• by  • April 14, 2020 • Crystal Amber

    (“Crystal Amber Fund” or the “Fund”)

    Monthly Net Asset Value

    Crystal Amber Fund announces that its unaudited net asset value (“NAV”) per share at 31 March 2020 was 89.59 pence (29 February 2020: 133.08 pence per share). 

    The proportion of the Fund’s NAV at 31 March 2019 represented by the ten largest shareholdings, other investments and cash (including accruals), was as follows:

    Ten largest shareholdingsPence per sharePercentage of investee equity held
    Allied Minds plc  15.222.6%
    Hurricane Energy plc14.56.3%
    De La Rue plc12.319.2%
    Redde Northgate plc9.32.5%
    Equals Group plc9.121.4%
    Board Intelligence Ltd5.9*
    Kenmare Resources plc4.31.8%
    Camellia plc2.21.1%
    Sutton Harbour Group plc1.910.8%
    *GI Dynamics Inc.1.573.1%
    Total of ten largest shareholdings76.2 
    Other investments10.0 
    Cash and accruals3.4 
    Total NAV89.6 

    *Board Intelligence Ltd is a private company and its shares are not listed on a stock exchange. Therefore, the percentage held is not disclosed.

    Recent unprecedented conditions resulted in widespread distress selling and volatility, which led to the dramatic performance of the Fund’s concentrated portfolio. However, the Fund is closed ended, has net cash and added to some of its core holdings at extremely distressed levels. The Fund is confident that there is very significant value to be realised from the portfolio once markets have visibility that the worst of the pandemic and its consequences are over. Since month end, several core holdings including Hurricane Energy plc and Equals Group plc have seen strong share price recoveries, with Hurricane Energy’s share price rising by 49 per cent and Equals Group plc by 39 per cent.

    Investment Adviser’s commentary on the portfolio

    Over the quarter to 31 March 2020, NAV per share fell by 50.0%. A 2.5p dividend declared on 10 December 2019 was paid on 13 January 2020.

    The top three detractors to NAV over the quarter to 31 March 2020 were Equals Group plc (14.5%), Hurricane Energy plc (14.3%) and De la Rue (9%).

    Allied Minds plc (“Allied Minds”)

    In January 2020, Allied Minds declared a special dividend of $40 million, or 12.62p per share. This capital return was generated by the sale of HawkEye 360, which completed in November 2019. 

    In February 2020, Allied Mind’s investee company Federated Wireless launched a new connectivity as a service product in the US. Enterprises are able to buy and deploy 4G and 5G private networks through the market places of Amazon Web Services and Azure, two top global public clouds. 

    Allied Minds has a net asset value per share of around 75p, which includes net cash of 15p a share. Against a 26p share price, the portfolio (excluding cash) is therefore valued at 11p a share. This compares with its carrying value of 60p a share, resulting in the investment portfolio (excluding cash) trading at an 81.7% discount to its latest reported carrying value.

    During March 2020, the Fund increased its holding from 16.9% to 22.6% and is now the largest shareholder in Allied Minds. The Fund firmly believes that there remains scope to reduce its $6 million per annum overheads and in the current climate, Allied Minds should take quick and decisive action to reduce its cost base.

    Over the quarter, Allied Minds’ share price fell by 49%. Adjusting for the special dividend, the total return was a negative 33%.

    De La Rue plc (“De La Rue”)

    Over the period, De La Rue announced its turnaround plans, replaced its chief financial officer and met its covenant tests. A trading update at the end of the quarter confirmed operating profit guidance for the year to March 2020 of between £20 and £25 million. Financial year end net debt is expected to be approximately £105 million, down from £171 million six months earlier. 

    As part of its turnaround plans brought in by the new CEO, the company has already realised annualised savings of £10 million. It is targeting savings of £35 million by its financial year 2021/2022, exceeding previous cost reduction commitments of £20 million. The market has been advised that full details of the turnaround plan will be presented together with its preliminary results in May. 

    De La Rue has stated that it is too early to quantify the effects of COVID 19.  However, its share price, which until the end of February was unchanged over the previous two months, in March, fell by 60%, valuing its equity at around £50 million.

    Over the quarter, De La Rue’s share price fell by 60%.

    Hurricane Energy plc (“Hurricane”)

    In January 2020, Hurricane concluded its single well tests on its Early Production System (EPS) at Lancaster. It has since increased production at both wells and reached 20,000 barrels of production per day. This is the maximum it can produce under current permissions. 

    Over the quarter, the oil price fell sharply due to the Covid-19 induced demand shock and a fallout between producing countries. The company’s EPS cost of production is $17 per barrel at its guided production rate.

    The Oil and Gas Authority (OGA) has acknowledged the impact of Covid-19 on operators’ ability to carry out work programmes. Negotiations have started between Hurricane and the OGA to review existing commitments. We expect the company’s capex for 2020 to fall relative to prior outlook. 

    In its final results announced on 19 March 2020, Hurricane reported an unrestricted cash balance of £164.3 million. It forecasts this to be sufficient to meet obligations and committed costs as they fall due.

    Over the quarter, Hurricane’s share price fell by 68%.

    GI Dynamics Inc (“GI Dynamics”)

    On 27 January 2020, GI Dynamics announced the enrolment of the first patient on its US STEP-1 clinical trial.  On 31 March 2020, the Fund agreed to a one-month extension to its loan note. 

    Since November 2019, the Fund has held a board observer position in GI Dynamics. As a consequence, it is not in a position to comment other than by reference to public announcements made by the company. 

    Over the quarter, GI Dynamic’s share price fell by 83%.

    Issue of shares to charities and transactions in own shares

    During the quarter, the Fund issued 125,000 shares to five charities following the authority granted at its Annual General Meeting.

    The Fund also bought back 1,265,000 of its own ordinary shares at an average price of 82.52p per share as part of its buyback programme.

    For further enquiries please contact:

    Crystal Amber Fund Limited

    Chris Waldron (Chairman)
    Tel: 01481 742 742

    Allenby Capital Limited – Nominated Adviser

    David Worlidge/Liz Kirchner
    Tel: 020 3328 5656

    Winterflood Investment Trusts – Broker

    Joe Winkley/Neil Langford
    Tel: 020 3100 0160

    Crystal Amber Advisers (UK) LLP – Investment Adviser

    Richard Bernstein
    Tel: 020 7478 9080

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