BPET.L Regulatory News (BPET)

26 May 2009 11:08



F&C Private Equity Trust plc

Quarterly results for the three months to 31 March 2009 

NAV decrease for the ordinary shares of 6.7%* over quarter to 31st March

NAV increase for the restricted voting shares of 2.5% over the quarter to 31st March

Net out-flow of £1.1m 

* Based on fully diluted NAV

Manager's Review

Introduction

The valuation of the ordinary share pool of the Company at 31st March was £149m, giving a fully diluted NAV per share of 204.15p, a decrease over the quarter of 6.7%. The restricted voting pool was valued at £5.9m, giving an NAV per share of 8.74p, an increase of 2.5%. Foreign exchange movements over the quarter reduced the valuation of the ordinary share pool by 1.7% although there was a minimal effect on the restricted voting pool. 

The ordinary share pool of the Company had net debt of £30.4m at 31st March giving gearing of 16.6%.

The main portfolio events are discussed below, the striking feature being that the net outflow of funds at £1.1m over the quarter was much lower than usual. This attests to the difficulty of effecting private equity deals against the background of recession and the ongoing lack of availability of credit.

New Investments

No new commitments were made during the quarter. The outstanding undrawn commitments of the Company stood at £150.9m at 31st March, a slight decrease over the quarter. Given the current lack of investment activity it is probable that a substantial proportion of these commitments will not be drawn before the relevant fund investment periods expire. It is also expected that the level of commitments will reduce with the sale of non-core positions.

There were a small number of drawdowns over the quarter. In the UK, which accounts for 39% of the ordinary share pool portfolio by value at 31st March, it was especially quiet with new investments of only £0.65m. These drawdowns were for modest follow on investments and fees. In the US, which accounts for only 6.6% of the ordinary share pool portfolio, drawdowns were £0.75m. Most of this was for four investments in the Warburg Pincus funds. In the European focused funds there was more activity with drawdowns totalling £2.9m including four new investments: AIG New Europe Fund drew £0.5m for Sowiniec, a provider of roll-out services to the Polish retail sector; Mezzanine Management IV drew £0.4m for investment in the UK based healthcare company, Vanguard Healthcare, which operates a fleet of 36 mobile operating theatres and diagnostic (e.g. endoscopy) vehicles; Gilde Buy-Out Fund III called £0.4m for investment in electricity infrastructure company Powerlines; and lastly, Ibersuizas Fund II called £0.3m for investment in Hofmann, a company that has been a pioneer in the sale of digital albums.

Realisations

Whilst activity levels in the quarter were low there were some small realisations. Notably Dunedin Capital Partners achieved an excellent sale of aviation navigation company Fernau. This achieved an IRR of 92% and 3x money multiple over its short hold period of just over a year. The inflow for the Company was £0.4m. The other main realisation was the sale of the UK division of healthcare information company, HKI, which was sold by Inflexion 2003 achieving 1.5x cost and returning £0.2m. In the US, Camden Strategic III realised more of its holding in American Public Education, which is now listed, yielding £0.2m. Additional significant inflows came from Stirling Square, returning £1.1m in equalisation payments and Capvis III, returning £0.2m from syndicating Bartec and KVT.

Valuation Changes

The largest individual change during the quarter was a reduction of £2.4m (32%) in the valuation of the European Fund Argan Capital. This is a consequence of the manager factoring lower trading into its valuations. Within our co-investment portfolio we have recognised the difficulties associated with the recession and we have taken full provisions against the value of Equidebt and Eurotel, resulting in downgrades of £1.2m and £0.9m respectively. In both cases, the management teams and the lead private equity managers are working hard to restore equity value. Another significant downgrade of £1.0m is a result of the decline of Candover Investments PLC, which at the end of March was at the low price of 82.5p. It has since recovered to 289p. Other downgrades reflect pressure on profits and ratings of companies which are affected to varying degrees by the recession. In Germany DBAG V has been reduced by £0.5m and, in Spain, Nmas1 by £0.7m.

The portfolio is broad and well diversified and, despite the challenges of the recession, there have been some uplifts. Dunedin Buy-out Fund II and Equity Harvest Fund are up by £0.2m and £0.1m respectively as a result of the Fernau realisation. The mezzanine component of the portfolio is also performing well with most of these funds showing an increase in value over the quarter.

Financing 

The rate of drawdown is, as expected, very slow. This is a reflection of the deteriorating economic situation internationally and the difficulty of raising debt for MBO vehicles. However, there are some sectors where there is significant ongoing activity, notably healthcare. Private equity activity influences the Company through both sales and new investments. This was borne out during the quarter. The drawdowns totalled £4.3m and these were financed by some 75% through realisations (£2.7m) and income (£0.5m) from the portfolio. The result is that whilst we are now using more of our borrowing facility, it is being used slowly. 

As described in the annual report, secondary sales are being undertaken to increase the headroom on our existing facility while we explore several options for larger scale financing, intended to allow the Company to invest through the downturn by meeting all its outstanding commitments. This could include borrowing arrangements to allow the Company, if necessary, to gear up to 30% of total assets, in line with our investment guidelines.

As previously disclosed, our largest holding, the Inflexion led co-investment in Viking Moorings, continues to make good fundamental progress and remains in a live sale process. This gives a prospect of cash inflow and a reduction in the Company's debt.

Outlook

The recovery in the Company's share price from its low in March reflects investment by new shareholders, the wider stock market rally and a realisation that prices in the listed private equity sector were factoring in an unrealistically poor outcome. There remain substantial challenges for our investee funds and companies and for the Company itself. The interests of our investment partners are closely aligned with ours and all of them are very clear in their objective which is to build equity value through the recession. Their considerable skill and experience is being deployed on our behalf to meet the challenges of the recession. 

For more information, please contact:

  F&C PRIVATE EQUITY TRUST plc

Income Statement for the 

three months ended 31 March 2009

  F&C PRIVATE EQUITY TRUST plc

Income Statement for 

three months ended 31 March 2008

F&C PRIVATE EQUITY TRUST plc

Income Statement for 

year ended 31 December 2008

  F&C PRIVATE EQUITY TRUST plc

BALANCE SHEET

  F&C PRIVATE EQUITY TRUST plc

BALANCE SHEET (CTD)

  F&C PRIVATE EQUITY TRUST plc

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

Notes

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 2008.

2. These are not full statutory accounts in terms of Section 240 of the Companies Act 1985. The full audited accounts for the year to 31 December 2008, which were unqualified, have been lodged with the Registrar of Companies. The quarterly report will be available on the Company's website.

3. Returns per Restricted Voting share are based on the average number of shares in issue during the period of 67,084,807.

Returns per Ordinary share are based on the following average number of shares in issue during the period:-

Basic 72,282,273

Fully diluted 74,241,429

Basic net asset value per Restricted Voting share is based on 67,084,807 shares in issue at the end of the period.

Basic net asset value per Ordinary share is based on 72,282,273 shares in issue at the end of the period.

Fully diluted net asset value per Ordinary share is based on 74,241,429 shares in issue at the end of the period.