TIDMRC2
RNS Number : 6104H
Reconstruction Capital II Ltd
09 June 2017
09 June 2017
Reconstruction Capital II Limited (the "Company")
Annual Report and Audited Consolidated Financial Statements
for the year ended 31 December 2016
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 2016.
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 2016 was
EUR0.3670 per share (EUR0.3736 per share as at 31 December 2015), a
1.75% decrease over the year;
-- The Directors do not recommend the payment of a dividend.
Operational highlights
Private Equity Programme
In 2016, RC2 Cyprus Limited, a wholly owned subsidiary of RC2,
sold its investment in Albalact S.A., generating cash proceeds of
EUR19.5m. The transaction was concluded on 20 September 2016 and
generated a profit of EUR14.9m on the total cost of this
investment. RC2 Cyprus Limited's holding in Albalact S.A. was
valued at EUR12.3m at the end of 2015.
The investments held under the Private Equity Programme had a
total fair value of EUR36.0m at the end of 2016, which was
significantly less than the 2015 valuation of EUR44.4m, primarily
due to the sale of the holding in Albalact S.A. RC2 received EUR2m
of dividends in 2016 from its investment in Glasro Holdings
Limited. RC2 did not make any new investments under its Private
Equity Programme during 2016.
Trading Programme
RC2 Cyprus Limited sold down its residual listed equities
portfolio held under the Trading Programme during the year,
generating cash proceeds of EUR0.1m. At the end of the year, the
portfolio was worth EUR0.1m compared to EUR0.2m at the end of the
prior year. All the investments held under the Trading Programme
were in Romanian equities.
For further information, please contact:
Reconstruction Capital II Limited
Ion Florescu / Anca Moraru
Tel: +40 21 3167680
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett / Carolyn Sansom
Tel: +44 (0) 20 7383 5100
Panmure Gordon (UK) Limited (Broker)
Paul Fincham/Jonathan Becher
Tel: +44 (0) 20 7886 2500
ADVISER'S REPORT
For the year ended 31 December 2016
On 31 December 2016, Reconstruction Capital II Limited ("RC2")
had a total audited net asset value ("NAV") of EUR54.2m or
EUR0.3670 per share, a 1.75% decrease over the year on an undiluted
basis and a 28.92% year-on-year increase on a fully diluted
basis.
In 2016, EUR9.0m of convertible loan notes were converted into
ordinary shares at the rate of 7.41 shares for every EUR1 of
convertible loan notes, resulting in 62.6m new shares being issued.
Having acquired 15.0m of its own shares during the course of 2016,
at year end RC2 had 147.6m shares in issue, compared to 100m shares
at the end of the prior year.
Private Equity Programme
In 2016, RC2 Cyprus Limited, a wholly owned subsidiary of RC2,
sold its investment in Albalact S.A., generating cash proceeds of
EUR19.5m. The transaction was concluded on 20 September 2016 and
generated a profit of EUR14.9m on the total cost of this
investment. RC2 Cyprus Limited's holding in Albalact S.A. was
valued at EUR12.3m at the end of 2015.
The investments held under the Private Equity Programme had a
total fair value of EUR36.0m at the end of 2016, which was
significantly less than the 2015 valuation of EUR44.4m, primarily
due to the sale of the holding in Albalact S.A. Following the
annual independent valuation of its remaining private equity
investments at 31 December 2016, RC2 Cyprus Limited recorded a gain
on revaluation of EUR3.9m (2015: loss of EUR6.2m), as illustrated
by the table below:
Valuations
2016 2015
EUR EUR
Policolor S.A. 20,640,000 19,920,000
Top Factoring Group 11,284,423 9,026,716
Mamaia Resort Hotels SRL 4,049,921 3,194,735
36,004,344 32,141,451
=========== ==================
RC2 received EUR2m of dividends in 2016 from its investment in
Glasro Holdings Limited. RC2 did not make any new investments under
its Private Equity Programme during 2016.
Trading Programme
RC2 Cyprus Limited sold down its residual listed equities
portfolio held under the Trading Programme during the year,
generating cash proceeds of EUR0.1m. At the end of the year, the
portfolio was worth EUR0.1m compared to EUR0.2m at the end of the
prior year. All the investments held under the Trading Programme
were in Romanian equities.
Economic Overview
Both the Romanian and Bulgarian economies reported increases in
GDP during 2016 of 4.8% and 3.4% respectively, and are expected to
continue to grow during 2017. Increased private consumption is
expected to be the main driver for Romania's GDP growth in 2017
(forecast at 4.4% by the European Commission), whilst Bulgaria is
expected to benefit from the positive effect of investments, as a
number of big infrastructure projects are to be launched in 2017
(with GDP growth in 2017 forecast at 2.9% in the latest European
Commission report).
Events after the Reporting Period
On 23 February 2017, RC2 held an Extraordinary General Meeting
to increase its authorised share capital by 17,000,000 non-voting,
transferrable B shares of EUR1 nominal value, redeemable at the
option of RC2. On 24 February 2017, 16,997,375 B shares were issued
as a bonus to existing ordinary shareholders, being one B share for
each 8.685 ordinary shares in issue, and all such B shares were
redeemed during March and April 2017, with RC2 thereby returning
EUR17m to its shareholders, being the bulk of the Albalact S.A.
disposal proceeds.
On 19 April 2017, RC2 Cyprus Limited completed the disposal of
its 93% interest in Top Factoring SRL, and Glasro Holdings Limited
disposed of the whole of its non-performing loan book for a total
cash consideration of approximately EUR13.1m.
A condition of the disposal was the acquisition by Glasro
Holdings Limited of a 74.5% interest in Telecredit IFN SA
("Telecredit"), a Romanian non-banking financial institution that
provides consumer loans, which is majority-owned by C t lin Neagu,
the founder and CEO of Top Factoring SRL. The cash consideration
for the acquisition was EUR2.67m, and Glasro Holdings Limited also
committed to making a EUR0.15m capital increase in Telecredit,
bringing its total shareholding to 80%.
New Europe Capital SRL
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 New Europe Capital SRL (the "Adviser") 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 Adviser believes there is a clear
exit strategy available, such as trade sale, break up and
subsequent disposal of different divisions or assets, or 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
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 Adviser is involved at
board level in the investee entity to seek to implement operational
and financial changes to enhance returns. As part of the Company's
pre-acquisition due diligence, the Adviser seeks to identify
specific actions that it believes will create value in the target
investee 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
investee. The Adviser believes 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 and the Adviser have sought 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 Directors do not normally authorise any
investment in a single investee that is greater than 20% 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 that is greater than 25% 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
were 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% 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 2016
2016 2015
EUR EUR
Revenue
Fair value gain/(loss) on
financial assets at fair value
through profit or loss 4,699,325 (6,210,170)
Gain on disposal of investments - 170,498
Interest income 5,854,313 5,954,844
Dividend income 2,000,000 1,700,000
Other income 11,347 29,232
Total revenue 12,564,985 1,644,404
Expenses
Operating expenses (1,230,810) (1,035,750)
Financial expenses (775,195) (977,821)
Total expenses (2,006,005) (2,013,571)
Profit/(loss) from continuing
operations 10,558,980 (369,167)
Loss for the year from discontinued
operations - (69,349)
Profit/(loss) for the year 10,558,980 (438,516)
Other comprehensive income
Reclassification of foreign
exchange differences to profit
or loss - 26,245
Total comprehensive income/(loss)
for the year 10,558,980 (412,271)
Profit/(loss) for the year
attributable to:
- Owners of the Company 10,558,980 (372,605)
- Non-controlling interest - (39,666)
10,558,980 (412,271)
Total comprehensive income/(loss)
attributable to:
- Owners of the Company 10,558,980 (372,605)
- from continuing operations 10,558,980 (369,167)
- from discontinued operations - (3,438)
- Non-controlling interest - (39,666)
- from continuing operations - -
- from discontinued operations - (39,666)
10,558,980 (412,271)
STATEMENT OF COMPREHENSIVE INCOME (continued)
For the year ended 31 December 2016
2016 2015
EUR EUR
Total comprehensive income/(loss) from:
* Continuing operations 10,558,980 (369,167)
* Discontinued operations - (69,349)
----------- ----------
10,558,980 (438,516)
=========== ==========
Total Earnings Per Share attributable to the owners of the Company
Basic undiluted earnings per share 0.0971 (0.0037)
Fully diluted earnings per share 0.0971 0.0036
Continuing operations Earnings Per Share attributable to the owners of the Company
Basic undiluted earnings per share 0.0971 (0.0037)
Fully diluted earnings per share 0.0971 0.0036
Discontinued operations Earnings Per Share attributable to the owners of the Company
Basic undiluted earnings per share - (0.00003)
Fully diluted earnings per share - (0.00002)
STATEMENT OF FINANCIAL POSITION
As at 31 December 2016
2016 2015
EUR EUR
ASSETS
Non-current assets
Financial assets at fair
value through profit or
loss 36,300,265 4,995,164
Total non-current assets 36,300,265 4,995,164
Current assets
Financial assets at fair
value through profit or
loss - 41,158,753
Trade and other receivables 17,791 37,462
Cash and cash equivalents 18,004,241 269,719
Total current assets 18,022,032 41,465,934
TOTAL ASSETS 54,322,297 46,461,098
LIABILITIES
Current liabilities
Trade and other payables 138,006 123,061
Loans and borrowings - 46,490
Total current liabilities 138,006 169,551
Non-current liabilities
Convertible loan notes - 8,934,201
TOTAL LIABILITIES 138,006 9,103,752
NET ASSETS 54,184,291 37,357,346
STATEMENT OF FINANCIAL POSITION (continued)
As at 31 December 2016
2016 2015
EUR EUR
EQUITY ATTRIBUTABLE TO OWNERS
Share capital 1,476,223 1,000,000
Share premium 127,991,989 121,570,802
Retained deficit (75,283,921) (85,842,901)
Equity component of convertible loan notes - 629,445
TOTAL EQUITY 54,184,291 37,357,346
2016 2015
EUR EUR
Net Asset Value per share
Basic undiluted net asset value per share 0.3670 0.3736
Fully diluted net asset value per share 0.3670 0.2847
CASH FLOW STATEMENT
For the year ended 31 December 2016
2016 2015
EUR EUR
Cash flows from operating activities
Profit/(loss) before taxation 10,558,980 (412,271)
Adjustments for:
Fair value (gain)/loss on financial
assets at fair value through
profit or loss (4,699,325) 6,210,170
Gain on disposal of investments - (170,498)
Loss for the year from discontinued
operations - 16,859
Interest income (5,854,313) (5,954,844)
Financial expenses 775,152 977,294
Dividend income (2,000,000) (1,700,000)
Net loss on foreign exchange 43 527
Net cash outflow before changes
in working capital (1,219,463) (1,032,763)
Decrease in trade and other receivables 19,671 2,043
Increase/(decrease) in trade and
other payables 14,945 (391,797)
Purchase of financial assets (2,710) (535,000)
Disposals and repayments of financial
assets 20,410,000 778,968
Dividends received 2,000,000 1,700,000
Net cash flows from continuing
activities 21,222,443 521,451
Net cash flows from discontinued
activities - 20,296
Net cash generated by operating
activities 21,222,443 541,747
Cash flows from financing activities
Payments to purchase own shares (3,439,849) -
Loans received from subsidiaries 200,000 -
Repayment of loans from subsidiaries (240,000) -
Interest paid (8,029) (237,274)
Net cash flow generated from financing
activities (3,487,878) (237,274)
Net increase in cash and cash
equivalents before currency
adjustment 17,734,565 304,473
Effects of exchange rate differences
on cash and cash equivalents (43) (36,958)
Net increase in cash and cash
equivalents after currency
adjustment 17,734,522 267,515
Cash and cash equivalents at the
beginning of the year 269,719 124,343
Cash and cash equivalents included
in discontinued operations - (122,139)
Cash and cash equivalents at the
end of the year 18,004,241 269,719
This information is provided by RNS
The company news service from the London Stock Exchange
END
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