TIDMRC2
RNS Number : 2543N
Reconstruction Capital II Ltd
04 September 2013
4(th) September 2013
Reconstruction Capital II Limited (the "Company")
Interim Unaudited Consolidated Financial Statements
for the six months ended 30 June 2013
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 for the six
months ended 30 June 2013.
Copies of the Company's interim financial statements 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 net asset value as at 30 June 2013 was EUR 0.3932 per
share (EUR 0.3933 per share as at 31 December 2012);
-- As at 30 June 2013 the Company's market capitalisation was
approximately EUR 32m, with a closing price of EUR 0.32 per
share;
-- The Directors do not recommend the payment of a dividend.
Operational highlights
The Private Equity Programme
RC2 did not make any new investments under its Private Equity
Programme, and continued its efforts to exit from its existing
private equity investments. Unfortunately, the progress on exits
was slow due to the low level of interest in the region from
strategic investors. The investments held under the Private Equity
Programme had a fair value of EUR 42.4m at the end of June, up 0.8%
since the 2012 year-end audit report.
The Trading Programme
RC2 marginally reduced its position in listed equities under the
Trading Programme. Efforts to sell down more shares were
unsuccessful, due to the low liquidity of the listed equities owned
by RC2. At the end of June, RC2's listed equities held under the
Trading Programme had a total market value of EUR 0.4m. All the
investments in the Trading Programme were in Romanian equities.
For further information, please contact:
Reconstruction Capital II Limited
Ion Florescu / Ivanka Ivanova
Tel: +44 (0) 207 244 0088
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
On 30 June 2013, Reconstruction Capital II Limited ("RC2") had a
total unaudited net asset value ("NAV") of EUR 39.3m or EUR 0.3932
per share, virtually flat compared to the audited NAV at the
beginning of the year.
The comparative figures as at 30 June 2012 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 did not make any new investments under its Private Equity
Programme, and continued its efforts to exit from its existing
private equity investments. Unfortunately, the progress on exits
was slow due to the low level of interest in the region from
strategic investors. The investments held under the Private Equity
Programme had a fair value of EUR 42.4m at the end of June, up 0.8%
since the 2012 year-end audit report.
RC2 marginally reduced its position in listed equities under the
Trading Programme. Efforts to sell down more shares were
unsuccessful, due to the low liquidity of the listed equities owned
by RC2. At the end of June 2013, RC2's listed equities held under
the Trading Programme had a total market value of EUR 0.4m. All the
investments in the Trading Programme were in Romanian equities.
Over the first half of the year, RC2 received EUR 1.4m in
dividends from its investee companies, of which EUR 1.1m from the
Top Factoring group and the balance of EUR 0.3m from Albalact SA.
The proceeds were used to repay EUR 0.8m of loans from related
parties, and for RC2's working capital needs. At the end of June
2013, RC2 had EUR 0.2m of cash, dividends receivable of EUR 0.4m,
borrowings of EUR 4.2m, and another EUR 4.2m of accrued liabilities
to its service providers, including investment management and
advisory fees.
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 SIX MONTHS ENDED 30 JUNE 2013
30-Jun-13 30-Jun-12 31-Dec-12
As Restated
EUR EUR EUR
Unaudited Unaudited Audited
Investment gain / (loss)
Gain / (loss) on investments
at fair value through profit
or loss 237,252 (2,327,609) (49,389,415)
Interest income 216,387 152,055 329,387
Dividend income 1,416,918 1,278 1,282
Other income 55,792 101,269 197,958
------------ ------------ -------------
Total investment gain / (loss) 1,926,349 (2,073,007) (48,860,788)
Expenses
Impairment of loans receivable (428,921) - (943,143)
Operating expenses (966,770) (1,467,538) (2,764,984)
Total operating expenses (1,395,691) (1,467,538) (3,708,127)
Operating gain / (loss) 530,658 (3,540,545) (52,568,915)
Financial expenses (506,786) (198,254) (612,149)
------------ ------------ -------------
Profit / (loss) before taxation 23,872 (3,738,799) (53,181,064)
Income tax expense (8,715) (28,105) (71,733)
------------ ------------ -------------
Net profit / (loss) for the
period 15,157 (3,766,904) (53,252,797)
Other comprehensive (loss)
/ income
Exchange differences on translating
foreign operations (7,253) 14,358 10,458
Total comprehensive income
/ (loss) for the period 7,904 (3,752,546) (53,242,339)
============ ============ =============
Net profit / (loss) for the
period attributable to:
- Equity holders of the
parent (12,074) (3,840,617) (53,392,784)
- Non-controlling interest 27,231 73,713 139,987
15,157 (3,766,904) (53,252,797)
============ ============ =============
Total comprehensive income
/ (loss) attributable to:
- Equity holders of the
parent (12,618) (3,839,525) (53,392,000)
- Non-controlling interest 20,522 86,979 149,661
------------ ------------ -------------
Total comprehensive income
/ (loss) for the period 7,904 (3,752,546) (53,242,339)
============ ============ =============
Earnings Per Share attributable
to the equity shareholders
of the Company
Basic and diluted earnings
per share (0.0001) (0.0384) (0.5339)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 30 JUNE
2013
30-Jun-13 30-Jun-12 31-Dec-12
As Restated
EUR EUR EUR
Unaudited Unaudited Audited
Assets
Non-current assets
Property, plant and equipment 11,618 14,206 13,458
Financial assets at fair value
through profit or loss 42,377,362 89,103,386 42,041,100
Loans receivable 576,702 571,192 560,501
------------- ------------- -------------
Total non-current assets 42,965,682 89,688,784 42,615,059
------------- ------------- -------------
Current assets
Financial assets at fair value
through profit or loss 382,994 500,360 456,773
Trade and other receivables 683,887 195,561 277,777
Loans receivable 3,893,376 4,387,832 3,366,167
Cash and cash equivalents 150,389 880,950 1,318,380
------------- ------------- -------------
Total current assets 5,110,646 5,964,703 5,419,097
Total assets 48,076,328 95,653,487 48,034,156
============= ============= =============
Liabilities
Current liabilities
Trade and other payables (4,203,198) (2,616,564) (3,754,477)
Loans and borrowings (4,126,344) (832,715) (1,541,870)
Corporation tax payable (4,993) (76,282) (44,651)
------------- ------------- -------------
Total current liabilities (8,334,535) (3,525,561) (5,340,998)
------------- ------------- -------------
Non-current liabilities
Loans and borrowings (40,731) (2,872,979) (3,000,000)
------------- ------------- -------------
Total non-current liabilities (40,731) (2,872,979) (3,000,000)
------------- ------------- -------------
Total liabilities (8,375,266) (6,398,540) (8,340,998)
============= ============= =============
Total net assets 39,701,062 89,254,947 39,693,158
============= ============= =============
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 (83,553,275) (33,989,034) (83,541,201)
Foreign exchange reserve (28,510) (27,658) (27,966)
------------- ------------- -------------
Total equity and reserves 39,318,525 88,883,618 39,331,143
Non-Controlling Interests 382,537 371,329 362,015
Total equity 39,701,062 89,254,947 39,693,158
============= ============= =============
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS OF 30 JUNE
2013
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
2012 - as
previously
reported 1,000,000 121,900,310 (1,642,979) (40,174,182) 81,083,149 2,985,364 84,068,513
Prior year
adjustment
- (Note 2) - - 1,614,229 10,025,765 11,639,994 (2,625,218) 9,014,776
---------- ------------ ------------ -------------- -------------- ------------ --------------
Balance at 1
January
2012 - 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 period - - - (3,840,617) (3,840,617) 73,713 (3,766,904)
Other
comprehensive
income /
(loss) - - 1,092 - 1,092 13,266 14,358
---------- ------------ ------------ -------------- -------------- ------------ --------------
Total
comprehensive
income /
(loss) for
the period - - 1,092 (3,840,617) (3,839,525) 86,979 (3,752,546)
Dividends paid
to
non-controlling
interests - - - - - (75,796) (75,796)
---------- ------------ ------------ -------------- -------------- ------------ --------------
Balance at 30
June
2012 - as
restated 1,000,000 121,900,310 (27,658) (33,989,034) 88,883,618 371,329 89,254,947
(Loss) / Profit
for
the period - - - (49,552,167) (49,552,167) 66,274 (49,485,893)
Other
comprehensive
(loss) / income - - (308) - (308) (3,592) (3,900)
---------- ------------ ------------ -------------- -------------- ------------ --------------
Total
comprehensive
(loss) /
income for
the year - - (308) (49,552,167) (49,552,475) 62,682 (49,489,793)
Dividends paid
to
non-controlling
interests - - - - - (71,996) (71,996)
---------- ------------ ------------ -------------- -------------- ------------ --------------
Balance at 31
December
2012 1,000,000 121,900,310 (27,966) (83,541,201) 39,331,143 362,015 39,693,158
(Loss) / Profit
for
the period - - - (12,074) (12,074) 27,231 15,157
Other
comprehensive
(loss) / income - - (544) - (544) (6,709) (7,253)
---------- ------------ ------------ -------------- -------------- ------------ --------------
Total
comprehensive
(loss) /
income for
the period - - (544) (12,074) (12,618) 20,522 7,904
Dividends paid
to
non-controlling
interests - - - - - - -
Balance at 30
June
2013 1,000,000 121,900,310 (28,510) (83,553,275) 39,318,525 382,537 39,701,062
========== ============ ============ ============== ============== ============ ==============
Share premium is stated net of share issue costs and is not
distributable by way of dividend.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30
JUNE 2013
30-Jun-13 30-Jun-12 31-Dec-12
As Restated
EUR EUR EUR
Unaudited Unaudited Audited
Cash flows from operating activities
Net profit / (loss) before tax 23,872 (3,738,799) (53,181,064)
Adjustments for:
Depreciation and amortisation 1,608 2,545 3,243
(Gain)/ loss on financial assets
at fair value through profit or
loss (237,252) 2,327,609 49,389,415
Impairment / revaluation of fixed
assets 428,921 - 943,143
Interest income (216,387) (152,055) (329,387)
Interest expense 365,967 128,189 430,520
Dividend income (1,416,918) (1,278) (1,282)
------------ ------------ -------------
Net cash outflow before changes in
working capital (1,050,189) (1,433,789) (2,745,412)
(Increase) / decrease in trade
and other receivables (401,559) (8,049) (90,265)
Increase/ (decrease) in trade and
other payables 448,721 938,192 2,076,105
Sale of financial assets 5,772 1,354,887 1,365,234
Interest income received - - 12,118
Dividends received 1,412,366 1,278 1,282
------------ ------------ -------------
Cash generated by operating activities 415,111 852,519 619,062
Income tax paid (48,373) (4,790) (80,049)
Net cash generated by operating
activities 366,738 847,729 539,013
Cash flows from investing activities
Purchase of property, plant and
equipment (485) (8,684) (8,631)
Payments of loans granted to subsidiaries (756,000) (2,268,000) (2,268,000)
Proceeds from loans granted to
subsidiaries - 2,294,706 550,186
------------ ------------ -------------
Net Cash flow used in investing
activities (756,485) 18,022 (1,726,445)
Cash flows from financing activities
Dividends paid to non-controlling
interests - (75,796) (147,792)
Proceeds from loans granted by
related parties 40,000 - 3,000,000
Repayments of loans granted by
related parties (781,341) (200,000) (400,000)
Interest paid on loans - (11,222) (244,953)
------------ ------------ -------------
Net Cash flow used in financing
activities (741,341) (287,018) 2,207,255
(Decrease)/increase in cash and
cash equivalents (1,131,088) 578,733 1,019,823
Cash at beginning of period/ year 1,318,380 296,040 296,040
Foreign exchange gain (36,903) 6,177 2,517
------------ ------------ -------------
Cash at end of period/ year 150,389 880,950 1,318,380
============ ============ =============
This information is provided by RNS
The company news service from the London Stock Exchange
END
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