15 Feb 2012 07:00
15 February 2012
Better Capital PCC Limited
Interim Management Statement
This statement is made in accordance with the UK Listing Authority's Disclosure Rules and Transparency Rules and relates to the period from 1 October 2011 to 15 February 2012.
1 Overview
Better Capital PCC Limited ("Better Capital" or the "Company") is a limited liability, closed-ended investment company which, by special resolution of its members, converted from a non-cellular to a protected cell company on 12 January 2012 (the "Conversion"). The Company is incorporated in Guernsey with an unlimited life and registered with the Guernsey Financial Services Commission as a Registered Closed-Ended Collective Investment Scheme. Upon Conversion, the Company created the Better Capital 2009 Cell to which all of the members, members' shares, capital, assets and liabilities including its investments in BECAP Fund LP ("BECAP Fund") at the date of Conversion were attributed. The Company also created the Better Capital 2012 Cell which raised capital through the issue of the 2012 shares for investment in BECAP12 Fund LP ("BECAP12 Fund"). On 13 January, 169,861,895 Better Capital 2012 Cell shares were admitted to the UKLA Official List and to trading on the Main Market of the London Stock Exchange (ticker: BC12.L).
As a result of the above, Better Capital has two established cells, Better Capital 2009 Cell and Better Capital 2012 Cell. Better Capital 2009 Cell has the investment objective of generating attractive total returns from investing through BECAP Fund and Better Capital 2012 Cell has the investment objective of generating attractive total returns from investing through BECAP12 Fund (together the "Better Capital Funds"), in two portfolios of distressed businesses, such returns being expected to be largely from capital growth.
To date Better Capital 2009 Cell has committed an aggregate of £203.8 million in BECAP Fund and Better Capital 2012 Cell has committed an aggregate of £165.5 million in BECAP12 Fund.
2 BECAP Fund
At 10 February 2012, BECAP Fund had cash balances of £24.9 million, placed with maturity dates ranging from instant access to four months through a diversified cash management policy.
BECAP Fund has made the following investments in the period prior to 1 October 2011:
Sector | Platform investment | Bolt-on investment |
Aerospace manufacturing | Gardner Group Limited (together with its subsidiaries, "Gardner") | ·; Certain assets and obligations of RD Precision Limited and the shares of RD Precision Polska SP.z.o.o (together "RD Precision") |
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| ·; The trade and assets of Blade Tooling Company Limited and Blade Technology, a partnership (together "Blade") |
Direct marketing | The trade and assets of Reader's Digest Association UK Limited ("Reader's Digest") |
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Information systems | The trade and assets of certain subsidiaries of Calyx Holdings Limited ("Calyx") | ·; The trade and certain assets of a division of Touchstone Group plc ("Touchstone") ·; Trinity Computer Services Holdings Limited ("Trinity") ·; Gyrosoft Solutions Limited ("Gyrosoft") |
Business services | The trade and assets of the health and safety risk management advisory business of Connaught plc ("Santia") |
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Information systems | The principal debt facilities, trade and assets of the DigiPoS group ("DigiPoS") |
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Boat manufacturing | Fairline Boats Acquisition Limited ("Fairline") |
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Information systems | Clarity Commerce Solutions plc ("Clarity") |
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These investments continue to demonstrate improving trends and turnaround plans are progressing satisfactorily.
2.1 Recent transactions
Details of transactions by BECAP Fund in the period from 1 October 2011 to 15 February 2012 are listed below.
2.1.1. 4 October 2011 - BECAP Fund invested a further £1.5 million into Santia to fund its on-going restructuring programme. This brings the total invested in Santia to £13.0 million, with the total committed remaining unchanged at £15.0 million.
2.1.2. 14 October 2011 - An £8.0 million revolving loan facility was extended to Gardner by BECAP Fund to fund its Eurocopter and Vought work programmes in May 2011. On 14 October, Gardner withdrew £1.3 million, the fifth and final tranche of the facility. On 21 November, BECAP Fund advanced a further £1.5 million to fund working capital requirements. The total amount committed and invested in Gardner now stands at £37.5 million.
2.1.3. 2 November 2011 - In July 2011, BECAP Fund committed an £8.0 million short term facility to fund Reader's Digest on-going restructuring programme. On 2 November, Reader's Digest withdrew £1.5 million on the remaining £3.0 million facility. On 19 December, the company repaid £0.5 million of this facility. The total amount invested in Reader's Digest now stands at £21.0 million, with the total committed at £23.0 million.
2.1.4. 1 December 2011 - On 29 September, Enigmatic Investments Limited ("Enigmatic Investments"), a wholly owned special purpose vehicle of BECAP Fund, posted an offer document for the acquisition of the share capital of Clarity at 23 pence per share. On 11 November, Enigmatic Investments made a revised and final offer of 25 pence per share. On 1 December, all conditions had been either satisfied or waived and the offer became unconditional in all respects. On 20 January, Enigmatic Investment's holding in Clarity exceeded the 90% threshold which enabled Enigmatic Investments to exercise its rights under section 979 of the Companies Act 2006 to enforce the compulsory purchase of minority shareholdings. On 23 January, BECAP Fund committed and invested a further £0.4 million to fund the takeover of Clarity. The total committed and invested in Enigmatic Investments is £10.9 million.
2.1.5. 29 December 2011 - In July 2011, BECAP Fund entered into an agreement to acquire the UK and Irish businesses of Spicers ("Spicers") from Unipapel SA. The agreement was conditional upon the disposal of the entire European Spicers business by DS Smith plc to Unipapel SA. The transaction completed on 29 December. BECAP Fund has committed £40.0 million to this transaction and invested £30.0 million to date.
2.1.6. 31 January 2012 - Calyx announced the disposal of MentecPlus Integrated Solutions Limited ("MentecPlus") to UNIT 4 Business Software Holding B.V. ("UNIT4"), a NYSE Euronext-listed company and the author of the Agresso Business World suite of business software products. MentecPlus is the authorised Agresso distributor in Ireland. Net proceeds from the disposal have been retained in Calyx to fund further follow-on investments. MentecPlus has net assets of approximately €0.4 million and was budgeted to have turnover of approximately €4.8 million in the 2012 financial year. The business represents approximately 10% of the total Calyx group turnover for 2011.
2.1.7. 6 February 2012 - Following a period of assessment and restructuring, the board of DigiPoS considered that around £3.0 million of the £21.0 million committed and invested by BECAP Fund was surplus to requirements. Consequently, the board of DigiPoS consented to the repatriation of £3.0 million back to BECAP Fund. This reduces the total amount committed and invested in DigiPoS to £18.0 million.
3 BECAP12 Fund
On 13 January, 169,861,895 Better Capital 2012 shares were admitted to the UKLA Official List and to trading on the Main Market of the London Stock Exchange (ticker: BC12.L). Net proceeds of £165.5 million from Better Capital 2012 shares were invested into BECAP12 Fund.
At 10 February 2012, BECAP12 Fund had cash balances of £164.9 million, placed with maturity dates ranging from instant access to one month through a diversified cash management policy.
No investments have been completed in BECAP12 Fund and there are no opportunities in advanced stages of negotiation earmarked for BECAP12 Fund at present; however, the flow of opportunities remains strong.
4 Financial
The unaudited net asset value of Better Capital Limited as at 31 December 2011 was £229.1 million, representing a net asset value per share of 110.79 pence. Upon Conversion on 12 January 2012 this net asset value was attributed to Better Capital 2009 Cell. In accordance with the guidance set out in the Prospectus dated 10 June 2010, fair market valuations of BECAP Fund's investments are carried out on a six-monthly basis as at 31 March and 30 September. Consequently, the net asset value has not been subject to a revaluation of the underlying carrying value of investments from those reported in the Interim Report. Follow-on investment made into existing investee companies during the period 1 October 2011 to 31 December 2011 has been added at cost to the carrying values brought forward from the last valuation as at 30 September 2011.
The unaudited opening net asset value, after issuance costs, of Better Capital 2012 Cell as at 13 January 2012 was £166.0 million, representing a net asset value per share of 97.7 pence.
At market close on 10 February 2012, Better Capital's shares in BCAP.L and BC12.L had a mid-market price on the London Stock Exchange of 124.5 pence and 101.25 pence respectively.
4.1 Portfolio Summary & Reconciliation as at 31 December 2011
Sector | Fund Project cost* | Fund fair value investment in SPV's** | Valuation percentage of NAV | Valuation methodology | |
£m | £m | ||||
Gardner | Aerospace | 37.5 | 54.1 | 23.62% | Earnings & Assets |
Reader's Direct | Direct Marketing | 21.0 | 19.0 | 8.29% | Earnings |
Calyx | Information Systems | 27.8 | 34.5 | 15.06% | Earnings & Assets |
Santia | Professional Services | 13.0 | 18.6 | 8.12% | Earnings |
DigiPos | Information Systems: Hardware | 21.0 | 21.0 | 9.17% | Price of Recent Investment |
Fairline | Manufacturing | 15.0 | 15.0 | 6.55% | Price of Recent Investment |
Clarity | Information Systems: Software | 10.9 | 10.9 | 4.76% | Price of Recent Investment |
Spicers | Wholesale | 30.0 | 30.0 | 13.09% | Price of Recent Investment |
176.2 | 203.1 | 88.66% | |||
Fund cash on deposit | 23.1 | 10.08% | |||
Fund & SPV combined other net assets | 0.9 | 0.39% | |||
Company fair value of investment in Fund | 227.1 | 99.13% | |||
Company cash on deposit | 1.7 | 0.74% | |||
Company current assets less liabilities | 0.3 | 0.13% | |||
Company NAV | 229.1 | 100.00% | |||
* Better Capital Fund holds its investments at cost in accordance with the terms of the Limited Partnership Agreement | |||||
** The Company fair values its investment in the Better Capital Fund in accordance with the accounting policies as set out in Note 2 of the Annual Financial Report.
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5 Outlook
The performance of the businesses acquired by BECAP Fund has generally continued to improve in line with expectations. Although the markets that most portfolio companies operate in remain difficult, all are making solid progress in improving their operational and financial performance. The prospect for further investments in turnaround opportunities remains good as deal flow continues at a consistent rate.
The General Partner of BECAP Fund recently introduced a modest level of leverage into two of the portfolio group companies. Part of the proceeds from the re-financing was returned to BECAP Fund for deployment into new opportunities. The balance has been earmarked for the portfolio group companies' working capital and other follow-on investments.
Brand awareness remains strong and the Better Capital Funds continue to receive a solid pipeline of opportunities across a wide range of sectors.
Commenting on the Interim Management Statement, Richard Crowder, Chairman of Better Capital said, "The Board remains pleased with the progress shown in the portfolio group of companies which all demonstrated solid improvement in the period under review. The Better Capital fundraising took place at a time when there were significant uncertainties surrounding the risk of debt default contagion across Europe and the longevity of the Euro. In spite of this, Better Capital was successful in launching the Better Capital 2012 Cell. This bodes well for the Company as a whole and for the prospects for each Cell. The availability of funds enables Better Capital to react speedily to any opportunities that present a compelling investment case."
For further information, please contact:
Better Capital Limited +44 (0)1481 716 000
Mark Huntley (Director)
Laurence McNairn (Administrator and Company Secretary)
Powerscourt +44 (0)20 7250 1446
Carmen Murray
Jon Earl
Numis Securities Limited +44 (0)20 7260 1000
Nathan Brown
Oliver Hardy
This statement is a general description of the financial position and performance of the Company for the period from 1 October 2011 to 14 February 2012. It does not contain any profit forecast or forward looking information. Future performance and share price are likely to be affected by a number of factors, including (but not limited to) general economic and market conditions and specific factors affecting the financial performance or prospects of individual investments within the Company's portfolio.