| Tue 1 Jun 2010, 7:30 | | REI - Reinet Investments S.C.A. Depositary Receipts - Consolidated audited |
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REI
REI
REI - Reinet Investments S.C.A. Depositary Receipts - Consolidated audited
financial results for the year ended 31 March 2010
Reinet Investments S.C.A. Depositary Receipts
issued by Richemont Securities AG
(Incorporated in Switzerland)
ISIN: CH0045793657
Depositary Receipt Code: REI
1 JUNE 2010
CONSOLIDATED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2010
The Board of Reinet Investments Manager S.A. announces the results of Reinet
Investments S.C.A. for the year ended 31 March 2010.
Key financial data
- Net asset value at 31 March 2010: Euro 2 537 million, an increase of 37 per
cent from 31 March 2009
- Net asset value per ordinary share at 31 March 2010: Euro 12.95 (31 March
2009: Euro 9.42)
- Continued strong performance of Reinet`s investment in British American
Tobacco p.l.c.
- Consolidated profit for the year attributable to shareholders: Euro 691
million
Consolidated Net Asset
Value (`NAV`)
31 March 2010 31 March 2009
Euro m % Euro m %
Listed investments
2 159 85.1 1 470 79.7
- British American Tobacco
p.l.c.
- Other 5 0.2 1 -
2 164 85.3 1 471 79.7
Cash and liquid funds 343 13.5 331 17.9
Unlisted investments
- Trilantic Capital Partners 29 1.1 - -
funds (1)
- US land development and 23 0.9 - -
mortgages
- Other 35 1.4 46 2.5
Fees payable and other (55) (2.2) (2) (0.1)
liabilities, net of other
assets
2 539 100.0 1 846 100.0
Minority interest (2) - - -
2 537 100.0 1 846 100.0
(1) This amount includes the full investment in Trilantic, whereas the
discussion below refers to figures which represent Reinet`s 90 per cent
interest.
All of the underlying assets are held by Reinet Fund S.C.A. F.I.S. (`Reinet
Fund`).
A provision of Euro 40 million has been made in respect of the potential
performance fee, which may be payable after 31 March 2011, if certain conditions
are met. Further information is given later in this document.
The summary information contained in this announcement has been extracted from
the consolidated financial statements prepared in accordance with International
Financial Reporting Standards. The consolidated financial statements have been
audited.
BUSINESS REVIEW
Listed investment in British American Tobacco p.l.c. (`BAT`)
Reinet remains one of the largest shareholders in BAT, holding some 84 million
shares representing 4.2 per cent of BAT`s capital. At 31 March 2010, the value
of the investment in BAT in the balance sheet of Reinet was Euro 2 159 million,
being 85 per cent of Reinet`s net asset value.
Reinet Fund`s NAV has been positively impacted by the strengthening of the BAT
share price from Pound 16.13 to Pound 22.72 during the year. BAT shares are
listed principally on the London Stock Exchange and are denominated in pounds
sterling.
Although BAT`s share price is denominated in sterling, its revenues are
generated substantially outside the United Kingdom in a basket of currencies.
Although the value of the share in euro terms is subject to exchange rate
fluctuations, in the long-run, the share price is indirectly hedged against
sterling weakness. Reported profits measured in sterling should grow in the
event that the currency would continue to weaken. Reinet does not hedge the
sterling value of the investment against the euro for that reason.
Reinet received dividends from BAT during the year amounting to Euro 84 million.
Other listed investments are small portfolio investments, previously reported
under `other investments`.
Cash and liquid funds
Reinet Fund`s cash is held on deposit with banks in Luxembourg and the United
Kingdom. In addition, Reinet Fund has invested Euro 200 million in a euro-
denominated government bond fund. This holds exclusively short-dated bonds
issued by western European governments and short-term loans backed by government
bonds.
The cash balance also includes approximately Euro 2 million of funds advanced
and awaiting investment.
Unlisted investments
During the year under review, Reinet has considered numerous potential
investment opportunities. In evaluating these opportunities, Reinet applies a
minimum hurdle rate of return, recognising the performance target set by the
investment in BAT.
To date funding commitments in the amount of Euro 312 million have been entered
into in respect of the businesses detailed below, excluding the smaller
investments acquired as part of the Richemont restructuring.
Trilantic Capital Partners
Amount committed: Euro 164 million
Early last year, Reinet announced its decision to invest in the private equity
management business formerly owned by Lehman Brothers. Reinet bought this
interest, in conjunction with the management team, from the bankruptcy estate
for US Dollar 10 million in April 2009. This business is now known as Trilantic
Capital Partners (`Trilantic`).
At the time of the acquisition of the Trilantic interests, informal commitments
were made to colleagues who were instrumental in helping Reinet participate in
the Trilantic opportunity. It was agreed that Mr Ruggero Magnoni and Mr Alan
Quasha would be allowed to participate alongside Reinet in the Trilantic
investment once their involvement as members of the Board of Overseers
terminated after last year`s annual general meeting.
Recognising the role played by Mr Magnoni in introducing Reinet to the potential
investment in Trilantic, a company in which he is a major investor purchased a
10 per cent interest in the Reinet subsidiary company which holds the Trilantic
investment. The acquiring company fully funded its participation in the
subsidiary and has and will continue to contribute its pro rata share of the
capital calls received from Trilantic, reducing Reinet`s overall commitment to
Trilantic.
Mr Quasha was instrumental in negotiating the acquisition of the buy out
transaction, working with the bankruptcy estate and the Trilantic management
team to structure this complex transaction. Recognising his contribution, Mr
Quasha will receive a one sixth share of any carried interest attributable to
Reinet and its co-investors from Trilantic. This is in lieu of any fee for his
work in connection with the acquisition.
Also reflecting the commitment made when Reinet initially invested in Trilantic,
funds in which Mr. Quasha is an investor and has a management role (including
Vanterra Flex Investments L.P. - see below) will, during the year ahead, acquire
a 15% interest in the Reinet subsidiary company which holds the Trilantic
investment. The acquiring funds will also contribute their pro-rata share of the
capital calls received from Trilantic, thus further reducing Reinet`s commitment
to Trilantic.
The combined effect of the two transactions implemented to date is to reduce
Reinet`s remaining commitment to Trilantic by 10 per cent from Euro 170 million
to Euro 153 million and to reduce Reinet`s share of the carried interest
attributable to the management company on the realisation of investments from 15
per cent to 11.25 per cent. The transaction that is to be completed during the
year ahead will reduce Reinet`s commitment to Trilantic by a further 15 per
cent. Reinet`s direct share of the carried interest attributable to the
management company on the realisation of investments will therefore be reduced
from 11.25 per cent to 9.375 per cent.
Up to 31 March 2010, Reinet Fund and its minority partner had invested the
equivalent of Euro 7.6 million in the initial Trilantic management company
investment, Euro 2.1 million to acquire an interest in Trilantic Fund IV Europe
and a further Euro 12 million in the funds under Trilantic management. The
investment in Trilantic is carried at the estimated fair value of Euro 29
million at 31 March 2010, based on valuations prepared by Trilantic.
Accordingly, of the year-end valuation of Euro 29 million, some Euro 3 million
is attributable to the minority partner, being shown as Euro 2 million in
respect of minority interest and Euro 1 million under other liabilities.
At 31 March 2010, Reinet Fund had remaining commitments of Euro 153 million,
being US Dollar 106 million and Euro 75 million, to invest in these funds, after
taking into account the amounts payable by the existing minority partner.
United States land development and mortgages
Amount committed: Euro 74 million
During the year under review, Reinet invested Euro 25 million in property-
related investments located mainly in Florida and North and South Carolina. This
was principally mortgage debt in respect of land held for future development.
The debts were acquired from local lenders at substantial discounts to nominal
value, reflecting the depressed economic situation in the United States and the
risk that the development companies may not be able to meet their obligations.
Alongside its partners, Reinet is committed to invest a further Euro 49 million
in total to acquire further mortgage debt and to fund development projects.
Reinet is working closely with its partners and co-investors in the United
States, who have considerable experience in managing such projects, recognising
that this is an area where industry knowledge is critical to making the right
investment decisions.
Vanterra Flex Investments L.P.
Amount committed: Euro 74 million
In March 2010, Reinet entered into an agreement with Vanterra Flex Investments
L.P. (`Vanterra`), a newly created fund which was established for the purpose of
investing in other listed and unlisted funds and direct investments in the
United States and emerging markets. Reinet`s commitment is to invest up to US
Dollar 100 million over the life of the fund. As at 31 March 2010, no capital
contributions had been made to the fund in respect of this commitment, however
in April 2010 capital contributions totalling US Dollar 5 million were made.
Vanterra will seek to construct a globally diversified private equity portfolio
providing investors with long-term capital appreciation through private equity
investment funds investments and direct investments.
Other unlisted investments
Amount committed: Euro 34 million
In addition, Reinet continues to hold the small portfolio of unlisted
investments that it acquired as a consequence of the Richemont restructuring.
The portfolio includes small businesses with growth potential as well as
investments in specialised investment funds focused on developing markets and
niche sectors. This portfolio is valued at its fair value of Euro 35 million in
the balance sheet at 31 March 2010, based on a detailed independent evaluation
of each of the investments. Given the difficult economic conditions and the
difficulties in raising supplementary funding for development capital
investments, Reinet has aggressively marked down the valuations of certain of
these investments. During the year under review, two investments were realised.
Committed funds
The table below summarises Reinet`s outstanding investment commitments as at 31
March 2010.
Original Funded Funded Remaining
Commitment in in commitment
Euro m previous current Euro m
year year
Euro m Euro m
- Trilantic Capital 164 - 11 153
Partners (1)
- US land development 74 - 25(2) 49
and mortgages
- Vanterra Flex 74 - - 74
Investments L.P.
312 - 36 276
- Other 34 13 6 15
346 13 42 291
(1) amounts represent 90 per cent of the initial commitment assumed by Reinet,
10 per cent having been sold during the year.
(2) shown in the NAV statement as Euro 23 million in investments and Euro 2
million in cash.
Fees payable and other liabilities, net of other assets
Fees payable and other liabilities comprise principally a provision of Euro 40
million in respect of the potential performance fee payable after 31 March 2011,
together with the management fee and other operating expenses currently payable.
The performance fee is only payable if certain conditions are met. Specifically
the volume weighted average closing market price of the Reinet share on the
Luxembourg Stock Exchange over the last 20 trading days prior to 31 March 2011
must exceed Euro 7.1945. Whilst no performance fee is currently payable and no
fee will be payable if the market price would fall below Euro 7.1945, it is
considered prudent to make a pro-rata provision at this time, based on the
latest available share price information.
The management fee for the year under review amounted to Euro 17 million, of
which Euro 8 million was payable at 31 March 2010.
Summarised consolidated income statement
Year ended Six-months
ended
31 March 2010 31 March 2009
Euro m Euro m
Financial income 87 5
Operating expenses and (23) (7)
transaction-related costs
64 (2)
Realised losses on investments (2) -
Unrealised fair value adjustments
- BAT 689 (66)
- Other investments (19) (48)
Provision for performance fee (40) -
692 (116)
Non-recurring items related to
the Richemont restructuring in 542
2008
Minority interest (1) -
Profit attributable to the 691 426
shareholders of the Company
Financial income represents the dividend received from BAT, other dividends and
interest income received on Reinet Fund`s cash and liquid resources. During the
year under review, Reinet received Euro 84 million in dividends from BAT and
earned Euro 3 million on other investments and liquid funds.
Operating expenses include Euro 17 million in respect of the management fee for
the year ended 31 March 2010. The management fee in respect of the period ended
31 March 2009 was waived. Also included are Euro 2 million in charges from the
General Partner and transaction-related expenses, including legal and other
advisory fees, which amounted to Euro 2 million.
The investment in BAT increased in value by Euro 689 million during the year
under review. Of this, Euro 600 million was attributable to the increase in
value of the underlying BAT shares in sterling terms and Euro 89 million arose
due to the appreciation of sterling against the euro over the course of the
year. The unrealised fair value adjustment in respect of other investments
reflects the decision to further write down the carrying value of certain small
investments, offset to some extent by increases in the value of others.
A performance fee may become payable after 31 March 2011, if certain conditions
are met. As detailed above, a provision of Euro 40 million has been made during
the year under review.
The minority interest arises in respect of a third party`s ten per cent holding
of the vehicle which owns the Trilantic interests as described above.
Profit attributable to shareholders for the year amounted to Euro 691 million.
In the comparative period ended 31 March 2009, Reinet`s results were impacted by
transactions linked to the restructuring of Richemont. These included the one-
off holding gain realised when 90 per cent of Reinet`s holding of BAT shares was
distributed to shareholders in November 2008, the equity-accounted share of
BAT`s income for the period from 1 October 2008 up to the date of the
distribution of the shares as well as the contribution received from Richemont`s
luxury goods activities held by Reinet during the period from 1 October 2008 to
20 October 2008, when the current Reinet structure was created. These
restructuring-related items were non-recurring and had no impact on Reinet`s net
income in the year under review.
Cash flow
Year ended Six-months ended
31 March 2010 31 March 2009
Euro m Euro m
Investing activities
Government bond fund (100) (100)
Investments made (71) (19)
Proceeds of sale of investments 5 (166) - (119)
Dividends, interest and other 87 5
income received
Operating and related expenses (9) (6)
Net cash outflow (88) (120)
Opening cash position 231 1 482
Less cash flow relating to - 231 (1 131) 351
discontinued operations
Closing cash position 143 231
Liquid funds were held as
follows
Cash 143 231
Government Bond Fund 200 100
Total 343 331
An additional Euro 100 million was added to the euro-denominated government bond
fund during the year. In accordance with IFRS, this is shown as an investment
rather than liquid funds in the balance sheet, notwithstanding that the funds
are readily realisable and short-term in nature. These funds are invested
principally in short-term French and German bonds. In addition to bank deposits
of Euro 143 million, Reinet held Euro 200 million on deposit in the government
bond fund at 31 March 2010. In total, available liquid funds therefore amounted
to Euro 343 million at the balance sheet date.
Liquid funds increased by Euro 12 million over the year to Euro 343 million as
the inflow from dividends received from BAT, net of operating expenses, was
substantially offset by the amounts invested in new investments.
Investments totaling Euro 71 million were made during the year, including Euro
25 million in respect of US real-estate related opportunities and Euro 22
million in respect of investments in Trilantic. The balance relates to other
unlisted investments. Two small investments were sold during the year,
generating proceeds of Euro 5 million.
Dividends of Euro 84 million were received from BAT in the year, comprising a
final dividend in respect of the 2008 financial year of Euro 59 million (Pound
52 million) and an interim dividend for 2009 of Euro 25 million (Pound 23
million).
Dividends
Recognising the need to accumulate retained earnings within Reinet Fund and
taking into account the uncertain economic environment, the Board of the General
Partner believes it prudent not to propose any dividend at this time.
Shares in issue
The number of shares in issue remained unchanged during the period at 195 942
286. This figure includes 1 000 management shares held by the General Partner.
Financial statements
The consolidated financial statements at 31 March 2010, on which this
announcement is based, have been audited and approved by the Board of the
General Partner on 24 May 2010 and are subject to shareholder approval at the
annual general meeting to be held in September 2010. The printed Reinet Annual
Report and Accounts will be available upon request from mid-July 2010.
Website: www.reinet.com
Reinet Investments S.C.A. (the "Company") is a partnership limited by shares
incorporated in the Grand Duchy of Luxembourg and having its registered office
at 35, boulevard Prince Henri, L 1724 Luxembourg. It is governed by the
Luxembourg law on securitisation and in this capacity allows its shareholders to
participate indirectly in the portfolio of assets held by its wholly-owned
subsidiary Reinet Fund S.C.A. F.I.S. (the `Fund`), a specialised investment fund
also incorporated in Luxembourg. Reinet shares are listed on the Luxembourg
Stock Exchange and Reinet South African Depository Receipts are listed in
Johannesburg. Reinet shares are included in the `LuxX` index of the principal
shares traded on the Luxembourg exchange and the South African Depository
Receipts are included in the JSE `Top 40` Share Index.
Notes for South African editors
Acknowledging the interest in Reinet`s results on the part of South African
investors, set out below are key figures from the results expressed in rand. The
closing euro/rand exchange rate prevailing as at 31 March 2010 was 9.83985; this
compares with a rate of 12.62105 as at 31 March 2009.
in ZAR 31 March 2010 31 March 2009
Net asset value in millions 24 964 23 298 +7 %
Net asset value per 127.43 118.89 +7 %
ordinary share
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 01/06/2010 07:30:02 Produced by the JSE SENS Department.
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