BC12.L Regulatory News (BC12)

THIS REPLACES ANNOUNCEMENT NUMBER 0289K RELEASED AT 7:00 BST ON 15 AUGUST 2012. IN THAT EARLIER ANNOUNCEMENT THE FIGURES IN 4.2 IN RESPECT OF EACH OF THE '2012 CELL CASH ON DEPOSIT', '2012 CELL CURRENT ASSETS LESS LIABILITIES' AND '2012 CELL NAV' SHOULD HAVE READ 0.4 (0.24%), 1.2 (0.72%) AND 166.2 RESPECTIVELY. ALL OTHER INFORMATION REMAINS UNCHANGED.

15 August 2012

Better Capital PCC Limited

Interim Management Statement - Replacement 

This statement is made in accordance with the UK Listing Authority's Disclosure Rules and Transparency Rules and relates to the period from 1 April 2012 to 15 August 2012.

1 General information

Better Capital PCC Limited (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 date changed its name from Better Capital Limited to Better Capital PCC Limited. It has an unlimited life and is registered with the Guernsey Financial Services Company as a Registered Closed-ended Collective Investment Scheme. The registered office of the Company is Heritage Hall, PO Box 225, Le Marchant Street, St Peter Port, Guernsey, GY1 4HY.

Upon conversion, the Company established the 2009 Cell to which it attributed its investment in BECAP Fund LP ("Fund I") which has a portfolio of investments in distressed businesses. It also established a new protected cell, the 2012 Cell, which issued new shares raising £169.9 million for investment through the 2012 Cell into BECAP12 Fund LP ("Fund II") which will invest in a portfolio of distressed businesses.

The 2009 and 2012 Cells have the investment objective of generating attractive total returns from investing (through Fund I and Fund II respectively) in portfolios 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 and Ireland; such returns being expected to be largely derived from capital growth.

The 2009 Cell has committed an aggregate of £203.8 million in Fund I and the 2012 Cell has committed an aggregate of £165.5 million in Fund II.

2 BECAP Fund LP ("Fund I")

At 10 August 2012, Fund I had cash balances of £20.4 million, placed with instant access through a diversified cash management policy.

Market conditions for most portfolio companies remain weak but the Better Capital focus on improving operating margins, reducing costs and improving working capital mean that most businesses are making solid and significant improvements in profitability and cash generation.

Gardner continues to benefit from strong market demand in the civil aerospace sector and will shortly complete the two year rationalisation programme of its UK sites. The recent acquisitions in France and India position the business well for future growth. 

The traditional direct marketing business of Reader's Digest continues to decline in line with market trends. The migration of the business's customer base from more conventional sources of media such as books, CDs and DVDs, to electronic gadgets has occurred at a considerably faster rate. These trends are not just isolated to the UK business but are mirrored across the brand globally. The business's operating cost base continues to be closely managed, as is its working capital. A number of new growth initiatives are underway but are as yet insufficient to offset the decline in the base business. Considerable management resource is being applied in an effort to improve the situation.

Within Calyx Group, Calyx Managed Services continues to make significant progress in improving margins and reducing costs. M-hance, the business management software division, is growing satisfactorily. The Maxima business that was acquired in February 2012 has been fully integrated.

Santia continues to make solid progress despite soft demand in some sub-sectors. 

Fairline has made significant improvements in labour productivity and whilst demand for luxury yachts remains subdued, the business is performing well and the market reaction to new product releases has been favourable.

The integration of DigiPoS and Clarity continues at pace and significant opportunities exist for the software developments currently underway in the business.

Spicers continues to perform well with margin improvement and working capital benefits showing promising results.

2.1 Recent transactions

Details of transactions by Fund I in the period from 1 April 2012 to 15 August 2012 are listed below.

2.1.1. 23 April - Fund I, through its special purpose vehicles, invested £3.0 million into Gardner-Airia Holdings SAS, a sister company of Gardner, to part fund the £4.1 million acquisition of Airia SAS and its subsidiaries ("Airia"). Airia, a company with operations near Toulouse, and in Marseille and Lyon, manufactures, fabricates, assembles and distributes aerospace detailed parts. The acquisition of Airia brings the total committed and invested by Fund I in Gardner to £40.6 million.

2.1.2. 18 May and 4 July - Reader's Digest drew down the remaining £2.0 million working capital facility in two tranches to fund working capital and growth initiatives. Fund I's total commitment and investment in Reader's Digest is £23.0 million.

2.1.3 13 June - Gardner acquired 70 per cent. of Pranita Engineering Solutions Limited ("Pranita"). Pranita is an Indian based manufacturer and supplier of aerospace detailed parts and sub-assemblies. The £0.5 million consideration was funded from Gardner's cash reserves.

2.1.4. 1 August - Macsco 30 Limited, the acquisition vehicle of Fairline Boats Acquisition Limited, drew down the remaining £1.6m commitment from Fund I and £1.4m commitment from West Register (Investments) Limited to fund the business's on-going restructuring programme. The total amount committed and invested by Fund I now stands at £16.6m. 

3 BECAP12 Fund LP ("Fund II")

At 10 August 2012, Fund II had cash balances of £99.1 million, placed with maturity dates ranging from instant access to one month through a diversified cash management policy.

Fund II has made the following investments in the period prior to 1 April 2012:

Although still early days, the turnaround programme in Everest is progressing to plan. The new television advertising campaign is generating significant improvements in orders and operational efficiency improvements are yielding improved margins and better quality installations.

3.1 Recent transaction

Details of the transaction by Fund II in the period from 1 April 2012 to 15 August 2012 is shown below.

3.1.1. 16 April - Fund II committed and invested £40.0 million into the acquisition of Jaeger Group Limited ("Jaeger"), through a special purpose vehicle ultimately owned by Fund II. The aggregate cost of acquiring Jaeger was £19.5 million with the balance earmarked for its restructuring programme. It is anticipated that some of the original funding is surplus to requirements and will be returned to Fund II shortly. 

A number of initiatives have been introduced in Jaeger under Fund II's ownership. These include rejuvenating the business's store visual merchandising and increasing the availability of stock. Longer term investments have also been made to revitalise the brand, through advertising and improved merchandising and the recruitment of a number of key managers to lead the change programme. Early signs are promising.

4 Financial

In accordance with the guidance set out in the Prospectus dated 19 December 2011, fair market valuations of Fund I and Fund II'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 Annual Report. Follow-on investment made into existing investee companies during the period 1 April 2012 to 30 June 2012 has been added at cost to the carrying values brought forward from the last valuation as at 31 March 2012.

At market close on 10 August 2012, Better Capital's shares, BCAP.L and BC12.L, had a mid-market price on the London Stock Exchange of 148.75 pence and 117.75 pence respectively.

4.1 2009 Cell Portfolio Summary & Reconciliation as at 30 June 2012

4.2 2012 Cell Portfolio Summary & Reconciliation as at 30 June 2012

5 Outlook

Following a strong first half of 2012, deal flow is weaker than the economic environment would suggest. It remains that UK and European banks are reluctant to crystallise the losses within their distressed portfolios. However, deal flow is expected to remain sufficient to deploy the Better Capital Funds into attractive investment opportunities on planned timescales.

The portfolio continues to improve and opportunities for follow on investments will continue to be explored. Commenting on the Interim Management Statement, Richard Crowder, Chairman of Better Capital said, "The General Partner of Fund I has advised that despite weak market conditions for most portfolio companies, on the whole, solid progress continues to be achieved. 

"The General Partner of Fund II has advised the Board that whilst it is still early days, both Everest and Jaeger are responding well to their respective turnaround programmes. Both the portfolio companies are now trading from a significantly more stable platform than several months ago. 

"The Board has further been advised that there remains the opportunity to invest in one more deal out of Fund I and the priority, subject to funding requirements, remains with Fund I. 

"The situation in the UK of not permitting ailing businesses to fail cannot persist and, for the good of the economy, should not persist. Better Capital is well positioned to respond speedily when the situation changes."

For further information, please contact:

Better Capital PCC 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 April 2012 to 15 August 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 portfolios.