Interim Management Statement

RNS Number : 4742X

Crystal Amber Fund Limited

15 February 2012

 



15 February 2012

Crystal Amber Fund Limited

(the 'Fund' or the 'Company')

Interim results for the six months ended 31 December 2011

The Company announces its interim results for the six months ended 31 December 2011.

Highlights:

·      The proceeds from the Pinewood Shepperton PLC disposal were reinvested to build significant positions in TT Electronics PLC, Renishaw PLC and Devro PLC. 

·      The subsequent realised and unrealised gains of the new positions in TT Electronics PLC and Renishaw PLC have added 5.8p to Net Asset Value ("NAV") per share as at 31 January 2012.

·      A strategic stake in Sutton Harbour Holdings PLC was secured post period end at a 58% discount to the company's latest net asset value.

·      NAV per share at 31 December 2011 was 88.72p (30 June 2011: 109.01p per share).

·      During January, the Fund posted a 15% increase in NAV to 101.99p per share.

·      The Fund's management continues to pursue its policy of constructive activism.

"The period under review saw a continuation of political and economic uncertainty which fed through into considerable turbulence in financial markets. The Fund took advantage of the equity market sell-off in August and September to acquire stakes in what we consider to be quality companies trading at what we believe to be attractive valuations. It is pleasing to see that these investments have already generated significant returns for the Fund contributing to the 15% increase in NAV for the month of January."

William Collins, Chairman

Enquiries

Crystal Amber Fund Limited
William Collins - Chairman	Tel: [phone]
Merchant Securities Limited
David Worlidge	Tel: [phone]

CHAIRMAN'S STATEMENT

I am pleased to present the interim results of Crystal Amber Fund Limited, covering the six month period to 31 December 2011 ("the period").

The economic environment deteriorated progressively over the summer, with indicators pointing towards a recovery much weaker than expected. This fragile growth outlook, combined with concerns over European government debt levels and the solvency of its financial system, triggered a market sell-off in August. Subsequent changes in the risk appetite of investors caused increased volatility throughout the period.

In our opinion, an indiscriminate de-rating took place during the sell-off and this enabled the Fund to opportunistically acquire stakes in target companies affected by this market weakness. The subsequent realised and unrealised increase in value of the new positions in TT Electronics PLC and Renishaw PLC has added 5.8p to the Net Asset Value ("NAV") per share as at 31 January 2012.

Conversely, the share price of Omega Insurance Holdings Limited, which fell over 31% in the period under review, has been the main detractor from the Fund's NAV. However, we remain engaged with the company and are confident in the intrinsic value of Omega's Lloyds platform.

In October, the Fund presented a proposal to Sutton Harbour Holdings PLC for raising additional equity capital. This was accepted by the Board and your Fund invested £2.7 million (at a discount to NAV of approximately 58%) as part of the additional £6 million capital raised in January 2012.

As at 31 December 2011, equity holdings represented 85.5% of the Fund. Cash and liquid resources were in excess of £7.5 million. Since the period end cash has further reduced due to investments having been made as mentioned above.

We remain confident in our process of identifying undervalued companies and engaging with boards and management to help and encourage them to generate better returns for shareholders.

Net asset value fell from £65.4 million (109.01p per share) at 30 June 2011 to an unaudited £53.2 million (88.72p per share) at 31 December 2011, although I am pleased to report that as at 31 January 2012, the Fund's NAV had increased by 15% to 101.99p per share.

William Collins

Chairman

Investment Manager's Report

During the period the Fund has focused on realising value from core holdings and reinvesting the proceeds from the sale of its former largest holding, Pinewood Shepperton PLC ("Pinewood").

We have reinvested a substantial proportion of the Pinewood proceeds into a number of targets such as TT Electronics PLC and Renishaw PLC. These companies offer good potential for value enhancement, being debt free with strong customer franchises and access to growth markets outside Europe. In the case of TT Electronics PLC, the Fund is now one of its three largest shareholders having bought its stake at an attractive level following the stock's de-rating in August 2011.

The Fund also increased its holding in Devro PLC, a company in which the Fund has been a shareholder for the last three years. 

Cash reserves at the period end comprise 14% of the Fund, allowing the Fund to take advantage of opportunities. For example, in December, the Fund committed to participate in a conditional placing and open offer to refinance Sutton Harbour Holdings PLC, in order to allow the company to execute its Millbay marina project located in Plymouth and pay down some of the current debt. Following the participation in the fundraising at 18p per share and subsequent market purchases, the Fund's resulting shareholding in the company is 26.2% of the enlarged issued share capital as at 31 January 2011. The Directors of the Fund believe that following the fundraising, Sutton Harbour's net asset value is in excess of 42p per share.

Total Assets as at 31 December 2011:

	£m	Pence per share	% of investee equity held
TT Electronics PLC	12.0	20.0	5.8%
Renishaw PLC	5.0	8.3	0.7%
N Brown Group PLC	5.0	8.3	0.8%
Omega Insurance Holdings Ltd	4.3	7.2	3.2%
Devro PLC	3.9	6.4	0.9%
Other equities	15.3	25.6
Total equities	45.5	75.8
Cash and net current assets	7.7	12.9
Total Assets	53.2	88.7

TT Electronics PLC ("TT Electronics")

TT Electronics produces electrical components, sensors and secure power supply systems. Since the current management arrived in 2008, it has divested from non-core businesses, reorganised production and client facing functions and eliminated debt of over £100 million, moving to a net cash position of £15 million at the end of 2011.

The Fund has built a significant position in the company since it de-rated in August 2011 and is now the third largest shareholder. In our opinion, the delivery of TT Electronics' clear operating targets depends on self-help measures and could double operating profits over the next two years. The company's client base, including German premium auto brands, is evidence of a valuable franchise. 

Renishaw PLC ("Renishaw")

Renishaw is the global leading engineer of metrology instruments, which are used for a wide variety of industrial production and product quality control functions.  The company is managed by its two founders, Sir David McMurtry and John Deer, who own 53% of its share capital.  The company has a strong balance sheet with net cash to support its outstanding industry positioning in attractive markets such as the automation of industry in China. The Fund took this position opportunistically following the stock de-rating in August 2011. 

N Brown Group PLC ("Brown")

Brown is a home shopping retailer, with a strong position in the special size clothes market and we consider the management of Brown to be prudent. From a catalogue shopping background, the group now generates nearly 50% of its sales on the internet. Additionally, Brown has initiated its geographic expansion in the US and German markets. 

The Fund has invested in Brown since 2008 and has increased its position by 60% over the last six months.

Omega Insurance Holdings Limited ("Omega")

Omega is a Lloyd's insurer and reinsurer. Historically, it has enjoyed an excellent underwriting record. The Fund built up its holding in mid-2010 having assessed the replacement cost of Omega's insurance platform. 

The markets in which Omega operates have become increasingly challenging over the last year due to a series of natural disasters. Having been in an offer period since 10 January 2011, the company received an offer from Haverford Bermuda for 25% of its share capital and two indicative offers from Canopius Group and Barbican Insurance, all of which failed. The Manager has engaged with the bidders and remains confident that the intrinsic value of the business will be achieved.

Devro PLC ("Devro")

Devro is a global leader in production of edible collagen castings for sausages. Its strong balance sheet has allowed the company to invest heavily to improve its production facilities which we believe will drive operating margin growth through 2012 and 2013. We consider the company to be well-managed with growth prospects no longer recognised by the stock market.

The Fund has been an investor in Devro since 2008. Having previously realised a £0.8 million profit, over the last six months the Fund has increased its holding following share price weakness.

JJB Sports PLC ("JJB")

We are more encouraged by the trading of JJB during the second half of 2011 despite the exceptionally tough consumer environment. The management of the company continues to work on the implementation of the turnaround strategy and Richard Bernstein who joined the board of JJB in May 2011 is assisting management in this task.

Other holdings

In July 2011, the Fund announced a significant holding of over 4 million shares in Tribal Group PLC, the education business. Following the end of its offer period, we held meetings with management and set out ideas to enhance returns to shareholders. We are pleased to report that the latest trading statement from Tribal has been positive.

During the period, the Fund realised further profits in Paypoint PLC, bringing realised gains from this investment to date to £2.9 million. The Fund retains 650,000 shares, which represents the Fund's sixth largest holding.

Outlook

The economic outlook for the UK and other developed markets remains uncertain, yet we consider a severe economic downturn unlikely despite concerns as to the loan quality of UK banks. The Fund remains focused on identifying quality undervalued companies with strong balance sheets and diversified geographic revenues, which in the Manager's opinion offers a more defensive investment profile together with good opportunities for constructive activism. It is encouraging that in the month of January, the Fund's NAV grew by 15%.

Crystal Amber Asset Management (Guernsey) Limited
Investment Manager

Condensed Statement of Comprehensive Income (Unaudited)

for the six months ended 31 December 2011

		Six months ended 31 December				Six months ended 31 December
		2011				2010
		Revenue	Capital	Total		Revenue	Capital	Total
	Notes	£	£	£		£	£	£
Income
Dividend income from listed investments		630,364	-	630,364		1,013,756	-	1,013,756
Director's fees received	5	26,301	-	26,301		-	-	-
Fixed deposit interest		21,622	-	21,622		5,506	-	5,506
Bank interest		8,401	-	8,401		3,837	-	3,837
		686,688	-	686,688		1,023,099	-	1,023,099
Net gains on financial assets at fair value through profit or loss
Realised gains	4	-	10,249,937	10,249,937		-	883,693	883,693
Movement in unrealised losses	4	-	(21,446,820)	(21,446,820)		-	(9,105,187)	(9,105,187)
Total income		686,688	(11,196,883)	(10,510,195)		1,023,099	(8,221,494)	(7,198,395)
Expenses
Transaction costs		-	337,956	337,956		-	91,302	91,302
Exchange movements on revaluation of investments		-	135,558	135,558		-	(25,600)	(25,600)
Management fees		631,229	-	631,229		682,764	-	682,764
Consultancy fees	5	50,000	-	50,000		-	-	-
Directors' fees		47,500	-	47,500		47,500	-	47,500
Administration fees		38,372	-	38,372		38,454	-	38,454
Custodian fees		14,570	-	14,570		15,553	-	15,553
Audit fees		9,705	-	9,705		8,988	-	8,988
Other expenses		99,173	-	99,173		88,219	-	88,219
		890,549	473,514	1,364,063		881,478	65,702	947,180
(Loss)/return for the period		(203,861)	(11,670,397)	(11,874,258)		141,621	(8,287,196)	(8,145,575)
Basic and diluted (loss)/earnings per share (pence)	2	(0.34)	(19.45)	(19.79)		0.24	(13.81)	(13.57)

Condensed Statement of Financial Position (Unaudited)

as at 31 December 2011

		As at		As at		As at
		31 December		30 June		31 December
		2011		2011		2010
		(Unaudited)		(Audited)		(Unaudited)
ASSETS	Notes	£		£		£
Cash and cash equivalents		7,583,577		4,067,541		4,459,954
Trade and other receivables		208,353		354,628		63,976
Financial assets designated at fair value through profit or loss	4	45,516,815		61,062,843		56,695,250
Total assets		53,308,745		65,485,012		61,219,180
LIABILITIES
Trade and other payables		75,917		77,926		66,256
Total liabilities		75,917		77,926		66,256
EQUITY
Capital and reserves attributable to the Company's equity shareholders
Share capital		600,000		600,000		600,000
Distributable reserve		56,147,261		56,447,261		56,447,261
Retained (losses)/earnings		(3,514,433)		8,359,825		4,105,663
Total equity		53,232,828		65,407,086		61,152,924
Total liabilities and equity		53,308,745		65,485,012		61,219,180
Net asset value per share (pence)	3	88.72		109.01		101.92

Condensed Statement of Changes in Equity (Unaudited)

for the six months ended 31 December 2011

		Share	Distributable	Retained earnings			Total
	Note	Capital	Reserve	Capital	Revenue	Total	Equity
		£	£	£	£	£	£
Opening balance at 1 July 2011		600,000	56,447,261	6,814,554	1,545,271	8,359,825	65,407,086
Net realised gains on investments	4	-	-	10,249,937	-	10,249,937	10,249,937
Net unrealised losses on investments	4	-	-	(21,446,820)	-	(21,446,820)	(21,446,820)
Revenue loss for the period		-	-	-	(203,861)	(203,861)	(203,861)
Dividends paid in the period	7	-	(300,000)	-	-	-	(300,000)
Transaction costs and exchange movements		-	-	(473,514)	-	(473,514)	(473,514)
Balance at 31 December 2011		600,000	56,147,261	(4,855,843)	1,341,410	(3,514,433)	53,232,828
		Share	Distributable	Retained earnings			Total
	Note	Capital	Reserve	Capital	Revenue	Total	Equity
		£	£	£	£	£	£
Opening balance at 1 July 2010		600,000	56,447,261	11,073,859	1,177,379	12,251,238	69,298,499
Net realised gains on investments	4	-	-	883,693	-	883,693	883,693
Net unrealised losses on investments	4	-	-	(9,105,187)	-	(9,105,187)	(9,105,187)
Revenue profit for the period		-	-	-	141,621	141,621	141,621
Transaction costs and exchange movements		-	-	(65,702)	-	(65,702)	(65,702)
Balance at 31 December 2010		600,000	56,447,261	2,786,663	1,319,000	4,105,663	61,152,924

Condensed Statement of Cash Flows (Unaudited)

for the six months ended 31 December 2011

		Six months		Six months
		ended		ended
		31 December		31 December
		2011		2010
		£		£
Cash flows from operating activities
Dividend income received from listed investments		778,365		1,665,445
Director's fees received		29,698		-
Fixed deposit interest received		21,918		8,139
Bank interest received		8,401		3,837
Management fees paid		(631,229)		(682,764)
Consultancy fees paid		(41,667)		-
Directors' fees paid		(47,500)		(47,500)
Other expenses paid		(177,581)		(181,200)
Net cash (outflow)/inflow from operating activities		(59,595)		765,957
Cash flows from investing activities
Purchase of investments		(42,270,156)		(13,109,670)
Sale of investments		46,483,743		4,475,487
Transaction charges on purchase and sale of investments		(337,956)		(91,302)
Net cash inflow/(outflow) from investing activities		3,875,631		(8,725,485)
Cash flows from financing activities
Dividends paid		(300,000)		-
Net cash outflow from financing activities		(300,000)		-
Net increase/(decrease) in cash and cash equivalents during the period		3,516,036		(7,959,528)
Cash and cash equivalents at beginning of period		4,067,541		12,419,482
Cash and cash equivalents at end of period		7,583,577		4,459,954

Notes to the Unaudited Condensed Financial Statements

for the six months ended 31 December 2011

General Information

Crystal Amber Fund Limited is a closed-ended company incorporated and registered in Guernsey on 22 June 2007 under the Companies (Guernsey) Law, 1994 which has been superseded by the Companies (Guernsey) Law 2008.  The address of the registered office is given on page 2. The Company has been established to provide shareholders with an attractive total return which is expected to comprise primarily capital growth but with the potential for distributions. The Company will achieve this through the investment in a concentrated portfolio of undervalued companies which are expected to be predominantly, but not exclusively, listed or quoted on UK markets and which have a typical market capitalisation of between £100 million and £1,000 million. The Company was listed and admitted to trading on AIM, the market of that name operated by the London Stock Exchange, on 17 June 2008. The Company was also listed on the CISX on 17 June 2008. The Company is also a member of the AIC.

1.       SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied throughout the current period, unless otherwise stated.

Basis of preparation

The interim financial statements have been prepared in accordance with the International Accounting Standard ("IAS") 34, Interim Financial Reporting. 

The interim financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements for the year to 30 June 2011. The annual financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS").

The same accounting policies and methods of computation are followed in the interim financial statements as in the annual financial statements for the year ended 30 June 2011.

The presentation of the interim financial statements is consistent with the annual financial statements. Where presentational guidance set out in the Statement of Recommended Practice ("SORP") for Investment Trusts issued by the AIC in January 2003 (revised December 2005) is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. In particular, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the total Statement of Comprehensive Income.

The Company does not operate in an industry where significant or cyclical variations as a result of seasonal activity are experienced during the financial year. Income and dividends from investments will vary according to the construction of the portfolio from time to time.

Segmental reporting

The Board has considered the requirements of IFRS 8 'Operating Segments', and is of the view that the Company is domiciled in Guernsey and is engaged in a single segment of business, being UK equity instruments. The Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance and to allocate resources is the total return on the Company's net asset value, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in these financial statements.

2.       BASIC AND DILUTED LOSS PER SHARE

Basic and diluted loss per share is based on the following data:

				Six months		Six months
				ended		ended
				31 December		31 December
				2011		2010
				(Unaudited)		(Unaudited)
Loss for the period				(£11,874,258)		(£8,145,575)
Average number of issued Ordinary Shares				60,000,000		60,000,000
Basic and diluted loss per share (pence)				(19.79)		(13.57)

3.       NET ASSET VALUE PER SHARE

Net asset value per share is based on the following data:

		As at		As at		As at
		31 December		30 June		31 December
		2011		2011		2010
		£		£		£
		(Unaudited)		(Audited)		(Unaudited)
Net asset value per balance sheet		£53,232,828		£65,407,086		£61,152,924
Number of Ordinary Shares outstanding		60,000,000		60,000,000		60,000,000
Net asset value per share (pence)		88.72		109.01		101.92

4.       FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

	1 July 2011 to 31		1 July 2010		1 July 2010 to 31
	December 2011		to 30 June 2011		December 2010
	(Unaudited)		(Audited)		(Unaudited)
	£		£		£
Equity investments - UK equity securities	45,516,815		61,062,843		56,695,250
	45,516,815		61,062,843		56,695,250
Cost brought forward	77,985,395		65,840,714		65,840,714
Purchases	42,270,156		54,151,989		12,508,668
Sales	(46,483,743)		(45,680,841)		(4,175,278)
Realised gain	10,249,937		3,673,533		883,693
Cost carried forward	84,021,745		77,985,395		75,057,797
Unrealised losses brought forward	(16,949,976)		(9,247,423)		(9,247,423)
Movement in unrealised losses	(21,446,820)		(7,702,553)		(9,105,187)
Unrealised losses carried forward	(38,396,796)		(16,949,976)		(18,352,610)
Accumulated effect of exchange rate movements	(108,134)		27,424		(9,937)
Fair value	45,516,815		61,062,843		56,695,250

5.       RELATED PARTIES

Mark Huntley, Director of the Company, is Managing Director of the Company's Administrator, Heritage International Fund Managers Limited, Managing Director of the CISX Listing Sponsor and a Director of the Investment Manager. During the period the Company incurred administration fees of £38,372 (2010: £38,454) of which £18,750 (2010: £20,176) was outstanding at the period end. Mark Huntley also received a Director's fee of £10,000 (2010: £10,000) of which £5,000 (2010: £5,000) was outstanding at the period end.

Richard Bernstein is a Director of the Investment Manager and a holder of 780,000 Ordinary Shares (2010: 800,000), representing 1.30 per cent. (2010: 1.33 per cent.) of the issued share capital of the Company at the period end. He is a non-executive Director of JJB Sports PLC, one of the Company's investments, and during the period the Company earned £26,301 in relation to this directorship. At the period end, £3,397 (2010: £Nil) had been received in advance.

The Company also incurred a consultancy fee of £50,000 during the period (2010:£Nil) in relation to its investment in JJB. This was paid in by the Investment Manager  with the agreement that it would be reimbursed in full by the Fund. At 31 December 2011, an amount of £8,333 was due from the Company to the Investment Manager (2010:£Nil) in relation to this consultancy fee.

During the period the Company incurred management fees of £631,229 (2010: £682,764) all of which had been paid at the period end. The Investment Manager did not earn a performance fee during the period (2010: £nil).

On 16 November 2011, the Investment Manager purchased 237,000 ordinary shares in the Company, resulting in a holding of 1,000,000 ordinary shares in the Company at the period end, which represents 1.67 per cent. (2010: 1.33 per cent.) of the issued share capital.

All related party transactions are carried out on an arm's length basis.

6.       COMMITMENTS

On 22 December 2011, the Company committed to invest up to £3,546,422 in Sutton Harbour under its placing and open offer announced on 23 December 2011.

On 18 January 2012, the Company invested £2,741,485 in Sutton Harbour following the closure of the open offer and placing.

7.       DIVIDENDS

On 7 July 2011, the Company declared an interim dividend of £300,000, equating to 0.5p per share, which was paid on 12 August 2011 to shareholders on the register on 15 July 2011.

8.       POST BALANCE SHEET EVENTS                       

On 7 February 2012 the Company reported that its unaudited NAV at 31 January 2012 was 101.99 pence per share.

9.       COPIES OF THE INTERIM REPORT

Copies of the Interim Report will be available to download from the Company's website www.crystalamber.com.

 

END

 

 

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