Interim Results

RNS Number : 0803O

Crystal Amber Fund Limited

02 March 2009

 



2 March 2009

Crystal Amber Fund Limited

('Crystal Amber' or 'the Company')

Interim results for the period ended 31 December 2008

The Company announces its interim results for the six month period ended 31 December 2008.

Highlights:

• Net asset value rose from an initial 95.02p to 95.58p per share (and to an unaudited 98.41p per share on 23 February 2009)

• Cautious approach from the outset in conditions of extreme volatility

• Cash and short-dated gilts 59 per cent. of the portfolio at 31 December 2008

• An active start on engagement with investee companies

• Interim net profit of £334,000

William Collins, Chairman of Crystal Amber, commented:

'We are pleased to have maintained our asset value in conditions which have been, and remain, extremely challenging. We will proceed with the care and discipline which has served us well so far.'

Enquiries

Crystal Amber Fund Limited
William Collins	Tel: [phone]
John East & Partners Limited
David Worlidge / Bidhi Bhoma	Tel: [phone]

  Chairman's Statement

I am pleased to present the interim results of the Company, covering the six month period to 31 December 2008. The Company was admitted to trading on AIM and the Channel Islands Stock Exchange on 17 June 2008 and had made no investments up to 30 June 2008. 

Over the second half of 2008, a profit of £333,979, after deduction of capital expenses, is shown in the Income Statement. 

The net asset value, from an initial level at flotation of 95.02p per share, which reflected the Company's launch costs, rose to 95.58p per share as at 31 December 2008.  

Our programme of engagement with investee companies, which is continuing, included constructive discussions with the management of  3i Quoted Private Equity plc ('QPE'), the Company's largest equity holding. On 23 February 2009, QPE received a takeover approach at a significant premium to our cost of investment. Following this, the unaudited net asset value at 23 February 2009 is estimated at 98.41p per share.

The period under review was one of extreme market volatility and posed unprecedented challenges in the early months of the life of the Company.

In particular, banks and the quoted financial sector experienced what can only be described as extreme turbulence for much of the period. Despite huge commitments of public funds by the UK and other governments, confidence has yet to be restored. 

The effect on stock markets was severe with the FTSE 100 index falling more than 20 per cent. during the second half of 2008. The FTSE 250 index, which contains many of the Company's existing investments and possible targets, fell more than 30 per cent. over the same period.

Our approach from the outset has been cautious and we maintained this stance throughout the period and into 2009. As at 31 December 2008, approximately 59 per cent. of Crystal Amber's assets were held in cash or short-dated UK government stock, the latter in place of bank deposits during the recent period of uncertainty for the banking system. Although our investments are generally undertaken with a medium-term time horizon, the opportunity to realise some gains has been taken.

As outlined in its admission document, Crystal Amber plans to engage actively with the boards and management of investee companies as part of our efforts to achieve the investment objective. Initial steps have been taken and we have held a series of meetings with investee companies during the period under review.   

The economic climate remains very uncertain. We are aware of the risks of investing in the current environment but remain alert to investment opportunities. We will proceed with the care and discipline which has served us well so far.

William Collins

Chairman

Crystal Amber Fund Limited

2 March 2009

Investment Manager's Report

The 'credit crunch', which has caused unprecedented turbulence in global financial markets, deepened during the second half of 2008, providing a very challenging environment in the first months of the Company's operation. 

With some of the world's biggest banks needing to be rescued by government action, markets fell sharply. The FTSE 100 index showed a decline of more than 30 per cent. between July 2008 and mid-November 2008 and although a modest recovery followed it ended the six month period more than 20 per cent. lower. The FTSE 250 index, which contains many of the stocks in Crystal Amber's target area, fell more than 30 per cent.in the period under review.

Our focus is on absolute return and in our approach, caution was the watchword.  Of the £57 million net proceeds generated on flotation, approximately £34 million, or 59 per cent., was held in cash or short-dated government stock at 31 December 2008.

As stock market conditions deteriorated, we continued to focus on the quality of our investments and their balance sheet strength.  This approach was vindicated as weaker companies or those exposed to heavy debts were de-rated, sometimes savagely. Whilst Crystal Amber's portfolio did not entirely escape the general stock market decline, its performance relative to the market testifies to the underlying strength of the portfolio companies.  

As stated in the admission document, net asset value is calculated quarterly on 31 March, 30 June, 30 September and 31 December. In view of the turbulence in the financial markets in recent weeks, the Investment Manager feels it appropriate to report that the Company's unaudited net asset value at 23 February 2009 was 98.41p per share.

Our objective is to build core holdings in carefully chosen stocks where we believe engagement can enhance value. The due diligence process may involve the purchase of a modest initial stake in a potential target.  

As set out in the Company's admission document, we have the flexibility to make other investments to ensure that our funds are appropriately deployed. While this flexibility is useful in current markets, our focus remains firmly on our core strategy.  

Top Five Equity Holdings

		Value at 31 December 2008
		£m
3i Quoted Private Equity plc		5.20
Chloride plc		4.03
Kentz plc		2.95
Kesa Electricals plc		1.77
Bodycote plc		1.73

Our holding of Treasury 4 per cent 2009 stock, which was valued at £22.98m at 31 December 2008, was the largest single holding in the Company at that date.

The largest equity holding, in 3i Quoted Private Equity plc ('QPE'), was purchased at an average cost of 55p per share.  The decision to invest was taken after an analysis of the QPE portfolio satisfied us that its shares were trading at substantially below the value of its assets and that it held cash resources broadly equivalent to its stock market value. Our objective was to promote measures to correct this undervaluation. On 13 January 2009 QPE reported net asset value of 90.1p per share, of which cash amounted to 61p per share.

Following further purchases, which raised the average cost to 57p per share, the Company's holding in QPE exceeded 3 per cent. and was disclosed on 11 February 2009. On 23 February 2009 3i Group ('3I') announced an agreed offer for the assets of QPE at 50p cash plus 0.1706 of a new 3i share, per share of QPE, valuing each QPE share at 88.8p.

The holding in Chloride plc ('Chloride') was purchased at an average cost of 160p per share.  Chloride is a leader in 'power protection' - protecting companies and institutions against power blackouts and associated data loss. This market is growing strongly and we remain convinced of Chloride's long term growth prospects. In March 2008, Chloride's board rejected a takeover proposal from Emerson Electric at 270p per share on the basis that they believed the offer undervalued the company. Following further purchases, the average cost per share at 23 February 2009 was 157p.

Kentz plc ('Kentz') is an oil services group, predominantly focused on the Middle East, where new development projects are viable at crude oil prices well below the current level.  Its customer list includes some of the world's largest energy companies and the company has a $1,003 million (£701 million, using an exchange rate of £1/$1.43) backlog of orders. Our holding in Kentz was purchased at an average price of 114p per share. The company's cash resources of £105 million (using an exchange rate of £1/$1.43) at 31 December 2008 are equivalent to more than 80 per cent. of its current market capitalisation. It expects revenue and profits for 2008 to be marginally ahead of analysts' expectations. Despite the fall in crude prices, we remain positive about the growth prospects of well managed oil service companies. Following further purchases in 2009, the average cost per share at 23 February 2009 was 112p.

Our holding in Kesa Electricals plc ('Kesa') was purchased at an average price of 93p per share. While retail markets remain extremely challenging, Kesa (Europe's third largest electrical retailer) is a well managed company with a solid balance sheet including property valued at over £200 million, has no net debt and a current dividend yield in excess of 6 per cent. Since the period end, profits have been taken on part of our holding.

Bodycote has a heat treatment and metal technology business with 309 plants around the world. In 2008 it rejected four takeover approaches from Sulzer, a Swiss engineering group. In May 2008 Bodycote put its materials testing division up for sale, effectively shrinking the size of the group. Following the sale, a special dividend of 40p per share was paid to investors in December 2008. Adjusting for this, the average cost of the Company's holding at 23 February 2009 was 157p per share.  Since the period end, part of the holding has been sold at 147p per share.

Despite the general caution surrounding consumer facing businesses, we believe that correct stock selection and timing can still deliver returns. For example, one of the Company's initial investments was N Brown Group plc, the home shopping company, which has a rapidly growing internet business. Profits were taken on part of this holding.  The Company's remaining stake is currently valued at well in excess of its cost. We remain optimistic about the underlying value of this business, where online sales are growing rapidly and now account for 35 per cent. of total turnover, a figure that is expected to rise above 50 per cent. in the future.

Subsequent to the period under review, the Company disclosed a 4.4 per cent. holding in Pinewood Shepperton Group plc ('PWS'),  the owner of the Pinewood and Shepperton film studios.  The studios have hosted more than 1,500 films. PWS has been aiming to grow the revenues generated from television productions and is developing its property assets, which include over 200 acres west of London. It has financing arrangements in place to support its growth strategy for the next five years. The Company's holding represents around 4 per cent of its assets. Whilst the film industry is unlikely to be immune from the current economic downturn, we believe that as well as being a centre of technical excellence, PWS offers long-term intrinsic value. 

Engagement

The Company's brief is to engage with investee companies and to promote active steps to correct undervaluation, thus realising value for Crystal Amber's shareholders. We have held meetings with most of Crystal Amber's investee companies. We have, in several instances, begun to share our ideas with the management of investee companies. So far the response has, on the whole, been positive. Issues we have raised include the strength and representative character of company boards, the need to identify and promote growth sectors within a business, and optimal capital structures including, where appropriate, the return of cash to shareholders.

Whilst we recognise that, in the current extreme adverse funding environment, some of the traditional routes to realising value are largely closed, such as public-to-private transactions, our experience to date leads us to believe that the process is developing well.

Market outlook

The unprecedented collapse of the financial market during 2007 and 2008 has shaken confidence not only in the stock markets, but throughout the entire financial system. Governments worldwide have been making repeated efforts to support the banking system and restore the flow of credit. Financial stability is a necessary, but not sufficient, condition for a sustainable economic recovery.

Thus our approach remains cautious and conservative, with capital preservation being a priority. We are keenly aware that distressed markets will present attractive opportunities and are already seeing evidence of this. The Company's cash resources give it considerable scope to take advantage of such opportunities.

We are encouraged by the successful outcome of our largest equity investment, 3i Quoted Private Equity. At the latest traded price of QPE, the Company is showing a gain of more than 40 per cent. on its holding.  

Few people could have imagined what a testing time the Company's initial months would prove to be. That we have come this far with shareholder value remaining intact gives us confidence that, despite the undoubted economic difficulties that still lay ahead, our strategy can deliver worthwhile gains for investors. Vigilance, courage and the ability to seize opportunities will be vital in the coming months.

Crystal Amber Asset Management (Guernsey) Limited

Investment Manager

2 March 2009

Income Statement (Unaudited)

For the period from 1 July 2008 to 31 December 2008

	Notes		Revenue	Capital	01.07.08 to  31.12.08 Total		22.06.07 to 30.06.08 Total
					(Unaudited)		(Audited)
Income			£	£	£		£
Investment income			499,985	-	499,985		-
Fixed deposit interest			315,627	-	315,627		-
Bank interest			333,182	-	333,182		74,906
			1,148,794	-	1,148,794		74,906
Net gains on financial assets at fair value through
profit or loss
Market movements	3		-	140,444	140,444		-
Total income			1,148,794	140,444	1,289,238		74,906
Expenses
Cost of acquisition and disposal of investments	4		-	218,790	218,790		-
Management fees			582,062	-	582,062		17,533
Directors' fees			47,695	-	47,695		76,658
Administration fees			37,654	-	37,654		2,877
Custodian fees			12,671	-	12,671		959
Other fees and expenses			56,387	-	56,387		9,429
Total expenses			736,469	218,790	955,259		107,456
Profit/(loss) for the period			412,325	(78,346)	333,979		(32,550)
Basic and diluted earnings per share attributable to the equity-holders of the Company during the period (pence)	5		0.69	(0.13)	0.56		(0.05)

The Condensed Notes to the Unaudited Financial Statements form an integral part of these financial statements.

All items in the above statement derive from continuing operations.

Balance Sheet (Unaudited)

as at 31 December 2008

	Notes		31.12.08		30.06.08
			(Unaudited)		(Audited)
			£		£
ASSETS
Non-current assets
Financial assets designated at fair value through
profit or loss			46,296,833		-
Current assets
Trade and other receivables			437,386		2,553,225
Cash and cash equivalents			10,727,957		54,616,689
			11,165,343		57,169,914
Total assets			57,462,176		57,169,914
LIABILITIES
Current liabilities
Trade and other payables			113,486		155,203
Total liabilities			113,486		155,203
EQUITY
Capital and reserves attributable to the Company's equity
shareholders
Share capital			600,000		600,000
Share premium			-		56,447,261
Distributable reserve			56,447,261		-
Realised reserve			2,121,163		-
Unrealised reserve			(2,199,509)		-
Revenue reserve			379,775		(32,550)
Total equity			57,348,690		57,014,711
Total liabilities and equity			57,462,176		57,169,914
Net asset value per share (pence)	5		95.58		95.02

The Condensed Notes to the Unaudited Financial Statements form an integral part of these financial statements.

The financial statements were approved by a committee of the Board of Directors and authorised for issue on 2 March 2009.

William Collins    

Chairman

Crystal Amber Fund Limited

2 March 2009

Sarah Evans

Director    

Crystal Amber Fund Limited

2 March 2009

Statement of Changes in Equity (Unaudited)

           For the period from 1 July 2008 to 31 December 2008 (Unaudited)

	Share Capital	Share Premium	Distributable Reserve	Realised Reserve	Unrealised Reserve	Revenue Reserve	Total
	£	£	£	£	£	£	£
Opening balance at 1 July 2008	600,000	56,447,261	-	-	-	(32,550)	57,014,711
Gain/(loss) on investments	-	-	-	2,339,953	(2,199,509)	-	140,444
Revenue profit for the period	-	-	-	-	-	412,325	412,325
Cost of acquisition and disposal of investments	-	-	-	(218,790)	-	-	(218,790)
Transfer to distributable reserve	-	(56,447,261)	56,447,261	-	-	-	-
Balance at 31 December 2008	600,000	-	56,447,261	2,121,163	(2,199,509)	379,775	57,348,690

            For the period from 22 June 2007 to 30 June 2008 (Audited)

	Share Capital	Share Premium	Distributable Reserve	Realised Reserve	Unrealised Reserve	Revenue Reserve	Total
	£	£	£	£	£	£	£
Opening balance at 22 June 2007	-	-	-	-	-	-	-
Share capital issued	600,000	59,400,000	-	-	-	-	60,000,000
Share issue expenses	-	(2,952,739)	-	-	-	-	(2,952,739)
Loss for the period	-	-	-	-	-	(32,550)	(32,550)
Balance at 30 June 2008	600,000	56,447,261	-	-	-	(32,550)	57,014,711

The Condensed Notes to the Unaudited Financial Statements form an integral part of these financial statements.

Statement of Cash Flows (Unaudited)

For the period from 1 July 2008 to 31 December 2008

			01.07.08 to  31.12.08		22.06.07 to 30.06.08
			(Unaudited)		(Audited)
			£		£
Cash flows from operating activities
Investment income			93,868		-
Fixed deposit interest			346,963		-
Bank interest			341,047		-
Management fees			(582,062)		-
Directors' fees			(100,408)		-
Other expenses			(75,346)		(19,300)
Net cash inflow from operating activities			24,062		(19,300)
Cash from financing activities
Proceeds from issuance of Ordinary Shares			2,462,075		57,537,925
Share issue expenses			(50,802)		(2,901,936)
Net cash inflow from financing activities			2,411,273		54,635,989
Cash flows from investing activities
Purchase of investments			(58,994,257)		-
Sale of investments			12,888,980		-
Transaction costs relating to the purchase and sale of investments			(218,790)		-
Net cash outflow from investing activities			(46,324,067)		-
Net (decrease)/increase in cash and cash equivalents during the period			(43,888,732)		54,616,689
Cash and cash equivalents at the start of the period			54,616,689		-
Cash and cash equivalents the end of the period			10,727,957		54,616,689

The Condensed Notes to the Unaudited Financial Statements form an integral part of these financial statements.

Condensed Notes to the Unaudited Financial Statements

For the period from 1 July 2008 to 31 December 2008

General Information

Crystal Amber Fund Limited is a company incorporated and registered in Guernsey under The Companies (Guernsey) Law, 1994 on 22 June 2007. The address of the registered office is given on page 3. 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 Channel Islands Stock Exchange (CISX) on 17 June 2008.  

1. SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) under the historical cost convention.

The interim financial statements have been prepared in accordance with the International Accounting Standard (IAS) 34, Interim Financial Reporting. The same accounting policies and methods of computation are followed in the interim financial statements as in the annual financial statements. The presentation of the interim financial statements is consistent with the annual financial statements. 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 period to 30 June 2008.

Where presentational guidance set out in the Statement of Recommended Practice (SORP) for Investment Trusts issued by the Association of Investment Companies (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 Income Statement between items of a revenue and capital nature has been presented alongside the total Income Statement.

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.

Investments

All of the Company's investments are designated at fair value through profit or loss at the time of acquisition. They are initially recognised at fair value, being the cost incurred in their acquisition. Transaction costs are expensed in the Income Statement. Gains and losses arising from changes in fair value are presented in the Income Statement in the period in which they arise.

Purchases and sales of quoted investments are recognised on trade date.

Quoted investments are valued at the bid price on the valuation date.. Where investments are listed on more than one securities market, the price on the market on which the security was originally purchased will be used. If the price is not available as at the valuation date, the last available price will be used. The value of any investment which is not listed or dealt in on a securities market will be at fair value as determined by the Directors in accordance with IPEV Guidelines.

Income

Investment income and interest income have been accounted for on an accruals basis. Dividends receivable are taken to the income statement when the relevant security is quoted ex-dividend.

Expenses

Expenses are accounted for on an accruals basis. Expenses incurred on the acquisition and disposal of investments at fair value through profit or loss are accounted for in the Income Statement.

Segmental reporting

The Company is organised and operates as one segment, both in terms of business and geography. Consequently, no segmental reporting is provided in the Company's financial statements.

2. NEW STANDARDS AND INTERPRETATIONS NOT APPLIED

No new IFRS, interpretations or amendments to existing standards have been adopted early; however it is unlikely that any such standards or interpretations or amendments issued, when adopted, will result in changes to the recognition and measurement accounting policies.

3. NET GAINS ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

	01.07.08 to 31.12.08		22.06.07 to 30.06.08
	£		£
Gain on investments sold during the period	2,339,953		-
Unrealised loss on financial assets held at 31 December 2008	(2,199,509)		-
Net gains on financial assets at fair value through profit or loss	140,444		-

4. COST OF ACQUISITION AND DISPOSAL OF INVESMENTS

During the period transaction charges relating to the acquisition and disposal of investments amounting to £218,790 were paid (period to 30 June 2008: £Nil). These are analysed as follows:

	01.07.08 to 31.12.08		22.06.07 to 30.06.08
	£		£
Stamp duty	133,134		-
Commissions and custodian transaction charges	85,656		-
	218,790		-

5. BASIC AND DILUTED EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE

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

	01.07.08 to 31.12.08		22.06.07 to 30.06.08
	£		£
Profit/(loss) per income statement	333,979		(32,550)
Average number of Ordinary Shares in issue	60,000,000		60,000,000
Basic and diluted earnings per share (pence)	0.56		(0.05)

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

	31.12.08		30.06.08
	£		£
Net asset value per balance sheet	57,348,690		57,014,711
Issued average number of Ordinary Shares	60,000,000		60,000,000
Net asset value per share (pence)	95.58		95.02

6. RELATED PARTIES

Mark Huntley, director of the Company, is also a director of the Company's administrator, Heritage International Fund Managers Limited. During the period the Company incurred administration fees of £37,654, of which £18,904 was outstanding at the period end. Mark Huntley also received a Director's fee of £10,041, of which £5,041 was outstanding at the period end.

Richard Bernstein is a director of the Investment Manager and also a shareholder of Company. During the period the Company incurred management fees of £582,062, of which £Nil was outstanding at the period end.

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

7. INTERIM DIVIDEND

The directors of the Company are not proposing an interim dividend for the six months ended 31 December 2008.

8. COPIES OF THE INTERIM REPORT

Copies of the interim results for the six months ended 31 December 2008 will be sent to shareholders shortly and will be available, along with a copy of this announcement, from the Company's website www.crystalamber.com.

 

END

 

 

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