CRYSTAL AMBER FUND LIMITED
Monthly Net Asset Value and Interim Dividend Declaration
Crystal Amber Fund announces that its unaudited net asset value (“NAV”) per share on 31 March 2016 was 156.5p (29 February 2016: 151.2p per share).
The proportion of the Fund’s NAV at 31 March 2016 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|
|Pinewood Group Plc||20.7||6.4%|
|Dart Group Plc||14.6||1.5%|
|Leaf Clean Energy Co.||12.5||29.9%|
|STV Group Plc||12.1||7.3%|
|Hurricane Energy Plc||10.9||16.1%|
|Coats Group Plc||9.4||2.4%|
|FairFX Group Plc||7.8||24.8%|
|Sutton Harbour Holdings Plc||6.9||29.3%|
|Hansard Global Plc||4.8||3.3%|
|Total of ten largest holdings||132.1|
|Cash and accruals||5.2|
Investment Adviser’s commentary on the portfolio
Over the quarter to 31 March 2016, NAV per share grew by 0.4 per cent or 2.0 per cent after adjusting for the 2.5p dividend paid in the period.
The top three positive contributors to NAV growth over the quarter to 31 March 2016 were Pinewood Group plc (3.3 per cent), FairFX Group plc (1.7 per cent) and Dart Group plc (1.4 per cent). The three main detractors were STV Group plc (-2.0 per cent), Sutton Harbour Holdings plc (-1.2 per cent) and Grainger plc (-0.5 per cent).
Dart Group plc
The company issued a trading update on 4 March 2016 indicating that current year profits would be ahead of market expectations due to a better than anticipated winter season. The company also stated that it “expects operating performance for the year ending 31 March 2017 to be broadly in line with the current year” which led to a substantial upgrade of consensus forecast for pre-tax profit.
FairFX Group plc (“FairFX”)
On 7 March 2016, FairFX announced a £5.0 million strategic investment by the Fund to finance its marketing strategy. The investment was at 20p per share. Furthermore, in exchange for strategic assistance from the Fund, FairFX issued the Fund a three-year warrant over 7.5 million shares at an exercise price of 27p per share.
Historically, the company had limited investment to execute its “land grab” strategy to fully leverage its scalable platform. The Fund’s investment, part of a £5.25m fundraising, is expected to accelerate growth. In 2015, FairFX acquired 75,000 currency card customers, up 54 per cent on 2014. This takes the total number of customers to 508,000. The Fund notes that market forecasts for 2018 are for earnings per share of 3.8p, placing the shares on a prospective PE multiple of 8.2.
Grainger plc (“Grainger”)
On 4 January 2016, Grainger announced the exchange of contracts, subject to regulatory approval, to sell its Equity Release division on or before 30 May 2016 for an estimated gross consideration of £325 million, comprising £175 million cash and the transfer to the buyer of £150 million of debt. Grainger said the sale would significantly reduce its financial and operational costs.
On 28 January 2016, Grainger announced the outcome of its strategy review, which includes plans to reduce overheads through a streamlined structure, exit non-core development assets and reduce financing costs with a target of 4 per cent cost of debt. It also announced plans to invest over £850 million by 2020 into the private rented sector to drive the growth of rental income and dividends.
The Fund welcomes and supports Grainger’s actions to streamline the business and cut costs; however, we remain concerned both with the pace and scope of cost cutting. We continue to believe that further significant value can be realised through either a spin-off of the regulated tenancies division or a sale of Grainger.
Leaf Clean Energy Co. (“Leaf”)
In March 2016, Leaf announced a NAV per share of 62.5p as at 31 December 2015, following the return of £6.4 million to shareholders in October 2015. Over 90 per cent of Leaf’s value is held in its investment in Invenergy. The process to exit this investment is ongoing, yet the timing remains uncertain.
The Fund is confident that the value of Invenergy will be released and expects this to happen in 2016. The Fund believes that the shares, trading at more than a 40 per cent discount to the December NAV, remain deeply undervalued.
Pinewood Group Plc (“Pinewood”)
On 10 February 2016 Pinewood announced that management’s expectations of performance for the year to 31 March were higher than at the time of the interim results. Pinewood’s board appointed Rothschild “to assist with a strategic review of the overall capital base and structure, which could include a sale of the company”. The Fund believes that whilst the strategic review may result in the release of value at Pinewood through a possible sale, this would have been unnecessary had management run the business more efficiently.
Transaction in shares
During the quarter to 31 March 2016, the Fund sold 6.1 million shares from Treasury at NAV, or 155p per share to an institutional investor. The Fund subsequently bought back 300,000 shares at an average cost of 147.5p per share. These shares are held in Treasury.
The Board declared an interim dividend of 2.5p per share which was paid on 19 February 2016 to shareholders on record on the register on 22 January 2016. This interim dividend brings total dividends paid since August 2015 to 5p per share.