26 May 2011 12:06
To: Stock Exchange | For immediate release: |
26 May 2011 |
F&C Private Equity Trust plc
Quarterly results for the three months to 31 March 2011 (unaudited)
·; NAV total return for the three months of +3.7 per cent for the Ordinary Shares
·; NAV total return for the three months of +18.7 per cent for the Restricted Voting Shares
·; Realisation of Microtecnica yields £5.2 million
·; New commitments to Ciclad 5 and Piper Private Equity V
Manager's Review
Introduction
The portfolio valuation at 31 March 2011 was £220.8 million. The net assets of the Ordinary Share Pool were £171.1 million giving a fully diluted NAV per share of 233.88p and a total return of 3.7 per cent over the first quarter. The net assets of the Restricted Voting Pool were £4.8 million giving an NAV per share of 7.11p and a total return for the quarter of 18.7 per cent. The net debt of the Ordinary Share Pool stood at £11.4 million. Together with the accrued liability for the Zero Dividend Preference Shares of £32.5 million the Ordinary Share Pool's total debt was £43.9 million giving gearing of 20.4 per cent. The total outstanding commitments at 31 March were £85.0 million.
New Investments
No new investments were made during the first three months, but after the quarter end two modest commitments were made to funds managed by private equity managers with whom we have invested successfully for many years.
On 12 April we made a €3 million commitment to the €150 million French lower mid-market fund Ciclad 5. This is the fourth Ciclad fund we have backed, with our original involvement dating back more than 20 years. Ciclad is remarkable in that they have remained focused on lower mid-market French private companies. Other private equity groups have tended to move up the size scale sometimes with a major change of strategy. Ciclad, by contrast, have been consistent and this gives them an advantage in accessing dealflow in what is a relatively less intermediated market.
On 10 May a commitment of £2 million was made to the £100 million Piper Private Equity Fund V. Piper are specialists in investing in consumer branded companies in the UK. We have successfully invested with Piper in prior funds with our connection dating back 20 years.
Both these commitments are in accord with our strategy of focusing on the European mid-market and of allocating our resources preferentially towards managers with a proven and sustainable ability to generate strong returns over the longer term. There is also additional scope to highly selectively add emerging management groups. It is likely that during the course of 2011 a small number of additional commitments to private equity funds will be made with a bias towards groups who have already delivered for us. There are also a good number of co-investment opportunities coming through and we expect that a small number of these will result in investments.
Drawdowns
Over the course of the quarter our investment partners drew down £5.8 million. This was for a typically diverse range of new investments.
In the UK £2.3 million was called. The Company's principal venture capital investment, SEP III, called £0.8 million for three new investments; Hetras (hotel software), Metaforic (anti-tamper software) and Media Ingenuity (online marketing for financial services). Dunedin Buy-out Fund II called £0.4 million for investment in U-Pol, a manufacturer and distributor of high end car bodywork filling, finishing and polishing products. Piper Private Equity Fund IV invested £0.2 million on the Company's behalf in Celtic Sheepskin, an internet and mail order supplier of sheepskin and natural clothing.
In Continental Europe there were £3.2 million of drawdowns. Procuritas IV called £0.7 million for Sonans, a Norwegian private education provider. The Aurora Fund called £0.5 million to fund various drawdowns and two new secondary acquisitions. Herkules Private Equity III called £0.6 million for Norsk Jernbanedrift (railway maintenance and infrastructure in Norway) and to finance an acquisition by Norwegian shopfitter, New Store Europe. The Candover 2005 Fund invested £0.5 million as follow-on investments in Parques Reunidos (attractions park operator) and EurotaxGlass (automotive valuation data provider). Gilde Buy-Out Fund III called £0.3 million for Gamma Holdings, a Netherlands based manufacturer of textile based products.
In the US and Global funds section of the portfolio only £0.3 million was drawn from the funds.
Distributions
Total distributions amounted to £3.9 million over the quarter. There was an additional £0.7 million of income. The larger individual distributions were from realisations from a range of funds. SEP III had an exceptionally active quarter with two realisations. In January the Company received £0.6 million, as its share of the sale of the Edinburgh based fabless semiconductor company Gigle to Broadcom. The investment multiple is 2.2x potentially rising to 2.6x depending on escrow release and earn-outs. In March the Company received £0.4 million from the sale of anti-cancer drug company Biovex to Amgen. This represents 2.5x the original investment, but there is the potential for the investment multiple to rise to 6.5x once certain 'milestones' are reached.
Mezzanine Management Fund IV achieved a notable exit with the sale of its holding in catering group WSH. Including income the Company's share of the proceeds was £0.8 million. The investment multiple was 2.2x and the IRR 27 per cent. Accession Mezzanine benefited from loan repayments from the Bulgarian (Telelink) and Czech (Falcon) telecoms groups and this yielded £0.4 million. In the US Camden Partners Fund III made three partial realisations allowing a distribution of £0.3 million. Warburg Pincus VIII sold shares in Polypore (polymer based membranes) allowing a distribution of £0.17 million. Warburg Pincus IX sold Brandywine Senior Living returning £0.1 million. Additional realisations from this diverse portfolio yielded an additional £0.2 million.
Valuation Changes
The changes in valuation over the quarter reflect a combination of actual and imminent realisations and improvements or weaknesses in the trading of underlying companies.
The largest individual uplift, of £2.0 million, is for our holding in Stirling Square Capital Partners II which has recently announced the sale of Italian aerospace components company Microtecnica to US trade buyer Goodrich. This is an exceptionally successful investment where profits have been tripled during the ownership of Stirling Square and there has been a consequent improvement in valuation multiple. The net proceeds to the Company are €6 million (£5.2m) which will be received later this month.
International Mezzanine Investment, a very longstanding holding which is 63 per cent held in the Restricted Voting Pool, has been uplifted by £1.2 million. This reflects the strong trading performance of one of its two remaining holdings, Industrial Acoustics, which is in the early stages of a sale process. Other major uplifts include £0.5 million from Pinebridge Global Emerging Markets Fund II which has uplifted a number of holdings, SEP II up £0.5 million also with uplifts in key holdings and The Aurora Fund, £0.4 million, reflecting a range of uplifts. Accession Mezzanine Capital II is uplifted £0.4 million mainly reflecting an uplift in Polish vehicle leasing company Masterlease. Argan Capital has been increased by £0.4 million reflecting strong trading across its portfolio, SEP III is up £0.3 million mainly due to a rise in the share price of stent company Stentys and DBAG Fund V, our principal German investment, is up by £0.3 million as the valuation of Coperion, its manufacturer of process industry machinery, has been uplifted as it recovers strongly from the recession.
There have been relatively few downgrades. Mezzanine Management Fund IV is down by £0.3 million reflecting a provision for carried interest. 3Si, the anti-theft security company, has been reduced by £0.4 million to reflect ongoing weakness in its European business.
Financing
At the end of March £14 million of the £40 million revolving credit facility was drawn. The Company also had £2.6 million of cash in the Ordinary Pool. Since the quarter end there have been further draw downs which have reduced the cash and the current net debt figure is £13 million. In the short term there will be an inflow of £5.2 million from the Microtecnica proceeds which will reduce the net debt to below £8 million. The balance sheet progression from here will be a direct consequence of the timing and magnitude of drawdowns and realisations and the number and timing of new co-investments. Given the maturity of the portfolio and the number of investments which are at various stages of a sales process, we continue to expect a significant upswing in realisations this year. There is also considerable new deal activity and this will lead to drawdowns of some of the outstanding commitments. It is likely that we will continue to use a significant proportion of the borrowing facility throughout the year. The outstanding undrawn commitments, were £85.0 million at the end of March. Taking into account the drawdowns since then and the new commitments the current outstanding undrawn commitments stand at approximately £87 million. As funds reach the end of their investment period, an increasing proportion of this amount will only be callable under limited circumstances for follow-on investments and we expect that a significant minority of the total will not be called. The proportion of outstanding undrawn commitments relative to the net assets of the Company continues to fall and at 51 per cent is the lowest level in the Company's history.
Outlook
European buy-out activity, which accounts for the great majority of private equity investment, increased by 127 per cent in 2010 compared with 2009. The value of new deals is currently running at approximately 50 per cent of the pre-crash peak. There is some evidence that 2011 to date has seen a modest decline in activity with the external influences of Middle Eastern instability, Japanese earthquakes and the continuing deficit reduction measures having slightly dampened confidence. It would appear that we are probably at a new equilibrium and that from here investment activity will be closely correlated to economic growth. As the world economies emerge from recession it is becoming clear that private equity backed companies have fared relatively well. This is a logical consequence of the focused alignment of management and ownership which is inherent in the private equity model. The feedback from our broad mid-market portfolio is consistent with considerable further growth and recovery in profits over the course of 2011. This should lead to further increases in asset value and accompanying improvements in the Company's financial resources.
Hamish Mair
Investment Manager
F&C Investment Business Limited
F&C PRIVATE EQUITY TRUST PLC
Consolidated Statement of Comprehensive Income for the
three months ended 31 March 2011 (unaudited)
Revenue £'000 | Capital £'000 | Total £'000
| |
| Capital gains on investments | |||
Gains on investments held at fair value | - | 8,011 | 8,011 |
Currency losses | - | (12) | (12) |
- | 7,999 | 7,999 | |
| Revenue | |||
Investment income | 690 | - | 690 |
Other income | 27 | - | 27 |
| Total income | 717 | 7,999 | 8,716 |
| Expenditure | |||
Investment management fee | (114) | (496) | (610) |
Other expenses | (172) | - | (172) |
| Total expenditure | (286) | (496) | (782) |
Profit before finance costs and taxation | 431 | 7,503 | 7,934 |
Finance costs | (48) | (871) | (919) |
Profit before taxation | 383 | 6,632 | 7,015 |
Taxation | (107) | 107 | - |
Profit for period/total comprehensive income | 276 | 6,739 | 7,015 |
Return per Ordinary Share - Basic | 0.37p | 8.30p | 8.67p |
Return per Ordinary Share - Fully diluted | 0.36p | 8.08p | 8.44p |
Return per Restricted Voting Share - Basic | 0.01p | 1.10p | 1.11p |
F&C PRIVATE EQUITY TRUST PLC
Consolidated Statement of Comprehensive Income for the
three months ended 31 March 2010 (unaudited)
Revenue £'000 | Capital £'000 | Total £'000
| |
| Capital gains on investments | |||
Gains on investments held at fair value | - | 3,526 | 3,526 |
Currency gains | - | 92 | 92 |
- | 3,618 | 3,618 | |
| Revenue | |||
Investment income | 518 | - | 518 |
Other income | 20 | - | 20 |
| Total income | 538 | 3,618 | 4,156 |
| Expenditure | |||
Investment management fee | (105) | (315) | (420) |
Other expenses | (118) | - | (118) |
| Total expenditure | (223) | (315) | (538) |
Profit before finance costs and taxation | 315 | 3,303 | 3,618 |
Finance costs | (10) | (672) | (682) |
Profit before taxation | 305 | 2,631 | 2,936 |
Taxation | (88) | 88 | - |
Profit for period/total comprehensive income | 217 | 2,719 | 2,936 |
Return per Ordinary Share - Basic & Diluted | 0.30p | 3.31p | 3.61p |
Return per Restricted Voting Share - Basic | 0.00p | 0.48p | 0.48p |
F&C PRIVATE EQUITY TRUST PLC
Consolidated Statement of Comprehensive Income for the
year ended 31 December 2010 (audited)
Revenue £'000 | Capital £'000 | Total £'000
| |
| Capital gains on investments | |||
Gains on investments held at fair value | - | 18,938 | 18,938 |
Currency gains | - | 1,000 | 1,000 |
- | 19,938 | 19,938 | |
| Revenue | |||
Investment income | 2,170 | - | 2,170 |
Other income | 41 | - | 41 |
| Total income | 2,211 | 19,938 | 22,149 |
| Expenditure | |||
Investment management fee | (420) | (1,262) | (1,682) |
Other expenses | (693) | - | (693) |
| Total expenditure | (1,113) | (1,262) | (2,375) |
Profit before finance costs and taxation | 1,098 | 18,676 | 19,774 |
Finance costs | (160) | (3,263) | (3,423) |
Profit before taxation | 938 | 15,413 | 16,351 |
Taxation | (239) | 268 | 29 |
Profit for year/total comprehensive income | 699 | 15,681 | 16,380 |
Return per Ordinary Share - Basic & Diluted | 0.96p | 21.02p | 21.98p |
Return per Restricted Voting Share - Basic | 0.00p | 0.73p | 0.73p |
F&C PRIVATE EQUITY TRUST PLC
Consolidated Balance Sheet
As at 31 March 2011 | As at 31 March 2010 | As at 31 December 2010 | |
(unaudited) | (unaudited) | (audited) | |
£'000 | £'000 | £'000 | |
Non-current assets | |||
Investments at fair value through profit or loss | 220,798 | 179,585 | 210,914 |
220,798 | 179,585 | 210,914 | |
Current assets | |||
Other receivables | 16 | 152 | 19 |
Cash and short term deposits | 2,854 | 8,454 | 2,681 |
2,870 | 8,606 | 2,700 | |
Current liabilities | |||
Other payables | (15,315) | (1,021) | (12,130) |
Net current (liabilities)/assets | (12,445) | 7,585 | (9,430) |
Total assets less current liabilities | 208,353 | 187,170 | 201,484 |
| Non-current liabilities | |||
Zero dividend preference shares | (32,500) | (29,655) | (31,774) |
Net assets | 175,853 | 157,515 | 169,710 |
Equity | |||
Called-up ordinary share capital | 1,394 | 1,394 | 1,394 |
Special distributable capital reserve | 15,679 | 15,679 | 15,679 |
Special distributable revenue reserve | 35,814 | 37,357 | 36,686 |
Capital redemption reserve | 664 | 664 | 664 |
Capital reserve | 121,234 | 101,533 | 114,495 |
Revenue reserve | 1,068 | 888 | 792 |
Shareholders' funds | 175,853 | 157,515 | 169,710 |
Net asset value per Ordinary Share - Basic | 236.69p | 210.45p | 228.02p |
Net asset value per Ordinary Share - Fully diluted |
233.88p |
210.45p |
228.02p |
Net asset value per Restricted Voting Share - Basic |
7.11p |
8.04p |
7.29p |
F&C PRIVATE EQUITY TRUST PLC
Reconciliation of Movement in Shareholders' Funds
Three months ended 31 March 2011 | Three months ended 31 March 2010 | Year ended 31 December 2010 | |
(unaudited) | (unaudited) | (audited) | |
£'000 | £'000 | £'000 | |
Opening shareholders' funds | 169,710 | 154,579 | 154,579 |
Total comprehensive income | 7,015 | 2,936 | 16,380 |
Dividends paid | - | - | (578) |
Special dividends paid | (872) | - | (671) |
Closing shareholders' funds | 175,853 | 157,515 | 169,710 |
Notes (unaudited)
1. The unaudited quarterly results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2010.
2. The basic return per Ordinary Share is based on a net return on ordinary activities after taxation of £6,269,000 (31 March 2010 £2,562,000 - ; 31 December 2010 - £15,889,000) and on 72,282,273 (31 March 2010 - 72,282,273; 31 December 2010 - 72,282,273) shares, being the weighted average number of Ordinary Shares in issue during the period.
The fully diluted return per Ordinary Share is based on a net return on ordinary activities after taxation of £6,269,000 (31 March 2010 - £2,562,000; 31 December 2010 - £15,889,000) and on 74,241,429 (31 March 2010 - 72,282,273; 31 December 2010 - 72,282,273) shares, being the weighted average number of Ordinary Shares in issue during the period after conversion of the Ordinary Share warrants.
The basic return per Restricted Voting Share is based on a net return on ordinary activities after taxation of £746,000 (31 March 2010 - £374,000; 31 December 2010 - £491,000) and on 67,084,807 (31 March 2010 - 67,084,807; 31 December 2010 - 67,084,807) shares, being the weighted average number of Restricted Voting Shares in issue during the period.
3. The basic net asset value per Ordinary Share is based on net assets at the period end of £171,087,000 (31 March 2010 - £152,122,000; 31 December 2010 - £164,818,000) and on 72,282,273 (31 March 2010 - 72,282,273; 31 December 2010 - 72,282,273) shares, being the number of Ordinary Shares in issue at the period end.
The fully diluted net asset value per Ordinary Share is based on net assets at the period end of £173,632,000 (31 March 2010 - £152,122,000; 31 December 2010 - £164,818,000) and on 74,241,429 (31 March 2010 - 72,282,273; 31 December 2010 - 72,282,273) shares, being the number of Ordinary Shares in issue at the period end after conversion of the Ordinary Share warrants.
The basic net asset value per Restricted Voting Share is based on net assets at the period end of £4,766,000 (31 March 2010 - £5,393,000; 31 December 2010 - £4,892,000) and on 67,084,807 (31 March 2010 - 67,084,807; 31 December 2010 - 67,084,807) shares, being the number of Restricted Voting Shares in issue at the period end.
4. The financial information for the three months ended 31 March 2011, which has not been audited or reviewed by the Company's auditors, comprises non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2010, on which the auditors issued an unqualified report, have been lodged with the Registrar of Companies. The quarterly report is available on the Company's website www.fcpet.co.uk.
For more information, please contact:
Hamish Mair | 0131 718 1184 |
Gordon Hay Smith | 0131 718 1018 |
F&C Investment Business Limited | |
hamish.mair@fandc.com / gordon.haysmith@fandc.com | |