Performance
· For the six months ended 30 June 2018, the Net Asset Value (“NAV”) per ordinary share decreased by 5.1%, representing a (3.0)% total return including distributions to shareholders, compared with an increase in value of the FTSE All-Share of 1.7% over the same period. The NAV per realisation share over the period decreased by 4.0%. The decrease in NAV per ordinary share and realisation share over the period is primarily attributable to decreases in the share prices of Zegona Communications plc (“Zegona”) and Gloo Networks plc (“Gloo”).
· The Company's strategy has delivered a 194.1% NAV total return to ordinary shareholders since inception in March 2006 to 30 June 20181, compared with a total return of 120.1% for the FTSE All-Share Index over the same period. The NAV total return attributable to realisation shareholders since inception on 30 November 2016 to 30 June 2018 is (0.8)%.
Highlights
Distributions to shareholders
· Pursuant to the Ordinary Share Distribution Policy, quarterly interim dividends of 2.064p per ordinary share were paid in January, April and July 2018. To the date of this report, a total of £44.3 million has been returned to ordinary shareholders since the implementation of the policy, representing 43.0% of the market capitalisation of the Company's ordinary shares2.
· The Ordinary Share Distribution Policy was amended on 5 September 2018, permitting distributions to ordinary shareholders to be made by the repurchase of ordinary shares. Under the amended policy, returns to ordinary shareholders may now be made by the repurchase of shares, dividend payments, or a combination of both. It is the Board's current intention to effect the Minimum Annual Distribution via share repurchases each quarter, commencing in October 2018. We will review the means by which funds are distributed on a regular basis.
Portfolio Companies
· Safe Harbour Holdings plc (“Safe Harbour”), a portfolio company established alongside CEO Rodrigo Mascarenhas (formerly of Bunzl plc, a FTSE 100 company), completed its IPO in March 2018 raising a further £22.7 million of equity funding with backing from a number of high profile institutional investors. Safe Harbour is now in the process of evaluating various platform acquisition opportunities that fit its investment criteria for assets engaged in B2B distribution and/or business services.
· BCA Marketplace plc (“BCA”) recorded impressive results in its annual accounts announced in July 2018, with an increase in vehicle volumes across all divisions, showing continued success in leveraging its infrastructure and range of services to provide solutions to automotive customers across a vehicle life cycle. During the period, BCA received two proposals from Apax Partners LLP for an all cash offer of BCA, the first of which was priced at 200p per share. Both offers were unanimously rejected by the Board, concluding that the offers significantly undervalued the company and its highly attractive long term prospects.
· Following the sale of Telecable de Asturias S.A (“Telecable”), Zegona's first asset under its 'Buy-Fix-Sell' strategy, to Euskaltel S.A. (“Euskaltel”), Zegona has retained a 15% interest in the enlarged Euskaltel group. Since the sale, Euskaltel has reported a net profit of €28.8 million for the first six months of 2018, up 36.6% on the equivalent period in the prior year. Beyond Spain, Zegona continues to see a healthy environment for acquisitions across the broader European TMT landscape. Zegona is evaluating acquisition opportunities for its second buy-fix-sell asset and will actively pursue those which meet its rigorous financial and strategic criteria.
· Wilmcote Holdings plc (“Wilmcote”), a portfolio company established in 2017 alongside CEO Adrian Whitfield (formerly CEO of Synthomer plc, a FTSE 250 company) with target acquisitions focused on the downstream and specialty chemicals sector, has been actively pursuing acquisition opportunities during the period. In particular, Wilmcote made considerable progress with the potential acquisition of Arysta LifeScience, the agricultural solutions segment of Platform Specialty Products Corporation, leading to the suspension of trading of Wilmcote shares on 7 June 2018 following media speculation. However, Wilmcote announced on 18 June 2018 that it was no longer in discussions with Platform Specialty Products. The directors of Wilmcote continue to explore a number of further attractive opportunities and remain excited about the prospects of being able to execute the company's investment strategy and unlock the full potential of acquired assets.
· Le Chameau Group plc (“LCG”) continues its operational and marketing development, launching European e-commerce websites and partnering with Amazon in the UK and US, in addition to investing in new digital marketing initiatives to drive brand awareness ahead of the autumn / winter season. A range of children's boots has recently been launched and the business is also investing in the development of new clothing and accessory product categories, set to launch in 2019.
· Following a strategic review of the pipeline of potential acquisitions that demonstrated the requisite financial characteristics, the Gloo board believed that the likely timeframe to a successful completion would prove unpalatable to the broader shareholder base and consequently Gloo was put into voluntary liquidation which was approved by its shareholders on 4 June 2018. The first distribution to shareholders of 47p per share was made in August 2018, representing 39.2% of gross capital invested at cost. A final distribution is expected before 30 June 2019.
Chairman, Robert Ware, commented: “We remain confident in the value creation opportunities present in our existing portfolio companies, and were particularly pleased to see the record results announced by BCA in June. The Zegona team continue to assess their next move in the attractive European TMT space, while Le Chameau have made notable progress in its product range and new routes to market. In Wilmcote and Safe Harbour, we have two exciting opportunities to pursue acquisition-led growth strategies, backing sector-leading management teams. We look forward to a productive six months ahead with our portfolio companies, and the recently approved share repurchase mechanism taking effect.”