Source: The Telegraph
By Alan Tovey

Feared activist investor Crystal Amber's successful campaigns have boosted its value by 33pc over the past year.

Annual accounts from the listed business behind the investor, which targets mid-sized companies, reveal that its net asset value was £201m at the end of June, up from £151.5m a year ago.

Led by City veteran Richard Bernstein, the appearance of Crystal Amber on the shareholder register often causes fear in the boardrooms of the companies in which it invests. The activist usually agitates for changes that will boost the share price of its investment and often results in them being taken over.

Announcing the results, chairman William Collins said: "Most of the fund's activism takes place in private, but we are willing to make our concerns public when appropriate." He added that Crystal Amber seeks to 'release.. hidden or trapped value'.

Mr Collins said that the response of management at companies the fund invests 'has generally been encouraging'.

During the year the company exited its positions in property company Grainger; film studio Pinewood; and Frankie & Benny's, owner The Restaurant Group, receiving £12.7m, and reduced its stake in oil explorer Hurricane, generating £15.7m.

Total net realised gains for the year were £19.3m, including losses on derivatives.

Of Crystal Amber's major holdings, underperformers included the Sutton Harbour marina in Plymouth, and Ocado, which each account for less than 5pc of the fund's net asset value.

The fund is exploring sale options for Sutton Harbour, but said Ocado's expertise in online grocery sales has the potential to be a 'game-changer'. It added that Amazon's recent acquisition of Whole Foods 'sent tremors through the grocery market', which Crystal Amber expects to 'force' other retailers to 'address their online capability', potentially buying in Ocado's system.

Other major holdings in the portfolio include van hire group Northgate, representing 14.4pc of net asset value, which Crystal Amber is reported to be ready to sell, with a price mooted at about £6 a share.

Mr Collins, who will retire at the AGM in November, predicted political uncertainty would generate further investment targets for Crystal Amber, pointing to the Trump presidency and Brexit.

Brexit has created several activist opportunities, he said. 'Sterling's weakness has made UK companies particularly attractive for overseas acquirers.'

Backers of the fund included heavyweights Invesco which holds almost 30pc and Neil Woodford, who holds about 16pc.

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The Telegraph
By Ashley Armstrong, Retail Editor

The boss of online grocer Ocado has admitted that the business faces the challenge of the City not knowing whether it is a retailer or a technology player after posting a fall in profits and a ballooning debt pile.

Tim Steiner, chief executive, tried to argue that the company was both in retail and technology as it reported a 9.4pc drop in pre-tax profits to £7.7m for the six months to May 28, partly caused by higher costs associated with the opening of its new distribution centre in Andover, which is not yet at full capacity.

Debt jumped from £14.6m to £102.4m on the back of its investments in technology.

Ocado has been under pressure from short sellers and activist fund Crystal Amber, which has called on the company to overhaul its investor relations and focus on being a technology company.

Mr Steiner said that a recent discussion with Crystal Amber's fund manager, Richard Bernstein, had been "very constructive".

The Ocado boss argued that Amazon's recent swoop on Whole Foods, which gives the online giant 460 shops, was a move "to accelerate a channel shift towards online in the US. We think that this will be a catalyst for the market and help our own conversations in the US".

He added that renewed speculation about Amazon's takeover interest in Ocado was "just that, it has been speculation since we listed seven years ago".

Ken Odeluga, market analyst at City Index, said that the Ocado boss had "an admirably positive attitude but has more convincing to do".

Ocado has continued to disappoint investors by failing to sign with a major international retailer to license its technology, which remains the reasoning behind the company's high share price multiples. Earlier this year the market was underwhelmed by an announcement that the online grocer had licensed its "store pick" technology to an unnamed regional player overseas.

Mr Steiner said that the reason for not disclosing the partner's name was because of commercial sensitivity: "If you are a good hotel, you don't say which celebrities are staying there," he said.

He added that he was not setting a deadline to sign an international partner after missing a self-imposed deadline to find a second customer by the end of 2015 by a year and a half. "I think we learnt that lesson," he said.

The Ocado boss said that the company was still going through a "huge investment cycle" related to its newest warehouses in Andover and Erith and its new robotic picking systems and building its store-picking technology, which Morrisons has begun to roll out in shops this week.

A recent analyst visit to Andover prompted some negative feedback to the City because of teething problems with its robotics, which caused Ocado's shares to fall almost 7.9pc. However, Mr Steiner said that he had taken "several dozen people who had been impressed, including one of our client's chairmen who said he thought it was "remarkable"... there will always be those who find faults.

Retail revenues rose by 22pc to £659.6m in the half year, helped by an extra two weeks of trading compared to 2016. Total revenues climbed by 22pc to £713.8m.

While sales rose basket size continued to fall, slipping 1.4pc - a reflection of the intense price pressures on the major supermarkets.

"The Ocado narrative rolls on - namely its revenues from selling groceries aren't growing fast enough to recoup its astronomical set-up costs," said John Ibbotson of Retail Vision.

Ocado shares rose 1pc in morning trade to 293p.

Bosses at Ocado will be urged to rebrand the online grocer in the City as a technology business and overhaul their investor relations team when they face an activist shareholder for the first time this month.

Richard Bernstein, the fund manager behind Crystal Amber, is to meet Duncan Tatton-Brown, Ocado's chief financial officer, during the last week of June, after his investment firm revealed a 0.5pc stake in the food delivery business a fortnight ago.

The meeting could mark the start of a campaign by Crystal Amber to shake up Ocado, which has disappointed "investors with its lack of progress" licensing its technology overseas and the way it communicates with the City.

Mr Bernstein told The Sunday Telegraph that one problem with the FTSE 250 company was that it interacts mainly with stockbroking analysts who focus on the grocery industry.

But Ocado's growth strategy is aimed at finding foreign retailers willing to pay to use its robotic warehouse technology and software to help run online grocery delivery businesses.

Last week it raised £200m from a bond sale and said it would put £94.5m towards developing its robots and expanding capacity at its warehouses.

"Why is it positioned as a food retailer? Because the expenditure is going into becoming a provider of technology solutions for food retailers," Mr Bernstein said.

The veteran activist investor added that Ocado should focus more on technology analysts and "people who want to invest in technology" so that its business is better understood in the City.



Ocado has developed robots that pick groceries for delivery from warehouses
Ocado is partnered with Wm Morrison and Waitrose in the UK. To reduce its reliance on those retailers, it had pledged to expand overseas by the end of 2015, a deadline it missed, much to investors" frustration.

It finally announced its maiden international tie-up earlier this month, although the deal with a regional European retailer only allows its unnamed partner to use its software.

The retailer did not sign up to use Ocado's warehouse robots, disappointing investors.

The online grocer also faces mounting competition in the food delivery industry. On Friday, Amazon announced a $13.7bn (£10.7bn) takeover of Whole Foods, the upmarket American supermarket chain that has shops in the UK.

The deal sparked speculation Amazon could soon bid for Ocado, sending its shares up 0.6pc. Amazon already sells groceries for Ocado partner Morrisons.

An Ocado spokesman said: "We do not comment on individual shareholders views".

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The value of looking into the crystal ball
Martin Waller
The Times, 9.5.17

Most investment trusts tend towards the steady but reliable end of the spectrum. Crystal Amber is a little different, being as close as the London market gets to an activist trust of the sort more common in the United States, with the likes of Pershing Square and Elliott Advisors.

The fund, which was founded in 2008 by Richard Bernstein, specialises in taking strong positions in smaller or medium-sized companies where he feels that action is needed or where the shares look undervalued.

Mr Bernstein describes his approach as contrarian, supportive and patient. He does not go in for aggressive tactics only once has Crystal Amber called an extraordinary meeting "of Leaf Clean Energy " and the request was withdrawn after the chairman and chief executive resigned. He does have an ability to find takeover candidates. Mr Bernstein was involved in a longrunning dispute with Michael, now Lord Grade of Yarmouth, over his chairmanship of Pinewood Studios, who he wanted to stand down. The company was taken private last year by a private equity fund. Other investments also taken over in recent years are Aer Lingus, the Irish airline, and Thorntons, the chocolate maker.

At present there are only seventeen investments and the top ten account for about 90 per cent of net asset value. Coincidentally, the biggest by value, Hurricane Energy, put out a favourable update on its reserves yesterday. Crystal Amber helped with a capitalraising that allowed this North Sea explorer to continue its drilling programme and bought the shares at about 19p. They trade at above 60p.

Other significant stakes are in Northgate, the van hire business, which Mr Bernstein views as subscale and ripe for a takeover after an approach from Avis was rebuffed several years ago, and Grainger, the property group. He has been pressing for change here and believes that the company's legacy properties, which are occupied and on controlled rents, are largely unvalued by the market.

The shares, unchanged at 244p, are trading at almost exactly the latest published net asset figure. Short-term gains may be limited, but Mr Bernstein's ability to spot winners speaks for itself.

My Advice: Buy
Why: The concentration of investments means that performance may be lumpy, but the fund's long-term record is excellent

The Telegraph - Business



From outside it appears nothing more than another of the anonymously plush townhouses that stand silent sentry in Mayfair, London. But behind the dark front door of this eighteenth-century terrace building is the nerve centre of Crystal Amber, one of Britain's most feared activist investors.

When the investment fund appears on a firm's shareholder register, both the company's management and other investors can be guaranteed that the business in question is in line for a shake-up. The £230m listed fund, led by City veteran Richard Bernstein, has a record of triggering seismic change at the small and mid-cap companies where it builds stakes. Many of the firms it targets are eventually taken over. As a result, whenever Crystal Amber starts buying shares in a business, the City pays attention.

"The correlation between companies we invest in which are subsequently taken over is very high," muses Bernstein, dressed in a dark suit and shirt and sitting at a conference table in Crystal Amber's offices, just a few minutes walk from Hyde Park.

"One of my shareholders has said to me, " Richard, you're not really a fund manager, you're a businessman, and I look at businesses as the same way as a businessman does. I look at our portfolio now and I can see why a lot of these businesses are attractive.

The fund has held stakes in the film studios business Pinewood, the chocolatier Thorntons, and the Irish airline Aer Lingus, and all three have been snapped up by suitors within the past two years. Pinewood was bought by a property fund for £323m, Thorntons was swallowed up by its Italian competitor Ferrero in a £112m deal, and Aer Lingus was taken over by British Airways owner International Airlines Group for 1.4bn.

All of these deals generated lucrative returns for Crystal Amber and its heavyweight shareholders, which include the top fund manager Neil Woodford and City giant Aviva Investors. Bernstein, 54, insists with a ready smile that he does not pursue the type of aggressive activist campaigns favoured by US funds, despite his success in overhauling companies and turning them into bid targets.

Traditionally, investor activism has been more common in the US, where hedge funds including Elliott Management and Bill Ackman's Pershing Square are not averse to publicly criticising companies where they hold stakes.

"We're not the US brand of activism," Bernstein says. "Our default position is not to be antagonistic towards management teams. In nine years of our existence we've called one EGM and that was a company where most of the board resigned that morning after we called it."

That is not to say, however, that Bernstein is afraid of going public and castigating company bosses when he believes he is not being listened to.

"Our style is contrarian, patient, supportive," he says. "But when management teams are deliberately obstructive and acting in their own interest rather than the stakeholders, then that is unacceptable and we act."

It was during one of those confrontations that did burst out into the open that Crystal Amber first came to widespread prominence in the City. In 2010, two years after Bernstein set up the fund with the backing of Woodford, he was involved in a high-profile spat with Michael (now Lord) Grade as he urged Grade, then chairman of Pinewood, to step down.

"He's probably a great guy to have at a dinner party, but in our assessment he doesn't have the desire, the determination, the sweat, or the toil to get the best for shareholders," Bernstein was quoted as saying at the time.


Richard Bernstein

"I always enjoyed the stock market and the psychology of what makes a share go up"

The dispute thrust him into the spotlight. Bernstein was born in London in 1962, the son of a property investor and a postmistress. He attended Haberdashers' Aske's in Elstree, where he was part of a team of pupils that entered a Williams & Glyn's Bank school stock-picking competition.

"I always enjoyed the stock market and the psychology of what makes a share go up," he says.

Bernstein went on to study economics at the London School of Economics and then trained as a chartered account at BDO Stoy Hayward: "I wanted to learn about business."

He did not enjoy the work, however, and soon left to become finance director of the financial public relations firm City Marketing, where he spent seven years, before setting up Amber Analysis (Bernstein means amber in German), a balance sheet screening system that counted Fidelity's star fund manager Anthony Bolton as a client.

Amber Analysis soon drew the attention of Philip Augar, Schroders' well-known equity broker, who hired Bernstein to become an analyst in 1997. Bernstein, fascinated by the explosion of technology firms, left Schroders in 2000 to set up his own tech-focused fund, Eurovestech. Bernstein listed the fund the day before lastminute.com floated on the stock market and then rode out the bursting of the dotcom bubble, market turmoil that allowed Eurovestech to pick-up a host of bargains.

The idea for Crystal Amber came after Eurovestech became involved in a dispute with the board of Prelude Trust, an investment company where Bernstein's outfit held a stake. Woodford, an investor in Eurovestech, was impressed by the campaign Bernstein waged at Prelude Trust and told him he would back him if Bernstein ever moved away from the tech sector to set up an activist fund.

With Woodford as its major investor, the Aim-listed Crystal Amber was launched in 2008. Despite having only five employees (Bernstein, two analysts, a head of marketing and a secretary), it has grown to become one of the UK's few activists, in an industry dominated by big American funds.

Increasingly, however, US activists are turning their attention to Britain. Last year, Elliott waged two high-profile campaigns in the UK, forcing the brewer AB InBev to raise its giant bid for FTSE 100 rival SABMiller to $103bn, and pressuring South Africa's Steinhoff to lift its offer for the discount retailer Poundland to £466m.

Bernstein believes the pound's slump since last June's vote to leave the European Union will spur more activism, because British companies are now more attractive to foreign buyers and investors will try to encourage deals.

"These are the same companies where, currency-wise, if you're a US investor they're 20pc cheaper so there's been a flurry of activity," he says. "If you've got a pot of money and you come from overseas this is a great place to invest."

Currently, however, Bernstein is focused on Johnston Press, the troubled newspaper publisher behind the i and a host of local titles, including The Yorkshire Post, where Crystal Amber holds a 20pc stake, making it the company's biggest shareholder.

Johnston, which is struggling to adapt to the decline of the local newspaper industry, is labouring under £137.7m of net debts, and many in the stock market believe a debt-for-equity swap is looming. Bernstein has publicly questioned whether Ashley Highfield, the publisher's chief executive, is the right man to lead the business through what the investors believes is an inevitable restructuring.

It appears to put Bernstein on a collision course with the publisher's board. But he warns: "If we and other shareholders feel this isn't the best course and Ashley's had long enough to get it right, then it's our right to act."

Given Bernstein's record of successful activism, there is no doubt that he will.

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INVESTORS CHRONICLE
Author: Simon Thompson

I noted with interest yesterday's drilling news from Aim-traded Hurricane Energy (HUR:48.5p), the UK-based oil and gas group focused on hydrocarbon resources in naturally fractured basement reservoirs and specifically on the UK continental shelf. So too did other investors whose buying sent the share price up 16 per cent to within 10 per cent of the June 2014 all-time high of 54p.

The price surge looks justified as Dr Robert Trice, chief executive of Hurricane, points out that the Lincoln Well has discovered a significant oil column outside structural closure on our Greater Lancaster Area acreage, west of Shetland. Our initial assessment of the drilling results will be subject to refinement by analysis of wireline and sidewall core data, however, current analysis indicates that our pre-drill resource assessments - which were constrained by the oil down to in the Arco Well - of approximately 250m barrels of recoverable oil for the Lincoln prospect may be conservative.

Analyst Dougie Youngson at brokerage finnCap has a target price of 72p on the shares, implying a valuation of £865m for the equity, noting that Hurricane is building a huge resource base in a strategically important part of the North Sea. He has a point as the company now has 444-470m barrels of oil equivalent of 2C Contingent Resources and 432-442m barrels of oil equivalent of P50 Prospective Resources on acreage it wholly owns. If anything, Mr Youngson's target price could prove conservative as analysts Sanjeev Bahl and Elaine Reynolds at Edison Investment Research upgraded their total risked net asset value by more than a third to 101p a share this morning, of which the the Lincoln component now accounts for 33p a share, up from 8p a share prior to yesterday's announcement. This is assuming a 60 per cent chance of success, rather than 15 per cent embedded in their previous risked net asset value estimate.

With newsflow from its wells positive, and the oil price recovering strongly, then this is rather good news for Hurricane's shareholders, and also for Aim-traded activist investment company Crystal Amber(CRS:189p).

That's because Crystal Amber owns a 14.5 per cent stake in Hurricane which accounted for 69.8p of its net asset value of 196.6p a share at the end of November. However, that valuation was based on Hurricane's previous share price of 39.5p, so with Hurricane's share price surging to 48.5p then this has added a thumping 16p a share to Crystal Amber's own net asset value. Furthermore, by my reckoning Crystal Amber's other top ten holdings have added 9p a share to its net asset value since the last monthly update, so spot net asset value is around 221p a share, or almost 13 per cent higher than at the last monthly update. This also means that the shares are trading on an unwarranted 14.5 per cent share price discount, and that's before factoring in the potential for Hurricane's share price to extend its gains.

So, having last advised running profits on Crystal Amber at 181p ('Small cap watch', 6 Dec 2016), having included the shares as one of the constituents of my 2015 Bargain Shares portfolio when the price was 149.25p, I now rate them an outright buy at 189p and have raised my target price to 205p. Buy.

Used under licence from the Financial Times. All Rights Reserved.