TIDMRC2
RNS Number : 8906O
Reconstruction Capital II Ltd
15 June 2022
15 June 2022
Reconstruction Capital II Limited
Annual Report and Audited Financial Statements
for the year ended 31 December 2021
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 2021.
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 2021 was
EUR0.1971 per share (EUR0.1586 per share as at 31 December 2020), a
24.27% increase over the year;
-- The Directors do not recommend the payment of a dividend.
Operational highlights
Private Equity Programme
At the end of December 2021, the investments held under the
Private Equity Programme had a total fair value of EUR26.24m, 29.5%
above the 2020 valuation of EUR20.25m. The valuations of Policolor,
Mamaia and Telecredit were all performed by independent valuers in
2021 (in 2020, the valuation of Telecredit was based on its audited
net asset value). The valuations of the Company's investments in
Reconstruction Capital Plc ("RC") and The Romanian Investment Fund
Limited ("RIF") 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.
In spite of the ongoing COVID pandemic and inflationary
headwinds, Policolor managed to generate a 23.7% year-on-year
increase in sales, from EUR64.1m in 2020 to EUR79.3m in 2021,
overperforming its budget by 12.5%. Helped in particular by the
strong performance from its resins and chemicals businesses,
Policolor more than doubled its recurring EBITDA from EUR2.1m in
2020 to EUR4.3m in 2021. The Policolor Group continues to implement
a turnaround plan which aims for an increased and more efficient
production capacity, a leaner and more efficient organisation
structure, improved internal planning and reporting systems, and
lower logistics costs.
Mamaia's 2021 revenues of EUR2.9m were 6.3% above budget, and
65% above the prior year, due to the positive effect of higher low
season sales, and the relaxation of pandemic restrictions over the
summer when the hotel benefited from a rebound in demand from
Romanian tourists. The hotel also made use of pandemic related
state aid, helping it achieve EBITDA of EUR0.35m, almost in line
with the budgeted EUR0.36m, and compared to an EBITDA loss of
EUR-0.33m in 2020.
Operating in an economy still affected by the COVID pandemic
where commercial banks continued to show a lower risk appetite for
financing small and medium sized enterprises, Telecredit deployed
EUR19m in financing products in 2021. This generated an operating
profit before depreciation and amortization of EUR0.39m, 5.6% above
the annual budget and significantly above the breakeven achieved in
2020.
Related parties' interests
As at 31 December 2021, 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. Mr Florescu
and interests related to him own in aggregate 81,862,859 shares
representing 60.26% of the current issued share capital of the
Company.
For further information, please contact:
Reconstruction Capital II Limited Cornelia Oancea / Luca Nicolae
Tel: +40 21 3167680
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett / George Grainger
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 2021
On 31 December 2021, Reconstruction Capital II Limited ("RC2" or
the "Company") had a total audited net asset value ("NAV") of
EUR26.8m, or EUR0.1971 per share. The NAV per share increased by
24.27% over the course of the year.
Private Equity Programme
At the end of December 2021, the investments held under the
Private Equity Programme had a total fair value of EUR26.24m, 29.5%
above the 2020 valuation of EUR20.25m. The valuations of Policolor,
Mamaia and Telecredit were all performed by independent valuers in
2021 (in 2020, the valuation of Telecredit was based on its audited
net asset value). The valuations of the Company's investments in
Reconstruction Capital Plc ("RC") and The Romanian Investment Fund
Limited ("RIF") 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.
2021 2020
EUR EUR
Policolor S.A 17,000,000 13,960,000
Mamaia Hotel Resorts SRL ("Mamaia") 4,076,986 3,440,548
Telecredit IFN S.A. ("Telecredit") 1,895,500 624,545
The Romanian Investment Fund Limited 1,719,419 1,256,983
Reconstruction Capital Plc 1,544,540 972,485
-------------- --------------
26,236,445 20,254,561
-------------- --------------
The above valuations are based on assumptions that applied as of
31 December 2021.
In spite of the ongoing COVID pandemic and inflationary
headwinds, Policolor managed to generate a 23.7% year-on-year
increase in sales, from EUR64.1m in 2020 to EUR79.3m in 2021,
overperforming its budget by 12.5%. Helped in particular by the
strong performance from its resins and chemicals businesses,
Policolor more than doubled its recurring EBITDA from EUR2.1m in
2020 to EUR4.3m in 2021. The Policolor Group continues to implement
a turnaround plan which aims for an increased and more efficient
production capacity, a leaner and more efficient organisation
structure, improved internal planning and reporting systems, and
lower logistics costs.
Mamaia's 2021 revenues of EUR2.9m were 6.3% above budget, and
65% above the prior year, due to the positive effect of higher low
season sales, and the relaxation of pandemic restrictions over the
summer when the hotel benefited from a rebound in demand from
Romanian tourists. The hotel also made use of pandemic related
state aid, helping it achieve EBITDA of EUR0.35m, almost in line
with the budgeted EUR0.36m, and compared to an EBITDA loss of
EUR-0.33m in 2020.
Operating in an economy still affected by the COVID pandemic
where commercial banks continued to show a lower risk appetite for
financing small and medium sized enterprises, Telecredit deployed
EUR19m in financing products in 2021. This generated an operating
profit before depreciation and amortization of EUR0.39m, 5.6% above
the annual budget and significantly above the breakeven achieved in
2020.
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 amount to EUR26.97m, reflects the
valuations of the underlying private equity holdings outlined in
the above table, plus loan receivables from investee companies of
EUR0.59m, cash and cash equivalents of EUR0.06m, and a net EUR0.08m
of sundry financial assets and liabilities, held by these
intermediary holding companies.
Economic Overview
Both the Romanian and Bulgarian economies reported an increase
in GDP in 2021 of 5.9% and 4.2%, respectively, as measures imposed
due to the COVID pandemic were relaxed and economic activity
resumed. Inflationary pressures have been building up, reaching
8.2% in Romania and 7.8% in Bulgaria at the end of 2021. The
European Commission has nonetheless forecast that growth would
continue in 2022 at 4.2% in Romania and 3.7% in Bulgaria. However,
these forecasts were made prior to the Russian invasion of Ukraine
which is already having a long-term, negative impact, in particular
on consumer confidence and energy prices.
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 2021
2021 2020
EUR EUR
Investment income
Fair value loss on financial assets
at fair value through
profit or loss 2,774,875 (1,752,486)
Interest income 3,197,478 4,280,442
-------------- --------------
Net investment income/(loss) 5,972,353 2,527,956
-------------- --------------
Expenses
Operating expenses (725,459) (660,299)
Net financial (expense)/income (11,595) (16,286)
-------------- --------------
Total expenses (737,054) (676,585)
-------------- --------------
Profit/(loss) for the year 5,235,299 1,851,371
-------------- --------------
Other comprehensive income - -
-------------- --------------
Total comprehensive income/(loss)
for the year attributable to owners 5,235,299 1,851,371
-------------- --------------
Gain/(loss) Per Share
Basic and diluted gain/(loss) per
share 0.0385 0.0136
STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
2021 2020
EUR EUR
ASSETS
Non-current assets
Financial assets at fair value through
profit or loss 26,971,821 21,999,552
-------------- --------------
Total non-current assets 26,971,821 21,999,552
-------------- --------------
Current assets
Trade and other receivables 6,027 13,600
Cash and cash equivalents 11,301 33,073
-------------- --------------
Total current assets 17,328 46,673
-------------- --------------
TOTAL ASSETS 26,989,149 22,046,225
-------------- --------------
LIABILITIES
Current liabilities
Trade and other payables 205,685 91,782
Borrowings - 406,278
-------------- --------------
Total current liabilities 205,685 498,060
-------------- --------------
TOTAL LIABILITIES 205,685 498,060
-------------- --------------
NET ASSETS 26,783,464 21,548,165
-------------- --------------
EQUITY AND RESERVES
Share capital 1,358,569 1,358,569
Share premium 109,206,779 109,206,779
Accumulated deficit (83,781,884) (89,017,183)
-------------- --------------
TOTAL EQUITY 26,783,464 21,548,165
-------------- --------------
Net Asset Value per share
Basic and diluted net asset value
per share 0.1971 0.1586
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Share Accumulated
Share capital premium deficit Total
EUR EUR EUR EUR
Balance at 1 January 2020 1,358,569 109,206,779 (90,868,554) 19,696,794
Profit for the year - -
Other comprehensive income - - 1,851,371 1,851,371
---------------- ----------- ----------------- --------------
Total comprehensive loss
for the
year - - 1,851,371 1,851,371
---------------- ----------- ----------------- --------------
Repurchase and cancellation
of - - - -
own shares
---------------- ----------- ----------------- --------------
Transactions with owners - - - -
---------------- ----------- ----------------- --------------
Balance at 31 December 2020 1,358,569 109,206,779 (89,017,183) 21,548,165
---------------- ----------- ----------------- --------------
Profit for the year - -
Other comprehensive income - - 5,235,299 5,235,299
---------------- ----------- ----------------- --------------
Total comprehensive income
for the year - - 5,235,299 5,235,299
---------------- ----------- ----------------- --------------
Balance at 31 December 2021 1,358,569 109,206,779 (83,781,884) 26,783,464
---------------- ----------- ----------------- --------------
STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
2021 2020
EUR EUR
Cash flows from operating activities
Profit/(loss) for the year 5,235,299 1,851,371
Adjustments for:
Fair value loss on financial assets
at fair value through profit or loss (2,774,875) 1,752,486
Interest income (3,197,478) (4,280,442)
Interest expense 11,035 6,278
Net (loss)/gain on foreign exchange (44) 8
-------------- --------------
Net cash outflow before changes in
working capital (726,063) (670,299)
Decrease in trade and other receivables 7,573 3,073
Increase/(decrease) in trade and other
payables 113,902 54,420
Purchase of financial assets (210,000) -
Repayments of financial assets 1,210,085 180,000
-------------- --------------
Net cash generated from/(used in) operating
activities 395,497 (432,806)
Cash flows from financing activities
Proceeds from borrowings 250,000 400,000
Payments to purchase own shares (650,000) -
Redemptions of B shares (17,313) -
-------------- --------------
Net cash generated from/(used in) financing
activities (417,313) 400,000
-------------- --------------
Net decrease in cash and cash equivalents
before currency adjustment (21,816) (32,806)
Effects of exchange rate differences
on cash and cash equivalents 44 (8)
-------------- --------------
Net decrease in cash and cash equivalents
after currency adjustment (21,772) (32,814)
Cash and cash equivalents at the beginning
of the year 33,073 65,887
-------------- --------------
Cash and cash equivalents at the end
of the year 11,301 33,073
-------------- --------------
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