TERRA CAPITAL PLC. Consolidated Interim Report 30 June 2018

Transcription

1 TERRA CAPITAL PLC Consolidated Interim Report 30 June 2018

2 Terra Capital plc Interim Report 30 June 2018 CONTENTS Directors and advisers 2 Page Chairman s statement 3 Report of the investment manager 4 Unaudited consolidated financial statements of the company: - Consolidated income statement 5 - Consolidated statement of comprehensive income 6 - Consolidated balance sheet 7 - Consolidated statement of changes in equity 8 - Consolidated statement of cash flows 9 - Notes to the consolidated financial statements Notice od Annual General Meeting 17 1

3 Terra Capital plc Interim Report 30 June 2018 Directors and advisers Directors Dirk Van den Broeck (Non-executive Chairman) Peter Bartlett (Non-executive Director) Ian Dungate (Non-executive Director) Registered Office Millennium House 46 Athol Street Douglas Isle of Man, IM1 1JB Nominated Adviser & Broker English Law Adviser Panmure Gordon & Co 1 New Change London EC4M 9AF Gowling WLG (UK) LLP 4 More London Riverside London SE1 2AU Administrator and Registrar Galileo Fund Services Limited Millennium House 46 Athol Street Douglas Isle of Man, IM1 1JB Auditors KPMG Audit LLC Heritage Court 41 Athol Street Douglas Isle of Man IM99 1HN Isle of Man Law Adviser Appleby 33 Athol Street Douglas Isle of Man IM1 1LB Investment Manager Terra Partners Asset Management Limited Portomaso Tower Suite 8/5A Portomaso Avenue STJ4011 St Julians Malta 2

4 Chairman s Statement On behalf of the Board of Directors (the Board ) I am pleased to present the interim results for Terra Capital plc (Terra or the Company ) for the six months ended 30 June The first half of 2018 has been an active one for the Company culminating in our shareholders resolving to adopt of a new investment policy whereby the Company shall cease to make any new investments and shall realise its portfolio of investments in an orderly manner and return the net proceeds to Shareholders as soon as practicable. This new investment policy was approved by Shareholders shortly after the period end. A tender for the re-purchase of up to ten percent. of the shares in issue (excluding shares held in treasury) was carried out in March in accordance with the discount control policy implemented in January 2016 as a result of the discount to Net Asset Value per Ordinary Share at which the shares traded during the last nine months of This tender retuned a total of $6.8 million to shareholders. In January 2015, as part of the recommended restructuring proposals, Shareholders approved proposals whereby the Board was released from the obligation to propose a continuation vote in Instead the Board agreed to offer Shareholders, in June 2018, an opportunity to realise all or part of their investment in the Company at a price equal to the then prevailing net asset value (less costs associated with the opportunity) (the Realisation Opportunity ). Additionally, it was envisaged that if the number of Shareholders who availed themselves of the Realisation Opportunity was such that the Company was no longer a viable proposition the Realisation Opportunity would be abandoned and the Company would be placed into voluntary liquidation. As announced on 19 April 2018, the Board consulted with Shareholders who between them hold in excess of 60 per cent. of the issued share capital of the Company, from which it became clear that such Shareholders would accept the Realisation Opportunity and as such the Company would no longer be a viable proposition. In the light of the above consultation the Board determined to dispense with the Realisation Opportunity, and instead, subject to approval by Shareholders, adopt the New Investment Policy which involves the Company ceasing all new investments and seeking to realise, in an orderly fashion, the Company s portfolio of investments and return the net proceeds generated to Shareholders as soon as is practicable. The Board, having consulted with its advisers, believed an orderly realisation of the portfolio of investments was preferable to an immediate liquidation as it was likely to achieve greater returns to Shareholders. In order to give the Board maximum flexibility in terms of the manner in which the net proceeds of the realisation of the Company s portfolio of investments is returned to Shareholders, it was also proposed to Re-register the Company under the 2006 Act. As part of this process the Company would adopt the New Articles which, in addition to reflecting the fact that the Company would be re-registered under the 2006 Act, would include a mechanism to allow the Company to redeem compulsorily Ordinary Shares as a means of returning the proceeds of realisations to Shareholders. These proposals were approved by shareholders after the period end on 10 July 2018 along with the New Investment Policy noted above. Following the shareholder approval, received on 10 July 2018, your Board implemented the first of these compulsory redemptions returning a further $36.8 million to shareholders representing 60% of the Net Asset Value at that time. Our Investment Manager continues to realise the portfolio in an orderly manner and a second compulsory partial redemption of 50% of the remaining shares in issue was announced on 26 September 2018, which will return a further $11.8 million to Shareholders in October Sincerely yours, Dirk Van den Broeck Chairman 27 September

5 Terra Capital plc Interim Report 30 June 2018 Report of the Investment Manager Given the Company s obligation to provide a realisation opportunity in June 2018 or, failing this, in preparation for the adoption of the New Investing Policy, the Company s investment level has been reduced during the first six months of 2018 as an excess of cash was established. The Company s investment level has been reduced from 81.7% at 31 December 2017 to 43.3% at 30 June The Investment Manager continues to realise the Company s investments in an orderly manner in furtherance of the New Investing Policy adopted subsequent to the year end. Respectfully Submitted by: Terra Partners Asset Management Limited Suite 8/5A, Portomaso Tower, Portomaso Avenue, St. Julian's STJ 4011 Malta Regulated by the Malta Financial Services Authority, Reg. No. C

6 Terra Capital plc Interim Report 30 June 2018 Unaudited consolidated income statement Income Note For the period from 1 January 2018 to 30 June 2018 For the period from 1 January 2017 to 30 June 2017 US$'000 Net changes in fair value on financial assets at fair value through profit or loss Realised gain on sale of financial assets at fair value through profit or loss (9,879) (1,151) 8,047 4,192 Interest income on cash balances 31 6 Dividend income on quoted equity investments 1,322 2,405 Total net (loss)/income (479) 5,452 Manager's fees 6 (418) (409) Incentive fees 6 - (544) Audit and professional fees (45) (70) Provisions 10 (1,164) - Other expenses (292) (263) Administrative and other expenses (1,919) (1,286) (Loss)/profit before tax (2,398) 4,166 Taxation 13 (28) (174) (Loss)/profit for the period (2,426) 3,992 Basic and diluted (loss)/earnings per share (cents per share) for the period 11 (4.17) 6.26 The accompanying notes form an integral part of these interim consolidated financial statements 5

7 Unaudited consolidated statement of comprehensive income For the period from 1 January 2018 to 30 June 2018 US$'000 For the period from 1 January 2017 to 30 June 2017 US$'000 (Loss)/Profit for the period (2,426) 3,992 Other comprehensive income Foreign exchange differences - - Total comprehensive (loss)/profit for the period (2,426) 3,992 The accompanying notes form an integral part of these interim consolidated financial statements 6

8 Unaudited consolidated balance sheet Note Unaudited At 30 June 2018 Audited At 31 December 2017 US$'000 US$'000 Financial assets at fair value through profit or loss 8 27,279 57,549 Trade and other receivables Cash and cash equivalents 35,310 14,127 Total current assets 63,050 71,999 Total assets 63,050 71,999 Issued share capital 12 6,147 6,830 Retained earnings 48,349 57,598 Capital redemption reserve 6,853 6,170 Total equity 61,349 70,598 Total current liabilities Taxation Trade and other payables 15 1, Total current liabilities 1,701 1,401 Total liabilities 1,701 1,401 Total equity and liabilities 63,050 71,999 Net Asset Value per share Approved by the Board of Directors on 27 September 2018 Ian Dungate Director Dirk van den Broeck Director The accompanying notes form an integral part of these interim consolidated financial statements 7

9 Unaudited consolidated statement of changes in equity For the six months ended 30 June 2018 Share capital Retained earnings Capital redemption reserve Total Balance at 1 January ,830 57,598 6,170 70,598 Loss for the period - (2,426) - (2,426) Other comprehensive income Total comprehensive loss Shares in treasury cancelled Shares subject to tender offer Total contributions by and distributions to owners (2,426) - (2,426) (683) (6,823) - (6,823) (683) (6,823) 683 (6,823) Balance at 30 June ,147 48,349 6,853 61,349 For the six months ended 30 June 2017 Share capital Retained earnings Capital redemption reserve Total Balance at 1 January ,726 56,377 5,274 69,377 Profit for the period - 3,992-3,992 Other comprehensive income Total comprehensive profit Dividends paid Shares in treasury cancelled Shares subject to tender offer Total contributions by and distributions to owners - 3,992-3,992 (896) (6,693) - (6,693) (896) (6,693) 896 (6,693) Balance at 30 June ,830 53,676 6,170 66,676 The accompanying notes form an integral part of these interim consolidated financial statements 8

10 Unaudited consolidated statement of cash flows For the period from 1 January 2018 to 30 June 2018 For the period from 1 January 2017 to 30 June 2017 US$'000 Operating activities (Loss)/profit before tax (2,398) 4,166 Adjustments for: Net changes in fair value on financial assets at fair 1,832 (3,041) value through profit or loss Finance income (31) (6) Finance costs - - Operating (loss)/gain before changes in working capital (597) 1,119 (Increase)/decrease in trade and other receivables (138) (243) Increase/(decrease) in trade and other payables (193) Taxation paid (250) (174) Net finance costs paid - - Interest received 31 6 Cash flows (used in)/generated from operating activities (432) 758 Investing activities Net purchase of financial assets - - Net sale of financial assets 28,438 3,957 Funds held at Brokers - - Cash flows used in investing activities 28,438 3,957 Financing activities Purchase of shares (6,823) (6,693) Cash flows used in financing activities (6,823) (6,693) Net increase/(decrease) in cash and cash equivalents 21,183 (1,978) Adjustment for foreign exchange - - Cash and cash equivalents at beginning of period 14,127 12,430 Cash and cash equivalents at end of period 35,310 10,452 The accompanying notes form an integral part of these consolidated interim financial statements 9

11 Notes to the consolidated financial statements 1. The Company Terra Capital plc (formerly named Speymill Macau Property Company plc) was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 31 October 2006 as a public company with registered number C. The interim consolidated financial statements of Terra Capital plc as at, and for, the six months ended 30 June 2018 comprise the Company and its subsidiaries (together referred to as the Group ). The consolidated financial statements of the Group as at, and for, the year ended 31 December 2017 are available upon request from the Company s registered office at Millennium House, 46 Athol Street, Douglas, Isle of Man, IM1 1JB or at The Company's investment objective to achieve capital appreciation while attempting to reduce risk primarily by applying a disciplined and diversified value investing philosophy in purchasing securities in Frontier markets for its portfolio was amended by Shareholder resolution subsequent to the period end on 10 July 2018 whereby, the Company shall cease to make any new investments and shall realise its portfolio of investments in an orderly manner and return the net proceeds to Shareholders as soon as practicable. 2 Statement of compliance and significant accounting policies These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at, and for, the year ended 31 December These condensed consolidated interim financial statements were approved by the Board of Directors on 25 September The Group has one segment focusing on achieving capital appreciation while attempting to reduce risk primarily by applying a disciplined and diversified value investing philosophy. No additional disclosure is included in relation to segment reporting as the Group s activities are limited to one business segment. The Group s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at, and for, the year ended 31 December The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December Use of estimates and judgements The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. Certain investments are in illiquid/inactive markets and classified as Level 2 in the IFRS 7 fair value Hierarchy (see note 7). 10

12 Notes to the consolidated financial statements continued 4 Finance income and costs Period ended 30 June 2018 Period ended 30 June 2017 Bank interest income 31 6 Finance income 31 6 Bank charges (5) (3) Finance costs (5) (3) Net finance income Net asset value per share The net asset value per share as at 30 June 2018 is US$ 1.11 based on 55,322,381 ordinary shares in issue as at that date (excluding 6,146,931 shares held in treasury) (31 December 2017: US$1.09 based on 61,469,312 ordinary shares (excluding 6,829,924 shares held in treasury)). 6 Related party transactions Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below. Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the party making financial or operational decisions. Directors of the Company Howard Golden and Filip Montfort are directors of the Manager. The Manager was appointed at the EGM held on 24 May Following the EGM, Mr Golden and Mr Yarden Mariuma resigned as directors of the Company and Mr Dirk van den Broeck was elected Chairman of the Board of Directors as an independent non-executive director and Mr Ian Dungate was elected as an independent non-executive director. Filip Montfort is a director of the Investment Manager and remained as a Director of the Company following the above noted EGM until his resignation on 16 December Mr Dungate is a director of the administrator. Directors remuneration is disclosed in note

13 Notes to the consolidated financial statements continued 6 Related party transactions continued The Investment Manager Following the EGM held on 24 May 2012, the Company appointed the immediate predecessor to the current investment manager until the current investment manager, Terra Partners Asset Management, Limited ( TPAM ) received its license in Malta and then the Investment Management Contract was assigned to TPAM to be the Group s investment manager (the Manager ). Term and termination The Investment Management Agreement may be terminated by either party giving to the other not less than 12 months notice expiring on, or at any time after, the third anniversary of the commencement date of the agreement or otherwise, in circumstances, inter alia, where one of the parties has a receiver appointed over its assets or if an order is made or an effective resolution passed for the winding-up of one of the parties. Management fee The Manager shall be entitled to receive a management fee equal to 1.25 per cent. per annum of the aggregate Net Asset Value of the Company during the relevant fee payment period, calculated on the first day of each month, accrued on a daily basis and payable monthly in arrears (or pro rata for lesser periods). Performance fee The Manager is also entitled to receive a performance fee equal to 12 per cent. of the increase (if any) in the Net Asset Value per Share (with dividends and other distributions added back and ignoring any accrued performance fee) as at each semiannual performance fee calculation period above the Net Asset Value as at the commencement of each such semi-annual performance fee calculation period, provided that any performance fee shall be payable only to the extent that the Net Asset Value of the Share exceeds the Net Asset Value immediately following the settlement of the Tender Offer or, if a performance fee has been paid, the Net Asset Value per Share when a performance fee was last paid. The performance fee shall be calculated on 30 June and 31 December in each year and paid following such calculation. The performance fee for the period ending 30 June 2018 was US$ Nil (30 June 2017: US$ 544,375). Expenses In addition, the Company shall be responsible for the payment of certain out-of-pocket expenses reasonably incurred by the Manager in the proper performance of the Investment Management Agreement up to a maximum of US$75,000 per annum and any other out-of-pocket expenses in excess of this maximum shall be borne by the Investment Manager. The Administrator The Administrator shall be paid by the Company a fixed fee of US$100,000 per annum, payable quarterly in arrears. For the preparation of the financial statements the Administrator shall be paid by the Company US$3,000 per set. In the event that the Administrator provides secretarial services to the Company, the Administrator shall be paid an annual fee of US$8,000. The Administrator shall be entitled to additional fees for such general secretarial services based on time and charges where the number of board meetings or general meetings exceeds four per annum. The Administrator shall be entitled to an attendance fee of US$750 per day or part thereof where the Administrator attends a board meeting or general meeting which is not held in the Isle of Man. 12

14 Notes to the consolidated financial statements continued 7 Fair value hierarchy IFRS 7 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). US$25,172,000 (31 December 2017: US$55,309,000) of the Company s investments are classed as level 1 investments and US$2,107,000 (31 December 2017: US$2,240,000) of the Company s investments are classed as level 2 investments. 8 Financial assets at fair value through profit or loss Group 30 June 2018: Financial assets at fair value through profit or loss (all quoted equity securities): Security name Number Speedy EAD-Sofia 47,518 1,132 Bank of Bahrain and Kuwait 700, Gulf Hotel Group 704, BB Votorantim (B65JNX7) 54, FDO S F Lima , Fi Projecto Agua Branca 1, Fii BM Edificio Galeria B8C2Zb5 39, Fii Torre Almirante B0B23L6 1, Fii Vila Olimpia Cor 34, SDI Logistica Rio 13, Emaar Misr for Development 7,361,000 1,799 Polis Banc QF 1,789 1,154 Great Wall Motor Company 828, Allami Nyomda (Hungarian Printing Co) 471,848 2,218 Komercijalna Banka 6,

15 Notes to the consolidated financial statements continued 8 Financial assets at fair value through profit or loss continued Security name Number Bank Muscat 1,159,676 1,137 Ooredoo (OMAN) 699, Refineria La Pampilla SA 18,064,485 1,156 Belle Corp ,778, Fabryki Mebli Forte 58, Kernel Holdings 71, Gulf Warehousing 91,694 1,047 Galenika Fitofarma 79,115 2,201 Artes SA 53, One Tech Holding 248,305 1,527 Blom Bank GDS 95,919 1,007 KCell JT 377,630 1,624 Lebanese GDS 114, Onatel BF 60, Total 27,279 9 Trade and other receivables 30 June December 2017 Prepayments and other receivables Provisions The Company is now operating as a realisation company. The calculation of the net asset value includes an estimate of liquidation costs and a provision for fees and expenses expected to be incurred in realising the assets. As at 30 June 2018 these provisions amounted to 1,163,605 (30 June 2017: Nil). 11 (Loss)/earnings per share Basic (loss)/earnings per share is calculated by dividing the profit for the period attributable to equity holders of the Company by the weighted-average number of ordinary shares in issue during the period. Period ended 30 June 2018 Period ended 30 June 2017 (Loss)/profit attributable to equity holders of the Company () Weighted average number of ordinary shares in issue (thousands) (excluding 6,146,931 held in treasury (2016: excluding 6,829,924 held in treasury) (2,426) 3,992 58,123 63,809 Loss/(earnings) per share (cent per share) (4.17)

16 Notes to the consolidated financial statements continued 12 Share capital Authorised: 30 June December ,000,000 Ordinary shares of US$0.10 each 40,000,000 40,000,000 Allotted, Called-up and Fully-Paid: 55,322,381 (31 December 2017: 61,469,312) Ordinary shares of US$0.10 each in issue, with full voting rights 6,146,931 (31 December 2017: 6,829,924) Ordinary shares of US$0.10 each in issue, held in treasury 5,532 6, ,147 6,830 As at 15 March ,146,931 shares were repurchased and placed in treasury and 6,829,924 shares previously held in treasury were cancelled. The Ordinary shares held in treasury have no voting rights and are not entitled to dividends 13 Taxation 30 June December 2017 Balance at 1 January Withholding taxes on dividends received Tax paid (250) (211) Closing Balance Isle of Man taxation The Company is resident in the Isle of Man which means that it pays income tax at 0%. The Company pays a corporate charge of 390 to the Isle of Man Government for each tax year. 14 Directors remuneration Mr Van den Broeck, as Chairman, is entitled to remuneration of US$45,000 per annum from the date of his appointment and Mr Dungate and Mr Bartlett are each entitled to remuneration of US$30,000 per annum from the respective dates of their appointments. 15 Trade and other payables 30 June December 2017 US$'000 US$'000 Sundry creditors and accruals 1, Total 1, Contingent liabilities and capital commitments The Company has no outstanding capital commitments as at 30 June

17 17 Post balance sheet events On 10 July 2018 at an Extraordinary General Meeting, Shareholders approved a change in the Company s investing policy. The new investing policy states that the Company shall cease to make any new investments and shall realise its portfolio of investments in an orderly manner and return the net proceeds to Shareholders as soon as practicable. In order to give the Board maximum flexibility in terms of the manner in which the net proceeds of the realisation of the Company s portfolio of investments is returned to Shareholders, it was also proposed to re-register the Company under the 2006 Act. As part of this process the Company adopted the New Articles which, in addition to reflecting the fact that the Company would be re-registered under the 2006 Act, would include a mechanism to allow the Company to redeem compulsorily Ordinary Shares as a means of returning the proceeds of realisations to Shareholders. This mechanism was used to carry out a compulsory partial redemption of 60% of the shares in issue on 26 July 2018, returning $36.8 million to Shareholders as a result. A second compulsory partial redemption of 50% of the remaining shares in issue was announced on 26 September 2018, which will return a further $11.8 million to Shareholders in October The Board, having consulted with Shareholders, believed that it was appropriate and in the best interests of Shareholders to incentivise the Investment Manager to realise, in accordance with the New Investment Policy, the Company's portfolio of investments in a timely fashion. The arrangements with the Investment Manager were varied with effect from 1 July 2018 whereby the then current fee structure, 1.25 per cent. per annum of NAV and a performance fee linked to NAV increases, have been replaced with an arrangement whereby the Investment Manager will be entitled to receive a fee equal to 1 per cent. of any Distributions made to Shareholders, which would include cash that is returned by way of a Compulsory Redemption of Ordinary Shares. 16

18 TERRA CAPITAL PLC (the Company ) Notice of Annual General Meeting NOTICE is hereby given that the Annual General Meeting of the Company will be held at the offices of Galileo Fund Services Limited, Millennium House, 46 Athol Street, Douglas, Isle of Man, IM1 1JB, British Isles on Wednesday 14 November 2018 at 11:00am to consider the following resolutions: ORDINARY RESOLUTIONS 1. THAT the Report of the Directors, Auditors Report and the Audited Consolidated Financial Statements of the Company for the year ended 31 December 2017 be received and adopted. 2. THAT KPMG Audit LLC Isle of Man, who has indicated its willingness to continue in office, be re-appointed as Auditors of the Company for the year to 31 December 2018 but upon resolution to wind up the Company this appointment will cease. 3. THAT the Directors be authorised to determine the remuneration of the Auditors, should an audit be necessary. 4. To re-appoint as a director Mr Peter Bartlett who retires in accordance with the Articles of Association and offers himself for re-election. BY ORDER OF THE BOARD Ian Dungate Company Secretary 5 October 2018 Registered office Millennium House 46 Athol Street Douglas Isle of Man IM1 1JE British Isles Notes: 1 A member entitled to attend and vote is entitled to appoint a proxy or proxies to attend and, on a poll, to vote instead of him; a proxy need not be a member of the Company. In the case of joint holders, if more than one of such joint holder is present, only the person whose name stands first in the Register of Members in respect of the relevant joint holding will be entitled to vote, whether in person or by proxy. 2 A form of proxy accompanies this Notice. Completion and return of the form of proxy will not preclude a member from attending and voting at the Meeting if he so wishes. In the event that a member who has lodged a form of proxy attends the Meeting, his form of proxy will be deemed to have been revoked. 3 In order to be valid, the instrument appointing a proxy and the power of attorney or any authorisations of corporate representatives or other authority (if any) under which it is signed, or a copy, certified by a notary, of such power of attorney or authority, should be deposited at Galileo Fund Services Limited, Millennium House, 46 Athol Street, Douglas, Isle of Man, 1 1JB, British Isles (Attn: Ian Dungate, fax: ), no later than 48 hours before the time appointed for holding the meeting. 17