TIDMRC2
RNS Number : 0538B
Reconstruction Capital II Ltd
07 June 2021
7 June 2021
Reconstruction Capital II Limited
Annual Report and Audited Financial Statements
for the year ended 31 December 2020
Reconstruction Capital II Limited ("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 2020.
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 2020 was
EUR0.1586 per share (EUR0.1450 per share as at 31 December 2019), a
9.38% increase over the year;
-- The Directors do not recommend the payment of a dividend.
Operational highlights
Private Equity Programme
At the end of December 2020, the investments held under the
Private Equity Programme had a total fair value of EUR20.25m, which
was 14.3% more than the 2019 valuation of EUR17.7m. The valuations
of Policolor and Mamaia were performed by independent valuers,
whilst the valuation of Telecredit IFN SA was based on its audited
net asset value. The valuations of Reconstruction Capital Plc and
the Romanian Investment Fund Ltd were also based on their audited
net asset values, but these were in turn based on the same
valuation of their main underlying asset, Policolor SA, as adopted
by the Company. The valuations are based on assumptions that
applied as of 31 December 2020.
Policolor proved relatively resilient to the effects of the
COVID pandemic, and its improved performance and prospects is
reflected in the increased valuation of the business. In spite of
the pandemic, the Policolor Group achieved a 5.5% year-on-year
increase in sales to EUR64.08m, and recorded recurring EBITDA of
EUR2.41m (compared to just EUR0.98m in 2019). The relocation of
production to the new plants in Bucharest and Ruse was completed
during the year as was the sale of the land at Theodor Pallady. A
new Group CEO was appointed in September. She has initiated a
turnaround plan focussed mainly on the Romanian business, including
a more streamlined organisational structure and more efficient
logistics.
The Mamaia hotel was closed for the redecoration of its public
areas and facades during the first five months of the year. Its
2020 revenues of EUR1.8m were 12.6% below the revised budget
prepared in May to reflect the estimated impact of the Covid-19
pandemic, and 40% below 2019, due to Covid-19 related restrictions.
These included limits on the use of the restaurant, a ban on
conferences and other corporate events as well as a country-wide
lockdown in the spring, whose knock-on effect was a delay to the
start of the season which only took off in July as opposed to June
in previous years.
Telecredit deployed EUR11m in factoring products to small and
medium sized businesses in 2020, generating EBITDA of EUR0.09m,
compared to an expected loss of EUR-0.17m in its revised budget
prepared in May to reflect the impact of the Covid-19 pandemic. The
Company tightened its lending criteria as well as increased its
levels of provisioning during the year. This resulted in the book
value of its SME portfolio shrinking from EUR2.3m to EUR1.9m over
the year.
Related parties' interests
As at 31 December 2020, Mr Florescu held 39,030,555 shares,
Portadrix Investments Limited (which is wholly-owned by The
Florescu Family Trust) held 42,726,319 shares, and New Europe
Capital SRL (which is the adviser to the Company and is 84% owned
by Portadrix Investments Limited) held 105,985 shares. Following
this revision in the shareholdings, Mr Florescu and interests
related to him own in aggregate 81,862,859 shares (previously
notified as 81,391,311 shares) representing 60.26% of the current
issued share capital of the Company.
http://www.rns-pdf.londonstockexchange.com/rns/0538B_1-2021-6-7.pdf
For further information, please contact:
Reconstruction Capital II Limited Cornelia Oancea / Anca Moraru
Tel: +40 21 3167680
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett
Tel: +44 (0) 20 7383 5100
finnCap Limited (Broker) William Marle / Giles Rolls Tel: +44 20
7220 0500
ADVISER'S REPORT
For the year ended 31 December 2020
On 31 December 2020, Reconstruction Capital II Limited ("RC2" or
the "Company") had a total audited net asset value ("NAV") of
EUR21.5m, or EUR0.1586 per share. The NAV per share increased by
9.38% over the course of the year.
Private Equity Programme
At the end of December 2020, the investments held under the
Private Equity Programme had a total fair value of EUR20.25m, 14.3%
above than the 2019 valuation of EUR17.7m. The valuations of
Policolor and Mamaia were performed by independent valuers, whilst
the valuation of Telecredit IFN SA was based on its audited net
asset value. The valuations of the Company's investments in
Reconstruction Capital Plc and The Romanian Investment Fund Limited
were also based on their audited net asset values, but these were
in turn based on the same valuation of their main underlying asset,
Policolor SA, as adopted by the Company.
2020 2019
EUR EUR
Policolor S.A 13,960,000 12,000,000
Mamaia Hotel Resorts SRL ("Mamaia") 3,440,548 3,371,233
Telecredit IFN S.A. ("Telecredit") 624,545 804,859
The Romanian Investment Fund Limited 1,256,983 992,643
Reconstruction Capital Plc 972,485 555,738
-------------- --------------
20,254,561 17,724,473
-------------- --------------
The above valuations are based on assumptions that applied as of
31 December 2020.
Policolor proved relatively resilient to the effects of the
COVID pandemic, and its improved performance and prospects is
reflected in the increased valuation of the business. In spite of
the pandemic, the Policolor Group achieved a 5.5% year-on-year
increase in sales to EUR64.08m, and recorded recurring EBITDA of
EUR2.41m (compared to just EUR0.98m in 2019). The relocation of
production to the new plants in Bucharest and Ruse was completed
during the year as was the sale of the land at Theodor Pallady. A
new Group CEO was appointed in September. She has initiated a
turnaround plan focussed mainly on the Romanian business, including
a more streamlined organisational structure and more efficient
logistics.
The Mamaia hotel was closed for the redecoration of its public
areas and facades during the first five months of the year. Its
2020 revenues of EUR1.8m were 12.6% below the revised budget
prepared in May to reflect the estimated impact of the Covid-19
pandemic, and 40% below 2019, due to Covid-19 related restrictions.
These included limits on the use of the restaurant, a ban on
conferences and other corporate events as well as a country-wide
lockdown in the spring, whose knock-on effect was a delay to the
start of the season which only took off in July as opposed to June
in previous years.
Telecredit deployed EUR11m in factoring products to small and
medium sized businesses in 2020, generating EBITDA of EUR0.09m,
compared to an expected loss of EUR-0.17m in its revised budget
prepared in May to reflect the impact of the Covid-19 pandemic. The
Company tightened its lending criteria as well as increased its
levels of provisioning during the year. This resulted in the book
value of its SME portfolio shrinking from EUR2.3m to EUR1.9m over
the year.
Apart from the shareholdings in RC and RIF, the other private
equity investments are held through two Cyprus-based wholly-owned
subsidiaries, RC2 (Cyprus) Limited and Glasro Holdings Limited,
which are not consolidated in the present financial statements, in
accordance with IFRS. The Assets at Fair Value shown in the present
financial statements, which amounts to EUR22.0m, reflects the
valuations of the underlying private equity holdings outlined in
the above table, plus loan receivables of EUR1.5m, cash and cash
equivalents of EUR0.1m, and a net EUR0.1m of sundry financial
assets and liabilities, held by these intermediary holding
companies.
Economic Overview
Due to the COVID pandemic which resulted in governments taking
various measures such as lockdowns which restricted economic
activity, the Romanian and Bulgarian economies reported decreased
GDP in 2020, of 3.9% and 4.2% respectively. However, both countries
are expected to recover during 2021, with the European Commission
forecasting annual GDP increases in 2021 of 3.8% for Romania, and
2.7% for Bulgaria. The speed of the recovery will be dependent on
the roll out of the Covid-19 vaccination programmes, allowing Covid
related restrictions to be eased, and a combination of fiscal
policies and successful deployment of the EU "Next Generation"
funds, with Romania set to receive EUR33.5bn and Bulgaria EUR29bn
over 2021-2027.
INVESTMENT POLICY
Investment Objective and Policy of the Company
At a general shareholder meeting on 21 February 2018, the
investment objective of the Company was changed so that it now aims
to achieve capital appreciation and/or to generate investment
income returns through the acquisition of real estate assets in
Romania, including the development of such assets, and/or the
acquisition of significant or controlling stakes in companies
established in, or operating predominantly in Romania, primarily in
the real estate sector. Any new private equity investment in
companies operating in sectors other than real estate is limited to
25% of the Company's total assets at the time of effecting the
investment. However, the Company may continue to make follow-on
investments in existing portfolio companies (which include
Policolor SA, Mamaia Resort Hotels SRL and Telecredit SA IFN)
without any such limitation.
Gearing
The Company may borrow up to a maximum level of 30% 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.
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2020
2020 2019
EUR EUR
Investment income
Fair value loss on financial assets
at fair value through
profit or loss (1,752,486) (14,482,512)
Interest income 4,280,442 4,319,475
-------------- --------------
Net investment income/(loss) 2,527,956 (10,163,037)
-------------- --------------
Expenses
Operating expenses (660,299) (845,572)
Net financial (expense)/income (16,286) 255
-------------- --------------
Total expenses (676,585) (845,317)
-------------- --------------
Profit/(loss) for the year 1,851,371 (11,008,354)
-------------- --------------
Other comprehensive income - -
-------------- --------------
Total comprehensive income/(loss)
for the year attributable to owners 1,851,371 (11,008,354)
-------------- --------------
Gain/(loss) Per Share
Basic and diluted gain/(loss) per
share 0.0136 (0.0806)
STATEMENT OF FINANCIAL POSITION
As at 31 December 2020
2020 2019
EUR EUR
ASSETS
Non-current assets
Financial assets at fair value through
profit or loss 21,999,552 19,651,596
-------------- --------------
Total non-current assets 21,999,552 19,651,596
-------------- --------------
Current assets
Trade and other receivables 13,600 16,673
Cash and cash equivalents 33,073 65,887
-------------- --------------
Total current assets 46,673 82,560
-------------- --------------
TOTAL ASSETS 22,046,225 19,734,156
-------------- --------------
LIABILITIES
Current liabilities
Trade and other payables 91,782 37,362
Borrowings 406,278 -
-------------- --------------
Total current liabilities 498,060 37,362
-------------- --------------
TOTAL LIABILITIES 498,060 37,362
-------------- --------------
NET ASSETS 21,548,165 19,696,794
-------------- --------------
EQUITY AND RESERVES
Share capital 1,358,569 1,358,569
Share premium 109,206,779 109,206,779
Accumulated deficit (89,017,183) (90,868,554)
-------------- --------------
TOTAL EQUITY 21,548,165 19,696,794
-------------- --------------
Net Asset Value per share
Basic and diluted net asset value
per share 0.1586 0.1450
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020
Share Accumulated
Share capital premium deficit Total
EUR EUR EUR EUR
Balance at 1 January 2019 1,403,324 109,862,098 (79,860,200) 31,405,222
Loss for the year - - (11,008,354) (11,008,354)
Other comprehensive income - - - -
---------------- ----------- ----------------- --------------
Total comprehensive loss
for the year - - (11,008,354) (11,008,354)
---------------- ----------- ----------------- --------------
Repurchase and cancellation
of own shares (44,755) (655,319) - (700,074)
---------------- ----------- ----------------- --------------
Transactions with owners (44,755) (655,319) - (700,074)
---------------- ----------- ----------------- --------------
Balance at 31 December 2019 1,358,569 109,206,779 (90,868,554) 19,696,794
---------------- ----------- ----------------- --------------
Profit for the year - - 1,851,371 1,851,371
Other comprehensive income - - - -
---------------- ----------- ----------------- --------------
Total comprehensive income
for the year - - 1,851,371 1,851,371
---------------- ----------- ----------------- --------------
Balance at 31 December 2020 1,358,569 109,206,779 (89,017,183) 21,548,165
---------------- ----------- ----------------- --------------
STATEMENT OF CASH FLOWS
For the year ended 31 December 2020
2020 2019
EUR EUR
Cash flows from operating activities
Profit/(loss) for the year 1,851,371 (11,008,354)
Adjustments for:
Fair value loss on financial assets
at fair value through profit or loss 1,752,486 14,482,512
Interest income (4,280,442) (4,319,475)
Interest expense 6,278 -
Net (loss)/gain on foreign exchange 8 (255)
-------------- --------------
Net cash outflow before changes in
working capital (670,299) (845,572)
Decrease in trade and other receivables 3,073 4,338
Increase/(decrease) in trade and other
payables 54,420 (58,233)
Purchase of financial assets - (133,603)
Repayments of financial assets 180,000 800,000
-------------- --------------
Net cash used in operating activities (432,806) (233,070)
Cash flows from financing activities
Proceeds from borrowings 400,000 -
Payments to purchase own shares - (1,048,662)
Redemptions of B shares - (132,941)
-------------- --------------
Net cash generated from/(used in) financing
activities 400,000 (1,181,603)
-------------- --------------
Net decrease in cash and cash equivalents
before currency adjustment (32,806) (1,414,673)
Effects of exchange rate differences
on cash and cash equivalents (8) 255
-------------- --------------
Net decrease in cash and cash equivalents
after currency adjustment (32,814) (1,414,418)
Cash and cash equivalents at the beginning
of the year 65,887 1,480,305
-------------- --------------
Cash and cash equivalents at the end
of the year 33,073 65,887
-------------- --------------
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END
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