The Board of Better Capital PCC Limited has received an update from the General Partner of the Better Capital Funds ahead of the release of the Interim Report to 30 September 2016.
2012 Cell NAV may fall by 14%
Everest is expected to close FY16 with positive EBITDA better than prior year albeit, significantly below expectations and potential, and with a much improved order pipeline going into FY17. This follows on from a series of cost reduction and revenue enhancing initiatives launched during the year. Net cash is improved.
Recent financial performance in Jaeger has been disappointing. Having enjoyed a strong start to its FY17 financial year through its Spring/ Summer 2016 collection with LFLs, full price sell through and EBITDA ahead of budget, the end of season sale proved very competitive with deeper markdowns and a longer sales period. The start of Autumn/ Winter 2016 sales have been slow with the warm weather affecting sales of outerwear. The consequent increase in competitive promotional activity means that trading continues to be challenging. The business received GBP3.0 million of new funding from Fund II in September 2016.
SPOT is trading profitably with good cash generation, ahead of prior year but below budgeted levels in a fiercely competitive environment. Daily sales were impacted over the summer period following Brexit with margins under pressure mainly due to FX price increases. Cash flow has improved.
iNTERTAIN has traded well ahead of prior year although marginally behind expectations. The business performed strongly throughout the Euro 2016 tournament but the prolonged period of hotter than usual weather in July to September was unhelpful to a business with limited outdoor areas. The business has added one new venue since the Annual Report.
CAV continues its trend of steady improvement on an operational and financial basis. Considerable progress in areas such as machine maintenance and health and safety have helped improve both product quality and the working environment. Customer arrears are significantly and consistently reducing. The warranty claim process is continuing. Significant restructuring and customer renegotiations continue.
Since the Annual Results, Fund II acquired a further 23.7 million Better Capital 2012 Shares (“2012 Shares”) with an average gross price of 31.96 pence per share. At 30 September 2016, Fund II held 57.1 million shares (16.47 per cent. of the 2012 Cell share capital). The 2012 Shares are valued based on their quoted closing price at that date of 33.00 pence. Subject to shareholder consents, it is the Company’s current intention to acquire up to 50 per cent. of Fund II’s holding of the 2012 Shares by way of an off-market transaction and to cancel these on acquisition. Further communication on the matter will be made in due course.
The Fund II GP has advised the Board that the recent underperformance in Everest, Jaeger and SPOT against their respective current year budgets is expected to impact the 2012 Cell NAV as at 30 September 2016 with a current expectation of a decline in the region of 14 per cent.
2009 Cell may report modest NAV uplift
Gardner continues to perform to expectation. The sale process has commenced and is receiving strong global interest. It is anticipated that negotiations will be concluded with a selected bidder pre-Christmas.
The progress of m-Hance has been slower than planned primarily due to lower monthly sales than budgeted. However, there have been new sales wins and the pipeline is stronger going into Q4 FY16, both in the Microsoft GP and the HighCloud (NetSuite) services.
Omnico closed its financial year ended 30 September 2016 with positive EBITDA, a considerable improvement on the loss reported for the prior year. This performance demonstrates a turnaround for the business which has successfully moved away from the legacy custom software development and hardware manufacture to focus on core product development and delivery for Food, Beverage and Retail customers. Opportunities in Hospitality, Entertainment and Retail are looking increasingly positive, particularly in theme parks in the US, Middle East and Asia due to market expansion.
SPOT, which is a minority interest in Fund I, is discussed further below.
The Board of the Company has been advised by Fund I GP that the 2009 Cell is anticipated to report a modest uplift to NAV as at 30 September 2016 which is largely driven by the performance in Gardner.
BC12 / BCAP : Better Capital 2012 NAV may fall by 14%