• by  • May 9, 2013 • Crystal Amber


    Crystal Amber Fund announces that its unaudited net asset value (“NAV”) per share on 28 February 2013 was: 124.05p (31 January 2013: 123.78p per share).

    The proportion of the Fund’s NAV at 28 February 2013 represented by the ten largest holdings, other investments and cash (including accruals), was as follows:

    Pence per share Percentage of equity
    TT Electronics 15.1 3.1%
    Sutton Harbour plc 10.1 27.9%
    Norcros plc 12.3 8.2%
    API Group plc 8.5 10.3%
    Devro plc 10.1 1.0%
    Tribal Group plc 10.3 4.4%
    Smiths News plc 8.1 1.4%
    Northgate plc 5.9 0.8%
    4imprint Group plc 6.7 3.2%
    Hansard Global plc 3.7 1.6%
    Total of ten largest holdings 91.1
    Other investments 16.8
    Cash and accruals 20.3
    Total NAV 128.2

    Investment adviser’s quarterly commentary on the portfolio
    Over the quarter to 31 March 2013, Net Asset Value grew by 6.75%. This follows a 35% increase in the year to December 2012. The top three positive contributors to NAV performance over the last quarter were TT Electronics (2.5% contribution),Tribal Group (2.4%) and Norcros (2.4%).

    The top three detractors have been Sutton Harbour (-3%), API Group (-1.9%) and Renishaw (-0.4%).
    TT Electronics’ share price is up 22% over the quarter. Despite a challenging economic backdrop


    and a decline in sales, TT reported 60bp margin improvement for 2012.  At 6.2%, operating margins are progressing towards the 8% target for 2014.  With approximately £50 million of net cash, we are particularly interested in the use of cash proceeds for acquisitions and the opportunities for investment in consolidating Western European production sites.  In our view, the initial move of production lines to Romania demonstrates that larger scale consolidation exercises could materially improve margins, in addition to the self-help measures that already underpin the current 8% target. We hope that the company will elaborate on its strategy to consolidate sites at its June capital markets day.
    Sutton Harbour’s share price fell by 33% over the quarter.  Despite no material developments, the share price’s discount to its 38.3p NAV has widened to more than 40%, highlighting what we consider to be a lack of investor confidence. As an activist Fund, we regard this situation as untenable and we are now working on proposals to restore investor confidence and to unlock the company’s potential.
    The February IMS from Norcros indicated stronger than expected sales growth, albeit at some cost to margins. The share price rose 29% over the quarter.
    Following the significantly upgraded guidance for estimates that was issued one week before its results, Tribal Group’s shares have responded strongly and are up 42% over the quarter. An important contract in Australia is progressing well.  There is considerable momentum both in Australia and other overseas markets, and we believe that this will be helped in future by the recent acquisition of i-graduate.
    API’s share price fell by 24% over the quarter.  In February 2013, after the board announced that indicative bids were below 90p per share, we wrote to the chairman indicating that, in our opinion, an offer at that level would not reflect the value of the company. The board confirmed its agreement with our position and the sale process was terminated. With the distraction of the sale process now removed, we have held discussions with the board around key issues including the reintroduction of a dividend and the consolidation of the two API Foils Americas sites.  In our view the latter could release considerable value from the Rahway freehold property, and be significantly accretive to margins.
    Furthermore, our assessment is the business is now highly cash generative and now in a position to embark on a significant, sustainable and growing dividend distribution policy.

    Share buy-back Over the quarter, and following the release of its interim results, the Fund has purchased 1,705,000 of its own shares at an average price of 109.5p per share, which are held as treasury shares together with the 1m shares purchased in December. The buy-back has had the effect of reducing the share price discount to the Fund’s net asset value.  Cash resources Over the quarter, cash and accruals decreased from 21.4p per share to 20.3p per share. A number of opportunistic investments have been undertaken. At current market levels, the Adviser is keen to retain cash reserves to be in a position to take advantage of a potential significant market sell-off