Better Capital sees 42% NAV uplift

The firm, which plans to top its Fund II with £250m over the next few weeks, has distributed £26.5m from its first vehicle back to investors since the beginning of the year.

The last 12 months were eventful ones for London-listed Better Capital, which released its 2013 annual results last Friday. 

The firm’s Fund I, whose investment period closed on 31 December 2012, made its first distributions, totalling £26.5 million (€30.93 million, $40.3 million). The proceeds came from the vehicle’s first realisation, generated through the sale of debt instruments held in coal mining business ATH Resources. 

This allowed the £210 million, 2009-vintaged vehicle to post a 42 percent NAV increase since inception. The fund, which holds seven companies in its portfolio, is now valued at £291.3 million including distributions. 

These positive developments have helped raise further interest in Fund II, the firm’s latest vehicle, Better Capital said in a statement. “The Board is confident that the Better Capital brand is attracting sufficient opportunities for the profitable deployment of the remainder of Fund II in the near term.” 

The firm recently announced its intention to top up Fund II’s initial £169.9 million capital pool with fresh equity. The firm is aiming to collect £250 million, in a share issue to be organised this summer, a source close to the matter told Private Equity International last week. 

Fund II made its second platform investment in double-glazing maker Everest last March, and a third acquisition when buying express delivery business Citylink in April. The vehicle recorded a 3.75 percent NAV increase since inception. Launched in 2012, it is now 66.5 percent deployed.

Fund I’s portfolio, which counts seven companies, has seen a number of them achieve tangible progress in their turnaround plans. Office equipment maker Spicers has repaid 87.5 percent of the vehicle’s initial cash injection of £40 million, made in 2011. Gardner, a provider of components to the aerospace industry, and m-hance, a business software developer, are improving their prospects for a future exit, Better Capital said. 

A number of other assets owned by the fund are expected to return to profit this year, or have just posted a small one over the last 12 months. These include luxury boat maker Fairline and POS software provider Omnico. 

The fund’s other companies, Reader’s digest and Calyx Managed Services, continue to face difficult prospects in the near term. 

Better Capital was decidedly downbeat about the immediate outlook for the economy, which it expects to “perform sluggishly with low growth and falling real wages.” This would continue to provide a sustainable flow of opportunities for turnaround investing, it said, with Better Capital’s non-reliance on debt funding deemed a distinct advantage when it came to look out for them.