REG - Reconstruction CapII - Annual Report and Audited Financial Statements
15/06/2022 07:00
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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 (http://www.reconstructioncapital2.com/)
. (http://www.reconstructioncapital2.com/)
Financial highlights
• The audited net asset value as at 31 December 2021 was €0.1971 per
share (€0.1586 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 €26.24m, 29.5% above the 2020 valuation
of €20.25m. 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 €64.1m in
2020 to €79.3m 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 €2.1m in 2020 to
€4.3m 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 €2.9m 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 €0.35m, almost in
line with the budgeted €0.36m, and compared to an EBITDA loss of €-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 €19m in financing products in 2021.
This generated an operating profit before depreciation and amortization of
€0.39m, 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 €26.8m, or
€0.1971 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 €26.24m, 29.5% above the 2020 valuation
of €20.25m. 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 €64.1m in
2020 to €79.3m 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 €2.1m in 2020 to
€4.3m 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 €2.9m 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 €0.35m, almost in
line with the budgeted €0.36m, and compared to an EBITDA loss of €-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 €19m in financing products in 2021.
This generated an operating profit before depreciation and amortization of
€0.39m, 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 €26.97m,
reflects the valuations of the underlying private equity holdings outlined in
the above table, plus loan receivables from investee companies of €0.59m,
cash and cash equivalents of €0.06m, and a net €0.08m 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 - - 1,851,371 1,851,371
Other comprehensive income - -
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 - - 5,235,299 5,235,299
Other comprehensive income - -
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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