Craven House Capital sees decreases in a number of investments
Craven House Capital issued an unaudited investment update for the six months ended 30 November on Thursday, reporting that the value of its shareholding in Craven Industrial Holdings - its principal wholly-owned investment holding company - had decreased to $20.5m from $27.4m during the period.
The AIM-traded firm said that reflected the change in the respective value of subsidiary holdings.
It said the first subsidiary holding, DLC Holdings, which was 68% owned by Craven House, had decreased as a result in a drop in the mark-to-market valuation of the shares on 30 November compared to 31 May.
DLC is a Toronto-listed agricultural investment company with holdings in Brazil and South Africa.
Craven House said that, while the share price reduced to 12 Canadian cents from 27 cents during the period, it was “important to emphasise” that the share price remained at or above the 27 cent level for the majority of the period, and only traded down on very low volume during the tax loss selling season in Canada.
“There has been no deterioration in the valuation of the underlying holdings of DLC and management believe that the end of period share price represents a significant discount to the orderly liquidation value of DLC,” the board said in its statement.
“Management also believes that the political and economic situation in South America will likely provide for further acquisition opportunities as distressed sellers are forced to liquidate good properties.”
At Qeton, which is 50% owned by Craven House, the valuation during the six month period had reduced to $0.31m from $0.41m, which the board said reflected a small reduction in the adjusted earnings of Qeton during the respective trailing 12-month periods
Qeton is a joint venture company focusing on the distribution of mobile phones, tablet computers and accessories in emerging markets.
Craven House said Qeton remained profitable, however trading was said to be likely to continue to be subdued in comparison to historic levels, due to the weakness of currencies in local markets, particularly the Angolan kwanza compared to the US dollar.
“This means products - manufactured and shipped on a dollar basis - have become more expensive for local consumers and demand is reduced,” the board said.
“Management believes that the importation of consumer electronics will remain a viable business over the long term and will be highly correlated to the global oil price, which is the determining factor in access to foreign currency and discretionary consumer spending.”
At Craven House Angola, which is wholly-owned by Craven House, the board said there was no change in its valuation during the period.
The underlying loan portfolios continued to perform according to their terms, with interest payments received as expected during the period.
Management was reportedly evaluating options to repatriate capital from Angola on an accelerated basis, to take advantage of opportunities in Europe and North America.
At Craven House Capital North America, also wholly-owned by Craven House, the valuation reduced to $5.9m from $7.9m during the six months to November.
The board said that decrease was the result of mark-to-market valuation of shares in DLC and LM Funding America, owned by Craven House North America, which both declined during the period.
Finally, at Kwikbuild Corporation, which is 97% owned by Craven House, the board said the valuation remained “almost unchanged” during the period.
There was no activity relating to the underlying assets of the subsidiary, the directors added.
“The investment manager has again confirmed that it has agreed to waive $1.66m in performance fees which are payable to them under the terms of the management services agreement in place with the company,” Craven House said in its statement.
“The board welcomes this decision by the investment manager as it, once again, emphasises the investment manager’s desire that their interests remain aligned with all other shareholders.”