Interim Unaudited Financial Statements

RNS Number : 8682W

Reconstruction Capital II Ltd

21 August 2020

 

21 August 2020

Reconstruction Capital II Limited (the "Company")

Interim Unaudited Financial Statements

for the six months ended 30 June 2020

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 six months ended 30 June 2020.

Copies of the company's interim financial statements will today be posted to shareholders. The interim report is also available on the Company's website http://www. reconstructioncapital2.com/.

Financial highlights

On 30 June 2020, Reconstruction Capital II Limited ("RC2") had a total unaudited net asset value ("NAV") of €19.5m or €0.1428 per share, which represents a 1.52% fall since the beginning of the year.

As at 30 June 2020, RC2 had cash and cash equivalents of approximately €10,000 while its subsidiary, RC2 (Cyprus) Ltd, had cash and cash equivalents of €68,000. Additionally, RC2 (Cyprus) Ltd had loan receivables from Telecredit and Mamaia Resort Hotels of € 1.5m. As at 30 June 2020, RC2 had sundry liabilities of €137,000.

Operational highlights

The Romanian and Bulgarian governments took timely measures to contain the spread of COVID-19 when the numbers of cases and fatalities were still relatively low compared to Western Europe. Although these measures, which were stricter in Romania, seemed to have suppressed the pandemic, once the restrictions in both countries were gradually lifted in mid-May, the number of cases has been rising to worrying levels with Romania and Bulgaria posting two of the highest rates of new cases in South-East Europe. At the end of July, Romania and Bulgaria were reporting 100 and 70 COVID-19 active cases per 100,000 inhabitants, respectively, compared to 22 and 19 active cases at the end of May.

The Policolor Group's January-June 2020 sales results were up 3.4% year-on-year at € 31.2m, albeit 13.9% below budget. Sales of coatings were badly affected by the COVID-19 pandemic and related lockdown restrictions during April, but sales of both coatings and resins have since recovered, making up some of the lost ground. Over the first half of 2020, the Policolor Group generated a recurring EBITDA (excluding revenues and expenses allocated to the real estate division) of € 2m, in line with the budget, helped by production efficiencies and operating cost savings.

Both Mamaia and Telecredit's operations have been badly affected by the COVID-19 pandemic, and both management teams have prepared revised budgets to reflect the estimated impact of the pandemic on their respective businesses this year.

Following the finalization of the second phase of the renovation works on its public areas, and due to the Romanian authorities re-allowing open air restaurants to operate, the Mamaia hotel re-opened at the beginning of June. However, it is still not allowed to use its indoor restaurants, and is forced to restrict its food and beverage service to its outdoor terrace, where social distancing rules limit the number of customers. Management's revised 2020 budget for the Hotel envisages total revenues of € 2.0m instead of an originally planned € 3.2m, and a net loss of € -0.24m instead of an original estimated net profit of € 0.18m. In April, RC2 provided a € 0.3m loan to the Hotel to help finalize its planned renovation works. The loan was fully drawn by the end of May.

Telecredit deployed € 3.7m in financing products to small and medium sized enterprises in the first semester, generating an Operating Loss before Depreciation of € 0.2m due to increased provisions expenses, reflecting the difficulties small and medium-sized companies are currently facing due to the pandemic. The revised 2020 budget prepared by management anticipates a net loss of € 0.39m compared to an original estimated net profit of € 0.06m, due to lower financing volumes generating lower interest revenues (€ 0.8m as opposed to an initial € 1m) and significantly higher provisions on SME lending (€ 0.2m as opposed to an initial € 0.1m). The company reimbursed € 0.3m of the € 1.5m loan RC2 provided to Telecredit in the second half of 2019.

For further information, please contact:

Reconstruction Capital II Limited

Cornelia Oancea / Anca Moraru

Tel: [phone]

Grant Thornton UK LLP

(Nominated Adviser)

Philip Secrett
Tel: [phone]

finnCap Limited

(Broker)

William Marle / Giles Rolls

Tel: [phone]

ADVISER'S REPORT For the six months ended 30 June 2020

On 30 June 2020, Reconstruction Capital II Limited ("RC2") had a total unaudited net asset value ("NAV") of €19.5m or €0.1428 per share, which represents a 1.52% fall since the beginning of the year. TheRomanianandBulgariangovernmentstooktimelymeasurestocontainthespreadofCOVID-19whenthe numbers of cases and fatalities were still relatively low compared to Western Europe. Although these measures, which were stricter in Romania, seemed to have suppressed the pandemic, once the restrictions in both countries were gradually lifted in mid-May, the number of cases has been rising to worrying levels with Romania and Bulgaria posting two of the highest rates of new cases in South-East Europe. At the end ofJuly, Romania and Bulgaria were reporting 100 and 70 COVID-19 active cases per 100,000 inhabitants, respectively, compared to 22 and 19 active cases at the end ofMay. The Policolor Group's January-June 2020 sales results were up 3.4% year-on-year at € 31.2m, albeit 13.9% below budget. Sales of coatings were badly affected by the COVID-19 pandemic and related lockdown restrictions during April, but sales of both coatings and resins have since recovered, making up some of the lost ground. Over the first half of 2020, the Policolor Group generated a recurring EBITDA (excluding revenues and expenses allocated to the real estate division) of € 2m, in line with the budget, helped by production efficiencies and operating cost savings. Both Mamaia and Telecredit's operations have been badly affected by the COVID-19 pandemic, and both management teams have prepared revised budgets to reflect the estimated impact of the pandemic on their respective businesses this year. Following the finalization of the second phase of the renovation works on its public areas, and due to the Romanianauthoritiesre-allowingopenairrestaurantstooperate,theMamaiahotelre-openedatthebeginning of June. However, it is still not allowed to use its indoor restaurants, and is forced to restrict its food and beverage service to its outdoor terrace, where social distancing rules limit the number of customers. Management's revised 2020 budget for the Hotel envisages total revenues of € 2.0m instead of an originally planned € 3.2m, and a net loss of € -0.24m instead of an original estimated net profit of € 0.18m. In April, RC2 provided a € 0.3m loan to the Hotel to help finalize its planned renovation works. The loan was fully drawn by the end ofMay. Telecredit deployed € 3.7m in financing products to small and medium sized enterprises in the first semester, generating an Operating Loss before Depreciation of € 0.2m due to increased provisions expenses, reflecting thedifficultiessmallandmedium-sizedcompaniesarecurrentlyfacingduetothepandemic.Therevised2020 budgetpreparedbymanagement anticipatesanetlossof€0.39mcomparedtoanoriginalestimatednetprofit of€0.06m,duetolowerfinancingvolumesgeneratinglowerinterestrevenues(€0.8masopposedtoaninitial € 1m) and significantly higher provisions on SME lending (€ 0.2m as opposed to an initial € 0.1m). The company reimbursed €0.3m of the €1.5m loan RC2 provided to Telecredit in the second half of 2019. As at 30 June 2020, RC2 had cash and cash equivalents of approximately €10,000 while its subsidiary, RC2 (Cyprus)Ltd,hadcashandcashequivalentsof€68,000.Additionally,RC2(Cyprus)Ltdhadloanreceivables fromTelecreditandMamaiaResortHotelsof€1.5m.Asat30June2020,RC2hadsundryliabilitiesof €137,000. New Europe Capital SRL

STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2020

Investment Income		30 June 2020 EUR Unaudited		30 June 2019 EUR Unaudited		30 December 2019 EUR Audited
Fair value loss on financial assets at fair value through profit or loss		(2,113,199)		(2,162,241)		(14,482,512)
Interest Income		2,131,097		2,151,033		4,319,475
Net Investment profit/loss		17,898		(11,208)		(10,163,037)
Expenses
Operating expenses		(315,688)		(443,456)		(845,572)
Financial income		-		255		255
Total expenses		(315,688)		(443,201)		(845,317)
Loss for the period/year		(297,790)		(454,409)		(11,008,354)
Other comprehensive income		-		-		-
Total comprehensive loss for the period/year attributable to owners		(297,790)		(454,409)		(11,008,354)
Earnings Per Share attributable to the owners of the Company
Basic and diluted earnings per share		(0.0022)		(0.0033)		(0.0806)

STATEMENT OF FINANCIAL POSITION

As at 30 June 2020

		30 June 2020 EUR		30 June 2019 EUR		31 December 2019 EUR
		Unaudited		Unaudited		Audited
ASSETS
Non-current assets
Financial assets at fair value through profit or loss		19,509,494		30,293,424		19,651,596
Total non-current assets		19,509,494		30,293,424		19,651,596
Current assets
Trade and other receivables		13,585		14,299		16,673
Cash and cash equivalents		10,200		100,964		65,887
Total current assets		23,785		115,263		82,560
TOTAL ASSETS		19,533,279		30,408,687		19,734,156
LIABILITIES
Current liabilities
Trade and other payables		134,275		109,949		37,362
TOTAL LIABILITIES		134,275		109,949		37,362
NET ASSETS		19,399,004		30,298,738		19,696,794
EQUITY ATTRIBUTABLE TO OWNERS
Share capital		1,358,569		1,362,569		1,358,569
Share premium		109,206,779		109,250,778		109,206,779
Accumulated deficit		(91,166,344)		(80,314,609)		(90,868,554)
TOTAL EQUITY		19,399,004		30,298,738		19,696,794
Net Asset Value per share Basic and diluted net asset value per share		0.1428		0.2224		0.1450

STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2020
	Retained
Share	(deficit)/
Sharecapital  premium EUR    EUR	earnings EUR		Total EUR
Balance at 1January2019  1,403,324  109,862,098	(79,860,200)		31,405,222
Loss fortheperiod  -  - Othercomprehensiveincome  -  -	(454,409) -		(454,409) -
Total comprehensive loss fortheperiod  -  -	(454,409)		(454,409)
Repurchase and cancellation ofownshares  (40,755)  (611,320)	-		(652,075)
Transactionswithowners  (40,755)  (611,320)	-		(652,075)
Balance at 30June2019  1,362,569  109,250,778	(80,314,609)		30,298,738
Loss fortheperiod  -  - Othercomprehensiveincome  -  -	(10,553,945) -		(10,553,945) -
Total comprehensive loss fortheperiod  -  -	(10,553,945)		(10,553,945)
Repurchase and cancellation ofownshares  (4,000)  (44,000)	-		(48,000)
Transactionswithowners  (4,000)  (44,000)	-		(48,000)
Balance at 31December2019  1,358,569  109,206,779	(90,868,554)		19,696,794
Loss fortheperiod  -  - Othercomprehensiveincome  -  -	(297,790) -		(297,790) -
Total comprehensive loss fortheperiod  -  -	(297,790)		(297,790)
Repurchase and cancellation ofownshares  -  -	-		-
Transactionswithowners  -  -	-		-
Balance at 30June2020  1,358,569  109,206,779	(91,166,344)		19,399,004

CASH FLOW STATEMENT

For the six months ended 30 June 2020

	30 June 2020 EUR		30 June 2019 EUR		31 December 2019 EUR
	Unaudited		Unaudited		Audited
Cash flows from operating activities Loss before taxation	(297,790)		(454,409)		(11,008,354)
Adjustments for:
Fair value loss on financial assets at fair value
through profit or loss	2,113,199		2,162,241		14,482,512
Interest income	(2,131,097)		(2,151,033)		(4,319,475)
Net gain on foreign exchange	-		(255)		(255)
Net cash outflow before changes in working capital	(315,688)		(443,456)		(845,572)
Decrease in trade and other receivables	3,088		6,712		4,338
Increase/(decrease) in trade and other payables	96,913		14,348		(58,233)
Purchase of financial assets	-		(133,602)		(133,603)
Disposals and repayments of financial assets	160,000		310,000		800,000
Net cash used in operating activities	(55,687)		(245,998)		(233,070)
Cash flows from financing activities Payments to purchase own shares	-		(1,000,657)		(1,048,662)
Redemptions of B shares	-		(132,941)		(132,941)
Net cash flow used in financing activities	-		(1,133,598)		(1,181,603)
Net decrease in cash and cash equivalents before currency adjustment	(55,687)		(1,379,596)		(1,414,673)
Effects of exchange rate differences on cash and
cash equivalents	-		255		255
Net decrease in cash and cash equivalents after currency adjustment	(55,687)		(1,379,341)		(1,414,418)
Cash and cash equivalents at the beginning of the
period/year	65,887		1,480,305		1,480,305
Cash and cash equivalents at the end of the period/year	10,200		100,964		65,887

 

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