Interim Results for the Six Months to 30 June 2007
26 July 2007
ACP Mezzanine Limited ("ACP Mezzanine" or the "Company"), the closed-ended investment company focused on lending to European small and medium-sized enterprises ("SMEs"), today announces interim results for the six months ended 30 June 2007.
Highlights
- Diluted net income per share1 of €0.045 - 100% distributed in dividend
- Dividend per share of €0.045 ahead of IPO target of €0.04 per share
- On track to exceed target total 2007 dividend per share of €0.09
- Net asset value per share of €1.01 (31 Dec 2006: €0.98)
- Assets under management of €137.7 million2, up 28% from €107.5 million at 31 Dec 2006
- Board reiterates objective of increasing assets under management to €550 million by the end of 2009
- Strong prospects for continued profitable growth - range of
attractive investment opportunities
1 ACP Mezzanine's issued capital amounted to 101,412,000 shares as at 30 June 2007
2 Including committed bridge underwriting facility
Derek Vago, Chief Executive Officer of ACP Capital Limited, the parent of ACP Mezzanine's investment manager, said:
"We are delighted with ACP Mezzanine's results over the last six months, which show good progress. Following the Company's bridge financing for IFR which was committed at the end of May 2007, the Company has now almost fully invested all the proceeds from the IPO.
ACP Mezzanine is set to deliver a dividend which is above our target dividend for the calendar year 2007, as stated at the Company's listing. ACP Mezzanine is now well positioned for a capital raise in the fourth quarter to continue its growth as had been its intention at the time of the IPO.
It is clear that the strategy of being a lender to the SME sector with the ability to underwrite, syndicate and hold loan assets has proven itself. Our next stage of growth benefiting from ACP Capital's origination platforms should give rise to greater diverse funding opportunities alongside ACP Capital in its integrated finance approach.
We do not rely on the established LBO market where competition for participating is extreme. Furthermore we are not comfortable at this stage with the prevalent standard of credit analysis in this sector."
Operational Review
ACP Mezzanine generated revenue of €6.7 million for the six-month period ended 30 June 2007 and net income of €4.6 million. Diluted earnings per share were €0.045. The Directors have declared an interim dividend of €4,563,540 or €0.045 per share. The interim dividend exceeds the targeted interim distribution of €0.04 per share set out at the time of ACP Mezzanine's listing in 2006. The Company believes it is well-placed to exceed its total target dividend per share of €0.09 for the year ending 31 December 2007.
Invested assets on the balance sheet as at 30 June 2007 were €98.3 million excluding committed underwriting, or €137.7 million including committed underwriting, representing an increase of 28% from €107.5 million of assets as at 31 December 2006.
There are no impairments in the portfolio and all assets are performing in line with the Company's expectations.
The Company has invested almost the entire net IPO proceeds following the payout of the interim dividend. The Company is currently evaluating the launch of a further capital raise for the fourth quarter of 2007, consistent with its objectives at the time of listing in order to achieve the Company's long-term growth target of €550 million of assets under management by the end of 2009.
In parallel with this potential secondary, the Company is evaluating a transfer to a primary listing on Euronext, in order to access potentially greater pools of investor liquidity and diversification of its investor base, whilst remaining compliant for holders of UK tax- efficient savings plans such as PEPs and ISAs.
Developments Since the End of the Period
On 3 July 2007, ACP Mezzanine funded a debt bridge facility of €75 million for the acquisition of Homann Chilled Food GmbH by IFR Capital plc ("IFR"). The Company provided this debt as part of an integrated finance package alongside a €142 million senior debt bridge provided by ACP Capital Limited ("ACP Capital"). This underwritten financing was committed on 30 May 2007.
The €35 million outstanding at the end of the period of the €60 million debt package underwritten by ACP Mezzanine in December 2006 for Nordsee, Europe's largest fish speciality restaurant chain, was repaid at the same time as the bridge financing for IFR in July 2007.
ACP Mezzanine received a total of approximately €1.2 million in debt underwriting fees and commitment fees for the IFR transaction. These fees have been included in the interim results. Repayment of the bridge financing is due at the end of December 2007. ACP Capital has the right to be lead underwriter on any refinancing of IFR and the right to refinance at any time for which ACP Mezzanine would be the preferred non-investment grade lender. Should it not do so, additional break fees would be payable to ACP Mezzanine.
In line with the origination strategy through the ACP Capital network (the "Network"), the Company is expected to commit a non-investment grade funding line to Leasecom Group SAS ("Leasecom") by the end of September 2007. ACP Capital acquired a 45% stake in Leasecom, the leasing business, in July 2007 to develop a strategic origination platform in France.
The Company anticipates that a further two such funding lines will be committed to the Network by the end of 2007, again demonstrating the benefits of the integrated finance lending strategy of ACP Capital.
The Company anticipates that the combined strategy of providing underwriting and funding lines in the SME markets and to the Network will result in ACP Mezzanine developing a unique position as a leading independent non-regulated SME lender.
Portfolio Highlights
At 30 June 2007, ACP Mezzanine's portfolio consisted of €98.3 million of non-cash investments excluding committed underwriting, or €137.7 million including committed underwriting. The portfolio (including committed underwriting) consisted of 19 advances to 13 borrowers, with an average asset size of €7.2 million. Excluding committed underwriting, the portfolio consisted of 16 advances to 12 borrowers, with an average asset size of €6.1 million. The largest asset was €35 million. The smallest asset was €1.2 million.
The largest single borrower group exposure is to IFR with four loans totalling €75 million of principal (secured on two underlying borrowers), which represents the bridge underwriting exposure for the Homann acquisition, and which is consistent with ACP Mezzanine's stated underwriting limits. This exposure is expected to be refinanced in the fourth quarter.
The portfolio is structured as follows:
| Asset Type | Including Underwriting |
Excluding Underwriting |
| Corporate SME | 54.5% | 35.8% |
| CLO LL | 27.3% | 38.5% |
| CDO ABS | 6.9% | 9.7% |
| RMBS | 5.4% | 7.6% |
| Corporat | 5.9% | 8.4% |
| Total | 100% | 100% |
| Geography | Including Underwriting |
Excluding Underwriting |
| Germany | 54.5% | 35.8% |
| Europe Diversified |
32.6% | 45.9% |
| UK | 11.3% | 16.0% |
| US | 1.6% | 2.3% |
| Total | 100% | 100% |
| Rating | Including Underwriting |
Excluding Underwriting |
| BB | 33.7% | 47.4% |
| B | 5.9% | 8.4% |
| NR | 60.4% | 44.2% |
| Total | 100% | 100% |
| Currency | Including Underwriting |
Excluding Underwriting |
| EUR | 87.1% | 81.8% |
| GBP | 11.3% | 16.0% |
| USD | 1.6% | 2.3% |
| Total | 100% | 100% |
| Currency | Including Underwriting |
Excluding Underwriting |
| EUR | 87.1% | 81.8% |
| GBP | 11.3% | 16.0% |
| USD | 1.6% | 2.3% |
| Total | 100% | 100% |
| Interest Rate |
Including Underwriting |
Excluding Underwriting |
| Fixed | 87.8% | 100% |
| Floating | 12.2% | 0.0% |
| Total | 100% | 100% |
The Company believes that by 2009 it will achieve its target balance sheet mix as stated at launch.
The average spread of the invested assets over the relevant LIBOR/EURIBOR index was 4.8% excluding committed underwriting, or 6.8% including committed underwriting.
The Company has a negligible exposure to the UK residential mortgage sector (no more than 5% of invested assets) and no exposure to the residential mortgage sector in the US.
By the end of 2009, the Company intends to have €550 million of assets under management.
Dividend Declaration
The Directors have declared an interim dividend for the Period of €0.045 per share, which exceeds the targeted level of €0.04 per share stated at the time of the Company's listing. The dividend will be paid on 23 August 2007 to all shareholders on the register at close of business on 3 August 2007.
Leverage
ACP Mezzanine employs conservative leverage to optimise returns on assets. In May 2007, ACP Mezzanine raised a committed leverage facility of €150 million provided by Deutsche Bank AG.
The facility was entered into on improved terms over the Company's existing leverage facility, benefiting from lower financing costs and extending the maturity from two years to five years. This in turn is expected to provide enhanced portfolio returns over the existing facility as well as a significant reduction in refinancing risk. In addition, the new facility also provides leverage on an unrated portion of the portfolio, which is in line with the nature of the Company's lending business.
Leverage on invested assets on the balance sheet as at 30 June 2007 was approximately 40.5% excluding committed underwriting, or 32% including committed underwriting. Leverage is expected to increase to 65-70% on a stabilised basis in the long term as the Company builds up and diversifies its asset base.
The average leverage financing margin was 0.89%, compared with 1.5% as at 31 December 2006.
Liquidity Analysis
As at 30 June 2007, ACP Mezzanine had approximately €9 million of available cash on the
balance sheet, taking into account the funds committed to underwriting as of 30 May 2007.
Following the forthcoming payment of the interim dividend, the cash balance is expected to
reduce to approximately €4.5 million.
Net Asset Value Calculation
The Company's net asset value as at 30 June 2007 was €1.01 per share, up from €0.98 as at 31 December 2006.
Business Update
ACP Capital has grown significantly, with close to 20 employees and additional access to
resources through the Network. ACP Capital's recent hiring of Lyndon Miles, responsible
for debt origination, and Andrew Cormack, responsible for credit underwriting, will bring
additional skill sets which are expected to be of value to the Company.
Enquiries:
| Tim Mickley, Collins Stewart Europe Limited (Nominated Adviser to the Company) |
+44 (0) 20 7523 8350 |
| Rob Bailhache & Nick Henderson, Financial Dynamics (Media Relations) |
+44 (0) 20 7269 7200 |
For further information, please visit www.acpcapital.com
Analyst Presentation
There will be an analyst presentation on ACP Mezzanine's results at 11.30am on 26 July 2007 at Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB. Those analysts wishing to attend or to register are asked to contact Nick Henderson at Financial Dynamics on +44 20 7269 7114 or at nick.henderson@fd.com.
Notes to Editors:
About ACP Mezzanine
ACP Mezzanine Limited (LSE AIM: ACPM) is a Jersey-incorporated, closed ended
investment company listed on AIM. It is a provider of mezzanine finance to European
small and mid-sized enterprises ("SMEs") - with a primary focus on the UK, France,
Germany and Italy - originating, structuring and underwriting the majority of its
investments through ACP Capital. ACP Mezzanine's lending can be provided in
conjunction with ACP Capital who may provide investment grade debt and equity
alongside the Company. ACP Mezzanine aims to optimise risk-adjusted returns by actively
managing its portfolio and to distribute at least 85% of profits as dividends. ACP Capital
owns 46% of ACP Mezzanine and, through a subsidiary, acts as its investment manager.
Fundamental changes in the market, such as Basel II, are expected to accelerate demand for alternatives to traditional bank financing in these segments. As a non-regulated lender, ACP Mezzanine is not affected by Basel II. In line with its strategy, ACP Mezzanine has a small exposure to the retail mortgage backed securities sector as well as an anticipated negligible exposure to the US (expected to be limited to certain US infrastructure assets).
By taking control of a majority of the underwriting process through ACP Capital's investment manager, ACP Mezzanine benefits from a diversified flow of assets whilst ensuring a risk-balanced growth. Its principal funding activities include:
- Non-investment grade funding lines (BB/B) as part of ACP Capital's strategy of
providing funding to its distinct geographic origination platforms - these are providers of specialised finance products mainly to SME companies below €50 million in size who provide loans mostly below €5 million
- Direct loans to SMEs which in turn will be B/BB rated (average loans of €5 - 20
million)
- Selective junior mezzanine loans to SMEs and other third parties which are
expected to generate immediate returns in excess of 15% (average loans of €5 -
20 million)
- Underwriting and subsequent syndication of non-investment grade debt packages (BB/B) on larger transactions, currently up to €75 million in size, with ACP Mezzanine holding no more than €20 million after syndication.
By the end of 2009, the Company intends to have €550 million of assets under management and looks set to achieve its target balance sheet mix as stated in its admission document.
ACP Mezzanine's Board includes Derek Vago, Christophe Tanghe, Wolfgang Mellinghof and two other Non-Executive Directors.
About ACP Capital
ACP Capital Limited (LSE AIM: APL) is a Jersey-incorporated specialist integrated
finance and asset management company focused on European small and mid-sized
enterprises. ACP Capital provides equity, mezzanine and senior debt to companies
targeting an integrated finance solution across their capital structure. ACP Capital aims to
benefit from the strong growth in SME demand for integrated finance to optimise corporate
profitability and the reduced appetite for SME lending among traditional banks owing to
higher regulatory capital requirements. ACP Capital is establishing strategic platforms in
Germany, France, the United Kingdom and Italy to originate lending and investment
opportunities to generate interest and fee income. In addition ACP Capital earns
management and performance-related fees from its listed investment vehicles, ACP
Mezzanine Limited and IFR Capital Plc. Since January 2006 ACP Capital has raised £215
million of public equity from leading institutional investors in primary and secondary
transactions.
ACP Capital's Board includes the highly-regarded retail entrepreneur, Heiner Kamps, the Director General of the international real estate investment and development company Jesta Group, Francois Georges, the Managing Director of the full service real estate private equity firm Presidio Partners LLC, Alan Braxton, an Italian certified barrister and Director of Investimente e Sviluppo S.p.a., Daniele Discepolo, Derek Vago, Eric Youngblood, Nikolaj Larsen and two other Non-Executive Directors.
Independent Review Report to ACP Mezzanine Limited
Introduction
We have been instructed by ACP Mezzanine Limited to review the financial information for the six months
ended 30 June 2007 which comprises the Consolidated Income Statement, Consolidated Balance Sheet,
Consolidated Cash Flow Statement, Consolidated Statement of Changes in Shareholders' Equity and the
related notes 1 to 7. We have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with the financial information.
This report is made solely to the Company in accordance with guidance contained in Bul etin 1999/4 " Review of interim financial information" issued by the Auditing Practices Board. To the ful est extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has
been approved by, the directors. The AIM Rules of the London Stock Exchange require that the accounting
policies and presentation applied to the interim figures should be consistent with those applied in preceding
annual accounts except where any changes, and the reasons for them, are disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 "Review of interim
financial information" issued by the Auditing Practices Board. A review consists principally of making
enquiries of group management and applying analytical procedures to the financial information and
underlying financial data and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as
tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than
an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore
provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the
financial information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that should be made to the
financial information as presented for the six months ended 30 June 2007.
Kingston Smith LLP
Chartered Accountants
Devonshire House
60, Goswel Road
London
EC1M 7AD
Dated: 25 July 2007
Consolidated Income Statement (Unaudited)
For the period ended 30 June 2007
| 6 months ended 30 June 2007 Unaudited |
Period ended 31 December 2006 Audited |
||
| £ | £ | ||
| Revenue | |||
| Investment income | 5,533,970 | 3,035,995 | |
| Fees receivable | 1,204,386 | 2,885 | |
| 6,738,356 | 3,038,880 | ||
| Interest payable and other related financing costs | (1,128,652) | (67,401) | |
| Exchange movements | 43,768 | (42,398) | |
| Equity-settled share-based payments | (58,049) | (41,069) | |
| Investment manager's fees | (875,000) | (753,460) | |
| Other operating expenses | (73,140) | (60,842) | |
| Profit before tax | 4,647,283 | 2,073,710 | |
| Income Taxes | 3 | - | - |
| Profit for the period attributable to the equity shareholders | 4,647,283 | 2,037,714 | |
| Earnings per share: | |||
| Basic (Euro cents) | 4 | 4.58 cents | 2.01 cents |
| Diluted (Euro cents) | 4 | 4.50 cents | 1.99 cents |
Al activities relate to continuing operations
There are no recognised gains and losses otherthan the profit forthe period stated above.Accordingly,a separate consolidated
statement of recognised income and expense is not presented in these financial statements.
Consolidated Balance Sheet (Unaudited)
As at 30 June 2007
| 30 June 2007 Unaudited |
31 December 2006 Audited |
|
| £ | £ | |
| Assets | ||
| Non-current assets | ||
| Investments | ||
| Loans and receivables | 98,332,056 | 107,522,875 |
| Total non-current assets | 98,332,056 | 107,522,875 |
| Current assets | ||
| Trade and other receivables | 2,347,148 | 1,507,980 |
| Cash and cash equivalents | 42,730,135 | 15,798,227 |
| Total current assets | 45,077,283 | 17,306,207 |
| Total assets | 143,409,339 | 124,829,082 |
| Non-current liabilities | ||
| Loans and borrowings | 39,816,271 | 19,265,934 |
| Total non-current liabilities | 39,816,271 | 19,265,934 |
| Current liabilities | ||
| Trade and other payables | 1,313,611 | 5,960,783 |
| Total current liabilities | 1,313,611 | 5,960,783 |
| Total liabilities | 41,129,882 | 25,226,717 |
| Net Assets | 102,279,457 | 99,602,365 |
| Equity & Reserves | ||
| Share capital 5 | - | - |
| Share premium | 95,783,580 | 95,783,580 |
| Share-based payment reserve | 1,761,401 | 1,781,071 |
| Retained earnings | 4,734,476 | 2,037,714 |
| Equity Shareholders' funds | 102,279,457 | 99,602,365 |
| Net Asset Value per share | 1.009 | 0.982 |
Consolidated Cash Flow Statement (Unaudited)
|
Notes to the Unaudited Interim Financial Statements
For the period ended 30 June 2007
- General Information
ACP Mezzanine Limited (the "Company") is a company incorporated on 31 May 2006 and registered in Jersey under registration number 93614. The Company's shares were admitted to trading on AIM on 26 July 2006. The Company carries on the business of an investment holding and management company. The business of the subsidiaries is the holding of non-investment grade assets and other investments.
- Basis of preparation
The unaudited interim financial statements have been prepared on the basis of the accounting policies set out in the Group's Report and Financial Statements for the period ended 31 December 2006. The interim financial statements comply with IAS 34 "Interim Financial Reporting". The interim financial statements and the comparative information for the period ended 31 December 2006 do not constitute statutory financial statements within the meaning of the Companies (Jersey) Law 1991. The Report and Financial Statements for the period ended 31 December 2006 contained an unqualified audit report and the audit report not contain any statement of matters that needed to be brought to the attention of the members. Interim financial statements for the period ended 30 June 2006 were not prepared. Accordingly, no comparatives for that period are disclosed in the interim financial statements. The interim financial statements were authorised for issue by the Directors on 25 July 2007.
- Taxation
The Company is a tax-exempt Jersey limited company. Accordingly, no provision for income taxes is made.
- Earnings per share
The calculation of the basic earnings and diluted earnings per share attributable to the equity shareholders of the Company is based on the following data:
6 months to 30
June 2007
£Period to 31
December 2006
£Earnings Earnings for the purposes of basic earnings per share being profit attributable to equity shareholders of the Company 4,647,283 2,037,714 Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share 101,412,000 101,412,000 Effect of dilutive potential ordinary shares Share options 1,866,607 944,480 Weighted average number of ordinary shares for the purposes of diluted earnings per share 103,278,607 102,356,480
- Share Capital
As at 30 June
2007
£As at 31 December 2006
£Authorised called up and fully paid 101,412,000 ordinary shares of no par value. - -
- Dividend
A dividend in respect of the period ended 31 December 2006 of 2 Euro cents per share, amounting to a total dividend of €2,028,240 was paid in the period.
- Post Balance Sheet Events
On 30 May 2007, the Company entered into a commitment to provide €75 million of financing for the acquisition of Homann Chilled Food GmbH by IFR Capital plc. The funding was completed on 3 July 2007 from bank facilities available to the Company and the redemption of loans and receivables amounting to €35 million. The €75 million advanced will be accounted for as an investment held at fair value through profit or loss by the Company.
A dividend in respect of the period ended 30 June 2007 of 4.50 Euro cents per share, amounting to a total dividend of €4,563,540 has been declared. These interim financial statements do not reflect this dividend payable.