Interim Unaudited Financial Statements

Reconstruction Capital II Ltd

30 August 2023

 

30 August 2023

Reconstruction Capital II Limited (the "Company")

Interim Unaudited Financial Statements

for the six months ended 30 June 2023

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 2023.

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 2023, Reconstruction Capital II Limited ("RC2") had a total unaudited net asset value ("NAV") of €23.4m or €0.1729 per share, which represents a 1.59% fall since the beginning of the year.

As at 30 June 2023, RC2 and its subsidiary, RC2 (Cyprus) Ltd had cash and cash equivalents of approximately €0.017m and receivables of €0.017m. As at 30 June 2023, RC2 had short-term liabilities of €0.243m.

Operational highlights

During the first half of 2023, the macroeconomic challenges which started in 2022 due to the outbreak of war in neighbouring Ukraine continued to erode consumers' purchasing power, affecting all of the Fund's investee companies, although inflationary pressures which had been fuelled by the outbreak of war fell significantly in the second quarter.

The Policolor Group achieved revenues of € 37.6m during the first semester, 22.7% below budget and 15.9% lower year-on-year, as the anhydrides division struggled to source the necessary raw materials due to the less available ortho-xylene, pursuant to the EU banning imports from Russia. The coatings division's sales were slightly higher year-on-year but 9% below budget, as the cost-of-living crisis reduced consumers' discretionary spending, while the construction market weakened. Although the Group's gross margin overperformed the budget in percentage terms, the Group's six-month EBITDA of € 1.5m was € 1.3m below budget, mainly due to the reduced activity at the anhydrides division and the underperformance of the coatings division.

The Mamaia Hotel did not meet its budget over the first half of 2023, as the cost-of-living crisis and the ongoing war in Ukraine across the Black Sea significantly impacted demand for the Hotel in the second quarter, despite an unexpectedly good performance in the first quarter. In addition, unseasonal bad weather, including lots of rainfall on weekends in May and June, led to the cancellation of a number of corporate events and a significant reduction in the number of walk-in clients. As a result, the Hotel generated revenues of € 0.90m, 22% below budget. During the first half of the year, the Hotel posted an EBITDA loss of € 0.52m, € 0.14m higher than the budgeted loss of € 0.38m, mainly due to lower accommodation revenues, higher food and beverage costs, and higher salaries due to a tight labour market.

During the first half of 2023, Telecredit generated interest revenues of € 0.83m, 7.8% higher year-on-year but 10% below budget, and an operating profit before depreciation and interest expenses of € 0.25m, below both the € 0.34m budget target and last year's result of € 0.38m. The underperformance was mainly driven by lower demand in the first quarter since Telecredit outperformed its budgeted financing volumes in the second quarter. In May, Telecredit extended the maturity of its € 2.0m loan from a specialized institutional lender by a year to 2024, and increased the facility amount to € 3.0m.

At the end of June, RC2 had cash and cash equivalents of € 0.017m, receivables of € 0.017m, and short-term liabilities of    € 0.243m.  

For further information, please contact:

Reconstruction Capital II Limited

Cornelia Oancea / Luca Nicolae

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 2023

During the first half of 2023, the macroeconomic challenges which started in 2022 due to the outbreak of war in neighbouring Ukraine continued to erode consumers' purchasing power, affecting all of the Fund's investee companies, although inflationary pressures which had been fuelled by the outbreak of war fell significantly in the second quarter. The Policolor Group achieved revenues of € 37.6m during the first semester, 22.7% below budget and 15.9% lower year-on-year, as the anhydrides division struggled to source the necessary raw materials due to the less available ortho-xylene, pursuant to the EU banning imports from Russia. The coatings division's sales were slightly higher year-on-year but 9% below budget, as the cost-of-living crisis reduced consumers' discretionary spending, while the construction market weakened. Although the Group's gross margin overperformed the budget in percentage terms, the Group's six-month EBITDA of € 1.5m was € 1.3m below budget, mainly due to the reduced activity at the anhydrides division and the underperformance of the coatings division. The Mamaia Hotel did not meet its budget over the first half of 2023, as the cost-of-living crisis and the ongoing war in Ukraine across the Black Sea significantly impacted demand for the Hotel in the second quarter, despite an unexpectedly good performance in the first quarter. In addition, unseasonal bad weather, including lots of rainfall on weekends in May and June, led to the cancellation of a number of corporate events and a significant reduction in the number of walk-in clients. As a result, the Hotel generated revenues of € 0.90m, 22% below budget. During the first half of the year, the Hotel posted an EBITDA loss of € 0.52m, € 0.14m higher than the budgeted loss of € 0.38m, mainly due to lower accommodation revenues, higher food and beverage costs, and higher salaries due to a tight labour market. During the first half of 2023, Telecredit generated interest revenues of € 0.83m, 7.8% higher year-on-year but 10% below budget, and an operating profit before depreciation and interest expenses of € 0.25m, below both the € 0.34m budget target and last year's result of € 0.38m. The underperformance was mainly driven by lower demand in the first quarter since Telecredit outperformed its budgeted financing volumes in the second quarter. In May, Telecredit extended the maturity of its € 2.0m loan from a specialized institutional lender by a year to 2024, and increased the facility amount to € 3.0m. At the end of June, RC2 had cash and cash equivalents of € 0.017m, receivables of € 0.017m, and short-term liabilities of € 0.243m.

STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2023

		30 June 2023 EUR		30 June 2022 EUR		31 December 2022 EUR
		Unaudited		Unaudited		Audited
Investment Income
Fair value loss on financial assets at fair value through profit or loss		(261,845)		(102,597)		(2,615,823)
Interest income		255,360		257,916		518,085
Net investment income		(6,485)		155,319		(2,097,738)
Expenses
Operating expenses		(363,202)		(394,892)		(844,981)
Net financial income/(expense)		(11,925)		(35)		(871)
Total expenses		(375,127)		(394,927)		(845,852)
(Loss)/profit for the period/year		(381,612)		(239,608)		(2,943,590)
Other comprehensive income		-		-		-
Total comprehensive (loss)/profit for the period/year attributable to owners		(381,612)		(239,608)		(2,943,590)
Earnings Per Share attributable to the owners of the Company Basic and diluted earnings per share		(0.0028)		(0.0018)		(0.0217)

STATEMENT OF FINANCIAL POSITION

As at 30 June 2023

		30 June 2023 EUR		30 June 2022 EUR		31 December 2022 EUR
		Unaudited		Unaudited		Audited
ASSETS
Non-current assets
Financial assets at fair value through profit or loss		24,027,598		26,557,140		24,104,083
Total non-current assets		24,027,598		26,557,140		24,104,083
Current assets
Trade and other receivables		17,126		19,172		15,492
Cash and cash equivalents		17,221		46,438		73,337
Total current assets		34,347		65,610		88,829
TOTAL ASSETS		24,061,945		26,622,750		24,192,912
LIABILITIES
Current liabilities
Trade and other payables		243,207		91,174		124,485
Total current liabilities		243,207		91,174		124,485
Non-current liabilities
Borrowings		382,756		-		250,833
Total non-current liabilities		382,756		-		250,833
TOTAL LIABILITIES		625,963		91,174		375,318
NET ASSETS		23,435,982		26,531,576		23,817,594
EQUITY ATTRIBUTABLE TO OWNERS
Share capital		1,355,784		1,357,034		1,355,784
Share premium		109,187,284		109,196,034		109,187,284
Accumulated deficit		(87,107,086)		(84,021,492)		(86,725,474)
TOTAL EQUITY		23,435,982		26,531,576		23,817,594
Net Asset Value per share Basic and diluted net asset value per share		0.1729		0.1955		0.1757

STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023
Share	Retained (deficit)/
Share capital          premium EUR                                        EUR	earnings EUR		Total EUR
Balance at 1 January 2022                                     1,358,569        109,206,779	(83,781,884)		26,783,464
Loss for the period                                                                       -                             - Other comprehensive income                                                    -                             -	(239,608) -		(239,608) -
Total comprehensive loss for the period                                 -                             -	(239,608)		(239,608)
Repurchase and cancellation of own shares                (1,535)              (10,745)	-		(12,280)
Transactions with owners                                            (1,535)              (10,745)	-		(12,280)
Balance at 30 June 2022                                          1,357,034        109,196,034	(84,021,492)		26,531,576
Profit for the period                                                                     -                             - Other comprehensive income                                                    -                             -	(2,703,982) -		(2,703,982) -
Total comprehensive profit for the period                              -                             -	(2,703,982)		(2,703,982)
Repurchase and cancellation of own shares                (1,250)              (8,750)	-		(10,000)
Transactions with owners                                            (1,250)              (8,750)	-		(10,000)
Balance at 31 December 2022                                1,355,784        109,187,284	(86,725,474)		23,817,594
Loss for the period                                                                       -                             - Other comprehensive income                                                    -                             -	(381,612) -		(381,612) -
Total comprehensive loss for the period                                 -                             -	(381,612)		(381,612)
Balance at 30 June 2023                                        1,355,784           109,187,284	(87,107,086)		23,435,982

CASH FLOW STATEMENT

For the six months ended 30 June 2023

	30 June 2023 EUR		30 June 2022 EUR		31 December 2022 EUR
	Unaudited		Unaudited		Audited
Cash flows from operating activities
(Loss)/profit before taxation	(381,612)		(239,608)		(2,943,590)
Adjustments for:
Fair value loss on financial assets at fair value
through profit or loss	261,845		102,597		2,615,823
Interest income	(255,360)		(257,916)		(518,085)
Financial expenses	11,923		-		833
Net (gain)/loss on foreign exchange	2		35		6
Net cash outflow before changes in working
capital	(363,202)		(394,892)		(845,013)
(Increase)/Decrease in trade and other receivables	(1,634)		(13,145)		(9,465)
(Decrease)/Increase in trade and other payables	118,722		(114,511)		(81,200)
Repayments of financial assets	70,000		570,000		770,000
Net cash provided by/(used in) operating	(176,114)		47,452		(165,678)
Cash flows from financing activities
Payments to purchase own shares	-		(12,280)		(22,280)
Proceeds from borrowings	120,000		-		250,000
Net cash flow (used in)/provided by financing	120,000		(12,280)		227,720
Net increase/(decrease) in cash and cash
equivalents before currency adjustment	(56,114)		35,172		62,042
Effects of exchange rate differences on cash and cash equivalents	(2)		(35)		(6)
Net increase/(decrease) in cash and cash
equivalents after currency adjustment	(56,116)		35,137		62,036
Cash and cash equivalents at the beginning of the period/year	73,337		11,301		11,301
Cash and cash equivalents at the end of the
period/year	17,221		46,438		73,337

 

END