24 May 2010 11:06
| To: Stock Exchange | For immediate release: |
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| 24 May 2010 |
F&C Private Equity Trust plc
Quarterly results for the three months to 31 March 2010
·; Ordinary share price total return of 27.6 per cent
·; Fourth consecutive quarterly increase in the ordinary share NAV, up 1.7 per cent
·; Realisation of Entec, returns £3.0m, at a 2.0x multiple and 30% IRR
·; Diverse new investments across Europe and US
·; Scope for new investments and commitments
Manager's Review
Introduction
The valuation of the ordinary share pool at 31 March 2010 was £152.1 million, giving a fully diluted NAV per share of 208.3p, an increase over the quarter of 1.7 per cent. The net assets of the restricted voting shares were £5.4m giving an NAV per share of 8.0p, an increase over the quarter of 6.3 per cent. The ordinary share pool had net cash of £7.6m and outstanding undrawn commitments at the end of March of £111m. The Company's revolving credit facility of £40m was completely undrawn.
New Investments
No new commitments were made to private equity funds or to co-investments during the quarter. There was an increase in new investment activity by the funds in the portfolio and a limited number of refinancings of certain co-investments. Over the quarter total drawdowns amounted to £9.4m. This was nearly double the quarterly run rate during 2009. There has been an observable improvement in confidence and this has resulted in a number of new deals being completed. The new investments covered a typically wide range of mid market companies. It is worth highlighting the more notable ones. £1.1m was drawn by August Equity II for investment in Active Assistance, a company which provides a national live-in care service for adults and children with spinal cord injuries and neurological conditions; this builds on August Equity's substantial expertise in the homecare market. TDR Capital II called £0.6m for VPS, a provider of products and services to protect vacated properties in Europe. Piper Private Equity IV called £0.5m for investment in Weird Fish, a leading UK wholesaler of outdoor clothing. Primary Capital III invested £0.5m in AMTECH Group, a producer of software and data services for the mechanical and electrical building services industry. Further afield, Accession Mezzanine II has invested £0.4m in Masterlease Polska, one of the largest Polish leasing companies. In the US our investment partners have also been active, with Camden Strategic Partners IV calling £0.8m for two investments; Patient Safe Solutions, a San Diego based patient safety and clinical quality solutions company, and The Princeton Review, a higher education support service company. Blue Point Capital Partners invested £0.4m in Atlas Railroad Construction Company, a Pennsylvania based railroad maintenance of way services company.
There were also several refinancings of existing investments. The most significant of these was for our co-investment in 3si (anti-theft systems) where an additional £1.7m has been invested. This investment has strengthened the company's position with its bank and gives us an excellent chance of making a strong return on this investment in due course. We also invested £0.8m in another Stirling Square led investment, Whittan (metal lockers and pallet racking). This was also used to reduce bank debt and give the company more room for manoeuvre. There were also refinancings for Rollover, the hotdog vending company led by Piper (£0.3m) and for Delsey, the luggage company led by Argan (£0.1m).
Realisations
Total distributions in the quarter were £4.4m. The major realisation in the portfolio was the sale of Entec (environmental consultancy) to Amec plc. This was anticipated in last quarter's valuation and had minimal impact on this quarter's valuation. F&C PET received £2.3m from the direct investment and £0.7m from the position held through the fund, making a total return of 2.0x and an IRR of 30 per cent. There is also the potential for an additional earn-out component which could boost the return slightly. This is an excellent result for the lead managers, Growth Capital Partners, who have a relatively unusual investment style involving the provision of debt as well as equity. The other inflows during the quarter were minor with the exception of £0.7m received from Stirling Square Capital II as an equalisation amount following the admission of additional partners into their fund.
Valuation Changes
There were relatively few valuation changes during the quarter reflecting the comprehensive review that most funds conducted at 31 December 2009 and a general reluctance to write up investments too quickly whilst the economic conditions remain uncertain. The largest individual uplift was of £0.9m for Nursing Agency ICS, which has continued to trade well and has been refinanced again, returning £0.5m of capital immediately after the quarter end. Inflexion have applied a small uplift in valuation multiple. Other upgrades include an uplift of £0.3m from Candover Investments, £0.3m from Argan Capital and £0.2m from Alto Capital II. Downgrades include several within the venture capital sub sector and some within the global funds section of the portfolio. The influence of foreign exchange movements was positive, mainly because of the strength of the dollar versus sterling; foreign exchange added £2.5m to the portfolio's value during the quarter.
Financing
There are no issues on financing at present with the Company continuing to achieve a flow of distributions which finances a large part of the commitments to the funds as they are drawn down. The net outflow this quarter has been £5.0m, which is rather more than was usual during 2009. This reflects some pick up in investment activity and also the refinancing of some of our co-investments. The former should feed through to more realisations in due course and the latter are effectively 'one off' events. The Company retains very substantial capacity to meet existing commitments and to make selected new investments during the remainder of the year.
Outlook
The economic situation globally is clearly much improved from the worst points of last year, but it remains replete with potential problems, most notably the drag factor of very large fiscal deficits. The current difficulties in the Euro zone have to date had little direct impact on our portfolio; but, if the problems of Greece, where we have no investments, spread to Spain, where we have approximately 5% exposure, there could be pressures, although many of the problem companies in our Spanish funds have already been written down. Closer to home, the improved confidence levels of many UK based companies could be tested by the currently fragile economic recovery and the as yet unclear long term implications of the new coalition government. The banking situation appears to have improved slightly, with those funds with good banking relationships and with modest appetites for debt, being able to implement small deals. Our positioning in the mid-market has ensured that a reasonable level of portfolio activity has been maintained. The current annual meeting season is indicating some improvement from the extremely quiet conditions of 2009, with a number of funds examining an improving pipeline of deals. Once private equity funds consider that they are definitely investing on the upslope of recovery investment activity will improve. The common refrain in 2009 was that vendors' price expectations were too high; there are some signs of more reasonable pricing returning. In the meantime, our investment partners continue to labour with management teams to build value for the long term.
Hamish Mair
For more information, please contact:
| Hamish Mair | 0131 718 1184 |
| Martin Cassels | 0131 718 1095 |
| hamish.mair@fandc.com / martin.cassels@fandc.com | |
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F&C PRIVATE EQUITY TRUST PLC
Consolidated Statement of Comprehensive Income for the
three months ended 31 March 2010
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| Unaudited
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| Revenue £'000 | Capital £'000 | Total £'000
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| Capital gains on investments |
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| Gains on investments held at fair value | - | 3,526 | 3,526 |
| Currency gains | - | 92 | 92 |
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| - | 3,618 | 3,618 |
| Revenue |
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| Investment income | 518 | - | 518 |
| Other income | 20 | - | 20 |
| Total income | 538 | 3,618 | 4,156 |
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| Expenditure |
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| Investment management fee | (105) | (315) | (420) |
| Other expenses | (118) | - | (118) |
| Total expenditure | (223) | (315) | (538) |
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| Profit before finance costs and taxation | 315 | 3,303 | 3,618 |
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| Finance costs | (10) | (672) | (682) |
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| Profit before taxation | 305 | 2,631 | 2,936 |
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| Taxation | (88) | 88 | - |
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| Total comprehensive income | 217 | 2,719 | 2,936 |
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| Return per ordinary share - Basic | 0.30p | 3.31p | 3.61p |
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| Return per ordinary share - Fully diluted | 0.29p | 3.22p | 3.51p |
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| 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
three months ended 31 March 2009
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| Unaudited
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| Revenue £'000 | Capital £'000 | Total £'000
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| Capital (losses)/gains on investments |
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| Losses on investments held at fair value | - | (12,041) | (12,041) |
| Currency gains | - | 1,635 | 1,635 |
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| - | (10,406) | (10,406) |
| Revenue |
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| Investment income | 512 | - | 512 |
| Other income | 11 | - | 11 |
| Total income | 523 | (10,406) | (9,883) |
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| Expenditure |
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| Investment management fee | (87) | (259) | (346) |
| Other expenses | (153) | - | (153) |
| Total expenditure | (240) | (259) | (499) |
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| Profit/(loss) before finance costs and taxation | 283 | (10,665) | 10,382 |
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| Finance costs | (76) | (229) | (305) |
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| Profit/(loss) before taxation | 207 | (10,894) | (10,687) |
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| Taxation | (60) | 60 | - |
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| Total comprehensive income | 147 | (10,834) | (10,687) |
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| Return/(loss) per ordinary share - Basic | 0.20p | (15.19)p | (14.99)p |
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| Return/(loss) per ordinary share - Fully diluted | 0.20p | (14.79)p | (14.59)p |
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| Return/(loss) per restricted voting share - Basic | 0.00p | 0.21p | 0.21p |
F&C PRIVATE EQUITY TRUST PLC
Consolidated Statement of Comprehensive Income for the
year ended 31 December 2009
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| Audited
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| Revenue £'000 | Capital £'000 | Total £'000
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| Capital (losses)/gains on investments |
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| Losses on investments held at fair value | - | (12,896) | (12,896) |
| Currency gains | - | 3,767 | 3,767 |
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| - | (9,129) | (9,129) |
| Revenue |
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| Investment income | 1,813 | - | 1,813 |
| Other income | 42 | - | 42 |
| Total income | 1,855 | (9,129) | (7,274) |
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| Expenditure |
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| Investment management fee | (356) | (1,067) | (1,423) |
| Other expenses | (720) | - | (720) |
| Total expenditure | (1,076) | (1,067) | (2,143) |
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| Profit/(loss) before finance costs and taxation | 779 | (10,196) | (9,417) |
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| Finance costs | (195) | (709) | (904) |
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| Profit/(loss) before taxation | 584 | (10,905) | (10,321) |
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| Taxation | (164) | 164 | - |
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| Total comprehensive income | 420 | (10,741) | (10,321) |
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| Return/(loss) per ordinary share - Basic | 0.58p | (14.89)p | (14.31)p |
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| Return/(loss) per ordinary share - Fully diluted | 0.56p | (14.49)p | (13.93)p |
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| Return/(loss) per restricted voting share - Basic | 0.00p | 0.03p | 0.03p |
F&C PRIVATE EQUITY TRUST PLC
Balance Sheets
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| As at 31 March 2010 | As at 31 March 2009 | As at 31 December 2009 |
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| (unaudited) | (unaudited) | (audited) |
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| £'000 | £'000 | £'000 |
| Non-current assets |
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| Investments at fair value through profit or loss | 179,585 | 185,119 | 171,011 |
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| 179,585 | 185,119 | 171,011 |
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| Current assets |
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| Other receivables | 152 | 649 | 157 |
| Cash and cash equivalents | 8,454 | 3,061 | 13,509 |
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| 8,606 | 3,710 | 13,666 |
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| Current liabilities |
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| Other payables | (1,021) | (33,945) | (1,106) |
| Net current assets/(liabilities) | 7,585 | (30,325) | 12,560 |
| Total assets less current liabilities | 187,170 | 154,884 | 183,571 |
| Non-current liabilities |
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| Zero dividend preference shares | (29,655) | - | (28,992) |
| Net assets | 157,515 | 154,884 | 154,579 |
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| Equity |
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| 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 | 37,357 | 37,692 | 37,537 |
| Capital redemption reserve | 664 | 664 | 664 |
| Capital reserve | 101,533 | 98,721 | 98,814 |
| Revenue reserve | 888 | 734 | 671 |
| Shareholders' funds | 157,515 | 154,884 | 154,579 |
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| Net asset value per ordinary share - Basic | 210.45p | 206.17p | 206.84p |
| Net asset value per ordinary share - Fully diluted |
208.33p |
204.15p |
204.81p |
| Net asset value per restricted voting share - Basic |
8.04p |
8.74p |
7.56p |
F&C PRIVATE EQUITY TRUST PLC
Reconciliation of Movement in Shareholders' Funds
| | Three months ended 31 March 2010 | Three months ended 31 March 2009 | Year ended31 December 2009 |
| | (unaudited) | (unaudited) | (audited) |
| | £'000 | £'000 | £'000 |
Opening shareholders' funds | 154,579 | 165,571 | 165,571 |
Total comprehensive income | 2,396 | (10,687) | (10,321) |
Dividends paid | - | - | (336) |
Special dividends paid | - | - | (335) |
Closing shareholders' funds | 157,515 | 154,884 | 154,579 |
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 2009.
2. These are not full statutory accounts in terms of Section 434 of the Companies Act 2006. The full audited accounts for the year to 31 December 2009, 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.