30 Nov 2012 07:00
To: Stock Exchange | For immediate release: |
30 November 2012 |
F&C Private Equity Trust plc
Quarterly results for the three months to 30 September 2012
·; Adoption of new dividend policy - interim dividend of 4.96p per Ordinary Share paid since the end of the quarter.
·; Share price total return for the quarter of 6.7 per cent for the Ordinary Shares.
·; NAV total return for the quarter of -1.1 per cent for the Ordinary Shares.
·; Expected final dividend for the Restricted Voting Shares of 1.675p per share, payable on 8 February 2013.
Manager's Review
Introduction
As at 30 September 2012 the Company's net asset value ('NAV') was £185.0 million. The Ordinary Pool's NAV was £183.9 million giving a fully diluted NAV per share of 251.08p, a decrease over the quarter of 1.1 per cent. The first dividend under the new distribution policy, of 4.96p per Ordinary Share, was paid on 2 November. The slight dip in NAV this quarter reflects the fact that the third quarter tends to be fairly quiet for valuation changes. There was also an adverse influence of about 1.3 per cent from foreign exchange movements.
The Restricted Voting Pool's NAV as at 30 September 2012 was £1.1 million, giving a NAV per share of 1.66p. Including the dividend of 3.3p per Restricted Voting Share paid on 28 September, this represents a decrease of 2.4 per cent over the quarter. Since the Company's establishment in March 1999 and taking into account the final dividend of 1.675p per Restricted Voting Share that is expected to be paid on 8 February 2013, £118.0 million will have been distributed to Restricted Voting shareholders representing 1.76x initial NAV, a NAV total return of 14.7 per cent per annum and an IRR of 9.6 per cent. Over the same period, the FTSE All-Share Index has delivered a total return of 1.0 per cent per annum, equating to an investment multiple of 1.14x and an IRR of 1.0 per cent.
As at 30 September 2012 the Ordinary Share Pool had net cash of £10.6 million. Together with the accrued liability for the Zero Dividend Preference Shares of £37.3 million the Ordinary Share Pool's total net debt was £26.7 million, equivalent to a gearing level of 12.7 per cent. The Company's £50 million committed revolving credit facility remains undrawn. The total outstanding undrawn commitments at 30 September 2012 were £70.6 million and, of this, approximately £15 million is to funds where the investment period has expired. During the quarter, combined realisations and income for both share pools totalled £16.5 million and drawdowns were £9.0 million.
New Investments
Three commitments to private equity funds were made during the quarter. As previously reported, a commitment of £4.0 million was made to the UK mid-market fund Lyceum Capital Fund III. Lyceum was a spin out of WestLB some years ago and since then we have invested with them through another of our fund of funds. £6.0 million was committed to the Inflexion 2012 Co-investment Fund. This will be a concentrated fund and the economics are more favourable than for a conventional fund. The first two investments have already been made. This commitment reinforces our strong relationship with Inflexion with whom we have invested successfully for a decade. The third commitment, of $5.0 million, was to the highly specialised orthopaedics healthcare fund Healthpoint Capital III. This fund focuses on an attractive large niche market. The initial portfolio is already showing signs of promise and the investment could be considered an advanced primary.
Since the quarter end we have made a direct investment of £2.3 million for a 9.5 per cent stake in Avalon, a funeral plans business operating in the UK and Spain. We have invested alongside the emerging private equity manager Lonsdale. Lonsdale are backing an experienced management team in a fast growing niche market. The business has been acquired on an EV:EBITDA multiple of 4.2x. There are a number of other fund commitments and co-investments under consideration and we would expect some of these to be committed before the year end.
Under the existing fund commitments there were drawdowns totalling £9.0 million during the quarter. The largest individual new investment was for £1.0 million by RJD Partners II for debt advisory business Harrington Brooks. This was sold by Inflexion and unusually we have reinvested an almost equivalent amount to the proceeds from the two Inflexion funds where we previously held this company. The Inflexion 2012 Co-investment Fund called £1.1 million for the two initial investments, CTC, a pilot training company and Marstons Group, the UK's largest provider of High Court and Civil enforcement services. Hutton Collins III called £0.6 million for an investment in Novus Leisure, a London oriented chain of 52 bars and restaurants. In Europe, Capvis III called £0.7 million for an investment in Ondal, the Germany based leading manufacturer of medical pendant systems to the medical technology industry. Capvis III also invested £0.5 million in Hessnatur, the German multi-channel retailer of natural and ecological apparel and home textiles. In Sweden, Herkules Private Equity III invested £0.5 million in the country's leading branded coffee shop chain, Espresso House. There were a number of other smaller new investments.
Realisations
During the quarter realisations totalled £16.5 million, including £1.6 million of income. This brings the total of realisations for the first nine months to £44.3 million. Subsequent to the quarter end the total has increased to £53.4 million compared with £38.3 million for 2011 as a whole. The individual exits illustrate healthy levels of activity within the European mid-market and further afield.
The largest single exit was Capvis III's sale of German explosives protection company Bartec to Charterhouse. The Company held this both through the Capvis III fund and directly as a co-investment. The disposal yielded £3.9 million and £3.1 million respectively, giving an investment multiple of just over 3.0x and an IRR of 33 per cent. The investment had been held for four years and despite an exceptionally challenging economic background the company doubled its profits over the period. In the US, Blue Point Capital II sold QSR (Quality Synthetic Rubber) achieving 3.7x cost and an IRR of 35 per cent, yielding £1.4 million for the Company. In Spain, Nmas I Private Equity Fund exited ZIV, a control and metering products provider for power utilities, through a sale to India's Crompton Greaves. This achieved an investment multiple of 3.5x and returned £0.8 million to the Company. As noted above, Inflexion sold debt advisory business Harrington Brooks to RJD. This was held in both Inflexion's Hickory Fund Portfolio and in Inflexion's 2003 Fund. The combined proceeds to the Company were £1.2 million, achieving an investment multiple of 3.1x and an IRR of 19 per cent. Lastly the Company's very longstanding holding in International Mezzanine Investment distributed £1.9 million, representing the proceeds from its last two holdings, IAC and Hallmark, which have now been sold. 63 per cent of this amount accrued to the Restricted Voting Pool.
Following the quarter end there have been some notable realisations including Enara, the UK care service company, which was sold by August Equity Partners II to MITIE Group plc for 2.5x cost and an IRR of 24 per cent, yielding £3.7 million to the Company.
Valuation Changes
There were a number of modest changes to valuations during the quarter where uplifts and downgrades more or less offset each other. Uplifts were mainly connected to actual or imminent realisations. August Equity Partners II was uplifted by £1.5 million, principally reflecting the Enara sale noted above. DBAG V was up by £0.9 million in anticipation of the sale of German machinery manufacturer Coperion, and Procuritas Capital IV was uplifted by £0.7 million reflecting the previously announced sale of Swedish tire service company Dackia. Nmas I Private Equity Fund was uplifted by £0.7 million, boosted primarily by the excellent sale of ZIV.
On the negative side there were some downward adjustments in the valuations of some of the holdings mainly reflecting difficult trading. Penta F&C Co-investment Fund was down by £0.8 million mainly because of weak trading at Blues Clothing which is still struggling from the loss of a major license. Our co-investment in Blues Clothing was also down by £0.6 million. Axitea (formerly known as Sicurglobal) was down by £0.6 million as result of a delay in processing some orders and collecting receivables from Italian municipalities.
Financing
The Company's financial resources are healthy with net cash at 30 September 2012 of £10.7 million. Since the quarter end there have been £6.9 million of drawdowns and co-investments and £9.0 million of realisations. The cash balance after funding the £3.6 million dividend payment on the Ordinary Shares in November currently stands at approximately £7 million. The £50 million revolving credit facility remains undrawn. This provides ample scope for financing new investments whilst building up resources in advance of the redemption of the Zero Dividend Preference Shares in December 2014.
Payment of Final Dividend on, and Cancellation of, the Restricted Voting Shares
As previously intimated, the Restricted Voting Pool is now too small to justify the administrative costs of maintaining a separate class of share. The remaining assets of the Restricted Voting Pool are all also held in the Ordinary Pool and, as these are very small positions in old funds and some conditional entitlements to future payments, a sale to an external third party is not practical nor likely to prove optimal. Accordingly, subject to a resolution to amend the Company's articles of association to enable the cancellation of the Restricted Voting Shares once there are no assets left in the Restricted Voting Pool (this is necessary in order to maintain the Company's investment trust status), it is proposed that the remaining assets of the Restricted Voting Pool are transferred to the Ordinary Pool at NAV, in return for a corresponding transfer of cash from the Ordinary Pool to the Restricted Voting Pool. This will enable a final dividend to be paid to Restricted Voting shareholders.
A circular convening a general meeting of the Company for 17 January 2013, at which the resolution to amend the articles referred to above will be proposed, will be sent to shareholders in due course. Subject to that resolution being passed, the Board will declare a final dividend on the Restricted Voting Shares, which will be payable on 8 February 2013 to Restricted Voting shareholders on the register on 25 January 2013 (with an ex-dividend date of 23 January 2013). The final dividend is expected to be be marginally higher than the 30 September NAV per Restricted Voting Share as it will take into account income received (net of expenses attributable to the Restricted Voting Pool) since that date. Based on the income already received to date, the final dividend is expected to be not less than 1.675p per share.
Following the payment of the final dividend, the Restricted Voting Pool will have no assets and, following the changes to the articles referred to above, will be cancelled. Pending cancellation, the Company intends to apply to the UKLA for the suspension of the listing of the Restricted Voting Shares with effect from 25 January 2012 (the date on which the remaining assets will be transferred to the Ordinary Pool at NAV in exchange for cash).
Outlook
The new dealflow for the Company is very healthy with a number of mid-market buy-out funds coming to market over the next year or so. The number and quality of co-investment opportunities shown to us has also improved. However, there remains considerable uncertainty, principally concerning the Eurozone, and this isn't helping business confidence nor the associated M&A market. There are some positive consequences in that the deals that are completed by private equity buyers have been subject to lengthy and extensive due diligence and they have generally been made at prices which factor in challenging times in the medium term at least. As has been demonstrated in this portfolio, there is a good market for well managed private equity backed businesses in the European mid-market. Whilst the most recent quarter has been flat there is good scope for further appreciation in the NAV in the remainder of the year and beyond.
Hamish Mair
Investment Manager
F&C Investment Business Limited
F&C Private Equity Trust plc
Consolidated Statement of Comprehensive Income for the
nine months ended 30 September 2012
| (Unaudited)
| |||
Revenue £'000 | Capital £'000 | Total £'000 | |
| Income | |||
Gains on investments held at fair value | - | 8,588 | 8,588 |
Exchange gains | - | 187 | 187 |
Investment income | 2,733 | - | 2,733 |
Other income | 15 | - | 15 |
| Total income | 2,748 | 8,775 | 11,523 |
| Expenditure | |||
Investment management fee | (364) | (1,093) | (1,457) |
Other expenses | (617) | - | (617) |
| Total expenditure | (981) | (1,093) | (2,074) |
Profit before finance costs and taxation | 1,767 | 7,682 | 9,449 |
Finance costs | (218) | (3,133) | (3,351) |
Profit before taxation | 1,549 | 4,549 | 6,098 |
Taxation | (439) | 431 | (8) |
Profit for period/total comprehensive income | 1,110 | 4,980 | 6,090 |
Return per Ordinary Share - Basic | 0.84p | 7.70p | 8.54p |
Return per Ordinary Share - Fully diluted | 0.82p | 7.50p | 8.32p |
Return per Restricted Voting Share - Basic | 0.75p | (0.88)p | (0.13)p |
F&C PRIVATE EQUITY TRUST PLC
Consolidated Statement of Comprehensive Income for the
nine months ended 30 September 2011
| (Unaudited) | |||
Revenue £'000 |
Capital £'000 |
Total £'000 | |
| Income | |||
Gains on investments held at fair value | - | 15,354 | 15,354 |
Exchange gains | - | 387 | 387 |
Investment income | 2,051 | - | 2,051 |
Other income | 34 | - | 34 |
| Total income | 2,085 | 15,741 | 17,826 |
| Expenditure | |||
Investment management fee | (348) | (1,122) | (1,470) |
Other expenses | (510) | - | (510) |
| Total expenditure | (858) | (1,122) | (1,980) |
Profit before finance costs and taxation | 1,227 | 14,619 | 15,846 |
Finance costs | (151) | (2,708) | (2,859) |
Profit before taxation | 1,076 | 11,911 | 12,987 |
Taxation | (317) | 317 | - |
Profit for period/total comprehensive income | 759 | 12,228 | 12,987 |
Return per Ordinary Share - Basic | 0.87p | 16.16p | 17.03p |
Return per Ordinary Share - Fully diluted | 0.85p | 15.73p | 16.58p |
Return per Restricted Voting Share - Basic | 0.09p | 0.92p | 1.01p |
F&C Private Equity Trust plc
Consolidated Statement of Comprehensive Income for the
year ended 31 December 2011
| (Audited)
| |||
Revenue £'000 | Capital £'000 | Total £'000 | |
| Income | |||
Gains on investments held at fair value | - | 17,923 | 17,923 |
Exchange gains | - | 911 | 911 |
Investment income | 2,176 | - | 2,176 |
Other income | 37 | - | 37 |
| Total income | 2,213 | 18,834 | 21,047 |
| Expenditure | |||
Investment management fee | (467) | (1,403) | (1,870) |
Other expenses | (694) | - | (694) |
| Total expenditure | (1,161) | (1,403) | (2,564) |
Profit before finance costs and taxation | 1,052 | 17,431 | 18,483 |
Finance costs | (208) | (3,672) | (3,880) |
Profit before taxation | 844 | 13,759 | 14,603 |
Taxation | (223) | 216 | (7) |
Profit for year/total comprehensive income | 621 | 13,975 | 14,596 |
Return per Ordinary Share - Basic | 0.80p | 18.75p | 19.55p |
Return per Ordinary Share - Fully diluted | 0.78p | 18.26p | 19.04p |
Return per Restricted Voting Share - Basic | 0.06p | 0.63p | 0.69p |
F&C Private Equity Trust plc
Amounts Recognised as Dividends
Nine months ended 30 September 2012 (unaudited) £'000 | Nine months ended 30 September 2011 (unaudited) £'000 | Year ended 31 December 2011 (audited)
£'000 | |
Final Ordinary Share dividend of 0.95p for the year ended 31 December 2010 |
- |
687 |
687 |
Final Ordinary Share dividend of 0.80p for the year ended 31 December 2011 |
578 |
- |
- |
578 | 687 | 687 |
On 7 January 2011 a special dividend of 1.30p per Restricted Voting Share was paid. The total amount paid was £872,000.
On 27 January 2012 a special dividend of 1.60p per Restricted Voting Share was paid. The total amount paid was £1,073,000.
On 28 September 2012 a special dividend of 3.30p per Restricted Voting Share was paid. The total amount paid was £2,214,000.
F&C Private Equity Trust plc
Consolidated Balance Sheet
| As at 30 September 2012 (unaudited) | As at 30 September 2011(unaudited) | As at 31 December 2011 (audited) | |
£'000 | £'000 | £'000 | |
Non-current assets | |||
Investments at fair value through profit or loss | 212,449 | 226,419 | 223,388 |
Current assets | |||
Other receivables | 477 | 19 | 23 |
Cash and short-term deposits | 10,745 | 1,277 | 4,044 |
11,222 | 1,296 | 4,067 | |
Current liabilities | |||
Other payables | (1,398) | (12,475) | (9,886) |
Net current assets/(liabilities) | 9,824 | (11,179) | (5,819) |
Total assets less current liabilities | 222,273 | 215,240 | 217,569 |
| Non-current liabilities | |||
Investment management fee | - | (75) | - |
Zero dividend preference shares | (37,301) | (34,027) | (34,822) |
(37,301) | (34,102) | (34,822) | |
Net assets | 184,972 | 181,138 | 182,747 |
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 | 32,527 | 35,814 | 35,814 |
Capital redemption reserve | 664 | 664 | 664 |
Capital reserve | 133,450 | 126,723 | 128,470 |
Revenue reserve | 1,258 | 864 | 726 |
Shareholders' funds | 184,972 | 181,138 | 182,747 |
Net asset value per Ordinary Share - Basic | 254.37p | 244.10p | 246.62p |
Net asset value per Ordinary Share - Fully diluted |
251.08p |
241.08p |
243.54p |
Net asset value per Restricted Voting Share - Basic |
1.66p |
7.01p |
6.68p |
F&C Private Equity Trust plc
Reconciliation of Movements in Shareholders' Funds
Nine months ended 30 September 2012 | Nine months ended 30 September 2011 | Yearended 31 December 2011 | |
(unaudited) | (unaudited) | (audited) | |
£'000 | £'000 | £'000 | |
Opening shareholders' funds | 182,747 | 169,710 | 169,710 |
Profit for the period/total comprehensive income | 6,090 | 12,987 | 14,596 |
Dividends paid (Ordinary Shares) | (578) | (687) | (687) |
Special dividends paid (Restricted Shares) | (3,287) | (872) | (872) |
Closing shareholders' funds | 184,972 | 181,138 | 182,747 |
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 Group for the year ended 31 December 2011.
2. Earnings for the nine months to 30 September 2012 should not be taken as a guide to the results for the year to 31 December 2012.
3. Investment management fee:
Nine months ended30 September 2012 | Nine months ended30 September 2011 | Year ended31 December 2011 | |||||||
Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | |
Investment management fee | 364 | 1,093 | 1,457 | 348 | 1,047 | 1,395 | 467 | 1,403 | 1,870 |
Incentive fee | - | - | - | - | 75 | 75 | - | - | - |
364 | 1,093 | 1,457 | 348 | 1,122 | 1,470 | 467 | 1,403 | 1,870 | |
4. Finance costs:
Nine months ended30 September 2012 | Nine months ended30 September 2011 | Year ended31 December 2011 | |||||||
Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | |
Interest payable on bank loans and overdrafts | 218 | 654 | 872 | 151 | 455 | 606 | 208 | 624 | 832 |
Finance costs attributable to ZDP Shares | - | 2,479 | 2,479 | - | 2,253 | 2,253 | - | 3,048 | 3,048 |
218 | 3,133 | 3,351 | 151 | 2,708 | 2,859 | 208 | 3,672 | 3,880 | |
5. The basic return per Ordinary Share is based on a net return on ordinary activities after taxation of £6,175,000 (30 September 2011 - £12,307,000; 31 December 2011 - £14,134,000) and on 72,282,273 (30 September 2011 - 72,282,273; 31 December 2011 - 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 £6,175,000 (30 September 2011 - £12,307,000; 31 December 2011 - £14,134,000) and on 74,241,429 (30 September 2011 - 74,241,429; 31 December 2011 - 74,241,429) 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 loss on ordinary activities after taxation of £85,000 (30 September 2011 - profit £680,000; 31 December 2011 - profit £462,000) and on 67,084,807 (30 September 2011 - 67,084,807; 31 December 2011 - 67,084,807) shares, being the weighted average number of Restricted Voting Shares in issue during the period.
6. Zero Dividend Preference Shares
The Zero Dividend Preference Shares ('ZDP Shares') of F&C Private Equity Zeros plc were issued on 14 December 2009 at 100 pence per share and redeem on 15 December 2014 at 152.14 pence per share, an effective rate of 8.75 per cent per annum.
The fair value of the ZDP Shares at 30 September 2012 was £41,250,000 based on the quoted price of 137.50p per ZDP Share.
Number of ZDP Shares | Amount due to ZDP shareholders £'000 | |
As at 31 December 2011 | 30,000,000 | 34,822 |
ZDP Shares finance cost | - | 2,479 |
| As at 30 September 2012 | 30,000,000 | 37,301 |
7. The basic net asset value per Ordinary Share is based on net assets at the period end of £183,861,000 (30 September 2011 - £176,438,000; 31 December 2011 - £178,264,000) and on 72,282,273 (30 September 2011 - 72,282,273; 31 December 2011 - 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 £186,407,000 (30 September 2011 - £178,983,000; 31 December 2011 - £180,810,000) and on 74,241,429 (30 September 2011 - 74,241,429; 31 December 2011 - 74,241,429) 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 £1,111,000 (30 September 2011 - £4,700,000; 31 December 2011 - £4,483,000) and on 67,084,807 (30 September 2011 - 67,084,807; 31 December 2011 - 67,084,807) shares, being the number of Restricted Voting Shares in issue at the period end.
8. The financial information for the nine months ended 30 September 2012, 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 2011, on which the auditors issued an unqualified report, have been lodged with the Registrar of Companies. The quarterly report is available at the Company's website www.fcpet.co.uk.
For more information, please contact:
Hamish Mair (Investment Manager) | 0131 718 1184 hamish.mair@fandc.com
|
Gordon Hay Smith (Company Secretary) | 0131 718 1018 gordon.haysmith@fandc.com
|