BC12.L Regulatory News (BC12)

23 December 2019

BETTER CAPITAL PCC LIMITED

(the "Company")

INTERIM RESULTS UPDATE

Better Capital PCC Limited announces its 2019 interim results for both the 2009 Cell and the 2012 Cell.

2009 Cell Interim Results

·; NAV at 30 September 2019: £26.4 million, NAV at 31 March 2019: £27.8 million, NAV at 30 September 2018: £28.3 million

·; £210.0 million total capital raised

·; £203.8 million net proceeds invested in Fund I

·; £288.8 million/137.5 per cent. cumulative distributions and redemptions to date

·; 9 total platform investments

·; 10 follow-on investments

·; 7 realisations - Gardner, Santia, ATH Coal, Calyx Managed Services Reader's Digest, Fairline, SPOT2

·; 2 remaining assets - m-hance, Omnico

·; 8.7 years average holding period of remaining portfolio companies

·; £0.3 million net debt across Fund I portfolio companies

1 Internal rate of return since inception, based on the net proceeds of share issues and distributions to shareholders

2 SPOT, a minority holding in Fund I

2012 Cell Interim Results

·; NAV at 30 September 2019: £46.6 million, NAV at 31 March 2019: £55.6 million, NAV at 30 September 2018: £58.0 million

·; £355.5 million total capital raised

·; £347.4 million net proceeds invested in Fund II

·; £99.6 million/28.0 per cent. cumulative distributions to date

·; 6 total platform investments

·; 1 follow-on investment

·; 4 realisations -iNTERTAIN, City Link, Jaeger, Northern Aerospace

·; 2 remaining assets - Everest, SPOT

·; 6.4 years average holding period of remaining portfolio companies

·; £25.6 million net debt across Fund II portfolio companies

1 Internal rate of return since inception, based on the net proceeds of share issues and distributions to shareholders

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 2019.

Better Capital 2009 Cell

The 2009 Cell NAV summary is set out below.

The table below summarises the movement of cost and fair value at Fund level and so does not reflect the movement of the primary statements. The total composition of the 2009 Cell NAV has been analysed below.

The Fund I portfolio value declined by £1.5 million in the six months to 30 September 2019. Omnico suffered a £1.5 million value reduction, being a £1.2 million of value decline compounded by a shareholder loan repayment of £0.3 million. Overall there was a 5 per cent. decline in the 2009 Cell NAV during the review period.

m-hance is on track to achieve its FY19 budget at both the revenue and EBITDA level. Over the course of the past year, the business has fundamentally found product market fit, improved its focus on delivery and sales conversion. External validation from Microsoft has been beneficial, with m-hance recognised as the market leader in legislative compliant CRM software for the Not-for-Profit sector. The focus in the coming year is to leverage on its solid current year performance and drive revenue and profit growth further.

Whilst it is encouraging that Omnico continues to add net new customers specifically to its new V6 product, profitability has been impacted due to early issues with implementation, now overcome, and further development work required to meet the requirements of its US customers. Alan Moody, the incumbent CEO at m-hance has been appointed Chair at Omnico.

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.

The table below summarises the movement of cost and fair value at Fund level and so does not reflect the movement of the primary statements. The total composition of the 2012 Cell NAV has been analysed below.

1 The movements at cost are at Fund level

2 Net movement based on the disposal of 12,677,471 2012 Shares at the volume weighted average price on 2 July 2019, of 9.96 pps

3 Included the remaining estimated net receivable from the City Link administration, the iNTERTAIN proceeds in escrow and the remainder of the proceeds from the warranty claim of CAV Aerospace Limited.

4 Includes partial proceeds from the iNTERTAIN escrow

5 The net remaining iNTERTAIN proceeds in escrow which are expected to be payable after the resolution of legacy matters

The 2012 Cell NAV declined by £9.0 million (16.2 per cent.) to £46.6 million during the review period, principally due to the further write down in Everest.

During the period, Fund II disposed of 12,677,471 2012 Shares to the Company's 2012 Cell at 9.96 pence per share, totalling £1.3 million. The shares were immediately cancelled on acquisition by the Company reducing the total 2012 Shares in issue from 302,181,436 to 289,503,965. The overall effect of this transaction was to reduce the 2012 NAV per share decline in the period from - 16.2 per cent. to -12.5 per cent.

Separately to this, during the period the 2012 Shareholders received distributions totalling £2.9 million (equivalent to 1.0 pps), following the disposal of subsidiaries in SPOT. This distribution has been treated by the Company as a reduction of share capital paid out of monies attributed to the "share capital account".

Performance in Everest remains mixed, but generally unsatisfactory since the issuance of the Annual Report. Improvements have been seen in areas such as pipeline management and the average timeframe taken to install. Cost of poor quality remains an issue, offsetting the profit improvement initiatives. The net effect has resulted in a reduction in the valuation by £5 million to £15 million. There has been changes in the executive team. John Bostock, a seasoned interim turnaround operator has been appointed Chairman. John was previously CFO at Gardner Aerospace. In addition, a manufacturing director and two quality managers have also been recently appointed.

SPOT has experienced a high level of activity during the review period. This included the completion of the consolidation of its footprint from four to two distribution centres and introducing initiatives to target new sales. However, the market in which SPOT operates continues to be largely contracting. Sales in OfficeTeam have deteriorated stemming from purchasing cut-backs in its customer base. Tightening of credit insurance availability has had an adverse impact, particularly for Spicers customers. The effect is that the market is seeing a higher level than normal of corporate failures and considerable efforts at consolidation. SPOT is well-positioned to take advantage of the changing market dynamics due to the relative strength of its balance sheet.

Further details on Fund II's activities, portfolio companies and valuation are set out in the Fund II GP's report below.

Overall clearly not a good period despite very considerable efforts by the Fund GPs and by management. All of the businesses have clear potential for improvement and it remains frustrating that it is taking so long to achieve.

Richard Crowder

Chairman

20 December 2019 

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 future performance of the Company.

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 2019. 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 and the recent electoral results and political climate 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

20 December 2019 

Independent Review Report to Better Capital PCC Limited

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the six months ended 30 September 2019 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 International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this interim financial report has 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 condensed set of financial statements in the interim financial report based on our review.

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 Financial Reporting Council 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 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 condensed set of financial statements in the interim financial report for the six months ended 30 September 2019 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.

Use of our report

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 United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person 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.

BDO LimitedChartered AccountantsPlace du Pré,

Rue du Pré,

St Peter Port,

Guernsey

20 December 2019

Condensed Statement of Financial Position

As at 30 September 2019

The unaudited condensed interim financial statements of the Company were approved and authorised for issue by the Board of Directors on 20 December 2019 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 2019

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 2019

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 2019

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 2019

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 final 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 unaudited 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 2019 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 2019, 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 2019.

There was one new standard applied during the period ended 30 September 2019.

IFRS 16: Leases was adopted for the accounting period beginning on 1 April 2019. As the Company has no leases, there was no impact from the adoption of IFRS 16.

Going concern

After making appropriate enquiries, the Directors have a reasonable expectation that the Company, and in turn Funds I and II and the Cells, 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:

1Of the £4.2m repayment, £1.3m was a non-cash repayment by way of a share buyback and cancellation of 12,677,471 2012 Shares at the volume weighted average price on 2 July 2019.

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, which form part of the overall investment in the Limited Partnership do not incur interest. The fair value of the loans is 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 Partners may, upon request by the Company, repay to the Company any amount of the outstanding loan. During the period £4.2 million was repaid to the Company by Fund II (Six months to 30 September 2018: £53.1 million, Year to 31 March 2019: £53.1 million).

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 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 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 £26.3 million for Fund I (30 September 2018: £28.1 million, 31 March 2019: £27.8 million) and £46.5 million for Fund II (30 September 2018: £57.5 million, 31 March 2019: £55.3 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.

The primary 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. 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 were 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.

6. Share capital

Core shares

Authorised:

The Company is authorised to issue an unlimited amount of ordinary shares at £1 par value.

Issued and fully paid:

Period ended 30 September 2019

Period ended 30 September 2018

Year ended 31 March 2019

Cell shares

Authorised:

The Cells are authorised to issue an unlimited amount of ordinary shares at £1 par value.

Period ended 30 September 2019

Period ended 30 September 2018

Year ended 31 March 2019

The five cumulative distributions (reductions of share capital) to date for the 2009 Cell total £288.8 million, being 137.5 per cent. of funds raised.

The five cumulative distributions (reductions of share capital) to date for the 2012 Cell total £99.6 million, being 28.0 per cent. of funds raised.

7. 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 and a substantial shareholder of the Company.

Annual remuneration for each Director is as follows: the Chairman receives £70,000, the Chairman of the audit committee receives £62,500, the Chairman of the management engagement, nomination and remuneration committee receives £60,000 and the other non-executive Director receives £45,000. From 1 July 2019, Mr Jon Moulton has waived his Directors' fees.

Directors' fees and expenses for the period to 30 September 2019 amounted to £108,000 (31 March 2019: £238,000, 30 September 2018: £119,000), of which £48,000 (31 March 2019: £59,000, 30 September 2018: £59,000) remained outstanding at the period end.

8. Earnings per share and net asset value per share

The earnings per share and net asset value per share for the 2009 Cell and 2012 Cell are shown below.

9. 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 acquired, 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

Portfolio update

m-hance maintained its momentum from the early part of the year and closed its third quarter for the FY19 financial year ending 31 December 2019 with an unaudited EBITDA of £0.7 million driven by on budget gross margin performance and overhead cost management. Cash management and strong financial processes remain major strengths at m-hance. The business is on-track to achieve its FY19 revenue and EBITDA budget.

Since my last report, the business has seen several key wins within the Not-for-Profit sector with major projects for The Children's Society and Concern Worldwide being the key orders. These orders were placed during Q2 FY19 providing a new record of sales achieved in the business. As at 30 September new sales orders were 22 per cent. higher year-on-year and are also ahead of budget. The success of the new nfp365 product offerings and subsequent order conversions within the Not-for-Profit sector has seen the professional services order book increase significantly over recent months. The operational focus is to ensure that the delivery of these projects is efficient, effective and timely. The management team under Alan Moody recognises resource utilisation, accurate project management and high-quality delivery as the key indicators to the success of projects.

During 2019 m-hance invested heavily in marketing with a range of on-line and off-line activities designed to position the business as a credible knowledge business partner for both new and existing clients with the benefits beginning to be felt in a growing sales pipeline in both new names and existing clients. Continued investment in Microsoft technologies is borne out through achieving multiple Gold Certifications which is awarded through a co-ordinated and sustained training programme across the business. In addition to Gold Certifications, m-hance has now achieved the status of being a global managed partner within Microsoft's Technology for Social Impact division.

The Enterprise Resource Planning sector has had a successful period with strong order intake and delivery of its Making Tax Digital for VAT products together with successful migrations of customers from on premise solutions to cloud-based platforms within the Microsoft Azure product set. In addition to investing in existing technologies, during FY19, m-hance has invested in training employees in Microsoft's new Enterprise Resource Planning product, Business Central, whilst also developing new intellectual property.

The focus on improving both the consistency as well as the level of customer support has seen case backlog management continuing to improve. This has resulted in quarter ended June and September 2019 backlogs being at the lowest level with daily planning, cross-training and communication routines being the key drivers behind the success.

Company-wide communications have continued throughout the period with the implementation of a new company wide SharePoint solution as well as the deployment of Microsoft's Teams. Both are being utilised to facilitate and encourage effective and consistent communication. Additionally, regular CEO updates and senior management team attendance and presentation at departmental team meetings has encouraged greater collaboration and a common set of behaviours and values throughout the business. The success of these initiatives can be seen from the latest employee survey results. These showed positive progress with Net Promoter Score moving from -13 to +31 in 12 months, "leadership communication" moving from 6.1 to 8.5 and "believing that the business is heading in the right direction" increasing from 7.1 to 8.2.

The valuation for m-hance is unchanged at £10.8 million. This has been derived using an earnings approach on the business's maintainable earnings. At 30 September 2019, the business had net debt of £0.1 million.

Omnico closed its FY19 financial year ended 30 September 2019 with unaudited revenue of £19.2 million and EBITDA of £1.7 million. At the half year, Omnico was performing in line with budget and reported revenue and EBITDA of £11.0 million and £1.9 million respectively. These unaudited figures are stated in line with IFRS15 (revenue recognition) and IFRS16 (lease accounting) standards which the business adopted in FY19.

Omnico's weaker performance in the second half of FY19 resulted directly from difficulties in implementing the new V6 product into new name US customers. During the second half of the year it became apparent that the product was overly configurable, lacked some sector specific functionality and that the implementation processes were not sufficiently robust. As a result, Omnico commenced a project to resolve the issues, diverting 600 resource days to remedying these issues but at the cost of being unable to pursue billable activities.

Subsequent new customers have deployed without the aforementioned issues leaving Omnico confident in its strategy to drive the business from a professional service led development company to a product led software as a service organisation. This journey is underpinned by a clear customer funded product work and continued development of managed service offerings. To support this transition, Omnico have augmented its leadership team through the recruitment of Cloud Services and Professional Services directors who bring experience of operating in a software as a service environment to Omnico.

Omnico's customers continue to support the business and particularly its new products and the pipeline remains strong. Second half wins include a £1.2 million 6-year contract with a UK local authority to deliver digital commerce and ticketing solutions to its estate of leisure parks. In addition, Omnico has secured and is delivering a contract to upgrade a major US theme park group to the latest V6 software paving the way for opportunities to expand Omnico's digital services into this key market. Omnico is benefiting from the expansion of its theme park and casino markets in Asia and is working with key US entertainment groups to offer solutions into destinations in China and Hong Kong. The business recognises the need to work with a local partner in this geography and has recently announced a partnership agreement with JOS, a local systems integrator and member of the Jardine Matheson Group.

The Omnico board has been boosted with the appointment of Alan Moody, the incumbent CEO at m-hance as Chair.

The V6 setback impacted on the business's FY19 profitability and momentum resulting in a downgrade of its valuation from £14.0 million to £12.5 million. Omnico's valuation has been derived using an earnings approach on its maintainable earnings. At 30 September 2019 Omnico had net debt of £0.2 million.

Closing remarks

The KPIs in m-hance are encouraging - the business is now well positioned to drive profitable growth. Omnico should follow suit as the V6 issues are fully resolved. The extension to the life of Fund I by a further 18 months should help enhance value for all stakeholders and at present exits look practicable in that timeframe.

Jon Moulton

Chairman

BECAP GP Limited

20 December 2019

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

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

Portfolio summary

Summary income statement for the Partnership

1 Fund I holds its investments at cost less impairment 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 2019, Fund I had placed a total of £3.0 million (31 March 2019: £2.9 million, 30 September 2018: £1.1 million) of cash on instant access deposit with one bank. Fund I has in place a strict cash management policy that seeks to avoid credit risk.

INDEPENDENT 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 in the interim financial report for the six months ended 30 September 2019 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 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 International Financial Reporting Standards (IFRSs) as adopted by the European Union. The 2009 Cell's condensed set of financial statements included in this interim financial report has 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.

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 Financial Reporting Council 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 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 2019 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.

Use of our report

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 United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person 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.

BDO LimitedChartered AccountantsPlace du Pré,

Rue du Pré,

St Peter Port,

Guernsey

20 December 2019

Condensed Statement of Financial Position

As at 30 September 2019

The unaudited condensed interim financial statements of the 2009 Cell were approved and authorised for issue by the Company's Board of Directors on 20 December 2019 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 2019

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 2019

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 2019

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 2019

1. General information

The 2009 Cell is a cell of Better Capital PCC Limited.

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.

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 2019 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 2019, 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 and considering the extension to the life of Fund I to 17 June 2021, 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 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 for 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 directly impacts 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.

2. Segmental reporting

For management purposes, the 2009 Cell is organised into one main operating segment, which invests in one limited partnership.

3. Investment in Limited Partnership

The movement in fair value of the Fund I investment is derived from the fair value decrease in Omnico, net of expenses of Fund I and its related special purpose vehicles.

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.

During the period, Fund I returned £0.2 million to the 2009 Cell by way of distribution (Six months to 30 September 2018: £nil, Year to 31 March 2019: £nil).

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 5 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:

This approach requires the use of assumptions about certain unobservable inputs. Significant unobservable inputs as at 30 September 2019 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 £2.3 million or 9.7 per cent. (+10.0 per cent.)

- A decrease in the carrying value of £2.3 million or 9.7 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 £7.9 million or 34.1 per cent. (+100.0 per cent.)

- An increase in the carrying value of £7.9 million or 34.1 per cent. (-100.0 per cent.)

The Fund I GP approves the valuations performed with input from any external consultant as appointed by the GPs 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 6 of the Company's financial statements above.

The five cumulative distributions to date for the 2009 Cell total £288.8 million, being 137.5 per cent. of funds raised.

7. Related party transactions

Further information on related party transactions can be found in Note 7 of the Company financial statements above.

Directors' fees and expenses, incurred by the 2009 Cell, for the period to 30 September 2019 amounted to £36,000 (year to 31 March 2019: £54,000, period to 30 September 2018: £27,000) apportioned on a NAV basis between the cells. At the period end, £nil (31 March 2019: £13,000, 30 September 2018: £13,000) remained outstanding.

8. Earnings per share and net asset value per share

Earnings per share

8. Earnings per share and net asset value per share (continued)

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