News Column

Phaunos Timber Fund Working To Become Cash Flow Positive

August 22, 2014

Samuel Agini

LONDON (Alliance News) - Phaunos Timber Fund Ltd, the embattled closed-ended investment scheme managed by Stafford Timberland Ltd, Friday said a planned USD10 million equity raising, combined with its ongoing cost cutting programme, should be sufficient to enable it to move to a cash flow positive position.

Earlier in August the fund had warned of "material uncertainty" over its immediate liquidity requirements and cash position, due to a number of changes circumstances, including a possible final capital call from Greenwood Tree Farm and a possible temporary suspension of dividends from Matariki, its New Zealand investment which is its single largest holding at 36% of the portfolio.

The fund also has suffered from reduced timber prices in China.

In its half yearly report Friday, Phaunos said it held USD4.9 million in cash at the end of June, a 42% drop from the USD8.5 million held at the end of December.

Cash generated by operating activities from timber operations and investment income over the six month period was USD2.8 million, down from USD5.6 million in the corresponding period last year. Cash outflows from operating activities amounted to USD5.3 million, a small increase on the USD5.2 million reported for the same stage last year.

The company wants to raise the USD10 million through a placing of about 5% of its current ordinary share capital, to bring the company's cash reserves back to a level at which they are equivalent to two years' operating costs.

The fund's half-yearly report also showed that its net asset value per share increased to USD0.81 from USD0.78 during the six months ended June 30, largely due to unrealised currency gains of USD15.4 million. These include net gains of USD8 million against the New Zealand dollar and Norwegian Krone relating to associates and net gains of USD7.4 million mainly against the Brazilian real relating to the translation of subsidiaries.

Chairman Henry Studholme said the fund and its manager are currently focused on the near-term and on generating cash.

"Stafford are putting a great deal of energy and resource into building or reviewing detailed operating plans with each of the managers on the ground," Studholme said in a statement.

"It is essential that these near-term actions take place in the context of a longer term vision and the board believes that the current changes take the company significantly towards our objective of building a London listed timber investment company that provides reliably-based long term returns to shareholders," Studholme added.

Phaunos shares were Friday untraded at USD0.385.

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Source: Alliance News

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