------------- ------------
TOTAL ASSETS 40,425 240,125 260,325
------------- ------------- ------------
Current liabilities
Trade and other
payables (58) (90) (73)
-------------
Total current liabilities (58) (90) (73)
------------- ------------- ------------
TOTAL LIABILITIES (58) (90) (73)
------------- ------------- ------------
NET ASSETS 40,367 240,035 260,252
============= ============= ============
EQUITY
Share capital 6 - 138,216 138,216
Retained earnings 40,367 101,819 122,036
-------------
TOTAL EQUITY 40,367 240,035 260,252
============= ============= ============
Number of 2009
Shares in issue
at period/year
end 6 35,262,505 206,780,952 206,780,952
============= ============= ============
Net asset value
per 2009 Share
(pence) 8 114.48 116.08 125.86
Adjusted net asset
value per 2009
Share (pence) 8 159.17 148.38 158.16
The unaudited condensed interim financial statements of the 2009 Cell were approved and authorised for issue by the Company's Board of Directors on 30 November 2017 and signed on its behalf by:
Richard Crowder Richard Battey 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 2017
Six months Six months
to to Year ended
30 September 30 September 31 March
2017 2016 2017
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Income
Change in fair value
investment in Limited
Partnership 4 (83,113) 4,037 24,570
Distributions 85,365 - -
Total income 2,252 4,037 24,570
------------- ------------- ------------------
Expenses
Administration fees 30 62 130
Directors' fees
and expenses 7 66 59 119
Legal and professional
fees 31 32 157
Other fees and expenses 13 31 46
Audit fees 5 16 37
Insurance premiums - - 13
Registrar fees 13 17 31
-------------
Total expenses 158 217 533
------------- ------------- ------------------
Profit and total comprehensive
income for the period/year 2,094 3,820 24,037
============= ============= ==================
Basic and diluted
earnings per 2009
Share (pence) 8 1.75 1.85 11.62
============= ============= ==================
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 2017
Share Retained Total
capital earnings equity
GBP'000 GBP'000 GBP'000
As at 1 April 2017 138,216 122,036 260,252
Profit and total comprehensive
income for the financial
period - 2,094 2,094
Total comprehensive income
for the period - 2,094 2,094
---------- --------- ----------
Transactions with owners
Distributions (138,216) (83,763) (221,979)
Total transactions with
owners (138,216) (83,763) (221,979)
---------- --------- ----------
As at 30 September 2017
(unaudited) - 40,367 40,367
========== ========= ==========
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
Distributions (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 2016 143,386 97,999 241,385
Profit and total comprehensive
income for the financial
year - 24,037 24,037
Total comprehensive income
for the year - 24,037 24,037
-------- --------- --------
Transactions with owners
Distributions (5,170) - (5,170)
-------- --------- --------
Total transactions with
owners (5,170) - (5,170)
-------- --------- --------
As at 31 March 2017 (audited) 138,216 122,036 260,252
======== ========= ========
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 2017
Six months Six months Year ended
to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Cash flows used in
operating activities
Profit for the financial
period/year 2,094 3,820 24,037
Adjustments for:
Change in fair value
on financial assets
at fair value through
profit or loss 83,113 (4,037) (24,570)
Movement in trade
and other receivables 5 27 22
Movement in trade
and other payables (15) 2 (15)
Repayment of loan
investment in limited
partnership 137,006 5,174 5,474
Net cash generated
from operating activities 222,203 4,986 4,948
------------- ------------- ---------------
Cash flows used in
financing activities
Distributions (221,979) (5,170) (5,170)
Net cash used in financing
activities (221,979) (5,170) (5,170)
------------- ------------- ---------------
Net movement in cash
and cash equivalents
during the period/year 224 (184) (222)
Cash and cash equivalents
at the beginning of
the period/year 223 445 445
Cash and cash equivalents
at the end of the
period/year 447 261 223
============= ============= ===============
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 2017
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 2017 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 2017, 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
2017 137,006 20 137,026
Repayment of loan investment
in Limited Partnership (137,006) - (137,006)
Carried forward - 20 20
---------- -------- ----------
Fair value adjustment through
profit or loss
Brought forward 123,071 - 123,071
Fair value movement during
period (83,113) - (83,113)
Carried forward 39,958 - 39,958
---------- -------- ----------
Fair value as at 30 September
2017 (unaudited) 39,958 20 39,978
========== ======== ==========
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
2016 142,480 20 142,500
Repayment of loan investment
in Limited Partnership (5,474) - (5,474)
Carried forward 137,006 20 137,026
-------- -------- --------
Fair value adjustment through
profit or loss
Brought forward 98,501 - 98,501
Unrealised fair value movement
during the year 24,570 - 24,570
Carried forward 123,071 - 123,071
-------- -------- --------
Fair value as at 31 March
2017 (audited) 260,077 20 260,097
======== ======== ========
The movement in fair value of the Fund I investment is derived from the fair value increase in Omnico, fair value decrease in SPOT and the sale of Gardner, net of 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 GBP137.0 million was repaid to the 2009 Cell by Fund I (Six months to 30 September 2016: GBP5.2 million, Year to 31 March 2017: GBP5.5 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 Rate Discounted
Methodology Applied to Multiples Value of portfolio valued on
Multiples this basis (GBP'm)
------------- ----------------- --------------- ------------- --------------- ------------ -----------------------------------------------------------------------------------------------------------------------------
30 September 30 September 31 March
2017 2016 2017
EBITDA
Most commonly multiples
used ranging
Private Equity from
valuation 6.6 times
methodology. A discount to
Used for is applied 9.6 times
investments to earnings (30
which are multiples, September
profitable and at 20 per 2016:
for cent. 6.5 times
which a set of Multiples are (30 September to
listed applied to 2016: 20 per 11.2
companies and the earnings Relevant cent. to 36 times,
precedent of the provisions per cent., 31 March
transactions investee may be 31 March 2017:
with similar company to deducted 2017: 6.6 times
characteristics determine the from the 20 per cent to
can enterprise multiple to 55 per 10.1
Multiple be determined. value valuation cent.) times) 37.0 261.1 35.2
30 September Earnings
2017 m-hance Reported
Omnico SPOT earnings
adjusted
for
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
(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
2016 Gardner valuation
m-hance generated by
Santia applying
Omnico SPOT multiples to
reflect
the time and
costs
of reaching
sustainable
profitability
and the
inevitable
accompanying
uncertainties
31 March Multiples The
2017 earnings
m-hance multiple
Omnico is derived
SPOT from market
transaction
multiples
(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
Values of
separate
elements
prepared under
other methods,
as deemed
suitable by the As
Fund determined
Net I GP, such as on a case
Realisable net realisable Net realisable by case
Value value. value basis n/a n/a - - 254.1
30 September
2017 None
30 September
2016 None
31 March
2017
Gardner
Level 3 Portfolio valuation 37.0 261.1 289.3
Other net assets/(liabilities) 3.4 1.9 0.5
Provision for Better Capital SLP interest in Fund I (0.3) (23.2) (29.6)
-------------------------------------------- -------------------------------------------- ---------------------------------
2009 Cell fair value of investments in Fund I 40.1 239.8 260.2
This approach requires the use of assumptions about certain unobservable inputs. Significant unobservable inputs as at 30 September 2017 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 GBP4.0 million or 10.8 per cent. (+10.0 per cent.)
- A decrease in the carrying value of GBP4.0 million or 10.8 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 GBP19.1 million or 51.5 per cent. (+100.0 per cent.)
- An increase in the carrying value of GBP35.1 million or 94.9 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 five cumulative distributions announced to date for the 2009 Cell total GBP288.8 million, being 137.5 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 2017 amounted to GBP21,000 (year to 31 March 2017: GBP119,000, period to 30 September 2016: GBP59,000) apportioned on a NAV basis between the cells. During the period a further fee of GBP45,000 was paid in relation to additional work undertaken by the Directors in respect of the sale of Gardner. At the period end, GBP10,000 (31 March 2017: GBP29,000, 30 September 2016: GBP29,000) 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
2017 2016 2017
(unaudited) (unaudited) (audited)
Profit for the period/year GBP2,093,879 GBP3,819,531 GBP24,036,173
Weighted average
number of 2009 Shares
in issue 119,615,839 206,780,952 206,780,952
EPS (pence) 1.75 1.85 11.62
============= ================= ==============
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 2017 30 September 2016 31 March 2017
(unaudited) (unaudited) (audited)
Net assets attributable to 2009 Cell
shareholders GBP40,366,983 GBP240,035,635 GBP260,252,277
Distributions GBP288,769,420 GBP66,790,246 GBP66,790,247
------------------- -------------------------------- ---------------
Adjusted Net asset value GBP329,136,403 GBP306,825,881 GBP327,042,524
------------------- -------------------------------- ---------------
2009 Shares in issue 35,262,505 206,780,952 206,780,952
NAV per share (IFRS) (pence) 114.48 116.08 125.86
------------------- -------------------------------- ---------------
Adjusted NAV per share (pence) 159.17 148.38 158.16
------------------- -------------------------------- ---------------
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 cumulative 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. The denominator at 30 September 2017 has been amended to add back the shares redeemed during the period.
9. Subsequent events
Fund I invested a further GBP400,000 short term funding in m-hance during October 2017 to fund short term working capital.
Fund I received a further GBP150,000 from the administration of Fairline in November 2017.
Other than the above, there were no significant events occurring after 30 September 2017.
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 set out in the Company's prospectus, available on the Company's website www.bettercapital.gg.
General Partner's Report
It is not good to have to report another disappointing performance from the constituents of Fund II, in particular Everest. Both Everest and SPOT have experienced a noticeable downturn in trading since the summer. There are also self-inflicted underperformance issues which are being addressed and improvement plans falling behind schedule. Northern Aerospace is also experiencing headwinds, with a difficult relationship with its largest customer, Airbus. Planning is now on the basis that this relationship will cease at the end of 2018, however, this has not affected the business's shorter term prospects.
Portfolio update
For Everest, the market continues to be competitive and there has been noticeable contraction since the summer primarily due to economic uncertainty leading to a weakening in consumer confidence. This macro factor alongside lower than planned installation efficiency has seen Everest move behind its FY17 budget ending 31 December. This is disappointing given such an improved start to the year compared to prior year. The business remains profitable and is capable of making better progress, albeit this year's results now look to close at a similar level to prior year (audited FY16 pre-exceptional EBITDA GBP2.4million).
Google Trends is showing a circa 4 per cent. year-on-year decline in pure volume of searches on terms such as 'double glazing', which is a significant indicator, with this decline coinciding with the decline in performance in the second half of the year. Furthermore, sales and marketing KPIs at Everest show that the market has become increasingly competitive with YTD cost to generate an online lead being 6.5 per cent. higher than prior year with core conversion to order rates at similar levels and actual core order levels some 7 per cent. lower. However, more agile promotional offerings, including the recent introduction of an Everest scrappage scheme and triple glazing offer, have helped core conversion rates remain comparable to prior year despite the turbulent market. Having introduced the new and innovative GrabLock mechanism earlier in the year, the business continues to work closely with Yale and is currently evaluating the recent launch of an electronically controlled lock.
Everest's business improvement programme continues; however, progress on improving the efficiency of the installation process is too slow. Greater focus and further resource have been applied to support the requirement for increased installation capacity and on placing greater emphasis on both efficiencies and controls in the regional installation centres in order to bring the programme back on track. The business has continued to invest in specialist knowledge and expertise and has made several key appointments in HR, Manufacturing and Engineering.
The business has entered the final stage of development for a new NetSuite finance system to replace its existing one. The system is expected to go live in January 2018 and is envisaged to make a significant difference to the speed and quality of financial reporting. In addition, it will pave the way for additional advanced manufacturing modules which will link up and increasingly automate more of the end to end processes.
Other improvement initiatives include procuring new agreements for fleet, logistics and major products supplies aimed at removing significant cost out of the supply chain whilst enhancing quality standards. A detailed review of the branch networks has also identified alternative ways to improve efficiency and better recovery rates for managing waste by changing processes within the installation centres.
There is very considerable scope to improve the conservatory business and actions are afoot to do so.
Applying an earnings approach, Everest has been written down by GBP18.0 million to GBP20.0 million reflecting weaker than expected current year EBITDA performance (range of EV/EBITDA: 5.3 times to 8.8 times). Everest has no external debt and at 30 September, it held GBP4.7 million of cash.
In my last report, I wrote that Spicers OfficeTeam (SPOT) traded profitably and was ahead for the first six months of its FY17 budget for the year ending 31 December. Since then, the office products market has experienced a challenging period of sales particularly over the summer months - the SPOT group has not been immune to this tougher environment. Consequently, SPOT has fallen behind on its budget expectations in Q3 FY17 and is likely to achieve an FY17 pre-exceptional EBITDA outturn similar to prior year (audited FY16 EBITDA: GBP8.9 million).
SPOT has been making a series of important upgrades to its delivery network in order to improve service quality to customers and remove redundant costs. In particular, the structure of the Smethwick Central Distribution Centre has been redeveloped to prepare for an efficient central environment to support customer pick and pack. These changes are part of the strategic direction for SPOT in order to create an infrastructure capable of delivering a highly effective low cost business to business solution.
Spicers now has a highly cost efficient position in the supply chain for business supplies resellers and has been rebuilding trust through its ability to service dealer requirements with resultant increase in sales. During YTD FY17, product availability, the main KPI, remained high through a stock build programme. We are pleased to report that Spicers is profitable and will provide a solid foundation on which to build customer service relationships. This has been underlined with a significant win as the preferred sole supplier to Advantia, a UK office products dealer group which will commence in February 2018. Key sales activity continues to revolve around the Alliance Programme which is now in operation with a growing pipeline of new customers. Alongside the Alliance Programme, a new initiative entitled Brilliant Partner has now been launched and is well received. As a Spicers Brilliant Partner, customers gain access to an increasing number of exclusive sales and marketing initiatives and these are aimed at delivering tangible benefits through reduced operating costs and duplication, rewarding loyalty and facilitating profitable sales growth.
OfficeTeam has been working hard to maintain and reinforce its position as a high service orientated business supplies company, aimed at creating a single source solution across a wide range of products and solutions. Focus this year has been on the large customers but there is a need to do more for the SME accounts, in particular to improve their online experience. SmartPad, a new portal, has been developed during the year and is due for imminent launch. Its aim is to provide an efficient and convenient solution, reducing the cost of sales whilst shifting the proposition towards services as well as fulfilment.
BECAP12 SPOT, the holding company to SPOT, repaid GBP5.0 million to Fund II (principal GBP4.6 million, interest GBP0.4 million) in April 2017, thereby reducing the fund's carrying cost in the investment to GBP91.6 million.
SPOT has been written down by GBP6.6 million to GBP40.7 million, reflecting the GBP4.6 million repayment to Fund II and the below budget performance in FY17. The valuation has been derived using an earnings basis, applied to the group's FY17 EBITDA outturn (EV/ EBITDA range: 5.2 times to 8.2 times). Net debt at 30 September was GBP34.0 million.
Northern Aerospace Limited (NAL) continues to make generally good progress during the FY17 financial year ending 31 December and is expected to complete the year with marginally lower than budgeted EBITDA and cash flow.
Operational performance has continued to advance despite having to adapt to cope with some customer demand headwinds. Delivery performance has improved throughout the customer base although a major customer's internal process delays and raw material changes have resulted in recent temporary, knock-on inefficiencies within the business. Improvement projects focused on scrap reduction and productivity continue to gain traction and are contributing to the positive financial metrics. A key example is the halving of the scrap rate within NAL to below 2 per cent. Other areas of focus include improving key parts of the process such as consistency of component clamping and the introduction of more modern tooling technology. Standard costing is now in place and starting to provide useful benefits. The business also recently introduced (albeit with some industrial relations issues) a new working shift pattern as well as outsourced its IT.
The implementation of the company's industrial plan continues with considerable investments during the year in the main UK facility and in Poland. Furthermore, the business recently completed the acquisition of a plot of land in Poland for new site development. The overall plan is designed to modernise and develop the technology within NAL as well as increase capacity in its low cost manufacturing base. To date all capital investments have been funded from internal cash resources. Business development is going well and new business prospects are good.
The warranty claim process is still running to its planned timelines, as reported previously. The pace of discussion has picked up and whilst it is difficult to predict the final outcome, the probability of success appears high. C Bidco Limited, the holding company of CAV Aerospace and NAL, received a GBP2.0 million investment in July 2017 to support the professional costs of the warranty claim.
NAL's valuation which includes the warranty claim is unchanged at GBP60.0 million, a write-down of GBP2.0 million when taking into account the recent funding. It is benchmarked against market comparables operating in a similar space to NAL, with EV/ EBITDA trading in the range of 7.0 to 11.1 times. At 30 September, the business had negligible finance lease obligations and net cash of GBP2.8 million.
Portfolio carrying value
The investment portfolio value has declined by GBP22.8 million in the period and is summarised as follows:
GBP'm
Portfolio value at 1 April
2017 153.2
Additions at cost - follow
on investments 2.0
Return of cash from SPOT (4.6)
NAV movement - portfolio
companies (22.0)
NAV movement - 2012 Shares 1.8
-------
Portfolio value at 30 September
2017 130.4
-------
The decline in the portfolio value during the period was due to significant write downs in Everest (GBP18.0 million) and to a much lesser extent in SPOT (GBP2.0 million) and Northern Aerospace (GBP2.0 million). The 2012 Shares benefitted from a 6.25 pence per share improvement, resulting in a NAV uplift of GBP1.8 million.
Distributions
Following the debt sale in Jaeger in March 2017, Fund II repaid GBP8.3 million to the 2012 Cell on 5 April 2017. This facilitated a third distribution to the 2012 Cell Shareholders, of 2.6 pence per share on 12 May 2017.
No further distributions are currently planned.
Rebate
During the review period, the Fund II GP granted a GBP0.5 million rebate against the management fee due. A similar level of rebate is planned for the remainder of the Company's financial year. Fees at the reduced NAV will thereafter continue to support the reduced team.
Closing remarks
Motivation is not lacking and efforts are renewed. The focus in the coming months is to install additional resource in the form of heavily engaged external Chairs into two of the Fund II companies to stimulate further profitable growth. Recruitment of these individuals is at an advanced stage and I hope to be able to report better news in my next report.
Jon Moulton
Chairman
BECAP12 GP Limited
30 November 2017
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 2017 31 March 2017 30 September 2016
GBP'm
Total invested 25.4 25.4 25.4
Total committed 25.4 25.4 25.4
Fund II fair value (earnings based) 20.0 38.0 38.0
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 2017 31 March 2017 30 September
GBP'm 2016
Total invested 91.6 96.2 96.2
Total committed 91.6 96.2 96.2
Fund II fair value (earnings based) 40.7 47.3 41.9
Northern Aerospace
Business description
A leading European aerospace manufacturer of complex metallic components and sub-assemblies to major original equipment manufacturers (www.northernaerospace.com)
Investment details
30 September 31 March 30 September
GBP'm 2017 2017 2016
Total invested 66.9 64.9 59.0
Total committed 66.9 64.9 59.0
Fund II fair value (earnings
and assets basis) 60.0 60.0 31.0
Portfolio summary
Fund
fair
Fund value Valuation
project investment percentage Valuation
Sector cost(1) in SPVs(2) of NAV methodology
---------------------------- -------------------- ---------- ------------- ------------- --------------
GBP'm GBP'm
Home Improvement
Everest Products 25.4 20.0 13.9% Earnings
SPOT Office Products 91.6 40.7 28.2% Earnings
Earnings
Northern Aerospace and Assets
Aerospace Manufacturing 66.9 60.0 41.6% basis
Private Equity
Better Capital Investment Market
2012 Cell Vehicle 11.1 9.7 6.7% value
195.0 130.4 90.4%
---------------------------- -------------------- ---------- ------------- ------------- --------------
Fund cash on deposit 10.2 7.1%
Fund & SPV combined other
net assets 2.7 1.9%
2012 Cell fair value
of investment in Fund
II 143.3 99.4%
-------------------------------------------------- ---------- ------------- ------------- --------------
2012 Cell cash on
deposit 0.3 0.2%
2012 Cell other current
assets less liabilities 0.7 0.4%
2012 Cell
NAV 144.3 100.0%
-------------------------------------------------- ---------- ------------- ------------- --------------
Cumulative distributions 48.4
-------------------------------------------------- ---------- ------------- ------------- --------------
2012 Cell Adjusted NAV 192.7
-------------------------------------------------- ---------- ------------- ------------- --------------
Summary Income Statement for the Partnership
1 Apr 2017 to 1 Apr 2016 to 1 Apr 2016 to
30 Sept 2017 30 Sept 2016 31 March 2017
GBP'000 GBP'000 GBP'000
------------------------------------- ----- ----------------------- -------------- --------------
Total income 108 106 204
Net loss on Fund II investment portfolio (18,990) (32,593) (25,614)
Fund II GP's Share (444) (2,774) (3,291)
Other operating expenses (107) (238) (1,419)
Partnership's operating loss for the
period/year (19,433) (35,499) (30,120)
-------------------------------------- ----- ----------------------- -------------- --------------
Portion of the operating loss for the
period/year for 2012 Cell's investment in
the Partnership
(Note 4) (19,433) (35,499) (30,120)
--------------------------------------------- ----------------------- -------------- --------------
(1) Fund II holds its investments at cost in accordance with the terms of the Limited Partnership
Agreement.
(2) 2012 Cell fair values its investment in Fund II in accordance with the accounting policies
as set out in Note 2
Cash Management
As at 30 September 2017, Fund II had placed a total of GBP10.2 million (31 March 2017: GBP15.2 million, 30 September 2016: GBP9.3 million) of cash on instant access deposit with the following banks. Fund II has in place a strict cash management policy that limits counterparty risks whilst simultaneously seeking to maximise returns.
Moody's 30 September 31 March 30 September
Counterparty Location Rating Term 2017 2017 2016
GBP'000 GBP'000 GBP'000
Royal Bank
of Scotland
International Instant
Limited Guernsey A3 access - 9 7
Barclays Bank Instant
PLC Guernsey A1 access 10,208 8,423 2,597
Lloyds Bank
International Instant
Limited Jersey A1 access - 6,732 6,674
10,208 15,164 9,278
------------- --------- -------------
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 2017 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 2017 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
30 November 2017
Condensed Statement of Financial Position
As at 30 September 2017
As at As at As at
30 September 30 September 31 March
2017 2016 2017
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
ASSETS:
Non-current assets
Investment in Limited
Partnership 4 143,335 208,461 170,243
-------------
Total non-current
assets 143,335 208,461 170,243
------------- ------------- ------------
Current assets
Trade and other
receivables 5 822 1,601 1,606
Cash and cash equivalents 266 1,899 531
------------- -------------
Total current assets 1,088 3,500 2,137
------------- ------------- ------------
TOTAL ASSETS 144,423 211,961 172,380
------------- ------------- ------------
Current liabilities
Trade and other
payables (141) (93) (75)
-------------
Total current liabilities (141) (93) (75)
------------- ------------- ------------
TOTAL LIABILITIES (141) (93) (75)
------------- ------------- ------------
NET ASSETS 144,282 211,868 172,305
============= ============= ============
EQUITY
Share capital 7 288,950 341,848 297,220
Accumulated losses (144,668) (129,980) (124,915)
-------------
TOTAL EQUITY 144,282 211,868 172,305
============= ============= ============
Number of 2012
Shares in issue
at period/year
end 7 318,052,242 346,600,520 318,052,242
============= ============= ============
Net asset value
per 2012 Share
(pence) 9 45.36 61.13 54.17
Adjusted net asset
value per 2012
Share (pence) 9 60.57 62.88 66.78
The unaudited condensed interim financial statements of the 2012 Cell were approved and authorised for issue by the Company's Board of Directors on 30 November 2017 and signed on its behalf by:
Richard Crowder Richard Battey 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 2017
Six months Six months
to to Year ended
30 September 30 September 31 March
2017 2016 2017
Notes GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Income
Change in fair value
investment in Limited
Partnership 4 (19,433) (35,499) (30,120)
Interest income - 2 4
-------------
Total expenses (19,433) (35,497) (30,116)
------------- ------------- --------------------------------
Expenses
Administration fees 110 63 133
Directors' fees
and expenses 8 99 61 122
Legal and professional
fees 37 27 144
Other fees and expenses 29 36 52
Audit fees 27 16 36
Insurance premiums - - 13
Registrar fees 18 11 30
-------------
Total expenses 320 214 530
------------- ------------- --------------------------------
Loss and total comprehensive
expense for the financial
period/year (19,753) (35,711) (30,646)
============= ============= ================================
Basic and diluted
earnings per 2012
Share (pence) 9 (6.21) (10.30) (9.05)
============= ============= ================================
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 2017
Share Accumulated Total
capital losses equity
GBP'000 GBP'000 GBP'000
As at 1 April 2017 297,220 (124,915) 172,305
Loss and total comprehensive expense for the financial period - (19,753) (19,753)
Total comprehensive expense for the period - (19,753) (19,753)
-------- ------------ ---------
Transactions with owners
Distributions (8,270) - (8,270)
-------- ------------ ---------
Total transactions with owners (8,270) - (8,270)
-------- ------------ ---------
As at 30 September 2017 (unaudited) 288,950 (144,668) 144,282
======== ============ =========
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 2016 341,848 (94,269) 247,579
Loss and total comprehensive expense for the financial year - (30,646) (30,646)
Total comprehensive expense for the year - (30,646) (30,646)
--------- ------------ ---------
Transactions with owners
Distributions (34,032) - (34,032)
Share buyback and cancellation (10,596) - (10,596)
--------- ------------ ---------
Total transactions with owners (44,628) - (44,628)
--------- ------------ ---------
As at 31 March 2017 (audited) 297,220 (124,915) 172,305
========= ============ =========
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 2017
Six months Six months Year ended
to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Cash flows from operating
activities
Loss for the financial
period/year (19,753) (35,711) (30,646)
Adjustments for:
Change in fair value
on financial assets
at fair value through
profit or loss 19,433 35,499 30,120
Movement in trade
and other receivables 783 5 1
Movement in trade
and other payables 65 (19) (37)
Repayment of loan
investment in limited
partnership 7,477 - 33,000
Net cash generated
from/(used in) operating
activities 8,005 (226) 32,438
------------- ------------- -----------
Cash flows used in
financing activities
Distributions (8,270) - (34,032)
------------- ------------- -----------
Net cash used in financing
activities (8,270) - (34,032)
------------- ------------- -----------
Net movement in cash
and cash equivalents
during the period/year (265) (226) (1,594)
Cash and cash equivalents
at the beginning of
the period/year 531 2,125 2,125
Cash and cash equivalents
at the end of the
period/year 266 1,899 531
============= ============= ===========
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 2017
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 2017 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 2017, 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
2017 297,728 17 297,745
Repayment of loan investment
in Limited Partnership (7,475) - (7,475)
Carried forward 290,253 17 290,270
---------- -------- ----------
Fair value adjustment
through profit or loss
Brought forward (127,502) - (127,502)
Fair value movement during
period (19,433) - (19,433)
Carried forward (146,935) - (146,935)
---------- -------- ----------
Fair value as at 30 September
2017 (unaudited) 143,318 17 143,335
========== ======== ==========
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
2016 341,325 17 341,342
Repayment of loan investment
in limited partnership (43,597) - (43,597)
Carried forward 297,728 17 297,745
---------- -------- ----------
Fair value adjustment
through profit or loss
Brought forward (97,382) - (97,382)
Fair value movement during
the year (30,120) - (30,120)
Carried forward (127,502) - (127,502)
---------- -------- ----------
Fair value as at 31 March
2017 (audited) 170,226 17 170,243
========== ======== ==========
The movement in fair value of the Fund II investment is derived from the write downs in Everest 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 GBP7.5 million (Year to 31 March 2017: GBP43.6 million, Six months to 30 September 2016: GBPnil) was repaid to the 2012 Cell by Fund II.
No distributions receivable from Fund II in the current or comparative periods 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 GBP0.8 million (Year to 31 March 2017: GBP1.6 million, Six months to 30 September 2016: 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
2017 2016 2017
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Debtors 822 1,601 1,600
Prepayments - - 6
-------------- -------------- ------------
822 1,601 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 GBP0.8 million (Year to 31 March 2017: GBP1.6 million, Six months to 30 September 2016: GBP1.6 million) relates to distributions receivable from Fund II. At the period end there is also an amount of GBP22,000 due from the 2009 Cell to the 2012 Cell.
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 28.5 million (Year to 31 March 2017: 28.5 million, Six months to 30 September 2016: 57.1 million) shares in the 2012 Cell, which are valued at GBP9.7 million based on their 30 September 2017 (Year to 31 March 2017: GBP7.9 million, Six months to 30 September 2016: GBP18.8 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 Rate Discounted
Methodology Applied to Multiples Value of portfolio valued on
Multiples this basis (GBP'm)
------------- ---------------------- --------------- ------------- --------------- ------------ ---------------------------------
30 30 31 March
September September 2017
2017 2016
EBITDA
Multiples
ranging
from
6.2 times
to
6.6 times
Most commonly used (30
Private Equity September
valuation 2016:
methodology. Used 0.4 times
for A discount revenue
investments which is applied and 5.8
are to earnings times
profitable and for Multiples are multiples at to 6.5
which a set of applied to 20 per cent. times
listed the earnings Relevant (30 September EBITDA, 31
companies and of the provisions 2016: at 20 March
precedent investee may be per cent., 2017:
transactions with company to deducted 31 March 6.0 times
similar determine the from the 2017: to
characteristics can enterprise multiple at 20 per 8.0 times
Multiple be determined. value valuation cent.) EBITDA) 60.7 147.9 85.3
-------------
30 September Earnings
2017 Everest Reported
SPOT earnings
adjusted
for
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).
Other earnings
such as
revenue
may also be
used where
relevant.
Further
information in
relation
to the
application of
earnings
can be found
in the Fund
II GP report
above
-------------
30 September Discounts to the
2016 Everest valuation
SPOT generated by applying
iNTERTAIN multiples to reflect
Jaeger the time and costs
of reaching
sustainable
profitability and the
inevitable
accompanying
uncertainties
31 March Multiples The
2017 earnings
Everest SPOT multiple
is derived
from
comparable
listed
companies
(Everest)
or relevant
market
transaction
multiples
(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 As
realisable value and Net realisable determined
earnings and assets value, on a case
basis (Northern earnings by case
Other Aerospace) and assets basis n/a n/a 60.0 32.0 60.2
---------------------- --------------- ------------- --------------- ------------ ---------- ---------- ---------
30 September
2017 Northern
Aerospace
---------- ---------- ---------
30 September
2016 City Link
Northern Aerospace
31 March 2017
City Link Jaeger
Northern Aerospace
---------- ---------- ---------
Level 3 Portfolio valuation 120.7 179.9 145.5
Level 1 Portfolio valuation 9.7 18.8 7.9
Other net assets 12.9 9.8 16.8
---------- ---------- ---------
2012 Cell fair value of investments in Fund II 143.3 208.5 170.2
This approach requires the use of assumptions about certain unobservable inputs. Significant unobservable inputs as at 30 September 2017 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 GBP8.3 million or 6.3 per cent. (+10.0 per cent.)
- A decrease in the carrying value of GBP8.3 million or 6.3 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 GBP20.7 million or 15.9 per cent. (+100.0 per cent.)
- An increase in the carrying value of GBP20.7 million or 15.9 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 three cumulative distributions announced to date for the 2012 Cell totalled GBP48.4 million, being 13.6 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 2017 amounted to GBP99,000 (year to 31 March 2017: GBP122,000, period to 30 September 2016: GBP61,000) apportioned on a NAV basis between the Cells. At the period end, GBP49,000 (31 March 2017: GBP30,000, 30 September 2016: GBP30,000) 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
2017 2016 2017
(unaudited) (unaudited) (audited)
Loss for the period/year GBP(19,752,711) GBP(35,710,463) GBP(30,645,610)
Weighted average
number of 2012
Shares in issue 318,052,242 346,600,520 338,779,074
EPS (pence) (6.21) (10.30) (9.05)
=================
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 2017 30 September 2016 31 March 2017
(unaudited) (unaudited) (audited)
Net assets attributable to 2012 Cell shareholders GBP144,281,984 GBP211,868,910 GBP172,304,053
Distributions GBP48,366,457 GBP6,065,509 GBP40,097,099
------------------- ------------------- ---------------
Adjusted net asset value GBP192,648,441 GBP217,934,419 GBP212,401,152
------------------- ------------------- ---------------
2012 Shares in issue 318,052,242 346,600,520 318,052,242
NAV per share (IFRS) (pence) 45.36 61.13 54.17
Adjusted NAV per share (pence) 60.57 62.88 66.78
------------------- ------------------- ---------------
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 cumulative 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
There were no significant events occurring after 30 September 2017.
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"
"AIM" Alternative Investment Market;
"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;
"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 Capital PCC Limited" Better Capital Limited, being prior 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 Union" the European Union first established 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 Aerospace Holdings Limited;
"GDPR" means the General Data Protection Regulations;
"General Partners" or "GPs" both Fund I GP and Fund II GP together;
"General Partner's Share" the priority profit share payable 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" or "NAV" the value of the assets of the Company less its liabilities, calculated in
accordance with
the valuation guidelines laid down by the Board;
"NfP" means not-for-profit;
"Northern Aerospace" means Northern Aerospace Limited;
"OfficeTeam" means Project Oliver Topco Limited and its subsidiaries, which together
trade as OfficeTeam;
"Omnico" 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);
"Redemption" means a compulsory pro rata redemption of the 2009 Shares;
"Redemption Date" effective date of 28 June 2017;
"Registrar" Capita Registrars (Guernsey) Limited;
"SLMR" means Shaanxi Ligeance Mineral Resources Co., Ltd.;
"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 Company
Richard Crowder (Chairman) Carey Olsen
Richard Battey PO Box 98
Philip Bowman Carey House
Jon Moulton Les Banques
St Peter Port
Company secretary Guernsey
Heritage International Fund Managers Limited GY1 4BZ
Heritage Hall
PO Box 225 English solicitors to the Company
Le Marchant Street DLA Piper UK LLP
St Peter Port 3 Noble Street
Guernsey London
GY1 4HY EC2V 7EE
Registered office Corporate broker and financial adviser
Heritage Hall Numis Securities Limited
PO Box 225 10 Paternoster Square
Le Marchant Street London
St Peter Port EC4M 7LT
Guernsey
GY1 4HY Independent auditor
BDO Limited
Guernsey administrator PO Box 180
Heritage International Fund Managers Limited Place du Pré
Heritage Hall Rue du Pré
PO Box 225 St Peter Port
Le Marchant Street Guernsey
St Peter Port GY1 3LL
Guernsey
GY1 4HY Public relations adviser
Powerscourt
Registrar 1 Tudor Street
Capita Registrars (Guernsey) 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
Better Capital PCC Limited, is a company incorporated in and controlled from Guernsey as a Protected Cell Company. There are currently two cells, being the 2009 Cell and the 2012 Cell. The ordinary shares of each cell are admitted to the Main Market operated by the London Stock Exchange plc.
The principal activity of the Company is to act as a feeder fund, through each cell, and pursue an investment objective which aims to generate attractive total returns by investing (2009 Cell through Fund I and 2012 Cell through Fund II) in a portfolio of distressed businesses, such returns being expected to accrue largely through capital growth.
Following the investment by the Cells into the Funds, the Funds invest in distressed businesses, through special purpose vehicles. The Fund GPs are the investment managers in each respective Fund and have overall responsibility for the management and administration of the businesses and affairs of the Funds, including the management of its investments and as such the Cells have no control over the investments made by the Funds.
The Company is a limited liability, Closed-ended Investment Company, which was incorporated on 24 November 2009 in Guernsey and which, by special resolution of its members, converted to a protected cell company on 12 January 2012 and on that same day changed its name from Better Capital Limited to Better Capital PCC Limited. The Company has an unlimited life and is registered with the GFSC as a Registered Closed-ended Collective Investment Scheme.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BMBRTMBJJBJR
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