• by  • April 9, 2014 • Crystal Amber

    ¬†CRYSTAL AMBER FUND LIMITED (“Crystal Amber Fund” or the “Fund”)

    Monthly Net Asset Value

    Crystal Amber Fund announces that its unaudited net asset value (“NAV”) per share on 31 March 2014 was 162.21p (28 February: 164.36p per share).

    The proportion of the Fund’s NAV at 31 March 2014 represented by the ten largest holdings, other investments and cash (including accruals), was as follows:


    Top ten holdings Pence per share Percentage of investee equity held
    Thorntons plc 12.4 9.30%
    Tribal Group plc 11.1 4.60%
    AER Lingus Group plc 10.7 1.10%
    4imprint Group plc 10.2 4.30%
    Sutton Harbour Holdings plc 9.1 29.00%
    Leaf Clean Energy Company 8.8 10.10%
    API Group plc 8.6 11.60%
    TT electronics plc 8 1.80%
    STV Group plc 6.5 3.50%
    Norcros plc 6.2 4.00%
    Total of ten largest holdings 91.6
    Other investments 61.9
    Cash and accruals 8.7
    Total NAV 162.2

    Investment Adviser’s quarterly commentary on the portfolio

    Over the quarter to 31 March 2014, NAV per share increased by 3.9 per cent. The top three positive contributors to NAV growth over the quarter to the end of March 2014 were Plus500 Limited (2.2 per cent contribution), Tribal Group plc (1.0 per cent) and Thorntons plc (0.7 per cent). The three main detractors have been Sutton Harbour Holdings plc (-0.7 per cent), Smith News plc (-0.7 per cent) and Devro plc (-0.6 per cent).

    Over the quarter to 31 March 2014, the Fund disclosed a new holding in AER Lingus Group plc and a notifiable holding in Hayward Tyler Group plc. During the period, following strong share price gains, the Fund has taken some profits on Cenkos Securities plc, Norcros plc, Plus500 Limited, Smith News plc and TT electronics plc. Significant points to note regarding individual investments are summarised below:-

    Thorntons plc (“Thorntons”)

    During the quarter, the Fund increased its holding in Thorntons. The Fund is now the largest shareholder in Thorntons, with the average cost per share now 75p.

    The Fund believes that operating margins at Thorntons have the potential to increase very significantly and that current market estimates fail to reflect this. Moreover, international sales can provide an additional channel for top-line growth as the business continues to benefit from its brand recognition. The Fund believes that the profit trajectory will enable the company to make dividend distributions as free cash flow generation increases.

    Over the quarter, the share price of Thorntons rose by 11.7% compared with a price of 67p at the December quarter end.

    AER Lingus Group plc (“AER Lingus”)

    During March, the Fund disclosed a holding in the Irish carrier. In our view, the company has a number of catalysts for realising shareholder value on the horizon; namely the resolution of its pension fund dispute, the return of surplus cash and the pressure on Ryanair to dispose of its 29.8 per cent stake. AER Lingus has net cash of $420 million. Pricing pressures on short distance flights contrast with the tailwinds of economic recovery in Ireland and AER Lingus’ good position in long distance travel. Pressure on Ryanair to dispose of its stake remains high and the carrier’s valuable landing slots at capacity constrained Heathrow suggest AER Lingus could be an acquisition target. Since the Fund acquired its holding, Etihad Airways has increased its shareholding.

    The share price of AER Lingus rose by 17.9% during the quarter.

    Leaf Clean Energy Company (“Leaf”)

    On 6 March 2014 the Fund announced it was requisitioning an EGM to replace Peter Tom and Bran Keogh as Chairman and Executive director of Leaf’s board. Since acquiring its holding in October 2013, and following constructive engagement with the company, the Fund came to the view that board renewal was necessary to accelerate the realisation of investments, reduce annual running costs, and increase visibility of underlying values. In our view, insufficient progress on these issues explained the wide discount of the company’s share price to reported net asset value, which stood at 47 per cent on 5 March 2014.

    On 26 March, Leaf announced the resignation of these directors and the appointment of the Fund’s nominees. The Fund welcomes this development and is already engaging with the new board members.

    Over the period, Leaf’s share price increased by 9.3 per cent.

    STV Group plc (“STV”)

    STV continues its steady improvement and reinstated its dividend alongside announcing its 2013 preliminary results. Highlights of these results included a further 21% reduction of net debt to £35.7m, a move from deficit to surplus at the pension fund, renewal of the Channel 3 licences for a maximum term of ten years, non-broadcast earnings rising from 11% to 19% of total earnings and 23% revenue growth from digital activities.

    Over the period STV’s share price increased by 22.6%.

    Norcros plc (“Norcros”)

    On 25 March 2014 Norcros announced a conditional agreement to dispose of its Australian subsidiary for a total consideration of GBP 4.2m. Whilst small, this deal constitutes another step towards focusing the group in fewer markets. It comes after closing its Greek operations, undertaking a turnaround of its South African division and acquiring Vado (a leading British bathroom brassware manufacturer) to gain scale in its bathroom fittings market. This follows the disappointing news that Morrisons has breached its agreement to purchase Norcros’s surplus land in Stoke: a deal that would have delivered Norcros net proceeds of GBP 2.6m.

    The recent trading statement provided a mixed picture of progress in the second half. The improvement in UK house building and housing transactions is to the benefit of the tiles and showers that are sold through trade outlets, however, sales through retail channels, particularly for tiles, are suffering from de-stocking and weak volumes.

    The company’s share price declined 12.8 per cent over the period.

    Cash resources

    Over the quarter, cash resources decreased from 23.5p per share to 8.7p per share, as the Fund was able to build positions with strong activist potential.