Elephant Capital : Interim Results For Six Months ended 28 February 2015

Elephant Capital plc and its subsidiaries

For Immediate Release 28 May 2015 ELEPHANT CAPITAL PLC INTERIM RESULTS FOR SIX MONTHS ENDED 28 FEBRUARY 2015Elephant Capital plc (AIM: ECAP), the India focused private equity company, announces its results the six months ended 28 February 2015.Key Points:· Net asset value per share of 36p as at 28 February 2015 (31 August 2014: 35p)

· Post 28 February 2015:

- Remaining holding in Nitco Limited sold for GBP 0.16 million.
- 5,000,000 ordinary shares bought back for aggregate consideration of GBP 1.0 million.
Commenting, Chairman Vikram Lall, said: 'We continue our efforts to dispose of our remaining unlisted investments in the interests of shareholders, and are conscious of the depletion of NAV arising from the ongoing operating costs of the Company. Further significant returns of capital are dependent on further investment realisations.'
Copies of the Interim Report will be available for download from Elephant Capital's website at www.elephantcapital.com shortly.
For further information please contact:

Vikram Lall, Chairman Gaurav Burman Elephant Capital plc	[phone] [phone]
Sue Inglis Cantor Fitzgerald Europe (Nominated Adviser & Broker)	[phone]

Chairman's Statement

Results and portfolio changesAs at 28 February 2015, Net Asset Value ('NAV') was GBP 7.26 million or 36p per share, compared to GBP 7.10 million or 35p per share as at 31 August 2014. The increase in NAV reflects a GBP 0.25 million increase in the valuation of the unlisted investment portfolio (including an exchange gain of GBP 0.24 million), a GBP 0.08 million increase in the listed investment portfolio (including an exchange gain of GBP 0.02 million) and the excess of expenses over income of GBP 0.17 million.
No new investments were made during the period. Since the period end there was a disposal of the remaining listed investment, which is detailed below.Unlisted investment portfolioAir Works India (Engineering) Private Limited ('Air Works') has been performing satisfactorily and exhibited operational strength during the period. It has been valued at GBP 3.33 million based on an independent third party valuation compared to GBP 3.05 million at 31 August 2014.
Amar Chitra Katha Private Limited ('ACK') has not performed in line with its budget. Accordingly, its valuation in INR terms decreased marginally based on an independent third party valuation However, in GBP terms its valuation increased to GBP 1.25 million at 28 February 2015, compared to GBP 1.2 million at 31 August 2014, due to favourable exchange rate movements.

The investment in Global Cricket Venture Limited ('GCV') has been valued at GBP 0.38 million based on the estimated net asset value of GCV as attributable to Elephant Capital's shareholding as at 28
February 2015 compared to GBP 0.47 million at 31 August 2014.
Full details of the Company's unlisted investments are included in the Investment Manager's review.Listed investment portfolioPost 28 February 2015, Elephant Capital sold its remaining holding in Nitco Limited ('Nitco') for GBP
0.16 million.Return of capitalIn March 2015, 5,000,000 ordinary shares were successfully tendered for cancellation at a price of
20p per share. Following the cancellation of these shares, 15,117,057 ordinary shares remain in issue.Board changesVincent Campbell has been appointed as director and company secretary in the place of Elizabeth Tansell who resigned with effect from 7 May 2015. The Board would like to thank Elizabeth Tansell for her significant contribution during her tenure as a director and company secretary.Auditor's review of half yearly reportIn order to save costs the Board has dispensed with the auditor's review of the Company's half yearly report.StrategyWe continue our efforts to dispose of our remaining unlisted investments in the interests of shareholders, and are conscious of the depletion of NAV arising from the ongoing operating costs of the Company. Further significant returns of capital are dependent on further investment realisations.Vikram Lall 27 May 2015 Investment Manager's Review IntroductionElephant Capital plc ('Elephant Capital' or the 'Company') holds its investments in businesses that are established or operating primarily in India through its Mauritian-based special purpose vehicles ('SPVs') Tusk Investments 1 Limited and Tusk Investments 2 Limited (individually the 'SPV', collectively the 'SPVs').
The SPVs are managed by Elephant Capital LLP (the 'Investment Manager'), a limited liability partnership which in turn is advised by Elephant India Advisors Private Limited, of which the senior executives in India are all members.Investment strategyThe Company was established to execute a value-based strategy in both public and private businesses. As previously announced, Elephant Capital will not make any new investments and has adopted a policy of actively managing and realising its current portfolio and returning surplus cash to its shareholders.
Investment activityDuring the six months period to 28 February 2015, the Investment Manager made no new investments. The focus was on managing the existing portfolio and trying to create liquidity to return cash to shareholders.
Post the period end, Elephant Capital sold its remaining holding in Nitco for GBP 0.16 million. The sale of Nitco resulted in a realised loss of GBP 0.41 million (being the excess of original cost of GBP
0.57 million over the sale proceeds of GBP 0.16 million).
The Investment Manager continues to focus on helping GCV pursue its claims for the alleged wrongful termination of its agreement by the Board of Control for Cricket in India ('BCCI'). Further, GCV continues to be plagued by various other legal actions and is involved in litigation with various parties in the UK and the US. While this litigation continues there is no visibility on an exit.
Given this activity Elephant Capital now holds only four unlisted investments: Air Works, ACK, GCV and Obopay, the last of which has no value. The Investment Manager is focused on finding ways to realise Air Works and ACK over the medium term as these businesses mature. No further investments in any of these companies are envisaged.Portfolio review Air Works India (Engineering) Private LimitedAir Works is one of the leading independent providers of Aviation Maintenance, Repair and Overhaul (MRO) services in India, Aircraft Paint and Refinishing in Europe and Aircraft Management Services in Dubai. Founded in 1951, Air Works has successfully transformed itself from a family run business focused on providing maintenance services to business aircraft into a professionally managed organisation providing a full suite of services to customers across Aircraft Management, Business and General Aviation MRO, Aircraft Paint and Refinishing, Commercial Aviation MRO, Avionics and Parts Distribution. It is India's largest and only EASA Certified Business Aviation MRO company.
The company has been performing satisfactorily. On a consolidated basis, Air Works had a profitable closing to its financial year FY2015 with revenue of approximately USD 105 million and an EBITDA of around USD 12 million. The revenue for FY2015 was lower than the previous year by circa 5% due to the impact on pricing and volumes of increased competition in the repainting market in Europe. However, the EBITDA on the consolidated basis has shown an improvement from 10% last year to circa 12% in FY2015 on account of improving operating efficiencies.
The company successfully completed a rights issue in April 2015 (Elephant Capital did not participate in the rights issue). The rights issue raised USD 7.72 million at a pre-money valuation of USD 125 million (the pre-money value at which Company originally invested in May 2011 was USD 50 million). Air Works has also negotiated circa USD 37 million of debt funding from its banking partners. This capital will be used to repay some existing loans and the rest will be earmark ed for funding the acquisition targets in the pipeline referred to below.
Air Works has also been evaluating various acquisition opportunities to fuel the company's growth via inorganic expansion and has identified targets in Aviation Auditing, Valuation, and Advisory services, and is in advanced stages of negotiating the deals.Amar Chitra Katha Private LimitedACK is one of the leading children's media companies in India, with a catalogue of over 750 print and digital products and 25 major (and 50+ minor) proprietary characters with India-wide recognition. ACK's origins are in children's books and comics, including 'Amar Chitra Katha', the number one children's comic book series dating back to 1967. Other key brands include Tinkle, the number one English magazine for children. ACK has also entered into a licensing arrangement with the National Geographic Society, US for publishing their magazines in India.
ACK missed its revenue target in the year FY2015 by about 33%, with full year revenue of INR 599 million vs. the management target of INR 889 million, and FY2014 revenue of INR 694 million. Overall gross margin of the business improved by 400 bps over FY2014, but this increase was more than offset by 14% year on year revenue decline and 5% increase in fixed costs leading to an increase in EBITDA loss to INR 37.8 million, vs. previous year loss of INR 8.2 million and budget forecast of profit of INR 13.7 million. ACK's management attributes much of this to lack of working capital in the business, which, according to their estimates, has been responsible for a loss of circa INR 70 million of topline. ACK's management has been working on measures to optimise costs, and on the divestment of non-core businesses such as Brainwave and Karadi Tales. It has also been working on optimising the revenue mix towards higher margin businesses, as a result of which the core publishing business and advertisement sales revenue contribution has grown to 53% of total sales (46% in FY2014), while the share of IBH Books and Magazines Distributors has declined to circa 40%.
In keeping pace with changing media consumption habits, and the increasing share of digital media, the company launched mobile apps across multiple platforms allowing consumers to purchase and access ACK products on their devices. The launch of digital titles increase the focus on online sales as digital media in India is expected to grow exponentially over the next 20 years.
Elephant Capital invested GBP 3.2 million in ACK in a primary transaction in June 2010. In April 2011, it announced a further investment of GBP 0.9 million in a second funding round, led by Future Consumer Enterprise Limited ('FCEL') (previously known as Future Ventures India Limited). Elephant Capital's stake in ACK was 22% post this investment. ACK subsequently bought back 70,457 of its own shares representing 15% of existing paid up capital of the company, at the purchase price FCEL and Elephant Capital paid in the second round. Neither Elephant Capital nor its co-investors participated in this buy-back and hence Elephant Capital's shareholding in the business increased to 26%. In the rights issue conducted in ACK's last financial year, Elephant Capital declined the opportunity to invest because the Company is in the process of returning capital to its shareholders. Its holding in ACK therefore declined to 20%.Global Cricket Ventures Limited, MauritiusIn November 2009, Elephant Capital announced an investment of GBP 5.95 million in a primary transaction in GCV, a cricket-focused, digital media and broadcasting company. At the time of its investment, GCV was the exclusive licensee of key internet and mobile rights to the Indian Premier League ('IPL') and key internet rights to the Champion's League Twenty20 ('CLT20') cricket tournaments.
In mid-2010, the BCCI announced that it would be rescinding its global media contracts with World Sports Group ('WSG') from whom GCV sub-licensed many of its own cricket-related rights. Further, WSG terminated GCV's contractual rights relating to the IPL. This obviously dealt a fatal blow to the business prospects of GCV, as GCV lost its key rights (which were re-awarded to other parties). As a result of WSG's termination, GCV entered into active discussions to settle liabilities towards its own sub-licensees and has made significant progress on such settlements.
GCV views the BCCI's termination of its contractual rights to be wrongful and has commenced an arbitration process with the BCCI in order to reach a resolution of the current situation.
GCV has been plagued by litigation on several fronts. This unfortunately continues with GCV embroiled in litigation in both the US and the UK. The Investment Manager has been working through this and aiding GCV and hopes that these matters can be brought to a resolution over the next 12 months.
The investment has been valued at GBP 0.38 million based on the Investment Manager's best estimate of the net asset value of GCV attributable to the Company's shareholding in GCV.