TIDMRC2
RNS Number : 0720I
Reconstruction Capital II Ltd
28 June 2013
28 June 2013
Reconstruction Capital II Limited (the "Company")
Annual Report and Audited Consolidated Financial Statements
for the year ended 31 December 2012
Reconstruction Capital II Ltd ("RC2, the "Company" or the
"Group"), a closed-end investment company incorporated in the
Cayman Islands admitted to trading on the AIM market of the London
Stock Exchange, today announces its results for the year ended 31
December 2012.
Copies of the Company's annual report will today be posted to
shareholders. The annual report is also available to view on the
Company's website http://www.reconstructioncapital2.com/.
Financial highlights
-- The audited net asset value as at 31 December 2012 was EUR
0.3933 per share (EUR 0.9272 per share as at 31 December 2011);
-- As at 31 December 2012 the Company's market capitalisation
was approximately EUR 50m, with a closing price of EUR 0.50 per
share;
-- The Directors do not recommend the payment of a dividend.
Operational highlights
The Private Equity Programme
During the year, RC2 continued to prepare its investee companies
for sale and put both Top Factoring Srl and its sister company
Glasro Holdings Ltd up for sale by means of an organised sales
process. It also started an organised sales process for Klar, the
automotive and industrial paints division of Policolor S.A, and
made progress in the preparation of the Policolor's Bucharest site
for sale. However, this sale is dependent on the sale of Klar, or
the relocation of its production, as Klar is the only division of
the Policolor group which still manufactures its products at the
Bucharest site.
The Trading Programme
During the year, RC2 exited a number of its equity positions
held under the Trading Programme, thereby generating EUR 1.4m of
cash proceeds. At year-end, its listed equities held under the
Trading Programme had a total market value of EUR 0.5 million. All
the Trading Programme was held in Romanian equities.
For further information, please contact:
Reconstruction Capital II Limited
Ion Florescu / Anca Moraru
Tel: +44 (0) 207 244 0088/ +40 21 3167680
Grant Thornton Corporate Finance (Nominated Adviser)
Philip Secrett / David Hignell
Tel: +44 (0) 20 7383 5100
LCF Edmond de Rothschild Securities (Broker)
Hiroshi Funaki
Tel: +44 (0) 20 7845 5960
INVESTMENT MANAGER AND INVESTMENT ADVISORS' REPORT
During the year, Reconstruction Capital II Limited ("RC2" or the
"Company") suffered a dramatic fall in its NAV per share, which
fell from EUR 0.9272 (as restated as at 31(st) December 2011) to
EUR 0.3933. The bulk of the fall mainly reflects a significant
write-down in the valuation of East Point Holdings Limited, which
is the most highly leveraged investment of RC2, and therefore its
valuation is highly sensitive to a deterioration in its trading
performance. However, the change also reflects lesser write downs
of the investments in Policolor S.A., Top Factoring Srl (and its
sister company Glasro Holdings Ltd), Mamaia Resort Hotels Srl and
Klas D.o.o.
The 2011 accounts were restated due to the early adoption of
IFRS 10 "Consolidated Financial Statements", IFRS 11 "Joint
arrangements", IFRS 12 "Disclosure of Interests in Other Entities"
and amendments to IFRS 10, IFRS 12 and IAS 27 on consolidation for
investment entities, which exempt investment companies from the
need to consolidate their investments. The Company took advantage
of this exemption in order to give a clearer view of the fair value
of the various investments held by the Company. Previously, the
investments in Top Factoring Srl (and its sister company Glasro
Holdings Ltd) and Mamaia Resort Hotels Srl had been
consolidated.
RC2's audited NAV per share as at the end of 2012 compares to an
unaudited published NAV per share of EUR 0.8784. The difference of
EUR 0.4851 per share is the result of a lower fair value for RC2's
private equity investments. The new annual independent third
parties valuation exercise took place after the computation of the
unaudited published year-end NAV.
RC2 did not make any new investments under its Private Equity
Programme, but started the exit process for some of its private
equity investments. Unfortunately, the depressed macro-economic
climate in the region, as well as the extremely low level of
interest in the region from strategic investors, meant that it was
not possible to effect any exits from these positions during the
year. However, RC2 exited certain positions held under its Trading
Programme, thereby generating EUR 1.4m, helping its cashflow. The
Company had to borrow EUR 3.0m from one of its shareholders in 2012
in order to support its operations. Consequently, it ended 2012
with EUR 1.3m of cash and borrowings of EUR 4.5m, as well as EUR
3.8m of accrued liabilities to its suppliers.
Private Equity Programme
During the year, RC2 continued to prepare its investee companies
for sale and put both Top Factoring Srl and its sister company
Glasro Holdings Ltd up for sale by means of an organised sales
process. It also started an organised sales process for Klar, the
automotive and industrial paints division of Policolor S.A, and
made progress in the preparation of the Policolor's Bucharest site
for sale. However, this sale is dependent on the sale of Klar, or
the relocation of its production, as Klar is the only division of
the Policolor group which still manufactures its products at the
Bucharest site.
Trading Programme
During the year, RC2 exited a number of its equity positions
held under the Trading Programme, thereby generating EUR 1.4m of
cash proceeds. At year-end, its listed equities held under the
Trading Programme had a total market value of EUR 0.5 million. All
the Trading Programme was held in Romanian equities.
Outlook
A shareholder meeting held in December 2012 approved extending
the life of the Company for a further two years until December
2014. During this time, RC2 will seek to exit its current
investments and will not make any new investments except follow-on
investments in existing investee companies.
During 2012, Romania, Serbia and Bulgaria, the three countries
where RC2 has investments, suffered from their export growth losing
steam due to economic weakness in the EU, their main export market.
However, the three countries have been sheltered by relatively
large foreign reserves and relatively low overall public debt. The
low levels of capital inflows and especially of foreign direct
investment in the context of a weak external environment should
continue to limit the economic growth of the three countries in
2013, making it particularly challenging for RC2 to effect exits
from its investments.
New Europe Capital Ltd
New Europe Capital S.R.L.
New Europe Capital DOO
INVESTMENT POLICY
Private Equity Programme
Under the Private Equity Programme, the Company takes
significant or controlling stakes in companies operating primarily
in Romania, Serbia, Bulgaria and neighbouring countries (the
"Target Region"). The Company invests in investee companies where
it believes its Investment Advisers can add value by implementing
operational and/or financial restructuring over a 3 to 5 year
horizon. The Company only makes an investment under the Private
Equity Programme if its Investment Advisers believe there is a
clear exit strategy available, such as trade sale, break up and
subsequent disposal of different divisions or assets, or a
flotation on a stock exchange.
Trading Programme
Under the Trading Programme, the Company aims to generate short
and medium term returns by investing such portion of its assets as
determined by the Directors from time to time in listed equities
and fixed income securities, including convertible and other
mezzanine instruments, issued by entities in the Target Region. The
Investment Manager is responsible for identifying and executing
investments and divestments under the Trading Programme. The
Trading Programme differs from the Private Equity Programme in the
key respect that the Company will typically not take significant or
controlling stakes in investee companies and will typically hold
investments for shorter periods of time than investments made under
the Private Equity Programme.
Value Creation
Under its Private Equity Programme, the Investment Advisers are
involved at board level in the investee company to seek to
implement operational and financial changes to enhance returns. As
part of the Company's pre-acquisition due diligence, the Investment
Advisers seek to identify specific actions that they believe will
create value in the target investee company post acquisition and,
where appropriate, seek to work with third party professionals to
develop, in combination with the proposed management team of the
target, a value creation plan with clear and identifiable short and
medium term targets. These plans are likely to address different
parts of the business and are tailored to reflect the specific
challenges of the relevant target company. Both the Investment
Advisers and the Investment Manager believe that the investment
strategies under the Private Equity and Trading Programme can
achieve returns which are different than the returns of the
relevant market indices.
Investing Restrictions and Cross-Holdings
The Directors, the Investment Advisers and the Investment
Manager will seek to ensure that the portfolio of investments is
sufficiently diversified to spread the risks of those investments.
The Investment Strategy does not restrict the Company from
investing in other closed-ended funds operating in the Target
Region. In line with the Company's investment policy, the Board
does not normally authorise any investment in a single investee
company that is greater than 20 per cent of the Company's net asset
value at the time of effecting the investment and in no
circumstances will it approve an investment in a single investee
company that is greater than 25 per cent of the Company's net asset
value at the time of effecting the investment.
Change of investment objective and policy of the Company
Following the annual general meeting of the Company on 14
December 2012, the investment objective and policy of the Company
was amended such that no new investments will be made, further
investments into existing portfolio companies will be permitted in
certain circumstances pending their realisation and, following each
realisation, all proceeds will be returned to Shareholders after
paying outstanding liabilities and setting aside a sufficient
amount for working capital purposes.
Gearing
The Company may borrow up to a maximum level of 30 per cent of
its gross assets (as defined in its articles).
Distribution Policy
The Company's investment objective is focused principally on the
provision of capital growth. For further details of the Company's
distribution policy, please refer to the Admission Document on the
Company's website.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
31-Dec-12 31-Dec-11
As restated
EUR EUR
Investment loss
Loss on investments at fair value
through profit or loss (49,389,415) (11,876,866)
Interest income 329,387 134,545
Dividend income 1,282 35,354
Other income 197,958 238,924
-------------- ---------------------------
Total investment loss (48,860,788) (11,468,043)
Expenses
Impairment on loan receivables (943,143) -
Operating expenses (2,764,984) (3,021,485)
-------------- ---------------------------
Total operating expenses (3,708,127) (3,021,485)
Operating loss (52,568,915) (14,489,528)
-------------- ---------------------------
Financial expenses (612,149) (32,127)
Loss before taxation (53,181,064) (14,521,655)
Income tax expense (71,733) (70,883)
Loss for the year (53,252,797) (14,592,538)
Other comprehensive income
Exchange differences on translating
foreign operations 10,458 12,705
Total comprehensive loss for the year (53,242,339) (14,579,833)
-------------- ---------------------------
Net loss for the year attributable
to:
- Equity holders of the parent (53,392,784) (14,770,148)
- Non-controlling interest 139,987 177,610
-------------- ---------------------------
(53,252,797) (14,592,538)
-------------- ---------------------------
Total comprehensive loss / income attributable
to:
- Equity holders of the parent (53,392,000) (14,769,193)
- Non-controlling interest 149,661 189,360
-------------- ---------------------------
Total comprehensive loss for the
year (53,242,339) (14,579,833)
-------------- ---------------------------
31-Dec-12 31-Dec-11
As restated
EUR EUR
Earnings Per Share attributable
to the equity shareholders
of the Company
Basic and diluted earnings
per share (0.5339) (0.1477)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2012
31-Dec-12 31-Dec-11 1-Jan-11
As restated As restated
Assets EUR EUR EUR
Non-current assets
Property, plant and equipment 13,458 7,862 2,515
Financial assets at fair value
through profit or loss 42,041,100 91,289,361 99,539,127
Loans receivable 560,501 550,895 406,700
Total non-current assets 42,615,059 91,848,118 99,948,342
----------- ------------- -------------
Current assets
Financial assets at fair value
through profit or loss 456,773 1,970,473 3,711,882
Trade and other receivables 277,777 187,512 4,133,322
Loans receivable 3,366,167 2,283,833 2,245,500
Cash and cash equivalents 1,318,380 296,040 680,487
Total current assets 5,419,097 4,737,858 10,771,191
----------- ------------- -------------
Total assets 48,034,156 96,585,976 110,719,533
=========== ============= =============
Liabilities
Current liabilities
Trade and other payables 3,754,477 1,678,372 624,718
Loans and borrowings 1,541,870 968,948 2,238,649
Corporation tax payable 44,651 52,967 9,923
----------- ------------- -------------
Total current liabilities 5,340,998 2,700,287 2,873,290
----------- ------------- -------------
Non-current liabilities
Loans and borrowings 3,000,000 802,400 -
----------- ------------- -------------
Total non-current liabilities 3,000,000 802,400 -
----------- ------------- -------------
Total liabilities 8,340,998 3,502,687 2,873,290
=========== ============= =============
Total net assets 39,693,158 93,083,289 107,846,243
=========== ============= =============
31-Dec-12 31-Dec-11 1-Jan-11
As restated As restated
EUR EUR EUR
Capital and reserves attributable to
equity holders
Share capital 1,000,000 1,000,000 1,000,000
Share premium reserve 121,900,310 121,900,310 121,900,310
Retained deficit (83,541,201) (30,148,417) (15,378,269)
Foreign exchange reserve (27,966) (28,750) (29,705)
----------------- ------------- -------------
Total equity and reserves 39,331,143 92,723,143 107,492,336
Non-Controlling Interests 362,015 360,146 353,907
----------------- ------------- -------------
Total equity 39,693,158 93,083,289 107,846,243
================= ============= =============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS OF
31 DECEMBER 2012
Foreign Retained Non-
Share Share exchange (Deficit)/ controlling
Capital Premium reserve Earnings Sub-total Interest Total
EUR EUR EUR EUR EUR EUR EUR
Balance at 1
January
2011 -as
previously
reported 1,000,000 121,900,310 (1,639,610) (24,439,609) 96,821,091 3,498,370 100,319,461
Prior year
adjustment
- Note 2 - - 1,609,905 9,061,340 10,671,245 (3,144,463) 7,526,782
---------- ------------ ------------ ------------- ------------- ------------- -------------
Balance at 1
January
2011 - as
restated 1,000,000 121,900,310 (29,705) (15,378,269) 107,492,336 353,907 107,846,243
(Loss)/Profit for
the
year - - - (14,770,148) (14,770,148) 177,610 (14,592,538)
Other
comprehensive
income - - 955 - 955 11,750 12,705
---------- ------------ ------------ ------------- ------------- ------------- -------------
Total
comprehensive
(loss) / income
for
the year - - 955 (14,770,148) (14,769,193) 189,360 (14,579,833)
Dividends paid to
non-controlling
interests - - - - - (183,121) (183,121)
---------- ------------ ------------ ------------- ------------- ------------- -------------
Balance at 31
December
2011 - as
restated 1,000,000 121,900,310 (28,750) (30,148,417) 92,723,143 360,146 93,083,289
(Loss) / Profit
for
the year - - - (53,392,784) (53,392,784) 139,987 (53,252,797)
Other
comprehensive
income - - 784 - 784 9,674 10,458
---------- ------------ ------------ ------------- ------------- ------------- -------------
Total
comprehensive
(loss) / income
for
the year - - 784 (53,392,784) (53,392,000) 149,661 (53,242,339)
Dividends paid to
non-controlling
interests - - - - - (147,792) (147,792)
---------- ------------ ------------ ------------- ------------- ------------- -------------
Balance at 31
December
2012 1,000,000 121,900,310 (27,966) (83,541,201) 39,331,143 362,015 39,693,158
========== ============ ============ ============= ============= ============= =============
Share premium is stated net of share issue costs and is not
distributable by way of dividend.
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED
31 DECEMBER 2012
31-Dec-12 31-Dec-11
EUR EUR
As restated
Cash flows from operating activities
Net loss before tax (53,181,064) (14,521,655)
Adjustments for:
Depreciation and amortisation 3,243 2,258
Loss on financial assets at FVTPL 49,389,415 11,876,866
Impairments on loans receivable 943,143 -
Interest income (329,387) (134,545)
Interest expense 430,520 32,127
Dividend income (1,282) (35,354)
============= =========================
Net cash outflow before changes in
working capital (2,745,412) (2,780,303)
(Increase)/Decrease in trade
and other receivables (90,265) 2,918,542
Increase in trade and other payables 2,076,105 1,053,654
Purchase of financial assets - (2,839,032)
Sale of financial assets 1,365,234 2,005,319
Interest income received 12,118 62,703
Dividends received 1,282 35,354
Cash generated by operating activities 619,062 456,237
Income tax paid (80,049) (27,839)
Net Cash generated by operating
activities 539,013 428,398
------------- -------------------------
Cash flows from investing activities
Purchase of property, plant and
equipment (8,631) (7,530)
Payments of loans granted to
subsidiaries (2,268,000) (2,356,186)
Proceeds from loans granted to
subsidiaries 550,186 2,245,500
Net Cash flow used in investing
activities (1,726,445) (118,216)
Cash flows from financing activities
Dividends paid to non-controlling
interests (147,792) (183,121)
Proceeds from loans granted by
related parties 3,000,000 1,745,505
Repayments of loans granted
by related parties (400,000) (2,238,649)
Interest paid on loans (244,953) (6,284)
============= =========================
Net Cash generated / (used)
in financing activities 2,207,255 (682,549)
Increase / (decrease) in cash
and cash equivalents 1,019,823 (372,367)
Cash and cash equivalents at
beginning of the year 296,040 680,487
Foreign exchange gain / (loss) 2,517 (12,080)
Cash and cash equivalents at
end of the year 1,318,380 296,040
============= =========================
This information is provided by RNS
The company news service from the London Stock Exchange
END
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