Interim results for the six month period ending 30 June 2008
30 August 2008
ACP Mezzanine Limited (“ACP Mezzanine” or the “Company”) today announces its interim results for the six months ended 30 June 2008.
Highlights:
- Secondary fund raising raised €80 million of which €47.5 million was subscribed by ACP Capital Limited
- Investments totalling €16.3 million made in the period, including €9 million in Pfaff Industrie Machinen AG ("Pfaff")
- Fair value adjustment and provisions to investment and loan portfolio resulting in an unrealised loss of €28.5 million (30 June 2007: nil)
- Net asset value per share at 30 June 2008: €0.648 (30 June 2007: €1.009)
- Loss per share €0.1925 (30 June 2007: earnings per share €0.0450)
- Cash and cash equivalents at the balance sheet date of €90.4 million (30 June 2007: €42.7 million)
- Significant board changes in August 2008 resulting in Mr. John Chapman being co-opted to the board and Messrs Vago, Youngblood and Tanghe resigning
- No further investments made since August 2008; a loan commitment of circa €10.7 million relating to Leasecom Group SAS remains outstanding
- Pfaff advised that it had filed for insolvency on 11 September 2008. The directors are of the opinion that it is unlikely that the loan and accrued interest (€9,061,250) will be repaid. These balances are included on the balance sheet as at 30 June 2008. Please refer to note 9a on page 18 for further details
- Decision to terminate Deutsche Bank AG facility made on 25 September 2008 resulting in a breakage fee of €3.2 million but an exit from an uneconomic facility
- Board has resolved to not pay quarterly dividends; intention to return cash to investors, presently subject to requisite shareholders and regulatory approvals
For Further Information:
- Chris Wells / Stewart Wallace of Collins Stewart Europe Limited - +44 (0) 207 523 8350
- www.acpcapital.com
John Chapman, Chairman of ACP Mezzanine said:
Dear Shareholders:
I am the new Chairman of ACP Mezzanine (“ACPM”) and am also the Chairman of ACP Capital (“ACP”). I would like to address here the results for the first half of 2008 when ACPM was under former management, what has happened at both companies over the last few months, and what we are looking at for the future for our portfolio and distributions.
Regrettably, I must start out announcing a loss of €23.2 million. The primary reason for this loss is the adjustment to the value at which ACPM’s investments in collateralised loan obligation (“CLOs”) and collateralised debt obligations (“CDOs”) are carried to accord with current indicative market pricing.
Writing down these structured assets and incurring a non-cash charge of €28.5 million was not an easy decision. The market for these products is in turmoil. There is little trading and obtaining accurate pricing information is difficult. Market turbulence has been further exacerbated by the fact that most of ACPM’s investments are in the low ranked, subordinated tranches. One source of pricing was through our leveraged facility with Deutsche Bank and the numerous margin calls we faced until we terminated the facility on 25 September 2008. Other sources of pricing have been the desks at some of the financial institutions that structured and manage these products. As of 30 June the indicative market value for these structured products was about 68% of their original cost.
There is a view that the pricing of these structured products is inaccurate and does not reflect an appropriate valuation. The crux of this argument is that these products are performing and paying coupons as agreed – so the market must be wrong.
We gave due consideration to this argument and decided to rely on indicative market prices rather than historical costs. Indicative pricing in our view is forward looking and based on the market’s perception of the likelihood of continued future performance and future coupon payments over the remaining life of the product. The product status reports indicating covenant compliance and the periodic coupon payments are backward looking. Note, however, that this adjustment is a non-cash adjustment that has no effect on ACPM’s actual cash and cash equivalents position, which as of 30 June 2008 was €90.4 million and as of the date of this letter was €36.1 million. Moreover, should the pricing of these products improve, ACPM would be able to write up the values and incur a commensurate, non-cash, gain. But please also bear in mind that as of the date of this letter (as opposed to 30 June 2008), on a weighted average basis, the average indicative market prices of the structured assets have reduced further.
* * * *
I would like now to turn to an overview of the events of the last few months and then conclude with an analysis of our portfolio.
The May 2008 Request For Return of Capital
Dissatisfied with ACP’s execution of its business model and compensation practices, ACP’s largest shareholder, owning close to 30% of ACP’s shares, served a written request on the ACP board in mid-May 2008. That request noted that ACP’s shares had been trading at a significant discount to NAV and requested an opportunity to redeem some shares for cash. This shareholder requested that ACP refrain from participating in the ACPM offering scheduled for the following month and from making any new investments until it had received shareholder approval for doing so. The request also asked for a meeting with ACP’s board to discuss the merit of these ideas.
On 2 June, the ACP board rejected the shareholder’s requests and stated that it: (i) would not meet with the shareholder, (ii) would proceed with the large participation in ACPM’s secondary offering making ACPM a de-facto subsidiary of ACP, (iii) intended to continue making new investments, and, (iv) offered to assist the shareholder to sell its shares through a “block trade”.
The ACPM Secondary Offering
On 4 June 2008, ACPM proceeded with the secondary offering. The ACPM offering was ultimately coercive because, notwithstanding that the original intention was to raise money at €0.80 per share, its secondary fundraising was placed at €0.60 per share, a 21.5% discount to the share price at the opening of the road show on 13 May 2008. Existing shareholders were faced with the unpleasant choice of either subscribing for new shares or not subscribing and having their ownership interest diluted.
According to ACPM‘s RNS announcement on 7 May 2008, the objective was to raise €150 million to fund a purported “pipeline” of mezzanine debt. The “pipeline’s” largest component was a transaction called “Helios CDO Limited,” a large CDO comprising sixty-one small loans to German corporate borrowers sourced by a third party broker.
ACPM issued an RNS announcement dated 4 June 2008 stating that “the management of the investment manager, including the Executive Directors Derek Vago and Eric Youngblood, committed to a combined minimum subscription of €1.25 million in the placing.” Despite their commitment to subscribe in the amount of €1.15 million, the two Executive Directors appeared to have subscribed for less than 4% of that amount. Rather than raising €150 million, the offering raised only €80 million. Almost 60% of the funds raised, €47.5 million, was ACP’s money. Furthermore, ACP exercised its right to purchase 1 million ordinary shares of ACPM granted on 20 July 2006 at €1.00 per share.
The upshot of the ACPM secondary offering was that ACP increased its investment in ACPM from about 47% to about 54%. Cash in the amount of €47.5 million moved from ACP’s balance sheet to ACPM’s. Management did not invest in a meaningful way. Existing shareholders who did not subscribe were diluted.
The 17 June Requisition
A little over a week after the ACPM secondary offering, on 17 June 2008, ACP’s largest shareholder requisitioned an extraordinary general meeting of shareholders to replace six directors with three new ones. The idea was that ACP would be placed in “run off.” ACP would write no new business but, rather, would undertake an orderly realisation of its assets over a period of years with no forced sale of any asset so as to achieve the highest risk adjusted return for shareholders.
Following the approach from the largest shareholder, but before the EGM, ACPM undertook a number of transactions, not all of which were announced:
- On 11 June 2008, ACPM entered into a commitment to subscribe for €15 million of loan notes issued by an SPV formed to fund Leasecom Group SAS (“Leasecom”), a so-called “strategic platform”. On 13 June 2008 ACPM advanced about 28% of that commitment;
- On 16 June 2008 ACPM made a loan to PFAFF Industrie Maschinen (“PFAFF”), a German sewing machine manufacturer, for €9 million (“the PFAFF loan”). This investment was introduced by GCI Management AG, another “strategic platform.” A wholly-owned subsidiary of GCI Management, was the majority shareholder in PFAFF. The PFAFF loan was secured by a pledge over that entity’s shares in PFAFF.
Less than ninety days after the drawdown, PFAFF voluntarily filed for insolvency. According to a report issued by a “stakeholder conference” on the eve of insolvency, PFAFF suffered from an unworkable capital structure including liquidity constraints, high overheads, “over-aged” product lines, uncompetitive product pricing and other issues. It appears as of this writing that any recovery from the PFAFF loan will be minimal; - On 8 July 2008, ACPM renegotiated its financing arrangements with Deutsche Bank. The amendments to the facility resulted in a steep increase in the minimum return criteria to be paid to Deutsche Bank through 2012. This had the effect of increasing costs to shareholders resulting from the change in control on 17 July 2008. As a result of the decreased valuation of the underlying CDO and ABS portfolio and large margin calls, the facility was largely cash collateralised;
- Finally, both ACP and ACPM were taking substantial steps to complete investments in the Helios CDO Limited transaction. The plan was that ACP would have invested €15.0 million and ACPM €56.6 million (together 56% of the transaction) in several classes of notes issued by a Lehman Brothers structured CDO. The notes had eight year maturities. The underlying portfolio comprised sixty-one loans to German Mittelstand borrowers in amounts between circa €0.5 million and circa €3.5 million.
The ACP Extraordinary General Meeting
On 17 July 2008, about 53% of ACP’s shares outstanding and about 64% of those shares voting at the meeting voted to remove all of ACP’s directors save for the two based in Jersey. On 25 July, the three former executive directors of ACP resigned their employment positions with ACP’s group by lawyers’ letters alleging “constructive dismissal” and ceased to be members of ACP’s advisor, ACP Capital UK LLP.
Following the changes at ACP, ACP as majority shareholder of ACPM asked several ACPM directors to resign. Those directors refused and ACP was forced to requisition an EGM for ACPM to remove them. Those directors eventually resigned from ACPM (and from ACPM’s investment manager, ACP Investment Management Limited “ACPIM”)), and the ACPM EGM requisition was withdrawn.
The New Board and New Management Team
Our board now comprises the two Jersey based directors who ACP had not requested to resign as well as me. I am a lawyer and Chartered Financial Analyst with substantial experience in winding up funds, selling off their assets and returning the proceeds to shareholders. We have also invited Stephen Coe to join the board. Steve is a chartered accountant with many years of hands on experience in the offshore funds industry. Once regulatory approval is obtained, Steve will head the audit committee and ensure appropriate reporting and financial controls are in place. Until then, Steve will be a board observer.
Following the changes at board level, ACP undertook a comprehensive examination of its office and determined that ACPIM should be strengthened by the addition of two new directors, subject to regulatory approval. We have now signed contracts. I would like to introduce you to them. Lyndon Miles will be our new managing director. Lyndon has many years’ experience in debt finance and was formerly a director with ACP. In addition to overall responsibility for ACP’s office, Lyndon will oversee the disposal of our debt portfolio. Jean-Christophe Gas will be second in charge at the director level. JC has many years experience in corporate finance and was formerly a Vice-President with ACP. Both Lyndon and JC will work together under my direct supervision and will have sufficient support to accomplish our objectives of disposing of all assets at the right price in the best interest of shareholders.
Helios CDO Limited is Blocked and Leverage Eliminated
Given the state of the world’s financial markets, proceeding with a large structured transaction like the Helios CDO transaction and having a leverage facility with Deutsche Bank seemed imprudent and in any event was contrary to the wishes of our majority shareholder, ACPC. Following the change of board, we declined to participate in the Helios CDO transaction and informed Deutsche Bank that we intended to terminate the leverage facility.
Regarding the leverage, our calculations showed that notwithstanding the breakage costs of over €3.9 million it was in ACPM’s interest to terminate the facility. We have now done so and ACPM is unlevered.
Our Investments
With the elimination of the Deutsche leverage facility, our portfolio is relatively straightforward.
Our portfolio comprises a large investment in IFR Capital an AIM-quoted food group, investments in various structured products and several bilateral loans. Our assets can therefore be summarised as follows:
As of 30 June, ACPM had approximately €56.2 million or about 52.2% of its assets invested in IFR Capital. That investment includes four classes of senior debt and preferred shares. IFR’s business includes the Nordsee retail fast food fish chain, Homman a German manufacturer primarily of chilled salads, Hamker, a German manufacturer of sauces, and Bastians, a retailer of baked goods. IFR Capital’s capital structure includes four classes of debt, and preferred equity. The preferred equity accrues interest at an initial rate of 20.0% per annum for the first 12 months, 27.5% for the second 12 months and 37.5% for the third 12 months and for all subsequent periods. IFR Capital has made all interest and capital payments as required under the facility agreement. About €2.5 million has accrued on the preferred equity held by ACPM.
As mentioned earlier, on 16 June 2008 ACPM provided a €9 million loan to PFAFF, which subsequently became insolvent. The loan has no direct charge over any assets of PFAFF but is secured by shares held by GCI Bridge Capital in PFAFF. Nonetheless, for reasons that are complex and probably not worth going into, as of this writing there is a possibility that a buyer for the PFAFF loan could emerge, but at a substantial discount to par. An investigation is to be conducted to understand how ACPM made a loan that defaulted less than ninety days later.
Our two other bilateral loans are a loan to Leasecom and a €3 million loan to GCI Automotive Holding, which is the holding company of a German auto parts manufacturer, Maschinenfabrik Spaichingen. The Leasecom loan of about €4.25 million is the first tranche of a total commitment of €15 million. Both of these companies are performing well and both loans are performing. At present we see no problems with either.
Turning to the structured products, about 29% our portfolio comprises CDO and CLO products. Because we may, at the right time, be sellers of these assets I will not get into the details of the specific instruments we hold. I think that by now we have all read about these products – the convoluted legal structures, the generous ratings by the rating agencies, and the myriad assets packed inside – and I don’t have anything to add. In pricing these products for the interims we have canvassed the market for indicative quotes and have huge variances among dealers with 30% or 50% variances not unusual. Our valuation is an average of the indicative prices we had obtained as of 30 June 2008. We do not claim that the assets would have been saleable at that price and as of mid-September 2008 indicative prices on a weighted average basis have reduced further.
****
Our investment manager, ACP Investment Management, is analysing our portfolio and assessing the strategy of ACPM under the current market conditions. I would expect that given the wishes of our largest shareholder, a decision will be made in accordance with regulatory requirements to return capital by distributing the bulk of our cash and over time realising those assets that are realisable at appropriate prices.
I and my fellow directors appreciate your support in these difficult times.
Respectfully yours,
John D. Chapman
Chairman
29 September 2008
Portfolio Review
At 30 June 2008, ACP Mezzanine’s portfolio consisted of €109.8 million of non-cash investments (including current assets). The portfolio consisted of 22 advances to 14 borrowers, with an average asset size of €4.9 million. The largest single borrower group exposure is to IFR Capital plc with four loans and preferred shares totalling fair value of €56.2 million.
The portfolio is structured as follows:
| Geography | |
| Germany | 63.3% |
| Diversified Europe | 27.4% |
| UK | 4.1% |
| France | 4.0% |
| US | 1.2% |
| Total | 100.0% |
| Asset-type | |
| CDO | 9.7% |
| CLO | 19.0% |
| Corporate SME | 67.3% |
| Corporate loans | 4.1% |
| Total | 100.0% |
| Fixed / Floating | |
| Floating | 68.7% |
| Fixed | 31.3% |
| Total | 100.0% |
| Currency | |
| EUR | 90.9% |
| GBP | 8.0% |
| USD | 1.2% |
| Total | 100.0% |
| Rating | |
| AA | 4.0% |
| B | 19.4% |
| BB | 41.2% |
| Not Rated | 35.4% |
| Total | 100.0% |
Liquidity Analysis
As at 30 June 2008, ACP Mezzanine had approximately €72.1 million of available cash on the balance sheet. An additional €18.3 million was held on a margin account to offset a facility from Deutsche Bank AG (“Deutsche Bank”). On 25 September 2008, the Company terminated this facility by settling all outstanding commitments, interest and associated breakage fees. Further details are available in note 9b on page 18.
FCC Financière Tourves Commitment
On 13 June 2008, ACP Mezzanine subscribed for €4.25 million of loan notes issued by FCC Financière Tourves, a party related to Leasecom Group SAS, as part of a commitment of €15 million. Further details are available in note 8 on page 17.
For Further Information:
- Chris Wells / Stewart Wallace of Collins Stewart Europe Limited - +44 (0) 207 523 8350
- www.acpcapital.com
About ACP Mezzanine:
ACP Mezzanine is a Jersey-incorporated, closed ended investment company quoted on AIM. Prior to 17 July 2008, its stated strategy was to be a provider of sub-investment grade finance to European small and mid-sized enterprises - with a primary focus on the United Kingdom, France, Germany and Italy. Following the change of control on 17 July 2008 of ACP Capital and subsequent amendments to the ACP Mezzanine board of directors on 5 / 8 August 2008, ACP Investment Management Limited (ACP Mezzanine’s investment manager) is currently assessing the strategy of ACP Mezzanine under the current market conditions.
About ACP Capital:
ACP Capital is a Jersey-incorporated closed-ended investment company quoted on AIM. Through its regulated Jersey subsidiary, it is also the investment manager and majority shareholder of ACP Mezzanine.
The board of ACP Capital is carrying out an in-depth review of the assets and businesses of ACP Capital with a view to minimising or curtailing future spending on new acquisitions and, in due course and subject to the necessary regulatory requirements, initiating a gradual realisation of the group's assets as opportunities arise. It is also intended that any net proceeds received by ACP Capital on the disposal of any assets will be returned to shareholders.
Independent Review Report of ACP Mezzanine Limited
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the Consolidated Income Statement, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity and the related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors’ Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Rules of the AIM Market.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’ as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Rules of the AIM Market.
Kingston Smith LLP
Chartered Accountants
Devonshire House
60, Goswell Road
London EC1M 7AD
Dated: 29 September 2008
Consolidated Income Statement (Unaudited)
For the period ended 30 June 2008
| 6 months ended 30 June 2008 | 6 months ended 30 June 2007 | Full year ended 31 December 2007 | ||
| Unaudited | Unaudited | Audited | ||
| € | € | € | ||
| Revenue | ||||
| Investment income | 8,005,087 | 5,533,970 | 13,489,908 | |
| Loss on disposal of loans and receivables | - | - | (6,250) | |
| Fees receivable | 420,000 | 1,204,386 | 2,596,892 | |
| 8,425,087 | 6,738,356 | 16,080,550 | ||
| Impairment of loans and receivables | (22,254,950) | - | - | |
| Change in value of investments held at fair value | (6,247,823) | - | - | |
| Interest payable and other related financing costs | (1,199,042) | (1,128,652) | (2,798,202) | |
| Exchange movements | (413,040) | 43,768 | (809,032) | |
| Equity-settled share-based payments | - | (58,049) | (64,569) | |
| Investment manager's fees | (949,812) | (875,000) | (1,942,767) | |
| Other operating expenses | (594,914) | (73,140) | (252,109) | |
| (Loss)/ profit before tax | (23,234,494) | 4,647,283 | 10,213,871 | |
| Income taxes | 3 | - | - | - |
| (Loss)/ profit for the period attributable to the equity shareholders | (23,234,494) | 4,647,283 | 10,213,871 | |
| (Loss)/ earnings per share | 4 | |||
| Basic | (19.25) cents | 4.58 cents | 10.07 cents | |
| Diluted | (19.25) cents | 4.50 cents | 9.97 cents |
There are no recognised gains and losses other than the loss for the 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 2008
| 6 months ended 30 June 2008 | 6 months ended 30 June 2007 | Full year ended 31 December 2007 | ||
| Unaudited | Unaudited | Audited | ||
| € | € | € | ||
| Assets | ||||
| Non-current assets | ||||
| Investments | ||||
| Investments measured at fair value through profit or loss | 55,550,818 | - | 63,019,114 | |
| Loans and receivables | 54,305,262 | 98,332,056 | 58,728,562 | |
| 109,856,080 | 98,332,056 | 121,747,676 | ||
| Current assets | ||||
| Investments measured at fair value through profit or loss | 679,590 | - | 538,460 | |
| Trade and other receivables | 2,164,402 | 2,347,148 | 9,024,895 | |
| Cash and cash equivalents | 90,423,730 | 42,730,135 | 15,157,208 | |
| Total current assets | 93,267,722 | 45,077,283 | 24,720,563 | |
| Total assets | 203,123,802 | 143,409,339 | 146,468,239 | |
| Equity & Reserves | ||||
| Stated capital account | 5 | 173,606,847 | 95,783,580 | 95,783,580 |
| Share-based payment reserve | 1,613,111 | 1,761,401 | 1,767,142 | |
| Retained earnings | (22,412,760) | 4,734,476 | 5,738,303 | |
| Equity shareholders' funds | 152,807,198 | 102,279,457 | 103,289,025 | |
| Non-current liabilities | ||||
| Loans and borrowings | 47,506,818 | 39,816,271 | 34,854,559 | |
| Total non-current liabilities | 47,506,818 | 39,816,271 | 34,854,559 | |
| Current liabilities | ||||
| Trade and other payables | 2,809,787 | 1,313,611 | 8,324,655 | |
| Total current liabilities | 2,809,787 | 1,313,611 | 8,324,655 | |
| Total liabilities | 50,316,604 | 41,129,882 | 43,179,214 | |
| Total equities and liabilities | 203,123,802 | 143,409,339 | 146,468,239 | |
| Net asset value per share | 0.648 | 1.009 | 1.018 |
Consolidated Statement of Changes in Shareholder’s Equity (Unaudited)
For the period ended 30 June 2008
|
|
Stated capital account |
|
Share-based payment reserve |
|
Retained earnings |
|
Total |
|
|
€ |
|
€ |
|
€ |
|
€ |
At 1 January 2007 |
|
95,783,580 |
|
1,781,071 |
|
2,037,714 |
|
99,602,365 |
Dividend paid |
|
- |
|
- |
|
(2,028,240) |
|
(2,028,240) |
Profit for the period |
|
- |
|
- |
|
4,647,283 |
|
4,647,283 |
Share based payments |
|
- |
|
58,049 |
|
- |
|
58,049 |
Share options cancelled |
|
- |
|
(77,719) |
|
77,719 |
|
- |
At 30 June 2007 |
|
95,783,580 |
|
1,761,400 |
|
4,734,476 |
|
102,279,457 |
|
|
|
|
|
|
|
|
|
Dividend paid |
|
- |
|
- |
|
(4,563,540) |
|
(4,563,540) |
Profit for the period |
|
- |
|
- |
|
5,566,588 |
|
5,566,588 |
Share based payments |
|
- |
|
6,520 |
|
- |
|
6,520 |
Share options cancelled |
|
- |
|
(779) |
|
779 |
|
- |
At 31 December 2007 |
|
95,783,580 |
|
1,767,141 |
|
5,738,303 |
|
103,289,025 |
|
|
|
|
|
|
|
|
|
Dividend paid |
|
- |
|
- |
|
(5,070,600) |
|
(5,070,600) |
Loss for period |
|
- |
|
- |
|
(23,234,494) |
|
(23,234,494) |
Share Issue |
|
76,823,267 |
|
- |
|
- |
|
76,823,267 |
Share options exercised |
|
1,000,000 |
|
(126,891) |
|
126,891 |
|
1,000,000 |
Share options cancelled |
|
- |
|
(27,140) |
|
27,140 |
|
- |
At 30 June 2008 |
|
173,606,847 |
|
1,613,110 |
|
(22,412,760) |
|
152,807,198 |
|
|
|
|
|
|
|
|
|
Consolidated Cash Flow Statement (Unaudited)
For the period ended 30 June 2008
|
|
6 months ended 30 June 2008 |
|
6 months ended 30 June 2007 |
|
Full year ended 31 December 2007 |
|
|
Unaudited |
|
Unaudited |
|
Audited |
|
|
€ |
|
€ |
|
€ |
Cash flow from operating activities |
|
|
|
|
|
|
Purchase of investments |
|
(16,293,780) |
|
(26,778,605) |
|
(132,820,420) |
Receipts from investments |
|
406,220 |
|
30,467,590 |
|
103,981,379 |
Investment income |
|
4,804,700 |
|
5,958,481 |
|
13,345,397 |
Fee income |
|
125,722 |
|
- |
|
2,596,841 |
Investment manager's fee |
|
(875,000) |
|
(875,000) |
|
(1,895,833) |
Other operating expenses |
|
(158,790) |
|
(54,354) |
|
(194,676) |
|
|
|
|
|
|
|
Net cash (outflow) / inflow from operations |
|
(11,990,928) |
|
8,718,112 |
|
(14,987,313) |
|
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
|
Proceeds from issues of share capital |
|
81,000,000 |
|
- |
|
- |
Costs of issues of share capital |
|
(1,275,458) |
|
- |
|
- |
Repayment of bank loan |
|
406,220 |
|
(19,265,934) |
|
(21,024,486) |
Drawdown of bank loan |
|
13,729,933 |
|
40,549,163 |
|
44,664,837 |
Interest paid and other related financing costs |
|
(1,084,106) |
|
(1,061,180) |
|
(2,476,676) |
Dividends paid |
|
(5,070,600) |
|
(2,028,240) |
|
(6,591,780) |
Net cash inflow from financing activities |
|
87,299,769 |
|
18,193,809 |
|
14,571,895 |
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
75,308,841 |
|
26,911,921 |
|
(415,418) |
|
|
|
|
|
|
|
Cash and cash equivalents at start of period |
|
15,157,207 |
|
15,798,227 |
|
15,798,227 |
Effect of exchange rate fluctuations |
|
(42,318) |
|
19,987 |
|
(225,602) |
Cash and cash equivalents at end of period |
|
90,423,730 |
|
42,730,135 |
|
15,157,207 |
Included within cash and cash equivalents of €90,423,730, €18.3 million is held on a margin account to offset a facility from Deutsche Bank AG.
Notes to the Unaudited Interim Financial Statements
For the period ended 30 June 2008
1. 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.
2. Basis of Preparation
The condensed 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 year ended 31 December 2007. The interim financial statements comply with IAS 34 "Interim Financial Reporting". The interim financial statements and the comparative information do not constitute statutory financial statements within the meaning of the Companies (Jersey) Law 1991. The Report and Financial Statements for the year ended 31 December 2007 contained an unqualified audit report and the audit report did not contain any statement of matters that needed to be brought to the attention of the members.
The interim financial statements were authorised for issue by the Directors on 29 September 2008.
3. Taxation
The Company has exempt status for Jersey taxation purposes for the year of assessment 2008. Effective 1 January 2009, Jersey’s tax regime will change. The new regime will impose a general corporate income tax rate of 0%. A 10% rate will apply to certain regulated financial services companies and 20% rate will apply to utilities and income from Jersey land (i.e. rents and development profits). Jersey registered companies will be treated as resident for tax purposes and will be subject to zero or ten percent standard income tax rate.
Since the Company is not a regulated financial service entity, the effect of the new tax regime is limited to the change of status from exempt to liable to Jersey income tax at 0%.
Notes to the Unaudited Interim Financial Statements
For the period ended 30 June 2008 (Continued)
4. 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:
Earnings |
|
6 months to 30 June 2008 |
|
6 months to 30 June 2007 |
|
Year to 31 December 2008 |
|
|
|
€ |
|
€ |
|
€ |
|
Earnings for the purposes of basic earnings per share being profit attributable to equity shareholders of the Company |
|
(23,234,494) |
|
4,647,283 |
|
10,213,871 |
|
|
|
|
|
|
|
|
|
Number of shares |
|
|
|
|
|
|
|
Weighted average number of ordinary shares for the purposes of basic earnings per share |
120,708,500 |
|
101,412,000 |
|
101,412,000 |
||
Effect of dilutive potential ordinary shares |
|
|
|
|
|
|
|
Share options |
|
23,899 |
|
1,866,607 |
|
1,058,884 |
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares for the purposes of diluted earnings per share |
|
120,732,399 |
|
103,278,607 |
|
102,470,884 |
|
Share options with an exercise price exceeding the weighted average quoted price of the issued shares in the period have been excluded from the calculation of diluted earnings per share as they are not deemed dilutive. As a result of this anti-dilutive effect of the issued share options, the basic and diluted earnings per share is the same.
5. Stated Capital
|
|
Number of shares |
|
|
|
Authorised, called up and fully paid |
|
|
Ordinary shares of no par value at 1 January, 30 June and 31 December 2007 |
|
101,412,000 |
Ordinary shares issued in secondary placing |
|
133,333,333 |
Share options exercised |
|
1,000,000 |
At 30 June 2008 |
|
235,745,333 |
During the period ended 30 June 2008, a secondary placing of 133,333,333 shares was made at €0.60 cents per share, which provided proceeds of €76,823,267 after costs. Also in the period, ACP Capital Limited exercised options as part of an Option Deed to acquire 1,000,000 shares at €1.00 per share which provided net proceeds of €1,000,000.
Notes to the Unaudited Interim Financial Statements
For the period ended 30 June 2008 (Continued)
6. Dividend
Dividends declared and paid |
|
6 months ended 30 June 2008 |
|
6 months ended 30 June 2007 |
|
Full year ended 31 December 2007 |
|
|
€ |
|
€ |
|
€ |
2006 Final dividend (2 cents per share) |
|
- |
|
2,028,240 |
|
2,028,240 |
|
|
|
|
|
|
|
2007 Interim dividend (4.5 cents per share) |
|
- |
|
- |
|
4,563,540 |
|
|
|
|
|
|
|
2007 Final dividend (5 cents per share) |
|
5,070,600 |
|
- |
|
- |
|
|
5,070,600 |
|
2,028,240 |
|
6,591,780 |
An interim dividend in respect of 2008 was paid on 11 July 2008 to shareholders of 101,412,000 shares at 3.75 Euro cents per share. The shares issued in the secondary placing did not carry the right to receive this interim dividend but rank pari passu in all other respects.
7. Segmental Reporting
The Group has only one line of business and its investment portfolio consists almost entirely of European based assets. Accordingly, no additional segment information is disclosed.
8. Commitments
On 11 June 2008, ACP Mezzanine Limited made a commitment to buy loan notes issued by a French vehicle, FCC Financière Tourves, up to a maximum of €15 million. Proceeds raised from the issuance of the notes will be used through a loan between FCC Financière Tourves and Leasecom Financial Assets SAS (the “Loan”), a subsidiary of Leasecom SAS, to allow the latter to fund 95% of the purchase price of lease contracts originated by Leasecom SAS. The Loan has been synthetically wrapped by Coface Deutschland AG (Fitch Ratings: AA, Moody’s: Aa3, S&P: AA-). As at 30 June 2008 the Company had acquired notes totalling €4.25 million under this commitment.
9. Post Balance Sheet Events
a) Pfaff Industrie Maschinen
On 5 September 2008, the Company announced that it had serious concerns about the ability of Pfaff Industrie Maschinen AG ("Pfaff"), a German industrial company, to meet its obligations under a €9 million loan facility for which ACP Mezzanine is the lender. This loan was arranged in June 2008. On 12 September 2008, ACP Mezzanine was informed by Pfaff that it had filed for insolvency as it was unable to obtain additional funding.
Notes to the Unaudited Interim Financial Statements
For the period ended 30 June 2008 (Continued)
9. Post Balance Sheet Events (cont)
a) Pfaff Industrie Maschinen (cont)
As at 30 June 2008, loans and receivables include €9 million in respect of this investment; a further €61,250 of income receivable on this facility is included within trade receivables. Any impairment in value of this investment results from events subsequent to 30 June 2008 and no provision has been made in these condensed financial statements for any loss that may eventually arise
Pfaff is currently in discussions with its creditors, but it is expected that this investment may detrimentally affect the net asset value of ACP Mezzanine as the directors consider it unlikely that the loan and accrued interest will be repaid.
b) Deutsche Bank Facility
On 25 September 2008, the Company announced that it had agreed to terminate its structured sale and repurchase transaction with Deutsche Bank AG (“Deutsche”) by settling all outstanding commitments, interest and associated breakage fees and as a consequence its balance sheet will be in a net cash position and unleveraged.
As a result of the early termination of the facility, a breakage fee of €3.2 million was paid to Deutsche on 25 September 2008.
c) Changes to Directors
On 5 August 2008, Mr. Derek Vago and Mr. Eric Youngblood resigned as directors of the Company. On 8 August 2008, Mr. Christopher Tanghe resigned as a director of the Company. On 8 August 2008, Mr. John Chapman was appointed a director and chairman of the Company.
Directors and Advisors
Directors
Mr. George Baird
Mr. Graeme Ross
Mr. Wolfgang Mellinghoff (resigned 18 February 2008)
Mr. Derek Vago (resigned 5 August 2008)
Mr. Eric Youngblood (resigned 5 August 2008)
Mr. Christophe Tanghe (resigned 8 August 2008)
Mr. John Chapman (appointed 8 August 2008)
Registered Office:
Ordnance House
31 Pier Road
St Helier, Jersey, JE4 8PW
Channel Islands
Secretary:
R&H Fund Services (Jersey) Limited
Ordnance House
31 Pier Road
St Helier, Jersey, JE4 8PW
Channel Islands
Registrars:
Computershare Investor Services (Channel Islands) Limited
Ordnance House
31 Pier Road
St Helier, Jersey, JE4 8PW
Channel Islands
Bankers:
Deutsche Bank International Limited
PO Box 727
St Paul’s Gate
New Street
St Helier, Jersey, JE4 8ZB
Channel Islands
Nominated Adviser and Broker:
Collins Stewart Europe Limited
9th Floor
88 Wood Street
London, EC2V 7QR
Auditor:
Kingston Smith LLP
Devonshire House
60 Goswell Road
London, EC1M 7AD
Legal Advisers:
Travers Smith LLP
10 Snow Hill
London, EC1A 2AL
Ozannes
P.O Box 733
29 Esplanade
St Helier, Jersey JE4 0ZS
Channel Islands