BCAP.L Regulatory News (BCAP)

Better Capital PCC Limited

NAV Update

Better Capital PCC Limited (the "Company") is a limited liability, closed-ended investment company. The Company has established two protected cells; the 2009 Cell, the limited partner of BECAP Fund LP ("Fund I"); and the 2012 Cell, the limited partner of BECAP12 Fund LP ("Fund II"). The 2009 Cell and 2012 Cell have the investment objective of generating attractive total returns from investing (through Funds I and 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.

Today the Company issues a Net Asset Value update for 31 March 2013.

In respect of the 2009 Cell:

In respect of the 2012 Cell:

Business review - Fund I

Portfolio summary and reconciliation

The focus in the financial year has been to continue to drive change in the portfolio companies in order to increase profitability and cash generation.

Activities

Fund I invested a total of £9.5 million to fund the on-going restructuring and working capital requirements of three portfolio companies in the year. Fairline received £7.0 million to fund various transformation programmes including the re-layout of its Corby factory and the development of the T-48 range of boats. Reader's Digest and Santia received £2.0 million and £0.5 million respectively to fund working capital and these investments were made in line with Fund I's commitments in the previous year.

In November 2012, Fund I committed £15.0 million into a wholly owned special purpose vehicle to fund the acquisition of certain bank facilities and related rights of ATH Resources (a surface coal mining business) and secondly, to invest in the business following a change of control. Despite a prolonged period of negotiations with various stakeholders, a satisfactory position could not be reached and Fund I agreed to sell the debt instruments onto Hargreaves Services plc. A net gain of £5.7 million was returned to Fund I in March 2013.

A further £3.0 million was invested into part funding an acquisition for Gardner. Airia is an aerospace components manufacturer based near Toulouse and has a very significant contracted work load with Airbus. The acquisition was strategically important, securing Gardner's migration from a 'Super Tier-2' to a Tier-1 supplier to the commercial aircraft industry.

In the year, two portfolio companies returned cash to Fund I. A special purpose vehicle within the Fairline structure repaid £0.5 million of surplus cash in February 2013 which had not been paid down to the underlying investment entity and a special purpose vehicle within the Spicers structure repaid £15.1 million over the course of the year. The repayments, particularly from Spicers, enabled Fund I to distribute £12.8 million to the 2009 Cell during this financial year for onward distribution to the 2009 Cell investors.

Post 31 March 2013 activities

Following the first distribution to the 2009 Cell in March 2013, a second distribution of £12.4 million was made in April 2013. This was enabled following the sale of certain debt instruments in ATH Resources in March 2013. Total distributions to the 2009 Cell now stand at £25.2 million or 12.4 per cent of the total investment of the 2009 Cell in Fund I. Total distributions from the 2009 Cell to 2009 Cell investors now stand at £26.5 million or 12.6 per cent of total funds raised.

On 2 May 2013, Fund I invested £2.0 million into Santia to fund the bolt-on acquisition of First Order Red Limited which is an asbestos consultancy business.

Portfolio update

The majority of Fund I portfolio companies continue to operate against a weak economic backdrop. Gardner continues to grow rapidly as a result of a buoyant civil aerospace market and significant new contract wins. The restructuring of the legacy UK business is now completed following a programme of extensive site closures, consolidation and re-investment into the business. Good progress has also been achieved on the integration and restructuring of Airia, an aerospace detailed parts fabricator and manufacturer in Toulouse, France and Pranita, an aerospace components manufacturer in Bangalore, India. The combined business, including sites in Poland, cements Gardner's position as a Tier-1 supplier in the commercial aircraft industry. Customer satisfaction is high as the investment in new plant has permitted a significant improvement in quality and delivery whilst reducing costs, enabling Gardner to remain competitive. The business's half year unaudited revenue to 28 February 2013 was c. £57 million.

Following a sustained period of restructuring, Reader's Digest has now exited from unprofitable direct marketing activities to allow a smaller, profitable business based around the magazine to continue to trade. The business is now much reduced in scale but expects small profits in 2013 and is debt free.

m-hance develops, manages and deploys enterprise wide business management software solutions. Together with Calyx Managed Services, m-hance forms the Calyx Group. The business continues to trade to plan. The acquisition of part of Maxima plc in February 2012 has enabled m-hance to better position itself as a bespoke business management software provider, an attractive value-add to potential buyers. m-hance delivered revenues of c. £21 million in the year to 31 December 2012.

Calyx Managed Services, the other part of the business forming the Calyx Group continues to face challenges growing its revenue streams in tough market conditions. The management team was strengthened in late 2012 and a major overhaul of the sales structure was implemented and further cost down measures deployed. The carrying value of Calyx Managed Services reflects the moderate profitability currently being obtained. It is anticipated that the company's profitability will improve in the near future. The business posted revenues of around £29 million in the year to 31 December 2012.

Santia's restructuring programme is now complete, following a major IT implementation in the financial year. This has enabled Santia to benefit from a further reduction in its cost base and re-focusing the business on growth initiatives. Business activities such as its Contractor Certification and Occupational Health & Safety are performing solidly against plan whilst UK Training has been impacted by customer cutbacks. Nonetheless, an encouraging order pipeline is building in International Training, particularly in Dubai and Turkey. Santia's Asbestos Consultancy suffered from a lack of scale and geographical coverage; however, this has been addressed by the acquisition of First Order Red in May 2013. The company is generating good profits currently and remains debt-free. Santia delivered revenues of c. £29 million in the year to 31 January 2013.

Omnico Group, the business formed from the merger of DigiPoS and Clarity is demonstrating improving trends. The business has undergone a strengthening of its senior management team and operations. New product developments have received encouraging feedback and a large scale transformation programme around Omnico's supply and logistic processes is resulting in major savings and working capital improvement. The order pipeline is showing good growth, particularly around software solutions. The cost of investing in new products will reduce short term profitability. The company has a strong, debt-free balance sheet. Omnico generated sales of c. £58 million in the year to 30 September 2012.

Fairline closed its first full year under Fund I's ownership by returning to profit having suffered substantial losses for a number of years pre-acquisition. The demand for luxury boats remains subdued with a number of Fairline's competitors falling into financial distress in recent times. Further funding was made available to Fairline in the year to facilitate the re-engineering of the Corby factory layout and the development of the T-48 range. The re-opening of Corby and the launching of the new T-48 range has received favourable feedback. Fairline's continued focus on driving efficiency and a reduced cost base position it well for the future. The business generated sales of around £83 million in the year to 31 December 2012.

Spicers continues to perform very well. Revenues have declined as expected and intended but the focus on margin and working capital improvements has driven increased profitability and strong cash generation in the business. This has enabled the business to return a further £15.1 million of cash in the year. Now the key challenge for the business is to drive sales growth organically through a number of new strategies. The re-development of its central distribution facility in Birmingham is progressing to plan while the surplus freehold land in Sawston, Cambridge is currently being marketed for disposal. Further profit growth is anticipated. Spicers posted audited revenues of £240 million and EBITDA of £8 million for the year ended 30 April 2013.

Valuation

The portfolio value has risen by a net £40.2 million in the year to 31 March 2013. Total movement of the portfolio during the year was as follows:

Post investment phase

The investment period for Fund I expired on 31 December 2012, with the Fund I portfolio moving towards realisation phase. The first exits are anticipated in 2014. Uninvested cash (£6.3 million at 6 June 2013) in Fund I may be utilised for the acquisition of bolt-on investments, working capital requirements or restructuring costs. The portfolio as a whole is now expected to be cash generative over the coming months. Surplus funds will be returned to investors.

Business review - Fund II

Portfolio summary and reconciliation

Fund II, the feeder fund of the 2012 Cell, was created in January 2012 with net proceeds of £165.5 million. At the time of writing, the portfolio consists of three investments - Everest, a home improvement business specialising in double-glazed windows and conservatories; Jaeger, an iconic British fashion retailer; and City Link (acquired in April 2013), a leading express delivery courier business. These businesses had one commonality - they were operationally distressed at the time of acquisition and they were in need of new investment and expertise. Considerable progress has been achieved in these companies and particularly in Everest. 66.5 per cent of Fund II is now committed.

Activities and portfolio update

Everest, a leading manufacturer and distributor of double-glazed windows and conservatories was acquired by Fund II in March 2012. The business has undergone extensive restructuring, including a complete top down overhaul of the organisational structure and a full cost rationalisation exercise together with a restructuring of the largely self-employed sales structure and improving the control environment in manufacturing and installation. Although the conversion of enquiries into sales has improved in the recent months, this is still an area requiring further improvement.

In December 2012, Fund II injected a further £5.0 million into Everest to fund short term working capital requirements, bringing the total investment by Fund II to £30.0 million. Some of the short term working capital investment is expected to be returned shortly.

Everest has turned the corner and is now expected to generate sustainable profitability.

The business generated sales of c. £128 million in the year to 31 December 2012.

Jaeger is a premium British women and menswear fashion retailer whose history can be traced back to 1884. The business was acquired in April 2012. A total of £40.0 million was committed and a net £33.6 million invested in the financial year.

Jaeger operates in a landscape that has seen dramatic changes in recent years. Still at risk are those retailers that remain heavily indebted and who are experiencing difficulty in differentiating their brands. Jaeger's transformation programme is taking root. Although it is still early days, like-for-like sales have grown in recent months, demonstrating an improvement in product range and stock availability. The business has also recently launched its new website. It has received strong interest from several parties to develop the Jaeger franchise internationally. However, as with all retail businesses, the improvement in product appeal and brand awareness will take time to build.

The business is expected to generate a small profit in its current financial period, a substantial improvement over the last financial year.

Jaeger generated sales of c. £71 million in the year to 28 February 2012.

Joint venture

Fund II entered into a joint venture with the National Pensions Reserve Fund (the "NPRF"), Ireland's €14 billion social welfare and public service pension fund in January 2013. The NPRF has committed to invest up to €50.0 million towards a portfolio of distressed businesses in Ireland, with Fund II investing alongside. The joint venture will be operated through Better Capital (Ireland) LP and is managed by the Fund II GP. Under the terms of the joint venture, Fund II will commit at least 51 per cent in all Irish investments with the NPRF.

As a result of the joint venture, Better Capital (Dublin) Limited, the Irish Consultant to the Fund II GP has been established. Since its launch, the three-strong team has been actively marketing to the local advisory and banking communities. The level of Irish opportunities logged has risen markedly since the joint venture was announced as Better Capital is viewed as a reputable investor in the market.

Post 31 March 2013 activities

On 29 April 2013, Fund II acquired the entire issued share capital of City Link, on a debt free basis, for a consideration of £1. City Link is one of the UK's leading express delivery courier companies, serving over 10,000 customers, including major account customers such as Amazon, Marks and Spencer, John Lewis and Argos and had sales generated of over £320 million in the year to 29 December 2012. A total of £40.0 million has been committed and invested into City Link to fund its turnaround programme, including the development of a "best in class" IT infrastructure as well as projects on parcel tracking and estimated time of arrival (ETA) to capitalise on its highly regarded security cage network that is already in place. Early views confirm that substantial performance improvement opportunities are available.

On 22 May, Jaeger received £1.8 million of further investment from Fund II. The new investment will be deployed towards refurbishing its flagship store on Regent Street, London.

Valuation

The portfolio value has risen by £49.5 million in the year to 31 March 2013, £38.6 million of which was through further investment.

Uninvested cash in Fund II

Uninvested cash at 31 March 2013 was £99.0 million and this has reduced to £55.9 million at the time of writing. Deal flow is sufficient to deploy the remainder of uninvested cash.

Enquiries:

Better Capital PCC Limited +44 (0)1481 716 000

Mark Huntley (Director)

Laurence McNairn (Administrator and Company Secretary)

Numis Securities Limited (Corporate Broker & Financial Adviser) +44 (0)20 7260 1000

Nathan Brown

Oliver Hardy

Powerscourt (Public Relations Adviser) +44 (0) 20 7250 1446

Justin Griffith