In Q1 2022, Fondul recorded an unrealized gain from equity instruments at fair value through P&L of RON 883.5m. Net operating income increased by 19% YoY, while the Fund recorded a net profit of RON 826.1m, an increase of 17.8% YoY. Finally, NAV as of 31 March 2022 stood at RON 14.5bn, an increase of 34% YoY.
In Q1 2022, the unrealized gain from equity instruments at fair value through profit and loss amounted to RON 883.5m. This increase was generated by Hidroelectrica, as a result of the increase in Hidroelectrica’s holding (+79% YoY), following the valuation updates conducted in 2021, January, and March 2022. It should also be noted that in April 2022, Fondul reevaluated its Hidroelectrica holding to RON 11.37bn, an increase of 15% YoY.
The Fund also recorded a net realized loss from non-current assets held for sale of RON 156.9m, resulting from the partial disposal of OMV Petrom holding. As a reminder, in January 2022, the Fund announced the decision to partially sell its investment in OMV Petrom through an ABB (accelerated book-building offering). The sale offering was completed on 19 January 2022 for a total amount of RON 978.3m. The RON 156.9m realized loss comes from the difference between these total proceeds (RON 978.3m) and the fair value at the reclassification date (RON 1.14bn).
In total, the net operating income amounted to RON 859.8m, an increase of 19% YoY. Moving on to OPEX, it amounted to RON 33.6m, an increase of 58.9% YoY, coming mainly from an increase in administration fees (+27.6% YoY). The larger increase in op. income compared to OPEX meant that EBIT amounted to RON 826.1m, an increase of 17.8% YoY.
The Fund therefore recorded a non-taxable income of RON 188m, which mitigates the non-deductible expenses of RON 20.2m, as well as the deferred tax asset for the tax loss of RON 35.6m. When combined with the income tax at 16% (RON 132.2m), this would mean that the Fund does not pay any income tax. As such, the net income amounted to RON 826.1m, the same as the EBIT, an increase of 17.8% YoY.
Fondul Proprietatea key financials (Q1 2021 vs. Q1 2022, RONm)
Balance Sheet
Looking at the balance sheet, the Fund recorded an increase in liquid assets (which includes cash and cash equivalents, deposits with banks, treasury bills, and govt. bonds) of 112% YoY. This came as a result of cash inflows from the partial disposal of the Fund’s OMV Petrom holding (RON 978.3m) and from the Ministry of Finance, as payment of unpaid shares held by the Romanian State in the Fund (RON 189.2m). This was offset by the cash outflow from the dividend distribution paid in February 2022 (RON 320.6m). Equity investments increased by 6.5% and amounted to RON 13.4bn, driven by the increase in value of unlisted holdings by RON 883.5m (Hidroelectrica valuation update), slightly reduced by the negative share price change of OMV Petrom (-5.8% in Q1 2022), resulting in a loss of RON 49m. Finally, other assets amounted to RON 207.1m (FY 2021: RON 298.7k), as a result of a guarantee deposited to the broker for the 13th buyback tender offer.
Meanwhile, total liabilities decreased by -74% YoY and amounted to RON 115.7m, due to the payments performed for the third special dividend, which was paid in February 2022. The Fund’s total NAV amounted to RON 14.5bn, an increase of 34% YoY, meaning that the NAV per share amounted to RON 2.3466, an increase of 29.2% YoY.
Impact of Russia-Ukraine Conflict
According to the Fund, Fondul does not have any direct exposure to Russia or Ukraine. They are actively monitoring developments that might affect financial markets such as sanctions, actions by governments, and developments in Ukraine itself. They will continue assessing the impact on the portfolio companies’ operations and valuation and take any necessary action that might be required. In Q1 2022, the Fund performed a period analysis of the multiples valuation of publicly traded peers companies and the portfolio companies and concluded no adjustments to unlisted holdings are needed as the impact is immaterial.
