Interim Report 1 January - 31 March 2010
Press release
Interim Report 1 January - 31 March 2010
- Net asset value per share on 31 March 2010 amounted to EUR 11.73 (EUR 7.25). The total net asset value amounted to EUR 410m (EUR 259m), corresponding to an increase of 20% (-2.2%) during the first quarter and an increase of 58% (-30%) during the last twelve months
- For the first quarter, the net profit amounted to EUR 86m (EUR -4.1m), including EUR 87m (EUR -3.9m) in unrealised value gain on investments. Earnings per share to the shareholders of the parent company amounted to EUR 1.94 (EUR -0.12)
- Cash, cash equivalents and bonds on 31 March 2010 amounted to EUR 83m (EUR 176m), corresponding to EUR 2.38 (EUR 4.92) per share
- In January, East Capital Explorer announced a EUR 5m direct investment in a new venture which, together with Intrum Justitia and the East Capital Financials Fund, will seek to invest in portfolios of non-performing consumer loans in Russia
- On 26 March 2010, East Capital Explorer announced an investment of additional EUR 5m in East Capital Bering Ukraine Fund Class A. East Capital Explorer invested in newly issued shares that were received in the beginning of April
- During March the Board utilised the buy-back mandate and repurchased 547,485 shares. After the close of the quarter, between 1 - 9 April, an additional 100,000 shares were repurchased, bringing the total number of shares repurchased to 647,485 for a total value of EUR 5.2m. These shares were resolved to be cancelled at the Annual General Meeting on 28 April 2010
- The total net asset value on 30 April 2010 amounted to EUR 417m, corresponding to EUR 11.96 (SEK 115 per share). Cash, cash equivalents and bonds per the same date amounted to EUR 55m (SEK 533m) corresponding to EUR 1.59 (SEK 15) per share. EUR 32m (SEK 303m) of those were available for future investments
CEO COMMENTS ON THE FIRST QUARTER
This was again a good quarter for East Capital Explorer, both in terms of how our existing investments performed and in terms of progress on new investments. Our NAV ended the quarter up by 20% and added another 2% in April. The East Capital Power Utilities Fund, our single largest fund investment, has continued to show very strong performance and has added another 42% during the first quarter.
For most of our markets, the first quarter was strong. Media attention shifted from Eastern Europe to Western Europe and this is positive for our region in a number of ways. First of all, investors are gradually realizing that Eastern European countries are, with a few exceptions, in much better financial shape than several Western European countries. Also, many Eastern European countries, for example the Baltics, have demonstrated their ability to implement painful reforms and adjust to new economic realities without major social or political disruptions. This shows that political maturity and economic resilience in our region is better than many had thought before. In addition, we have seen Russia positively engaging on a number of issues of global and regional importance, thereby improving its standing among the investor community.
We invested EUR 5.2 million in our own shares during March and April. We have not changed our strategy and continue to see ample attractive investment opportunities in our universe. As the discount was high, the Board decided to send a clear signal again that we are confident about the valuation and value growth potential of our portfolio. The buyback had immediate positive effect for our shareholders, as our share outperformed all relevant benchmark indices. Now that the shareholders meeting has decided to cancel these shares, every shareholder's ownership in our company has grown proportionally.
We were happy to announce our third direct investment in January and to get this venture up and running during the quarter. We have been impressed by the skills and experience that Intrum Justitia and the East Capital Financials Fund bring to the table. The pipeline has been satisfactory and we have taken an in-depth look at a dozen or so investment opportunities during the last couple of months. So far the debt portfolios we have evaluated have been of modest size and variable quality, but we are confident that we can find attractive investment opportunities in this field before long.
We have allocated an additional EUR 5 million to East Capital Bering Ukraine Fund Class A. This is the fund that focuses on listed Ukrainian securities, which we expect to benefit the most from political stabilization. We have been underweight in Ukraine for the last two years. Ukraine is a country of enourmous potential, but because of its troubled politics in recent years, we had decided to wait for a more favorable environment. Now, with the presidential elections behind us, and with a stable majority government in office, our expectation is that Ukraine is again better able to focus on the important reform issues that have been overshadowed by the political in-fighting before. The Ukrainian market has been the best performer in our universe this year: it is up by 93%, but still down by 41% from the peak. Our investment into the East Capital Bering Ukraine Fund Class A is up by 28% so far in 2010.
Melon Fashion Group has continued to grow very fast: it now has a total of 343 shops. During the first quarter it added 70 shops, most of which came from taking over the operations of a former competitor. In the course, MFG has acquired the franchising rights for three international brands: Springfield, women'secret and Colors&Beauty, first two from the Spanish retailer Cortefiel Group. By adding men's fashion, women's underwear and accessories to its brand portfolio, MFG has once again demonstrated its ability to utilize its strong financial position and execution capability to grow the business. This is exactly why we invested new capital into the company and once again, they are smartly taking advantage on the market situation. MFG's same store sales during the first quarter were weak. The company had some problems with getting goods to the shops quickly enough; these issues have now been resolved. All in all, the financial result was better than expected due to higher gross margins and lower operating costs.
Our investment in TEO has done fine, the stock is up 24% so far in 2010 2. First quarter results showed a modest revenue decline, but good net profit, due to effective cost control. Also, comparing TEO's performance to other Baltic telcos, we see that it has been quite resilient, as the economic downturn has taken a bigger bite out of competitors' revenues. TEO met our expectations in terms of dividend payout: it continued to pay high dividends, yielding 9.2%. This is great news for East Capital Explorer, as we will receive our first dividend income of approximately EUR 1 million in a couple of weeks. The TEO AGM also decided to cancel the 4.7% of share capital that was previously held in treasury, effectively meaning that our ownership in the company grew.
Looking ahead, we continue seeing many interesting opportunities, which means that we will continue investing at a fast pace, despite recent market nervousness. We are very close to meeting our target of being fully invested.
Gert Tiivas, CEO
The full Interim Report is available for download as a PDF-file through the link below and on the website www.eastcapitalexplorer.com.
TELEPHONE CONFERENCE
The report will be presented and commented at a telephone conference with Gert Tiivas, CEO and Mathias Pedersen, CFO.
Date: today, Tuesday, 11 May 2010
Time: 10.00 am CET
Telephone details: +46 8 505 598 53 (Sweden) or +44 203 043 24 36 (UK).
CONTACT INFORMATION
Gert Tiivas, CEO, +46 8 505 977 30
Mathias Pedersen, CFO, +46 8 505 977 48
FINANCIAL CALENDAR
- Monthly net asset value report on the fifth working day after the end of each month
- Interim Report 1 January - 30 June 2010, 20 August 2010
- Interim Report 1 January - 30 September 2010, 11 November 2010
About East Capital Explorer - East Capital Explorer AB is a Swedish company, created with the specific aim of bringing unique investment opportunities in Eastern Europe to a broader investor base. The company invests mainly in East Capital's private equity and semi-public equity funds that provide exposure to companies not otherwise accessible via the local stock exchanges in Eastern Europe. East Capital Explorer targets fast growing sectors such as the power utilities, financial, retail and consumer goods and real estate sectors. East Capital Explorer has appointed East Capital to manage its investment activities. Since 9 November 2007, East Capital Explorer is listed on NASDAQ OMX Stockholm, Mid Cap.
The information in this interim report is that which East Capital Explorer AB is required to disclose under Sweden's Securities Market Act. It was released for publication at 07:00 a.m. CET on 11 May 2010.
The full press release including tables can be downloaded from the following link.